What is Securities Lending?

What is Securities Lending?

Securities Lending is an investment activity that allows an owner of whole-shares of securities to earn extra income.

In this article:

Securities lending is a way to earn lending income from investments you already own. You temporarily lend eligible securities, such as stocks or ETFs, to a financial institution. In return, you may receive a portion of the loan fee.

What is a security?

A security is a financial asset you can invest in. On Stash, that generally means single stocks and ETFs. You can learn more about the difference between these two investment types here.

What is securities lending?

Securities lending is the temporary loan of securities from one party to another. The borrower provides collateral and pays a loan fee. The lender receives a portion of that fee, depending on the program terms.

Retail investors usually encounter this through a fully paid securities lending program. Fully paid means the securities are paid for in full and are not being purchased with borrowed margin funds.

Why would someone borrow securities?

Institutions borrow securities for several reasons, including:

Short selling
Settling trades
Market making
Hedging other positions
Supporting liquidity in the market

How does securities lending work?

Here is the basic flow:

You enroll in a securities lending program, if available.
Eligible securities in your account may be selected for lending.
A borrower requests those securities.
The borrower provides collateral, typically cash or other approved collateral.
The securities are loaned out.
The borrower pays a fee.
You receive your share of the lending income, often monthly.
The loan can end when the borrower returns the securities or when they are recalled.

A simple securities lending example

Say you own 100 shares of a stock trading at $20 per share. Your position is worth $2,000. If those shares are loaned for 30 days at a 5% annualized lending rate, the total lending fee before any program split would be roughly:

$2,000 x 5% x 30/360 = $8.33

If the annualized lending rate were 0.5% instead, the fee would be about $0.83 for the same 30-day period.

What are the benefits of securities lending?

The main benefit is the potential to receive lending income while continuing to own the investment economically.

That means:

You may receive monthly lending payments when your securities are borrowed.
You still participate in price gains or losses while the security is on loan.
You can generally sell the security, even if it is currently loaned.
You may earn income from securities you were already planning to hold.

What are the drawbacks?

Securities lending has real tradeoffs.

Tradeoff	What it means
Voting rights	The borrower, not you, generally has the right to vote loaned shares while they are on loan.
Dividend treatment	You may receive payments in lieu of dividends instead of ordinary dividends. These can be taxed differently.
SIPC coverage	Loaned securities may not be covered by SIPC while they are out on loan.
Borrower default risk	If a borrower fails to return securities, collateral is meant to protect you, but there can still be risk.
Variable income	Lending income is not predictable. Some securities may never be borrowed.
Tax complexity	Substitute payments may need different reporting than qualified dividends.

Are loaned securities SIPC protected?

Securities that are loaned out may not be protected by Securities Investor Protection Corporation coverage during the loan.

As of 2026, SIPC generally protects customers up to $500,000, including up to $250,000 for cash, if a brokerage firm fails and customer assets are missing. SIPC does not protect against normal investment losses.

Can my investments be lost in a securities lending program?

Securities lending programs are designed to reduce the risk that loaned securities are not returned. Borrowers must provide collateral, and fully paid securities lending programs generally require collateral worth at least 100% of the market value of the loaned securities.

Can I sell securities while they are on loan?

Generally, yes. If you sell a security that is currently loaned, the broker typically recalls the shares or otherwise manages the settlement process.

What is a dividend in lieu?

When a security is on loan, the borrower may receive the actual dividend. The borrower then passes an equivalent amount back to you as a payment in lieu of dividend, sometimes called a substitute payment.

Can I still vote on my loaned securities?

Usually, no. The borrower of the securities has the right to vote, or take similar shareholder actions, if the record date or voting deadline falls while the securities are on loan.

Is securities lending safe?

Safe is too broad a word. Securities lending is regulated, collateralized, and widely used. It also introduces risks you would not have if your securities were not lent.

How does securities lending work with my Stash account?

If securities lending is available for your Stash account, only eligible securities may be lent. Program details, eligibility, payment timing, collateral, and opt-out rules are governed by the applicable securities lending agreement.

Frequently asked questions

What is fully paid securities lending?

Fully paid securities lending is when securities you own outright are loaned to a borrower through a brokerage program. The borrower provides collateral and pays a lending fee. You may receive a portion of that fee.

Do I have to participate in securities lending?

In many retail brokerage programs, participation is optional. If you enroll, you may also be able to opt out later. Review your brokerage agreement for the exact rules, timing, and account eligibility.

How much can I earn from securities lending?

It depends. Lending income is based on demand for the security, the lending rate, how long the security is borrowed, and how revenue is split under the program.