Robinhood launches stock lending program – WSJ

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Robinhood bled active investors after hitting new highs at the start of the Covid-19 pandemic.


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Robinhood HOOD 7.92%

Markets Inc. announced on Wednesday that it is adding stock lending to its trading app, the latest in a series of products to bolster its business.

Clients who authorize stock lending authorize Robinhood to lend all fully paid stocks in their portfolio and will be paid when matched with a borrower. The brokerage has a dashboard to enroll in the program and track earnings.

“Robinhood does the work of finding borrowers and managing deals while clients can add a potential source of passive recurring income to their portfolio,” said Steve Quirk, Robinhood’s chief brokerage.

To be eligible, clients must have an account value of $5,000 or more, income of $25,000, and some trading experience. The program will be fully rolled out by the end of May, the company said.

The securities lending business is booming. Global securities lenders earned $828 million in revenue last month, a 20% increase from April 2021, according to research firm DataLend.

Robinhood competes in a crowded market with many established players focused on the same customers. Other brokerage firms, including Fidelity Investments, Charles Schwab,

TD Ameritrade and Webull also offer securities lending to individual investors.

Robinhood bled active investors and revenue fell 43% in the first quarter, the fifth consecutive quarterly decline. Last week, the brokerage said it was laying off 9% of its workforce.

The company has focused on introducing new products, including crypto wallets and auto-invest services, to diversify its revenue streams and recruit new investors.

The brokerage soared to new heights at the start of the Covid-19 pandemic as individual investors flooded the rising market, making a name for themselves with a slick interface and fee-free transactions.

It sends customer orders to high-speed trading companies in exchange for cash in a practice called payment for order flow. Fewer investors trading means Robinhood’s transaction-based revenue halved in the first quarter.

Hobby investors took the stock market by storm a year ago, buying shares of memes like GameStop and AMC Entertainment. Many remember them as a revolution against Wall Street, but in the end they largely lined only the pockets of the big financial corporations. The WSJ’s Dion Rabouin explains. Illustration: Sebastien Vega

Write to Jenna Telesca at [email protected]

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Appeared in the May 5, 2022 print edition as “Robinhood launches stock lending program”.

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