What is the Stock Yield Enhancement Program?
The Stock Yield Enhancement program provides customers with the opportunity to earn additional income on securities positions which would otherwise be segregated (i.e., fully-paid and excess margin securities) by permitting GPS to lend out those securities to third parties. Customers who participate in the program will receive a portion of the interest paid on the cash collateral by the borrower as loan compensation for any day the loan exists and will receive cash collateral to secure the return of the stock loan at its termination.
How do I manage the Stock Yield Enhancement Program (SYEP) participation?
MANAGE STOCK YIELD ENHANCEMENT PROGRAM PARTICIPATION
Clients who are eligible and wish to enroll or terminate their participation in the Stock Yield Enhancement Program (SYEP) may do so through Client Portal.
I’m enrolled in Stock Yield Enhancement Program (SYEP) but my shares aren’t being lent
There is no guarantee that all eligible shares in a given account will be loaned through the Stock Yield Enhancement Program as there may not be a market at an advantageous rate for certain securities, GPS may not have access to a market with willing borrowers or GPS may not want to loan your shares.
Clients carrying financing deficits are subject to having stock amounting to 140% of the deficit un-segregated, selected at the discretion of the broker, and therefore ineligible to lend as part of the SYEP.
What stocks are eligible for the Stock Yield Enhancement Program?
|US Market||EU Market||HK Market||CAD Market|
|Common stocks (exchange listed, PINK and OTCBB||Common Stocks (exchange listed)||Common Stocks (exchange listed)||Common Stocks (exchange listed)|
|Preferred Stocks||Preferred Stocks||Preferred Stocks||Preferred Stocks|
*Municipal bonds are not eligible.
- In order to optimize your revenue, we focus on the stocks with a borrow offset greater than 25bps from Fed Funds, the industry interest rate benchmark. Therefore, not all stocks in your portfolio may be loaned.
- The universe of stocks that are sought after and thus have the most value from a stock loan perspective are labeled Hard-to-Borrow (HTB) and represent a subset of the total equity available for lending in the USA.
- There is a constant shifting of the most desirable stocks and there is no comprehensive way to predict which stock will become HTB, so IBKR has set up the Stock Yield Enhancement Program (SYEP) to include all the stocks in a customer’s account. When a stock becomes HTB, the GPS algorithm can search all customer portfolios in the program for the stocks that can be loaned effectively.
Who is eligible for the Stock Yield Enhancement Program (SYEP)?
All GPS LLC, GPS HK, GPS UK and GPS Canada margin accounts or GPS LLC, GPS HK, GPS UK and GPS Canada cash accounts with equity over $50,000 at the time of application are eligible for the Stock Yield Enhancement Program. IRA accounts are also eligible to enroll.
Financial Advisor client accounts, fully disclosed GPS clients and Omnibus Brokers who meet the above requirements may participate.
How is the income received by a customer on any given Stock Yield Enhancement Program loan transaction determined?
The income which a client receives in exchange for shares lent through the Stock Yield Enhancement Program depends on loan rates established in the over-the-counter securities lending market. These rates can vary significantly, not only by the particular security loaned but also by the loan date. To determine the customer’s portion of these fees, the Market Interest Rate % is applied to the loan collateral. This daily Gross Lending Interest is split equally between GPS and the client, as GPS takes a portion of the gross interest paid in exchange for initiating, managing, and terminating transactions.
For example, assume loan collateral of $10,000 and an annualized Market Interest Rate of 15%. In this case the daily Gross Lending Interest would be $4.16 (($10,000 *.15)/360), of which $2.08 would accrue to the client and $2.08 to IBKR. Lending interest is calculated and accrued daily similar to interest credits.
How is the amount of cash collateral for a loan determined?
The cash collateral underlying the security loan from the Stock Yield Enhancement Program and used for determining interest payments is calculated using standard industry convention whereby the closing price of the stock is multiplied by 102% and then rounded up to the nearest whole dollar.
For example, a loan of 100 shares of a stock which closes at $59.24 would be equal to $6,100 ($59.24 * 1.02 = $60.4248; round to $61, multiply by 100).
Under what circumstances will a stock loan be terminated?
In the event of any of the following, a stock loan created through the Stock Yield Enhancement Program will be automatically terminated:
- If the client elects to terminate program participation
- Transfer of shares
- Borrowing of a certain amount against the shares
- Sale of shares
- Call assignment/put exercise
- Account closure
What happens if a Stock Yield Enhancement Program participant initiates a margin loan or increases an existing loan balance?
If a client maintains fully-paid securities which have been loaned through the Stock Yield Enhancement Program and subsequently initiates a margin loan, the loan will be terminated to the extent that the securities do not qualify as excess margin securities. Similarly, if a client maintaining excess margin securities which have been loaned through the program increases the existing margin loan, the loan may again be terminated to the extent that the securities no longer qualify as excess margin securities.
When is interest received for lent securities in the Stock Yield Enhancement Program?
Lending fees received through the Stock Yield Enhancement Program are calculated and accrued daily similar to interest credits. Please note, lending fees will be aggregated and will display as an accrual only when exceeding $1. Interest will post to your Cash balance monthly.
How can I stop shares from being loaned out in the Stock Yield Enhancement Program (SYEP)?
There is no way to prevent a stock from being lent out if you are currently participating in the Stock Yield Enhancement Program.
If you wish to restrict some or all of the stocks from being lent out, you would need to opt out of the Program.
What happens to loaned stock that is halted from trading?
A halt has no direct impact upon the ability to lend the stock through the Stock Yield Enhancement Program. As long as GPS can continue to loan the stock, such loan will remain in place regardless of whether the stock is halted.
How can I see Collateral for Customer Borrowing in my statements?
The section Collateral for Customer Borrowing will only appear on accounts affected by the European Alternative Investment Fund Management Directive (AIFMD).
If I cancel my participation in the Stock Yield Enhancement Program can I re-enroll in the program at a future date?
Yes. Clients who cancel participation in the SYEP can re-enroll in the program but must wait at least 90 calendar days from the cancellation date before doing so.
Can I sell all my stock, even if some of it is being lent?
As a participant of the Stock Yield Enhancement Program you can sell any number of shares including the entire amount if you want. There is no difference in how you trade based on whether or not the shares are lent.
Will my taxes be different if I am a US taxpayer?
There is no impact on capital gain treatment upon the sale of shares that have been lent through the Stock Yield Enhancement Program. Stock Yield Enhancement Program shares that are lent out are segregated and GPS will pay the dividend and not payment in lieu (PIL).
If I want to sell loaned stock, is the process of sale exactly the same as selling other stock in my account?
As a participant of the Stock Yield Enhancement Program you are free to sell your loaned stock at any time. Upon the sale, GPS recalls the loan from the street and makes normal delivery on your behalf on settlement date. The stock loan is then terminated.
Will this cash collateral appear as a separate category of cash on my account statement?
Yes. Your Stock Yield Enhancement Program activity is covered by three separate sections in an activity statement:
- GPS Managed Securities Lent – In this section, cash collateral is listed under Collateral Amount.
- GPS Managed Securities Lent Activity – This section lists each stock loan transaction including Transaction ID, Quantity, Interest Rate on Customer Collateral and Collateral Amount.
- GPS Managed Securities Lent Fee Details – This section lists each stock loan transaction with interest Rate earned by GPS, Interest Paid to IB and Interest Paid on Customer Collateral.
What will be the impact of lending stock on the calculation of my margin and my excess liquidity?
There is no impact from lending stock through the Stock Yield Enhancement Program on the calculation of your margin and your excess liquidity. Your ability to borrow is still based on your stock positions.