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Stock Yield Enhancement Program

How Do I Earn Extra Income on My Stocks?

Program Overview
Our Stock Yield Enhancement Program allows you to lend your fully-paid stock shares to Place Trade in exchange for cash collateral (either U.S. Treasuries or cash); PT will lend the borrowed shares to traders who want to sell them short and are willing to pay a fee to borrow them.


Each day that your stock is on loan, you will be paid interest on the collateral (U.S Treasury or cash) value for the loan based on market rates. You share a percentage of this with PT (currently 50%) as a fee for managing the program.1


Stocks that are eligible to be loaned out are all "fully-paid" stocks (stocks not held on margin) and "excess-margin" stocks (stocks held on margin but whose market value exceeds 140% of your margin debit balance).


The Stock Yield Enhancement Program is available to eligible PT clients2 who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000 (or equivalent).


Benefits    Risks    Eligibility    Additional Considerations & Risks    FAQs    Open Account

What are the Benefits of Lending My Stock Shares for Income?

Benefits

Simple and Automatic

PT manages all aspects of share lending. Once you enroll, PT will examine your fully-paid stock portfolio automatically. If you have stocks that are attractive in the securities lending market, PT will borrow the stocks from you, secured by collateral (either US Treasuries or cash), and will lend the shares.


Complete Transparency

When your stock is loaned out, you will see the interest rate that you are being paid on the collateral (U.S Treasury or cash) value along with the stock's market-based rate.^1 Other brokers with similar programs generally do not disclose the market rates to you, which allows them to pay you a small piece of the pie while holding on to most of the profits.


Earn Supplemental Income

Each day that your stock is on loan, you will be paid interest on the collateral (U.S Treasury or cash) value for the loan based on market rates.


No Restrictions: 

  • You Can Trade Your Loaned Stock Without Any Restrictions
  • You still own your shares of the stock.
  • You will be able to see the loaned shares on your account statement, indicating that they are being loaned out. 
  • You will also continue to have market risk and will recognize any profit (or loss) if the stock price moves. 
  • If you want to sell your shares, you can, at any time and without restriction. 
  • You can terminate your participation at any time for any reason.

Example

XYZ is currently trading at USD 75.00/share. You are long 5,000 shares of XYZ, with a market value of USD 375,000.00. XYZ is in demand and the market-based rate is 9%.


You sign up for PT's Stock Yield Enhancement Program and PT borrows your 5,000 shares of XYZ. PT will pay you interest on the U.S Treasury or cash collateral of USD 375,000.00 x 4.5% = USD 16,875.00.


You could earn USD 16,875.00/year on stock you already own.^3

Eligibility

Can I Earn Extra Income on My Shares?

The Stock Yield Enhancement Program is available to eligible PT clients^2:


  • who have been approved for a margin account, or


  • who have a cash account with equity greater than USD 50,000 (or equivalent).


Stocks that are eligible to be loaned out are all:


  • "Fully-paid" stocks (stocks not held on margin) and 


  • "Excess-margin" stocks (stocks held on margin but whose market value exceeds 140% of your margin debit balance).

What are the Risks of Lending My Stock Shares for Income?

Considerations and Risks

 

Shares loaned out may not be protected by SIPC.

The Securities Investor Protection Act of 1970 may not protect shares loaned out. This is why under SEC rules; PT must provide you with U.S Treasury or cash collateral in the same amount as the value of your shares to protect you in the very unlikely event that the stock is not returned to you.


Shares loaned out are typically used to facilitate short sales.

Shares are attractive in the stock loan market because other traders want to borrow and sell them short, possibly affecting the value of the shares.


Loan rates change frequently.

These rates and the interest you will receive may go down (or up) by 50% or more.


Loans may be terminated at any time by PT.

Also, PT does not guarantee that it will lend all eligible shares.


Voting rights go to the borrower.

During any period in which your securities are loaned out, you will forfeit your right to vote those shares by proxy.


Selling your shares or borrowing against them or withdrawing cash in a margin account will terminate the loan transaction.

If you sell the fully paid shares that have been lent out, or if you borrow the shares or withdraw cash in a margin account (such that the securities become margin securities and are no longer fully paid or excess margin securities) the loan will terminate and you will stop receiving loan interest.

Additional Considerations and Risks

For More Information About the Risks of Loaning My Shares

For a complete discussion of the risks and characteristics of the program, please click the download button below and:

  • Check out our FAQ page below.
  • Sign up for PT's Stock Yield Enhancement Program on the Account Settings configuration table in the Account Management/Client Portal.


Risks and Characteristics of the Stock Yield Enhancement Program (pdf)

Download

Stock Yield Enhancement Program FAQs

Please reach us at 919-719-7200 if you cannot find an answer to your question.

 

MANAGE STOCK YIELD ENHANCEMENT PROGRAM PARTICIPATION


Clients who are eligible and wish to enroll or terminate their participation in the Stock Yield Enhancement Program (SYEP) can use the button above or follow the below procedure:

  1. Log in to Account Management/Client Portal.
  2. Click the User menu (head and shoulders icon in the top right corner) followed by Settings.
  3. Under Account Settings find the Trading section.
  4. Click Stock Yield Enhancement Program.
  5. Sign up for the Stock Yield Enhancement Program by selecting the box, or terminate participation by removing the check from the box next to it.
  6. Click CONTINUE and follow the prompts on the screen.



 

The Stock Yield Enhancement program provides customers with the opportunity to earn additional income on securities positions which would otherwise be segregated (i.e., fully-paid securities) by permitting PT to lend out those securities to third parties. Customers who participate in the program will receive a portion of the interest paid on the cash collateral by the borrower as loan compensation for any day the loan exists and will receive cash collateral to secure the return of the stock loan at its termination.


Please Note

PT security positions can be fully-paid and/or have excess margin.



Yes. As a participant of the Stock Yield Enhancement Program 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. 



 

The income that a customer receives in exchange for shares lent depends on rates in the over-the-counter securities lending market. These rates can vary significantly, not only by the particular security loaned but also by the loan date. In general, PT pays interest to participants on their collateral at 50% of a market-based rate. 




There is no guarantee that all eligible shares in a given account will be loaned through the Stock Yield Enhancement Program as there may not be a market at an advantageous rate for certain securities, PT may not have access to a market with willing borrowers or PT may not want to loan your shares.


Clients carrying financing deficits are subject to having stock amounting to 140% of the deficit non-segregated, selected at the discretion of the broker, and therefore ineligible to lend as part of the SYEP.




The cash collateral underlying the security loan from the Stock Yield Enhancement Program and used for determining interest payments is calculated using standard industry convention whereby the closing price of the stock is multiplied by 102% and then rounded up to the nearest whole dollar.


For example, a loan of 100 shares of a stock which closes at $59.24 would be equal to $6,100 ($59.24 * 1.02 = $60.4248; round to $61, multiply by 100).his item.




Stocks that are eligible for the Stock Yield Enhancement Program:


US Market

  • Common stocks (exchange listed, PINK and OTCBB)
  • ETFs 
  • Preferred Stocks 
  • Corporate bonds*


EU & UK Marke

  • Common Stocks (exchange listed)
  • ETFs
  • Preferred Stocks


HK Market

  • Common Stocks (exchange listed) 
  • ETFs 
  • Preferred Stocks 


CAD  Market

  • Common Stocks (exchange listed) 
  • ETFs 
  • Preferred Stocks


*Municipal bonds are not eligible.


Please Note

  • 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 PT 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 PT algorithm can search all customer portfolios in the program for the stocks that can be loaned effectively.


 

Loan collateral, shares outstanding, activity and income from the Stock Yield Enhancement Program is reflected in the following 6 statement sections:


  1. Cash Report: This shows the starting collateral (either U.S. Treasuries or cash) balance, net change resulting from loan activity (positive if new loans initiated; negative if net returns) and ending collateral balance.
  2. Net Stock Position Summary: This section displays the borrowing and lending details for each stock. Net Shares (=Shares at PT + Shares Borrowed - Shares Lent). 
  3. Interest Accruals: SYEP income is included in the Interest Accrued and is treated like any other interest accrual (aggregated but only displayed as an accrual when exceeding $1 and credited to cash monthly). For year-end reporting purposes, this interest income will be reported on Form 1099 issued to U.S. taxpayers.
  4. Stock Yield Enhancement Program Securities Lent: This section displays all securities the account is lending as of the statement date, along with the interest rate and collateral amount.
  5. Stock Yield Enhancement Program Securities Held at PT: Clients of Interactive Brokers LLC will see an additional section on their statement showing the specific US Treasury held as collateral, including the quantity, price and total value securing the stock loan.
  6. Stock Yield Enhancement Program Securities Lent Activity: Displays the loan activity for each security including newly initiated loans (New Loan Allocation), terminated loans (Loan Return Allocation), the quantities and collateral amounts. 
  7. Stock Yield Enhancement Program Securities Lent Interest Details: Shows the income received on an individual loan basis including the security, quantity lent, collateral amount, the market-based rate and the interest amount paid to the account. Interest Paid to Customer is calculated by multiplying the Collateral Amount by the Interest Rate on Customer Collateral and dividing by 360 days. Please note: This section will only be displayed if the interest accrual earned by the client exceeds USD 1 for the statement period.   
  8. Interest: Income from SYEP for the current month is accrued daily and credited the next month. The credit will appear in the Interest section of the statement, along with other interest credits or charges.




Lending fees received through the Stock Yield Enhancement Program are calculated and accrued daily similar to interest credits. Please note, lending fees will be aggregated and will display as an accrual only when exceeding $1. Interest will post to your cash balance monthly. 




The income that a client receives in exchange for shares lent through the Stock Yield Enhancement Program depends on loan rates established in the over-the-counter securities lending market. These rates can vary significantly, not only by the particular security loaned but also by the loan date. To determine the customer’s portion of these fees, the Market Interest Rate % is applied to the loan collateral. This daily Gross Lending Interest is split equally between PT's clearing firm (IBKR) and the client, as IBKR takes a portion of the gross interest paid in exchange for initiating, managing, and terminating transactions.


For example, assume loan collateral of $10,000 and an annualized Market Interest Rate of 15%. In this case the daily Gross Lending Interest would be $4.16 (($10,000 *.15)/360), of which $2.08 would accrue to the client and $2.08 to IBKR. Lending interest is calculated and accrued daily similar to interest credits.



 

In the event of any of the following, a stock loan created through the Stock Yield Enhancement Program will be automatically terminated:

  • If the client elects to terminate program participation
  • Transfer of shares
  • Borrowing of a certain amount against the shares
  • Sale of shares
  • Call assignment/put exercise
  • Account closure



 

Yes. Clients who cancel participation in the SYEP can re-enroll in the program but must wait at least 90 calendar days from the cancellation date before doing so.



 

There is no way to prevent a stock from being lent out if you are currently participating in the Stock Yield Enhancement Program.


If you wish to restrict some or all of the stocks from being lent out, you would need to opt out of the Program. To do so, please see: How does one terminate Stock Yield Enhancement Program participation?



There is no impact on capital gain treatment upon the sale of shares that have been lent through the Stock Yield Enhancement Program. PT takes steps to prevent SYEP lenders from receiving a payment-in-lieu of a dividend ("PIL"). However, there may be cases where the account receives PIL.



 

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


  • Managed Securities Lent - In this section, cash collateral is listed under Collateral Amount.
  • Managed Securities Lent Activity - This section lists each stock loan transaction including Transaction ID, Quantity, Interest Rate on Customer Collateral and Collateral Amount.
  • Managed Securities Lent Interest Details - This section lists each stock loan transaction with interest Rate earned by IBKR, Interest Paid to IBKR and Interest Paid on Customer Collateral.


Find more information on the Stock Yield Enhancement Program statement sections in our Reporting Guide.



 

The first step is to determine whether securities are considered fully-paid for or if they are rehypothecated as collateral for a margin loan balance. A broker who finances client purchases of securities via margin loan is allowed by regulation to loan or pledge as collateral that client’s securities in an amount of 140% of the cash debit balance. For example, if a client maintaining a cash balance of $50,000 buys securities with a market value of $100,000, the debit balance will be $50,000. The broker holds a lien on 140% of that balance or $70,000 of securities. Any securities held by the client in excess of that amount are referred to as excess margin securities ($30,000 in this example) and are required to be segregated unless the client provides authorization to PT to lend through the Stock Yield Enhancement Program. Note that only $30,000 of securities is eligible to be lent via SYEP.


The cash debit balance is determined by first converting all non-USD denominated cash balances to USD and subtracting any short stock sale proceeds (converted to USD as necessary). If the cash balance is negative, then PT will rehypothecate 140% of that balance as collateral for the margin loan. PT does not take into account cash balances maintained in the commodities segment for the purpose of this calculation. For a more detailed explanation, please see here.


The previous day’s settled cash balances are used to determine the amount of the margin lien. Holding certain options positions may increase the amount of the margin lien.  The calculation of excess margin securities takes into account settled positions from the previous day and changes in those positions for the current settlement date.


Example 1: Account without a margin lien


Assume that an account holds $100,000 in cash and no other positions.  The trader purchases stock valued at $90,000. All securities will be deemed fully paid because the account will have a positive settled cash balance of $10,000.


Example 2: Account with a margin lien

Assume that an account holds $80,000, long stock worth $100,000 and short stock worth $100,000. Long securities totaling $28,000 are deemed margin securities and the remainder of $72,000 are deemed to be excess margin securities.


This is determined by subtracting the long stock value and short sale proceeds from the cash balance ($180,000 – $100,000 - $100,000 = -$20,000) and multiplying the resulting debit by 140% ($20,000 * 1.40 = $28,000).




The provisions of the Securities Investor Protection Act of 1970 may not protect you as a lender with respect to securities loan transactions in which you lend your fully-paid Securities to PT through the Stock Yield Enhancement Program. Therefore, the collateral delivered to you (and indicated on your account statement) may constitute the only source of satisfaction of PT's obligation in the event that IBKR fails to return securities.




There is no guarantee that all eligible shares in a given account will be loaned through the Stock Yield Enhancement Program as there may not be a market at an advantageous rate for certain securities, PT may not have access to a market with willing borrowers or PT may not want to loan your shares.




As a participant of the Stock Yield Enhancement Program you are free to sell your loaned stock at any time. Upon the sale, PT recalls the loan from the street and makes normal delivery on your behalf on settlement date. The stock loan is then terminated.




The cash account must meet this minimum equity requirement solely at the point of signing up for the Stock Yield Enhancement Program. If the equity falls below that level thereafter there is no impact upon existing loans or the ability to initiate new loans.




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



 

No, participants in the Stock Yield Enhancement Program do not retain voting rights for shares loaned out. The borrower of the securities has the right to vote or provide any consent with respect to the securities if the Record Date or deadline for voting, providing consent or taking other action falls within the loan term.




The loan will be terminated on T+1 of the action (trade, assignment, exercise) which closed or decreased the position. 




A  halt has no direct impact upon the ability to lend the stock through the Stock Yield Enhancement Program. As long as PT can continue to loan the stock, such loan will remain in place regardless of whether the stock is halted. 




No. Stock Yield Enhancement Program loans can be made in any whole share amount although externally we only lend in multiples of 100 shares. Thus, the possibility exists that we would lend 75 shares from one client and 25 from another should there be external demand to borrow 100 shares.



Disclosures

  

  1. The market-based rate is determined by taking into account the rates on shares PT has loaned to or borrowed from others, and third-party market data.
  2. Not all NON-US clients are eligible to participate in the Stock Yield Enhancement Program. 
  3. Indicative.

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All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful. 


Brokerage products are NOT FDIC insured or bank guaranteed and may lose value. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.


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Please note that while Place Trade strives to offer extremely low overall trading costs, we would like to remind investors that there will be trading costs associated with investing, trading and holding a brokerage account. Brokerage commissions and exchange fees along with potential other account fees, fund expenses and service fees may apply. Expenses related to your investment account may vary depending on the type of investments that you choose to hold, type of account, level of activity, account balance, tax withholding or other possible factors. Please consider your overall trading costs prior to investing.   


The information on this website is for discussion and information purposes only. Nothing contained herein should be considered as an offer to buy or sell any security, securities product or service, nor should be considered as investment, legal or tax advice. Place Trade Financial is a registered broker dealer (Member FINRA/SIPC) however it is not registered in all states or jurisdictions. Place Trade does not solicit securities, products or services in any jurisdiction where it is not authorized to do so. Please contact Place Trade Financial at 1-800-50-PLACE (1-800-507-5223) or 1-919-719-7200 for further information. Systems response and access times may vary due to market conditions, system performance as well as other factors. All accounts are accepted at the discretion of Place Trade Financial.


Place Trade Financial, Inc. does not provide investment advice to online trading clients/accounts, online institutional accounts or any other individual or account that is not specifically set up as a full service client and on a full service commission and fee schedule. Place Trade Financial, Inc. will only provide investment advice to full service clients that are specifically set up for full service trading and advice. (Full Service clients work with experienced financial consultants and pay full service commissions and fees which are different than online trading commissions and fees.) To take advantage of both our Online Trading and Full Service flexible client benefits please call 1-919-719-7200 today! Documentation for any claims and/or statistical information will be provided upon request. Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.


The risk of loss in trading stocks, bonds, mutual funds, options, and other securities can be substantial. Options are not suitable for all investors. For more information please read the "Characteristics and Risks of Standardized Options" guide prior to trading options along with the relevant risk disclosure statements on our website. 


Trading on margin is only for sophisticated investors with high risk tolerance. You may lose more than your initial investment. (The amount you may lose may be greater than the amount that you started with or more simply put; you can lose more than the amount that you actually put into an investment when trading on margin.) Please follow these links for additional information regarding trading on margin and margin loan rates.


IMPORTANT: The projections or other information generated by any investment analysis tools regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.


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Place Trade Financial, Inc. does not provide tax advice to online trading clients/accounts, online institutional clients/accounts or any other individual or account at any time. Please speak with your own personal tax advisor, CPA or tax attorney prior to making tax related decisions.


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