Introducing share lending at Freetrade

Freetrade Chat đŸ”„
21

hey @Timek

Will the returns be as a lump sum or would individual shares be listed with the return ?

You will receive a payment per borrower into your account for each month that an instrument(s) is on loan with a given borrower. This payment will be a sum of all the income you’ve earned with a given borrower, regardless of the number of loans you’ve participated in with that borrower. If you’re interested in seeing the individual share returns, you’ll be able to find these on the monthly statement at the end of each month!

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22

“You may receive a manufactured dividend”, it reads like I am not guaranteed to receive dividends (manufactured or otherwise) for all the shares I have that would pay my dividends had I not lent them out. Is this the case?

23

No. You will receive any dividends that you are due regardless if your shares are on loan or not.

It just means that if your shares are on loan and they pay a dividend this may be a “manufactured dividend”. This will be the same amount as the dividend you are owed for your shares it just means the cash may come from the borrower rather than the company.

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25

Great news this is on its way, it’s been a long time discussed!

So it’s a 50/50 split, Freetrade will make X millions per year which is great for the business and this gets shared evenly with customers. Those with more shares on loan will get more and there will be different rates per share lent out. So it’ll provide different individual returns loosely around the size of a dividend.

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26

Think we are many years away from Freetrade generating millions of pound of revenues from this. Still a good option to have for users though.

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27

What happens to my “borrowed” shares if I opt in then decide to opt out. Will the “person” who borrowed them have to “give” them back immediately?

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28

Thanks

I would need this information as if I ended up loaning out a share. The payment is a income on that share.

29

Robinhood makes around $20m per month from security lending.

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30

So considering that now Freetrade has more than 2 Billons of AUM, are this assumptions legit?

  • 20% of AUM into Share Lending → Gross Monthly income (0.02% rate): 80k
  • 40% of AUM into Share Lending → Gross Monthly income (0.02% rate): 160k
  • 60% of AUM into Share Lending → Gross Monthly income (0.02% rate): 240k
  • 80% of AUM into Share Lending → Gross Monthly income (0.02% rate): 320k

So assuming a (realistic) scenario of 60%, it means that Freetrade will generate yearly around (240/2)*12 = 1.44 Millions from share lending. Which would represents what % of total revenue?

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31

Congratulations to the Freetrade team on banging out another big feature! They’re really flying through them now. 2024 is a good year!

I don’t know how far along these things were under the old CEO but they’re certainly coming thick and fast under the new CEO.

:cow: :kiss:

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32

A significant proportion of their AUM will be in ISAs, shares from which cannot be leant. Which is a shame in all honesty, HMRC should allow it.

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33

As a ballpark estimate we could say 50% of AUA in ISA’s and most people will tick the box (say 80%+), at that 2bps per month would give £1.92m revenue. Split 50/50 is about £1m each to FT & to Customers.

I gather that 2bps per month might be conservate, as it would change year to year. It may also take them time to get it fully up and runnning.

2000*50%*80%*0.02%*12=ÂŁ1.92m per year

Edit: 90% will probably tick the box from a value perspective.

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34

That’s me! I was a bit bummed when I found out that I couldn’t take part. I wonder what the reasoning is for allowinjg it in a SIPP but not an ISA
 or maybe there is no reasoning.

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35

I’m pleased to be given the choice. I’ve not been given a similar courtesy elsewhere.

FT would have been worth including some real examples that are “accurate at the time of writing”. 2 bps appears to be at the bottom of the range.

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36

Likely comes down simply to being completely different legislation and therefor scope. Pensions have a much broader scope in the types of investments that you can do under them, where as ISAs are much more restricted, this includes share lending which would fall under a way to ‘invest’ your money (along with things like directly owning property or commodities, overseas property investments, unlisted shares etc)

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37

You are allowed to trade options in a SIPP if the platform allowed for it.

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38

You’re assuming that ALL shares are lent out ALL of the time. I would be greatly surprised if more than 5% of shares were lent out at any one time.

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39

Thinking that’s included in FT’s 2bps example I.e. 4% lent out on average in a year at 5% is 2bps. It is ballpark speculation though, I’m sure there are complications in forecasting it, even with the information.

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40

Maybe the Trading 212 calculator helps?

https://www.trading212.com/share-lending