Robinhood launches stock lending program as part of income diversification

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The Robinhood logo is seen on a smartphone in front of a same logo displayed in this illustration taken July 2, 2021. REUTERS/Dado Ruvic/Illustration

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NEW YORK, May 4 (Reuters) – Robinhood Markets Inc (HOOD.O) said on Wednesday it has launched a fully remunerated securities lending program, which allows users of the online brokerage to lend out stocks they own through the popular application to market players and passively. collect part of the fees.

The move is part of Robinhood’s effort to diversify its revenue away from transactional revenue, which accounted for nearly three-quarters of the company’s revenue in the first quarter and was down 48% from a year earlier, when individual investors piled up in the so-called actions themselves. . Read more

Robinhood already makes money by lending stocks its customers buy on margin, but the new fully paid program will include all stocks held by its nearly 23 million users, provided they sign up and meet certain terms.

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The new program will potentially bring in 1 to 2 times the revenue generated by Robinhood’s margined securities lending program, the company’s CEO, Jason Warnick, said in a call with analysts last week.

The Menlo Park, Calif.-based company earned $137.2 million from securities lending on margin in 2021.

“Transactional revenue has been the core component of revenue, but as you grow the offering, those other components become a more significant part,” Robinhood chief brokerage Steve Quirk said in an interview.

Demand to borrow stock for a fee often comes from institutional investors and other brokerage houses looking to settle trades or facilitate short sales.

“It’s just another way, especially in a tough market, like the one we’ve had recently, to generate a little extra income from an existing portfolio,” Quirk said.

To be eligible for the fully paid loan program, Robinhood users must have a total account value of $5,000, at least $25,000 in reported income or some trading experience, he said.

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Reporting by John McCrank; edited by Bernard Orr

Our standards: The Thomson Reuters Trust Principles.

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