In this article:
Overview
You can earn extra income by participating in stock lending on Wealthsimple. When you enable stock lending, we can lend out some of your eligible securities to other investors. In return, you receive a portion of the income generated from these loans.
Continue below to learn about
- the types of loans we offer,
- how we distribute earnings, and
- how dividends work with stock lending.
Stock lending loan types
We offer two types of loans: high demand loans and low demand loans.
High demand loans:
- We pay you 50% of the lending fee we receive from the borrower for loaning your securities
- These loans show up in your loan confirmations with a loan rate over 0%
Example of a high demand loan:
Let's say you have a $12,000 portfolio and you agree to participate in stock lending. If you loan all your shares at a lending rate of 8%, you could expect:
- Total monthly earnings: $80.00 ($12,000 * (8%) / 12 months)
- Our revenue: $40.00
- Your revenue: $40.00
Low demand loans:
- In high interest rate environments, you may benefit more from low demand loans, but we prefer high demand loans
- We pay the borrower to borrow the securities
- We pay you 10% of the net revenue we earn for loaning your securities
- Net revenue is based on variable overnight interest rate minus the fee paid to the borrower
- These loans show up in your loan confirmations with a loan rate of 0%
Example of a low demand loan:
Let's say you have a $12,000 portfolio and you agree to participate in stock lending. If you loan all your shares at a lending rate of -3% and assuming the overnight rate is 5%, you could expect:
- Total monthly earnings: $20.00 ($12,000 * (5% - 3%) / 12 months)
- Our revenue: $18.00 (90% of net revenue)
- Your revenue: $2.00 (10% of net revenue)
Revenue sharing and allocation
We use pooled profit sharing for revenue sharing and allocation. This means:
- When we lend out shares, all clients who agreed to participate and own that security have their shares included in the pool of securities and may have a portion of their shares lent out.
- You receive the same portion of revenue as the portion of shares you have lent out
Example
We lend out 300 shares of stock ABC. Here's how pooled profit sharing affects different clients:
| Client | Shares of ABC owned | Shares lent out | Revenue share (of the 50%) |
|---|---|---|---|
| Client 1 | 100 | 50 | 17% (50/300) |
| Client 2 | 200 | 100 | 33% (100/300) |
| Client 3 | 300 | 150 | 50% (150/300) |
| Total inventory pool | 600 | 300 | 100% |
More details:
- We calculate and reallocate the portion of the total inventory daily
- We calculate revenue daily and distribute it monthly
- We post daily loan confirmations to inform you of your loaned positions
Receiving dividends while participating in stock lending
If you own shares of a dividend-paying stock that are on loan on a dividend record date:
- You'll receive a manufactured payment from us equal to the dividend.
- It will have the same tax implications for you as a regular dividend.
- We'll pay the manufactured payment to you on the dividend payment date.
For U.S. persons:
- Tax implications may differ for manufactured payments and regular dividends.
- We recommend consulting with a U.S. tax professional to understand these implications.
Stock dividends will be added to your account, but may not be loaned back out immediately.
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