How eToro’s Stock Lending Feature Will Unlock Passive Income
In an attempt to democratise access to stock lending and facilitate lending transactions, eToro is supporting its users based in the UK and Europe to earn passive income by lending out their stocks through its new stock lending programme.
EquiLend will facilitate the stock lending process, while BNY will act as the custodian.
Initially, the feature will be available to members of the eToro Club. It will start with its Diamond, Platinum and Platinum+ members. Lower-tier club members will gain access to the programme at a later date.
Yossi Brandes, VP Execution Services at eToro, explains: “Stock lending has traditionally been the preserve of large financial institutions and it’s been much harder for retail investors to earn passive income in this way.
“Yet it is an important practice that helps to support liquidity in financial markets. Leveraging BNY’s Global Clearing services, we want to level the playing field by enabling millions of eToro users across the UK and Europe to engage with stock lending in an easy and transparent way.”
Levelling the playing field for securities and stock lending
The partnership between eToro, BNY and EquiLend will alter the tradition of securities and stock lending, where this has always been the domain of institutional investors, such as asset managers and hedge funds.
eToro’s new feature will allow individual investors to access full paid stock lending, meaning eligible eToro users in the UK or Europe can earn from their stock portfolio - something that didn’t used to be possible.
The feature will simplify the complexity of securities lending by offering automated monthly income tracking, an easy opt-in process and flexible participation.
eToro bypasses the barriers lenders face by removing the need for direct negotiations and cutting upfront fees or the requirement of a minimum portfolio size.
Users can stay in control and reduce risk as eToro’s model features collateral backing for lent stocks, exclusion of complex instruments and the ability to sell or reclaim stocks at any time.
Not only will eToro’s stock lending feature democratise access to passive income and embed institutional-grade practices into a user-friendly fintech platform, but it will also lower the barrier for entry for retail investors, helping to level the playing field in securities lending.
Yossi adds: “Since the inception of our relationship, BNY has enabled us to expand our offering of investment opportunities through their global clearing and custody services, which provide the financial structure for our global, fully funded stock and ETF offerings across 19 exchanges.
“This new collaboration marks a significant step in our commitment to adding features and products to the platform that enrich the investing experience and help users to grow their knowledge and wealth.”
How the stock lending programme works
eToro’s stock lending platform is crafted to be transparent, simple and secure to allow eligible users to earn passive income by lending out their fully-owned shares.
The platform will feature several aspects:
- Eligibility and access
The platform is initially available to Diamond, Platinum and Platinum+ members of the eToro club. It will expand to lower-tier members at a later stage.
- Opt-in process
Users must manually opt into the programme. This will allow their entire portfolio of whole-unit, real stock positions to be available for lending. Fractional shares and contracts for difference (CFDs) are excluded.
- Lending and borrowing
EquiLend will identify borrowers and support the lending process. Shares that have low market liquidity or are in high demand are likely to be borrowed. Those shares that are borrowed will be backed by collateral to minimise risk.
- Ownership & rights during lending
Users give up voting rights while the shares are on loan, but still can sell shares at any time, receive dividends and opt out of the programme at no cost.
- Earning passive income
Users will receive monthly statements that detail income earned from lent stocks.
- Security and custody
BNY will maintain secure handling of stock ownership and return by acting as the custodian. eToro will use BNY’s Global Clearing platform to offer settlement, global clearing, financing infrastructure and custody
Victor O’Laughlen, Executive Platform Owner - Global Clearing at BNY, says: “We are pleased to expand our relationship with eToro, supporting a holistic solution set across clearing, settlement, custody, foreign exchange, cash management.
“This development represents the very best of eToro, Equilend and the heritage and innovation of BNY’s world-class platform, as investors look to access a cutting edge feature in their investing journey.”
The strategic impact on the fintech industry
eToro’s new stock lending programme will mark a vital shift, allowing everyday users to access a once traditionally institutional practice.
It will set a new standard for ease-of-use and transparency in fintech by simplifying the complexity of the process.
This programme will model a rising trend of fintechs working alongside legacy financial institutions to scale securely.
eToro is demonstrating how fintechs can make advanced financial tools more liquid, inclusive and retail-friendly.
Dan Dougherty, Managing Director, Global Head of Sales & Account Management at EquiLend, explains: “The collaboration between EquiLend Spire and eToro marks a significant advancement in the securities lending market, enabling eToro to enhance its services with a fully paid lending program that benefits from cutting-edge technology.
“This move not only demonstrates EquiLend Spire's commitment to innovation but also eToro's dedication to providing efficient and modern financial solutions to its users.”
Explore the latest edition of FinTech Magazine and be part of the conversation at our global conference series, FinTech LIVE.
Discover all our upcoming events and secure your tickets today.
FinTech Magazine is a BizClik brand