FinTech: Robinhood Would Allow Users To Loan Stocks, Earn Passive Income

March 17, 2022 | FinTech, Latest News, News

The proposed feature was spotted on a beta version of Robinhood’s iPhone app.

Robinhood (NASDAQ: HOOD), the pioneer in commission-free mobile stock trading, is likely to roll out a stock lending feature in the coming months, Bloomberg reported. Dubbed the Stock Loan Income Program (SLIP), the new feature would compete with other legacy brokers when it rolls out in coming months.

Robinhood: Lend stocks, earn income

Users of the Robinhood app can use the new functionality to lend their stocks to other investors, generally financial institutions, and would take the battle for this business into the camps of rivals such as Fidelity Investments, Morgan Stanley’s E*Trade and Charles Schwab Corp.

Technically, the feature is called fully paid securities lending, and allows users to make some money off stocks sitting idle in their broking accounts.

Developer Steve Moser is credited with discovering SLIP in a beta version of the iPhone app. He shared the information with Bloomberg.

“Through SLIP, you have the opportunity to earn passive income by lending whole shares of stocks to other institutions,” it was explained in the app. “These institutions may borrow stocks to settle trades or facilitate short sales. You’ll be able to buy and sell as usual, even if your stocks are on loan.”

However, the downsides include the non-availability of SIPC protection on these trades. Also, a lending transaction is not guaranteed, and depends upon market demand and supply.

Robinhood representative Rouky Diallo had this to say in an email to Bloomberg: “We are still on target to release this product in the first half of 2022, which will provide even more value to our customers.”

Related Story: Robinhood Rides Gamestop Tumult To $3.4B Debt Financing

Image source: Marco Verch | | CC BY 2.0

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