Securities Lending Program FAQ

• Overview of the Securities Lending Program
• Eligibility
• How does Questrade determine whose shares get loaned out?
• Payout and earnings
• Statement changes and navigation
• Benefits of Fully Paid Lending
• Tradeoffs of Fully Paid Lending
• Start participation
• Stop participation
• Managing my securities

The Securities Lending Program, also known as Fully Paid Securities Lending, allows you to lend your securities (stocks and ETFs) to other investors and earn passive income. When you lend your securities, you will retain complete ownership of your assets throughout the lending period allowing you to sell or adjust your strategies at any time. In exchange for borrowing your securities to facilitate their trading activities, the investors will pay you a fee.

What accounts are eligible?

As of today, only securities held in TFSAs, margin and cash accounts are available to be lent out. We are working quickly to bring more accounts into the program.

What securities are eligible?

Currently only fully paid U.S. stocks and ETFs listed on one of the major exchanges are eligible. This means stocks and ETFs that are bought on margin are not eligible. We are also working to add Canadian securities into the program.

Securities that do not qualify can be held in the account, but only qualifying securities will be lent out.

Shares will be lent out evenly among shareholders according to availability in a round-robin system, meaning one share will be lent from each available lender, repeated until the order is fulfilled.

For example: let’s say someone is borrowing 200 shares of XYZ, and there are 3 available shareholders:

• Shareholder A has 10 shares
• Shareholder B has 100 shares
• Shareholder C has 1,000 shares

In this case, one share will be borrowed from shareholder A, B, and C until shareholder A’s shares are all borrowed:

First 30 shares = 10 from shareholder A, 10 from shareholder B, 10 from shareholder C

Since Shareholder A has no more shares to lend, the remaining 170 available shares will be split between shareholder B and shareholder C:

Next 170 shares = 85 from shareholder B, 85 from shareholder C

So of the 200 shares lent out, Shareholder A will lend all 10 of their shares, while Shareholder B and Shareholder C both lend out 95 of their shares.

If there were 300 shares being borrowed, it would continue the same way: the first 30 shares would be split between all 3, the next 180 shares would be split between Shareholder B and Shareholder C, and since Shareholder C is the only one with available shares left, the remaining 90 shares would all be borrowed from Shareholder C.

How do I get paid? How often will I get paid?

You will get paid once a month on the fifth business day of the following month for all the income received from securities lent out - it will be automatically deposited into your account. This will be deposited in the currency of the transaction. (For registered accounts this will NOT be treated as a contribution)

What will I be paid?

The lending rates can vary day-to-day, and depend on factors such as lending supply, borrowing demand, and overall market conditions. Stocks with lots of interest for short-sellers and hedgers will tend to have higher lending rates.

Where can I see how much I will earn?

A lending confirmation will appear in your account two business days after the loan has started. This confirmation will show you the securities lending rate and the amount of shares being borrowed. When the loan ends (or if the terms of the loan change), you will receive a lending confirmation displaying that the loan has ended.

The dollar amount that you are paid from all your loaned shares will appear on your account activity page the day it's paid and also on your monthly account statement.

What is the split between what Questrade makes and what I make?

Questrade will split the securities lending fee 50/50 with the customers who own the borrowed shares.

This structure may change as we expand the Securities Lending Program to include a wider variety of securities.

Monthly account statement

All shares loaned out will be captured in your monthly account statement. This will be broken down into three different areas:

• Cash collateral - a snapshot of all cash collateral related to your loaned out securities, taken on the last business day of the month.
• Loan and repay transactions - a list of all lending-related transactions from the current month.
• Stocks loaned - a snapshot of what stocks have been loaned out, taken on the last business day of the month.

Where are my payout details?

You'll find your payout information in your account activity.

There are many benefits to the Securities Lending Program:

• You passively earn income on investments that you’re already holding in your account.
• Your investments are fully protected. We keep 100% of the market value of the shares in collateral to ensure no risk to you when loaning your shares. 
• Every self-directed customer is eligible and there is no minimum dollar value. 
• You retain full control of your shares, you can still buy and sell whenever you want.

Please note that at launch only securities held in TFSA, Cash, and Margin accounts are eligible to participate - other registered accounts coming soon!

It's important to consider some potential trade-offs of Stock Lending before deciding to participate:

• You will not be able to vote with shares that are actively loaned out. However, if you want to temporarily regain voting rights you can always opt-out before a vote and then opt back in once your votes are cast.
• Your shares will temporarily lose CIPF coverage. However, to make sure your investments are still protected, we always keep 100% of the market value of the shares as cash collateral so that you can be compensated in the unlikely scenario that the shares are not returned.

For a full list of trade offs, please refer to the Securities Lending Program risk disclosure.

All Questrade customers with eligible accounts (TFSA, margin and cash) can be enrolled in the Securities Lending Program. Questrade will facilitate this process and there is nothing that you need to do to participate.

You can easily opt out by logging in to Questrade on a web browser and navigate to Management from your trading screen and go to Securities Lending Program.

You can also exclude specific securities from the program on the same page. You can opt out of any specific security at any time, which will be processed on the next business day. You are also able to select a specific risk level that aligns with your preferences.

Where can I see the shares that are lent out?

You can see the shares that are being lent out by logging in to Questrade on a web browser and going to Reports > Lending Confirmations. They will also appear on your monthly account statements.

If I want to sell my shares, does this have any impact?

There are no restrictions - you can sell your shares instantly. Lending them out has no impact on your ability to trade. As soon as you sell your shares, we will recall your shares from the pool. There is nothing you need to do!

Will I be notified if any of my positions have been loaned out?

As loans can be issued or recalled throughout the day, you will not be notified when your positions are loaned out. However, you can easily see when your shares are loaned by logging into Questrade on a web browser and going to Reports>Lending confirmations.

The Lending confirmation will be available two business days after the loan has begun, has ended or if the terms of the loan (lending rate, amount of shares, etc.) has changed.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.