Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
7 truths about stock lending: a guide for investors
Peter Siks
Summary: Stock lending - or securities lending - is a tool that has been used long and often by institutional investors. The concept offers an alternative revenue stream and has only recently become available for private investors and traders. And while the term may evoke different levels of confusion depending on how well trodden you are in the financial world, it is something you ought to consider.
What is stock lending?
In its shortest form possible, stock lending is an opportunity for you to earn additional income on the stocks and ETFs in your portfolio. This income is independent of the development in said stock or ETFs price development.The way it works is that you lend out your stock to a counterpart and for that, they pay you an interest. The size of this interest is determined by the supply and demand of the stock in question.
Who is it interesting for?
Stock lending is interesting for all investors that want the opportunity to earn an extra passive income on their portfolio. It can be particularly interesting for longer-term investors who invest in securities with a relatively high lending fee.Who are borrowing your stocks?
The counterpart borrowing your stocks can be more or less all market participants such as pension funds, insurance companies, brokers, banks, and other investors or even investment fund or ETF managers.Who owns the stocks while they are lent out?
You are still the economic owner of stocks that are lent out. This means that you still earn or lose money if the stock rises or falls in price. You are also entitled to a dividend-replacement payment. But while your stocks are lent out, you are not the legal owner, which primarily means you are not allowed to attend the shareholders' meeting.Most importantly, you can sell your stocks at any time you wish even though they are lent out. Naturally, this also ends the right to compensation for the lending.
Why do these people want to borrow my stocks?
What you will often hear is that it is only hedge funds that borrow stocks and that do that to short the stock, i.e., to bet against the stock. This does happen, but there is a very real chance that the borrower sees it as part of a more complex, comprehensive strategy. Because in reality, stock lending is widely used for a variety of purposes, such as being able to deliver on time by market makers and liquidity providers and arbitrage trading.What are the risks?
When you enable stock lending at Saxo, the borrower will always be Saxo. This means that the only risk you face is that Saxo defaults and is unable to return your shares to you. To protect you from this, we will post cash or other securities in a separate depot corresponding to the value of the securities you have lent out. That's called collateral. The collateral ensures that even in the unlikely event that Saxo defaults, you get back the proceeds of the collateral.
How do you get started?
You can activate stock lending in your account via the platform. Read more about how stock lending works in Saxo and compensation, you may get from some stocks.You can also dive further into the inner workings of stock lending.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer