Was just wondering, I am new to online trading…when i agreed to the ts and cs upon joining, it made me aware that 212 lend my shares out.
Is this standard practice amongst all online trading platforms? It doesn’t sit well.
Interested to hear any thoughts
Thanks
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Yes, it is.
Some platforms will pay you interests on the shares lent out, some not; surprisingly this (the payout of interests) is not industry standard!
This facilitates short selling, a vital component of the efficiency, accuracy and liquidity of the markets. It ensures that major price discrepancies do not get out of hand.
Edit:
Well, most. A broker needs a certain customer critical mass in order to handle lending out shares, so not all platforms will do it. But it is definitely industry standard.
A smaller broker like T212 is pretty much piggy backing from IBKR, so your shares are lent out via IBKR.
It’s probably worth noting that lots of, but not all investment funds lend their shares as well. It’s a popular way for pension funds to reduce their expenses. Blackrock and Vanguard are big players doing this.
Why doesn’t it sit well? It helps liquidity in the markets, can return you some extra revenue while you remain invested in a company you chose, or in the case of 212 helps fund the platform rather than fees. It doesn’t limit you as to when you can sell your shares, so you should see no noticeable impact.