Securities Financing - FAQs

IB will lend your fully-paid US stocks and eligible US corporate bonds only.

• In order to optimize your revenue, we focus on the stocks with a borrow offset greater than 25bps from Fed Funds, the industry interest rate benchmark. Therefore, not all stocks in your portfolio may be loaned.
• The universe of stocks that are sought after and thus have the most value from a stock loan perspective are labeled Hard to Borrow (HTB) and represent a subset of the total equity available for lending in the USA.
• There is a constant shifting of the most desirable stocks and there is no comprehensive way to predict which stock will become HTB, so IB has set up the Stock Yield Enhancement Program (SYEP) to include all the stocks in a customer's account. When a stock becomes HTB, the IB algorithm can search all customer portfolios in the program for the stocks that can be loaned effectively.

None. Your ability to borrow is still based on your stock positions.

Yes. Your Stock Yield Enhancement Program activity is covered by three separate sections in an activity statement:

• IB Managed Securities Lent - In this section, cash collateral is listed under Collateral Amount.
• IB Managed Securities Lent Activity - This section lists each stock loan transaction including Transaction ID, Quantity, Net Fee and Collateral Amount.
• IB Managed Securities Lent Fee Details - This section lists each stock loan transaction with Market Fee, Fee Paid to IB and Net Lend Fee Paid to Customer.

Yes. IB marks-to-market all positions nightly, which is the industry convention. The mark-to-market is calculated by rounding the end-of-day closing security price up to the nearest dollar. The collateral amount is then calculated by multiplying the rounded security price times the number of shares by 102% US securities (the collateral amount will be at least 100% but may be greater based on applicable laws or market custom).

For example, customer A has enrolled in the SYEP and IB has subsequently loaned 5000 shares of XYZ on behalf of this customer. XYZ's closing price is $22.15. The mark-to-market is calculated by rounding $22.15 * 1.02 = 22.59 rounded up nearest dollar = 23 * 5000 = $115,000.

You are free to sell your loaned stock at any time. Upon the sale, IB recalls the loan from the street and makes normal delivery on your behalf on settlement date. The stock loan is terminated.

You can sell any number of shares including the entire amount if you want. There is no difference in how you trade based on whether or not the shares are lent.

If the stock is fully paid, it will benefit you the same whether or not it has call options written against it.

The same US Tax withholding rates for non-resident aliens applies for both dividends and payments in lieu. In general the rate is 30%; however, a lower rate may be applied if there is a tax treaty between your resident country and the US.

There is no impact on capital gain treatment upon the sale of shares that have been lent. Payment in lieu income, or payments received in lieu of dividends or interest is considered ordinary income and does not meet the definition of qualified dividend income and therefore is taxed at ordinary income tax rates rather than qualified dividend rates.

IB will attempt to mitigate the payment of PILs by recalling shares prior to a dividend, however, IB cannot guarantee that the borrower will be able to return the shares within the necessary time frame to avoid PIL treatment.

Yes. The Stock Yield Enhancement Program enrollment process is the same for all eligible accounts, including IRA accounts.

No, the Stock Yield Enhancement Program is not currently available to Canadian clients.