Share lending facility

💬 Trading 212 chat
1

I might have underestimated the lending feature in Invest.

Lots of the big short positions are taken by funds who borrow the shares from other funds. Thus I could completely exclude them (the shorts by funds) from what happens with T212 share lending. Also total short positions usually are a fairly small percentage of the total share capital of the company (unless the company is in a really dire situation). Thus my assumption is that at point in time only a tiny percentage of a company’s shares need to be lent. I had also assumed that if total shorting in the market was 1% of a company’s shares only 1% of shares needed to be lent to support the lending and I’d assumed T212 lending would be roughly proportionate with that (ie lots of other source would equally lend - ie other platforms, brokers…). Thus at most I was expecting a tiny percentage of shares in Invest to be lent out. However, I’ve got one share where almost 100% of my shares in that company are lent. I’m happy with this because I suspect the share is likely to rise significantly in the near future and that the current low is a buying opportunity. I’m also happy that if the price does rise lots of shorts closing will only push the price higher. So I don’t have a concern about the lending or the volume of lending (the amount I hold in this company is also trivial) but I am very surprised at the % of shares being lent. Maybe I had simply got my calculations wrong and maybe shares in ISA etc can’t be lent and the available pool of shares available for lending is extremely limited (eg perhaps many brokers not releasing their shares for lending) and thus even a fairly modest level of shorting results in a massive demand for shares to borrow from the available pool.

I was just curious if anybody knew more about the mechanics and why the level of lending in T212 Invest is so high? I’m not complaining I assuming interest from lending would be close to zero and at the moment its looking like that it might be a reasonable amount at times. Just very curious

2

I might be wrong, but the services we receive from 212, are from Interactive Broker, so 212 act almost like a reseller of services. Interactive Broker offer share lending income, and 212 use this to fund the invest platform, and FX fees to fund the ISA platform(share lending not allowed in ISA).

I would suspect 212 are leveraging the benefits of IB being one of the largest brokers.

Also - share lending is used for much more than ‘shorting’. It is also used to stabilise the market to help avoid failing trades. There can be high fees incurred for failing trades in the market, so if you have an issue with a trade, you can ‘borrow’ shares until resolved, pay what is essentially a share lending fee, that would allow you to complete the transaction and avoid fees for failing trades.

3 Likes
3

Thanks for the explanation. I assumed the high level (nearly 100% of my shares lent in one company) was probably a supply and demand issue - ie lots of shares in a company not being available to be lent and thus even modest levels of demand for borrowing shares results in a high demand on the shares available for lending.

Originally I thought that the T212 lending facility was nice to have but would be an irrelevance in terms of an overall portfolio but if there are supply and demand issues (in terms of lending capacity) then it is a much more significant than I thought. I also like having a direct indication on whether a share is in demand for borrowing (assuming that equates to shorting). It may be a factor in timing buys (I never short)

4

correct & more characters

5

Short sellers must be covering their positions or facing margin call due to stock prices rising - am guessing that means less income for T212 investors whose shares were lent?

6

If shorts are closing thereby reducing the lending interest in Invest I will not complain because it probably means nice increases in share price and a good short squeeze is always nice to see