The Securities Lending Program is a way for the average investor to make a bit of extra money off of the stocks they already have in their account. This is done through Fully Paid Securities Lending, or FPSL.
Think of it like real estate. If you have a property that is going to sit idle for a few months, you can AirBnB it for the period that you aren’t using it.
The Securities Lending Program basically does the same thing with your held securities: it loans them out to investors who need them for advanced trading strategies for as long as they sit in your account.
You still own the shares and can sell them at any time through your trading platform, and dividends are still paid out to you.
Who is borrowing these shares?
Borrowing shares is required for certain advanced trading strategies. The most common of these strategies is short selling, where an investor borrows and sells shares in hopes
that the price will decline before they have to buy them back and return them.
Borrowers may also need the shares for more advanced reasons, like to fulfil contracts, meet obligations, or to leverage their voting rights.
Does short selling mean securities lending is harmful to the stock’s value?
Academic research has shown that stock lending does not have a significant negative impact on the value of the underlying security 1. The shorting strategy is supposed to benefit when the price of a security goes down,
not actively drive down the price. A short only lowers the share’s value as much as the sale of those shares. It is unlikely that a short-sale enabled by your securities will have a significant impact on the underlying price.