Stock lending explained

What is stock lending?

Stock lending, also known as securities lending, involves temporarily transferring your eligible stocks to another investor or institution. The borrower pays you interest for the loan and provides collateral (usually cash or other securities) as protection.

Participants in stock lending typically include:

• Lenders: Individual investors or funds that own the stocks.
• Borrowers: Traders or institutions borrowing the stocks for specific strategies.
• Brokers: Intermediaries like Crypto.com Stocks that manage and safeguard the process.

Why do investors borrow stocks?

Borrowers may use them for short selling, hedging or meeting delivery obligations. For example, if a trader expects a stock’s price to fall, they can borrow it, sell it and later repurchase it at a lower price to return to the lender – possibly profiting from the difference.

Example: Say you own 100 shares of Company X. You lend them through Crypto.com’s stock lending program. During the loan period, you earn daily interest and, once the loan ends, your shares are automatically returned to you.

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How does stock lending work?

The process is straightforward. Here’s how it typically unfolds:

1. You agree to lend your stocks

Within your Crypto.com Stocks account, you can review eligible stocks and opt into lending. You decide which shares to lend and for how long. The platform clearly displays potential interest rates and key terms before you confirm.

2. The broker matches your shares with a borrower

Crypto.com Stocks works with regulated partners to match your available stocks with institutional borrowers who need them – often for short selling, hedging or liquidity management. Every transaction is handled through a secure framework designed to protect both parties.

3. Stocks are lent out

Once matched, your stocks are temporarily transferred to the borrower. In exchange, the borrower provides collateral, typically cash or highly liquid securities, of equal or greater value. This collateral is held safely by the broker throughout the loan term.

4. You receive interest

For the duration of the loan, the borrower pays you a lending fee, calculated daily and credited to your account. These payments represent your passive income from stock lending.

5. Stocks are returned

When the loan period ends, or if you recall your stocks early, the shares are returned to your portfolio. You continue to benefit from any price appreciation (if any) once they’re back in your account.

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Benefits of stock lending

1. Passive income generation

Earn regular interest simply by lending your shares through Crypto.com Stocks. This income accrues daily and is automatically credited to your account – a straightforward way to make your portfolio work harder without additional effort or risk-taking.

2. Extra returns on long-term holdings

If you’re a long-term investor, securities lending can help you capture incremental gains from the shares you’re already holding. While your investments continue to grow over time, the lending interest adds a steady stream of additional returns. Note, however, that holding stocks doesn’t guarantee income, as share prices can decline.

3. Flexibility and control

You maintain full control over your positions. If you decide to sell, rebalance or stop lending your shares, you can recall them at any time. This flexibility ensures you never lose access to your holdings when opportunities arise elsewhere.

4. Platform reliability

With Crypto.com Stocks, the entire process is automated and transparent. The platform works exclusively with regulated, institutional borrowers and safeguards your assets with robust collateral and risk controls.

Example: Let’s say an investor holds $10,000 worth of blue-chip stocks and participates in Crypto.com Stock’s securities lending program, earning an annualized return of 4%. Over the course of a year, that’s roughly $400 in passive income earned without selling a single share or changing their long-term investment strategy.

Risks of stock lending

1. Counterparty risk

There’s always a small possibility that a borrower could default. Crypto.com Stocks minimizes this through strict overcollateralization requirements and partnerships with reputable, institutional borrowers. Collateral ensures your assets are protected even if repayment issues arise.

2. Temporary loss of voting rights

When your stocks are lent out, you may temporarily lose certain shareholder privileges, such as voting on company decisions or receiving special meeting notices. Once the shares are returned, these rights automatically resume.

3. Tax implications

Income earned from stock lending is typically considered interest income and may be taxable depending on your location. Investors should review their local tax regulations or consult a qualified tax professional for clarity.

4. Market fluctuations

If the value of the borrowed stock changes significantly during the loan period, the borrower’s position could be affected, but the collateral held helps reduce this exposure.

Crypto.com Stocks provides an additional layer of reassurance through SIPC coverage, which protects your securities up to applicable limits.

Remember: Stock lending is generally safe when conducted through a regulated, transparent platform – but, like all investments, it’s important to stay informed and manage your exposure thoughtfully.

How to switch online brokers

How to participate in securities lending on Crypto.com 

1. Open your Crypto.com Stocks account
   Sign up to Crypto.com and open a Crypto.com Stocks account. Or, simply log in.
2. Choose eligible stocks for lending
   Navigate to your holdings, review eligible securities and opt into lending.
3. Review the terms carefully
   Each loan has clear conditions, including rates, duration and collateral requirements.
4. Monitor and manage your income
   Track your interest earnings and recall your shares anytime within the App.
5. Enjoy transparent, secure lending
   Crypto.com Stocks ensures full visibility into every transaction, providing both flexibility and peace of mind.

Ready to get started?

With Crypto.com Stocks, you can lend confidently – anytime, anywhere.

1. Sign up to Crypto.com and create a Crypto.com Stocks account.
2. Discover your eligible stocks
3. Start your securities lending journey.
4. Enjoy transparent returns and trusted protection

This is informational content sponsored by Crypto.com and should not be considered as investment advice.

Securities lending is subject to certain risks and is not suitable for all investors. Such risks include, but are not limited, the potential to lose some, or all, of your loaned investments. Furthermore, the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) may not protect you with respect to Loaned Securities. Customers are required to review and accept FCUL’s Stock Lending Disclosure Statement and Agreement to engage in securities lending.

Securities lending is offered to FCUL customers through Apex Clearing. Apex Clearing makes independent decisions from FCUL about its securities lending program. This securities lending is done at Apex’s sole discretion: Apex is not required to borrow your securities and may borrow from other parties.

Foris Capital US LLC (“FCUL” or referred to herein as “Crypto.com Stocks”) is a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a Member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). For further information about FCUL, please visit FINRA BrokerCheck.  

FCUL is a subsidiary of Crypto.com. FCUL is a separate entity from Crypto.com, Foris DAX, Inc., and other affiliated Foris companies. FCUL does not engage in the sale, transfer or custody of crypto currencies or digital assets. Crypto.com is a separate entity from FCUL and does not engage in the securities business. Customer balances and crypto holdings held and transacted at Crypto.com and other entities outside of FCUL are not covered by SIPC insurance and are separate from securities transactions and holdings at FCUL.

All investments involve risk, and not all risks are suitable for every investor. The value of securities may fluctuate and as a result, clients may lose more than their original investment. The past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss in a down market. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing.