Swissquote’s Securities Lending program offers clients an opportunity to generate additional passive income by lending out the securities they already own. This service is designed to be seamless, allowing investors to earn extra revenue while retaining the primary benefits of ownership. This month, I’m enrolling to this lending scheme and i will keep you posted on how this works in practice.
How Securities Lending Works
In the realm of financial markets, securities lending involves the temporary transfer of securities from a lender to a borrower, with the agreement that the borrower will return the same securities at a later date. Borrowers, typically reputable financial institutions, seek these securities for various purposes, such as facilitating timely trade settlements or using them as collateral. In return for lending their securities, lenders receive compensation, often in the form of fees, which provides an additional income stream.
Swissquote’s Approach to Securities Lending
Swissquote has streamlined this process for its clients by managing the complexities involved in securities lending. Once a client opts into the program, Swissquote takes on the responsibility of identifying suitable borrowers, ensuring that all counterparties are reputable, top-tier banks and financial institutions. The revenue generated from lending activities is then deposited directly into the client’s account on a monthly basis. (info taken from swissquote.com)
Key Features and Benefits
- Effortless Passive Income: Clients can earn additional income without active involvement. Swissquote handles the entire lending process, from finding borrowers to managing transactions, ensuring that clients receive their share of the generated revenue seamlessly.
- Retention of Financial Benefits: Even when securities are on loan, clients continue to receive dividends or substitute payments. Importantly, they maintain the flexibility to sell their securities at any time, ensuring liquidity is not compromised.
- Safety and Security: Swissquote prioritizes the security of its clients’ assets. The company only lends to reputable, top-tier financial institutions and ensures that each loan is over-collateralized, maintaining at least 105% collateral to safeguard the client’s interests.
Eligibility and Participation
Currently, non-registered shares and select ETFs are eligible for the Securities Lending program. Swissquote plans to expand this offering to include a broader range of financial instruments in the future. Clients can activate the Securities Lending service for their entire portfolio through Swissquote’s platforms.
Considerations and Potential Returns
It’s important to note that securities lending is demand-driven. This means that not all securities in a client’s portfolio may be loaned out at any given time. Securities that are more scarce or in higher demand have a greater potential to be loaned and can yield higher returns. While Swissquote cannot guarantee that it will find borrowers for every security, the program is designed to maximize opportunities for clients to earn additional income.
How to Get Started
Clients interested in participating in the Securities Lending program can easily opt-in through Swissquote’s eTrading platform. Upon logging in, clients will be prompted to agree to the specific terms for the service. Once accepted, the service can be enabled or disabled at any time with a simple switch in the Securities Lending section of the platform. This flexibility ensures that clients have full control over their participation in the program.
Conclusion
Swissquote’s Securities Lending program provides a straightforward and secure way for investors to enhance the returns on their existing portfolios. By leveraging the demand for certain securities, clients can earn additional income while retaining the core benefits of ownership. With Swissquote handling the intricacies of the lending process and ensuring the security of transactions, clients can participate in this program with confidence.