I am delighted about the securities lending. It is nice to hear some good news on a regular basis,first of all the Swedish license and now this,Iām getting overwhelmed 
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For brokers to do it with shares belonging to individual unsophisticated retail investors while making them bear any counterparty risk?
Really?
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Yes. Itās a normal part of market participation to have exposure to share lending, whether itās via a broker or an ETF.
Why were you a beta tester for Freetrade, if you are against āunsophisticated retail investorsā being exposed to risks that are inherent in investing?
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Thatās not very nice. I get some agree with share lending and others donāt.
For the record Iāll cease with mentioning a certain other platform as an act of goodwill going forward.
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Agree, can we close this?
Maybe have an FAQ post instead.
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Iām asking FT to please reconsider and allow an opt out.
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I think your response is unfair, people in this chat are unsure about the changes and are asking fair questions to help understand and make a decision about how it affects them. Weāre all here to help each other learn and understand.
Clause 24.2.6 is clear that there is a risk that the borrower could default and not be able to return the loaned shares to Freetrade. In that event, Freetrade will take all reasonable measures to return equivalent securities, and this is why collateral is sought from the borrower. Freetrade does not guarantee that shares will be returned no matter what happens, just that they will take all reasonable measures to return equivalent securities. There is therefore a risk (no matter how small) that this could happen. I donāt see how the previous comment is spreading misinformation, the terms are quite clear about this.
In a word where we can be anything, letās me kind.
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I would also add to that,hiring TALENTED engineers and paying good wages and having a vision are also positive qualities in bringing new features!
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Just gonna chime in and give my opinion as I feel FT made this thread partly to see how customers feel.
Whilst this securities lending business bothers me somewhat, iām still willing to be an FT customer - yes, thereās a risk , but it is a risk iām willing to take to be able to invest(the alternative is paying >Ā£10 fee for trades, which is a non starter for me given the average value of my trades).
Itās also quite nice that ISA assets canāt be lent - my ISA is my main account, so thatās great. I do plan on opening a SIPP though, itās still an attractive proposition (fees, service, etc) despite the securities lending in my eyes.
I personally disagree with the notion that all this harms FTās brand/image to be honest - itās a necessary step to make commission free investing sustainable. However, I do feel it reinforces the idea that āyou get what you pay forā with brokers, or any service for that matter. If I had Ā£1m+ to invest, I would definitely be more comfortable with, say, Hargreaves Lansdown.
If FT were to take a step further and go full transparency on this in the app when it launches (Are my shares currently being lent? to whom? at what rate?), that would go a long way in making me more comfortable with the risk. Either way, iām still quite content as an FT customer. I will watch out for any updates like this in the future though, I definitely would draw the line at some point.
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Thanks for being constructive.
We need to remember that the terms are their to protect the customer AND the broker
Why is ātaking all the reasonable measuresā not fine by your standards?
My understanding it is formulated this way to give protection to the customer and at the same time protect FT in certain edge cases.
For example, how could FT guarantee you a return of your stock if the trading gets suspended on your security and the counterparty is not able to return it at the same time.
Thatās the way I see it at least. I donāt want my broker to get stuck in litigation with some customer demanding something unreasonable from FT and indirectly harming all other clients of the platform, so the formulation is fine by me.
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Iām sorry this happened at the worst time on the market. Who will think about selling some stock to transfer to the ISA or even stop being a customer when in many portfolios the ālossesā are huge at the moment? I hope we have some rally by the end of April (although I doubt) for those who do not agree to take a new path without losses.
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I do understand that, Freetrade has made a decision to enter into securities lending and, whilst they canāt please everyone, they are taking steps to protect customers. They must also protect the business.
From a business perspective, I understand why the terms are written as they are; it may create lots of risk for the business if they provide a guarantee to its customers when it isnāt always in there control and using the words āreasonable endeavoursā gives them a defence if for some reason they canāt get them back and / or the collateral obtained isnāt enough to cover the cost of providing an equivalent to replace the shares loaned out.
From a customer perspective, I believe Freetrade has a lot of new / retail investors who donāt understand securities lending and, if you read the terms strictly, they do suggest there is risk of losing your investment (aside from the usual risk of investing) which may have caused some concern and worry, and a few people in this conversation feel theyāre being forced to take the risk.
This announcement has come as a surprise to a lot of people (me included) and thatās where the beauty of this community helps; people can raise questions / concerns and get help and advice from fellow Freetrade Investors. Itās also a great way to share / receive feedback from the community and I really like that Adam and Viktor will often respond to concerns; there arenāt many companies like that.
This discussion has really helped me to understand the changes and, having read the terms and done my own research, I know how the changes affect me and what Iām comfortable with regarding the terms and conditions. I hope this conversation has helped others too.
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Who will think about selling some stock to transfer to the ISA or even stop being a customer when in many portfolios the ālossesā are huge at the moment?
Itās the best time to transfer to an ISA when stocks are down. You can move more stock in using less of your ISA allowance. You only lose on spread while selling in GIA and buying in ISA and thatās the same whether the price is low or high
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Just to put my thoughts down as well. I think it probably is fine, but we have to remember we are customers not Freetrade employees, and from a customer perspective, you have to protect yourself first, not Freetrade. From Freetrade perspective they have to protect themselves first not the customer (except where they are regulated to do so). Freetrade have the upper hand as theyāre stating the terms.
Weāve already seen that the terms have a mistake in them which are apparently going to be corrected. So customers carefully reading the terms before accepting them and pushing Freetrade on areas we are concerned about is a good thing. Because if it means stronger more clearer terms for customers in the end thatās good for all of us.
edit: to note, Iāve been dealing with a few small contracts for b2b and they almost always have the flexibility to modify the contract. Customers are always on the bad end of a contract because companies are almost always unwilling to change them. I think thereās a good opportunity here for Freetrade to take feedback and maybe where it makes sense (without removing share lending) make the contract stronger and clearer for customers. Not saying Freetrade will do that, but how often do companies actually take and implement feedback into their customer terms of service?
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Amen to that. Almost all of my money is elsewhere - nothing to do with Freetrade, it was there well before Freetrade existed - but I share the concerns (I only have a GIA with Freetrade). But for me personally, I could invest in a meme stock tomorrow and (potentially) lose it all anyway. I get the risk. Iāll chance it myself, but transferring my pension here has become a no go - at least for now.
YNWA.
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Sorry, I got confused. I donāt think you can transfer a stock of a GIA to an ISA without first selling it, right? So the losses I mentioned earlier would be huge in some portfolios (including mine) that were intended for the long term, because now people would have their goals changed at the worst time in the market. However, I forgot that people will still be able to keep their stocks being prevented only from buying new stocks.
Does anyone know if features such as live pricing will still be available if someone does not agree but keep their shares in a GIA? I read a lot of comments and I havenāt seen anyone say anything about it.
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My point was if you are buying it again in the ISA straight away it doesnāt make a difference whether you are up or down
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I understand, but I got only a GIA account at the moment with a portfolio on fire.
Being a beta tester does not mean I cannot have a view or ask questions. I am a shareholder as well.
Having customers exposed to securities lending is an additional layer of risk, compared to just buying and owning shares.
Itās a legitimate question to ask if Freetrade have discussed this change with the FCA/regulators given
a) the typical customer base of Freetrade;
b) whether the lack of risk sharing is appropriate/best practice; and
c) checking if the proposed T&C breach UK Unfair Contract Terms legislation or not.
I would also be interested in confirmation that the FSCS have confirmed that they would cover losses in the event of insufficient collateral - their website only talks about failed firms at a quick glance.
As for Freetradeās reassurance, that they plan to only engage in this practice with big and established playersā¦ well I imagine that would have included firms such as Bear Stearns, Lehman Brothers and AIG before they hit the buffersā¦
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Iām going to reiterate a few points that have been made a number of times above, as it seems as though weāre going around in circles.
Letās keep this thread constructive, respectful and useful. We understand there are lots of questions and concerns and weāve addressed many of them throughout. So if youāre coming to this thread for the first time, please take a quick glance through.
The terms that we require everyone to accept include an obligation on Freetrade to return your securities to you. In addition, we are obliged to hold collateral - government bonds or cash - that is greater in value than the shares on loan. We value this collateral daily to ensure it is of sufficient value.
That effectively means that for there to be a shortfall in collateral the borrower would have to default and - in the same c. 24 hour period - the value of the collateral would have to dip below the value of your shares (either the shares rise in value or the collateralās value falls).
To give you added reassurance, we have committed to taking all reasonable measures to return the equivalent shares to you should this occur.
We have shared these terms updates well in advance with everyone so that there is time to ask questions and so everyone has the opportunity to make the decision with which they feel comfortable. This is an exceptionally long grace period (of c. 90 days) to a terms and conditions update.
Finally, on FSCS protection, the securities lending programme does not impact this. This protection (up to Ā£85,000) remains in place to ensure that you are not left out of pocket in the unlikely event that Freetrade goes bust.
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