I’ve just read the new client agreement and I don’t like the sound of share lending. The agreement says I can opt out but how would I do this? Does this affect Invest and ISA accounts or just CFD?
Hi, I wouldn’t worry about share lending. Your shares are guaranteed and you’ll never lose anything. Even in the extremely unlikely event a share isn’t returned after share lending, Trading 212 will take the losses, not you.
And I would assume that it’s Invest and ISA as those are physical shares, whereas CFDs are just contracts.
If you are still worried about this, I would suggest emailing Trading 212 and asking them to opt you out of it, so that you have written evidence that can’t be deleted
@Tyler Check this out:
In a nutshell, it won’t affect you in any noticeable way but for us, it’s a huge step in becoming even more sustainable.
@tyler Many other brokers also lend out shares. It is common practice throughout the industry, and in my view nothing to be worried about at all.
I see, I had no idea it was common in the industry. Thanks for the clarification, guys
It’s actually just Invest, as we aren’t allowed to lend out stock held in an ISA, which has made the project surprisingly complicated.
I realised this shortly after posting, surely it messes up the deposit amounts which is a big problem in ISAs
Except you can’t, if you read the changes. Clause 22.7 literally says that if you opt-out of share lending, you will have to terminate the Client Agreement (and effectively have to close your account). The ‘prior consent’ repeatedly mentioned in the document is given by continued use of the platform.
None too pleased about this set of changes, to be honest. It increases the (albeit miniscule) counter-party risk we take, and allows for greater quantities of shares out there to be shorted, which isn’t the best thing if one’s long.
You’re right, looks like you have to accept it. Bit of a shame but there isn’t much reason for the client to be worried.
I’m sure the impact of the increased supply of shares available for shorting is not that substantial, those that want to short are not generally limited by supply.
It just has to be done, they should have done this sooner tbh. It’s just nice that they are so transparent in the forum letting us know prior to it being put in place.
You should still get the dividend amounts on shares lent out.
22.5. Shares that are lent out are generally recalled from the Borrower before ex dividend-date in order to capture the dividend. Where the recall does not take place, you will be entitled to a payment from the Borrower equivalent to the dividend you would otherwise have received.
From what I read the payment received in the later case should strictly speaking be taxed the same as bank interest income, not at lower dividend tax rates - but I think this can be safely ignored by most investors.
I don’t think they are as transparent as you think, since if this thread didn’t come out (written by a user) and people didn’t read the terms, they’d just sneak it in an email. At the baseline they’re running a business, and I don’t think it’s a good idea to always think they’re on our side.
As far as I’m concerned, I do see the logic of lending shares, but the terms going in a roundabout way in acting as if we have a choice to expressely consent and yet state that it’s either our way or the highway doesn’t leave a very nice taste in the mouth. Personally, I’d rather they be upfront about it in their terms of conditions than be sneaky about it.
This was explained by @David in posts to the community as long ago as 18 May, so it comes as no surprise to those who have been paying attention. The transparency has been excellent so far as I am concerned. When I saw the email in my inbox today I expected it was going to be about securities lending.
As we know, Trading 212 work with Interactive Brokers for execution and IB also organise the securities lending. If you would like to know more about how security lending operates you can read at the following at this link about the Interactive Brokers “stock yield enhancement program”.
I deleted my previous comment as I may be wrong.
When it states ‘Trading212’ does that mean the company or our accounts Held under Trading212 will be at risk?
“When Тrading 212 undertakes securities lending, it would be exposed to counterparty credit risk whereby the borrower may become insolvent and/or that the value of the collateral provided may fall below the cost of replacing the shares that have been lent.
Loaned shares are typically used to facilitate short sales and such transactions may affect the value of shares.”
Just reading the latest share dealing terms and conditions. Apparently, if you want to opt out of share lending then your client agreement will be terminated (22.1,22.7,28.6). It seems like you’re being forced to agree to lending your shares to a borrower by T212. Is anyone else concerned about this? How do I find out if I agreed to this in the first place?
@Kwabenanti2002 I moved your post to this topic where you can read some relevant posts. Personally, I feel unconcerned and am happy for Trading 212 to have this additional revenue stream to help pay for the no fee share dealing we enjoy.
Yes, I am concerned about share lending. I am pretty sure, that I have not agreed to it in the past. If T212 now tries to force it down my throat, that may be the end of our relationship.
I logged on here today specifically to find out what exactly T212 is trying to do with their sneaky amendments to legal documents.
“The amendments will come into force on 22.07.2020 as per the 30 day notice period.”
How is it “sneaky”? When you’ve literally acknowledged:
… that they’ve given you an ample notice period to digest the updated legal documents
They emailed you about it to let you know and have you thirty days to read it and posted a full description on the community detailing what it is and why. It’s hardly sneaky.
But onto the point, if this helps T212 remain in operation without leaning heavily on their CFD side and allows them to double down on releasing great features and new stocks, then I think it would be incredibly selfish of me to throw my toys out of the cot like some other commenters. Especially when it’s of no detriment to me or my investments and I’m using a premium service and not being charged for it.
Perspective is very important.
If you are concerned by this, you should be far more concerned by your bank using your money to give loans.