How does the Fully Paid Securities Lending Program work?
Our clearing firm, Apex Clearing Corporation (“Apex”), operates a Fully Paid Securities Lending Program (the “Securities Lending Program”). If you are enrolled in the Securities Lending Program, Apex can loan out whole shares in your brokerage account to investors and institutions (e.g., retail investors, banks, market makers, institutional investors). Shares loaned out by Apex are typically used by borrowers to facilitate short sales. These borrowers pay a market-driven interest rate to Apex.
How much will I earn from the Fully Paid Securities Lending Program?
Apex shares a portion of the interest it receives from loaning out your shares with both you and Public Investing. When your shares are loaned out, you earn 10% of the total net proceeds earned and received by Apex for lending your shares. Payments are automatically deposited into your brokerage account on a monthly basis, the following month. To view your monthly payments, navigate to the “Interest” tab of the History page within the Public app.
The fee share rate may be adjusted from time to time by Public Investing, but in no event will it fall below 10%. The current fee share will always be posted on this FAQ page.
It’s important to keep in mind that your income from securities lending will vary from month to month. There is no guarantee that Apex will lend out your shares, and therefore, there is no guarantee that you will earn interest in connection with this program.
Who can participate in the Securities Lending Program work?
We do not allow you to participate in the Securities Lending Program if you:
Have less than $5,000 in your Public brokerage account, and
Have less than $50K in annual income, investable assets, and net worth, and
Have a stated investing goal to preserve capital and no stated investing experience.
What types of investments are eligible for securities lending?
Only whole shares of stocks and ETFs held in your brokerage account may be loaned out by Apex. Apex cannot loan out fractional positions in your brokerage account.
Note, there is no guarantee that Apex will lend out your shares. Shares are typically loaned out when there’s high market demand for that share and low market inventory.
Why does Public participate in securities lending?
In lieu of payment for order flow, and in order to offer you commission-free securities trading, Public relies on securities lending as one revenue stream to make money to provide you all of the services that you love.
How does participation in securities lending affect me?
You still maintain full economic ownership of securities on loan, and are able to sell the stocks at any time. If shares you own are loaned out by Apex, your market exposure on those loaned shares does not change. If the value of the securities you have loaned increases, you keep those market gains. Conversely, if the value of the securities you have loaned decreases, your position still accrues those losses. As a reminder, gains and losses from market movements are not guaranteed or locked in until the position(s) are sold.
What are the risks associated with securities lending?
You waive voting rights in those shares while they are out on loan.
You may receive payments in lieu of dividends while they are out on loan, which could affect the taxes you pay.
Your shares lack SIPC protection while they are out on loan. To make up for the loss of SIPC coverage, Apex is required by law to post collateral (in cash or cash equivalents) greater than 100% of the value of the loaned shares at a partner bank.
Apex, the counterparty who borrows your shares, may default on its obligation to return your shares. Refer to “What happens if there is counterparty default?” below for more information.
Shares borrowed from you may be used to facilitate short selling, which could contribute to lowering the price of the securities on loan.
For additional information, please see Apex’s Fully Paid Securities Lending Disclosures.
What happens if there is counterparty default?
The principal risk in any securities lending transaction is counterparty default. When your shares are loaned out, Apex is technically the borrower and your counterparty. In the unlikely scenario that Apex were to default on its loan obligations and fail to return your shares, you would have a right to withdraw collateral posted by Apex in a custody account held in your name at J.P. Morgan Chase Bank.
When Apex loans out your shares, it is required by law to post collateral (cash or cash equivalents) with value equal to at least 100% of the market value of the loaned securities. To reflect changes in the value of your loaned securities, Apex marks-to-market your loaned securities on a daily basis. Collateral is posted to a custody account held in your name at J.P. Morgan Chase Bank. That account is managed by Wilmington Trust, a trustee, on your behalf.
While Apex is contractually obligated to post 100% cash collateral, there may be some highly unlikely circumstances where the collateral held on your behalf may not equal or exceed the value of the loaned securities. For additional information about Apex’s collateral obligations, please see the Apex Clearing Master Securities Lending Agreement.
How can I see which shares are out on loan?
You can access which of your shares are out on loan by visiting Apex.com.
Go to the Apex Clearing website at www.apexclearing.com.
Log in through the button in the top right.
Click on the Apex Online Menu in the top left corner of the screen, and select positions.
When viewing your positions, shares on loan will be reflected as “Fully Funded S/L” under the Account Type. Shares not on loan will be reflected as “Cash”.
Alternatively, you can also view which shares are on loan in your account statements. Shares on loan will be reflected with an “O” as the Account Type, while shares not on loan will be reflected as “C”.
To view your position type, including whether your shares are lent out through the securities lending program, view your positions and make sure the 'account type' column has been added to the view
If you haven't already, you will need to create an account with Apex to view your shares on loan. You'll need to include your brokerage account number (with just the first 8 digits no dashes, otherwise it won't work properly).
To find your brokerage account number on the app:
Select the Account Icon in the top left
Look at the Account Details in the top corner
You will see your account number under your username
How can I leave the Program?
You may opt-out at any time by emailing us at firstname.lastname@example.org with “Securities Lending Opt-Out” in the subject.
Where can I learn more about the Program?