Earn extra income on the fully-paid shares of stock held in your account by allowing GPS to borrow shares from you in exchange for cash collateral, and then lend the shares to traders who want to sell them short and are willing to pay interest to borrow them.
Each day that your stock is on loan, you will be paid interest on the cash collateral posted to your account for the loan based on market rates.
GPS pays you 50% of the income it earns from lending the shares.
The program is available to eligible GPS clients who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000 (or equivalent).
Simple and Automatic
GPSll aspects of share lending. Once you enroll, GPS will examine your fully-paid stock portfolio automatically. If you have stocks that are attractive in the securities lending market, GPS will borrow the stocks from you, deposit collateral into your account and lend the shares.
When your stock is loaned out, you will see the interest rate that you are being paid on the cash collateral along with the amounts earned by GPS from lending those shares. Other brokers with similar programs generally do not disclose the market rates to you, which allows them to pay you a small piece of the pie while holding on to most of the profits.
Earn Supplemental Income
Each day that your stock is on loan, GPS pays interest on the cash collateral directly into your account.
Trade Your Loaned Stock with No Restrictions
You will see the loaned shares on your account statement, indicating that they are being loaned out. You are still the owner of the stock, which means you continue to have market risk and will recognize any profit (or loss) if the stock price moves. You can sell your shares at any time without restriction and can terminate your participation at any time for any reason.
XYZ is currently trading at USD 75.00/share. You are long 5,000 shares of XYZ, with a market value of USD 375,000.00. XYZ is in demand and commands a loan interest rate of 9%.
You sign up for GPS’ Stock Yield Enhancement Program and GPS loans out your 5,000 shares of XYZ at 9%. GPS will pay interest on your cash collateral of USD 375,000.00 x 4.5% = USD 16,875.00.
You could earn USD 16,875.00/year on stock you already own.
The Stock Yield Enhancement Program is available to eligible GPS clients1 who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000 (or equivalent).
Stocks that are eligible to be loaned out are all “fully-paid” stocks (stocks not held on margin) and “excess-margin” stocks (stocks held on margin but whose market value exceeds 140% of your margin debit balance).
Considerations and Risks
Shares loaned out may not be protected by SIPC.
The Securities Investor Protection Act of 1970 may not protect shares loaned out. This is why under SEC rules GPS must provide you with cash collateral in the same amount as the value of your shares to protect you in the very unlikely event that the stock is not returned to you.
Shares loaned out are typically used to facilitate short sales.
Shares are attractive in the stock loan market because other traders want to borrow and sell them short, possibly affecting the value of the shares.
Loan rates change frequently.
These rates and the interest you will receive may go down (or up) by 50% or more.
Loans may be terminated at any time by GPS.
Also, GPS does not guarantee that it will lend all eligible shares.
Voting rights go to the borrower.
During any period in which your securities are loaned out, you will forfeit your right to vote those shares by proxy.
Selling your shares or borrowing against them or withdrawing cash in a margin account will terminate the loan transaction.
If you sell the fully paid shares that have been lent out, or if you borrow the shares or withdraw cash in a margin account (such that the securities become margin securities and are no longer fully paid or excess margin securities) the loan will terminate and you will stop receiving loan interest.