Agree - “zero benefit” is not accurate. You are helping the broker, to be sure, but you are getting compensated. I also agree that this probably won’t make anyone a lot of money, particularly with the boring, widely held ETFs that Bogleheads love.It isn't zero practical benefit. Its essentially free money. Fidelity IIRC pays out 60% of the revenue generated, so they get 40% you get 60%. And in taxable accounts where you get payment-in-lieu of the dividend while your shares are lent, they bump the payment up by ~26% to compensate you for the loss of qualified dividend tax status.Zero practical benefit to the client (you and me). Large benefit to Fidelity in aggregate across their client base. It's a form of skimming.Seems interesting...so why not got for this? Any reasons?
I also do lending at Robinhood. They pay out 15% and keep 85%. In my experience they lend out significantly more shares for much longer amounts of time, but make very small revenues on it. Fidelity borrows your shares much less often but generates much higher revenue per share compared to Robinhood. (Again, in my experience.)
Robinhood amounts to ~$40-$100 a month for me on ~$1.8m, which is pretty tiny.
Fidelity was paying out anywhere from ~$0 to $500 a month on the same balances (prior to xferring my IRAs to Robinhood during that 3% match promotion).
So while it isn't a significant benefit, I wouldn't call it zero practical benefit. It's a bit of free money with essentially no risk.
One quirk that I noticed with Fidelity’s FPL program - an investor cannot write a covered call on a stock that has been borrowed under the program unless it is sitting in a cash account (i.e., not in margin).
Statistics: Posted by CardinalRule — Thu Sep 19, 2024 11:35 pm — Replies 30 — Views 6120
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