Earn extra income by lending eligible shares of stock.
You can elect to grant authority to IBKR-Australia to enter into Stock Yield Enhancement Program ("SYEP") Derivatives to earn extra income in your account. You will need to agree to lend IBKR-Australia your shares and in exchange IBKR-Australia will deposit cash collateral into your account and pay you a return that is broadly equivalent to the revenue that may be earned were IBKR-Australia to on-lend the shares, less IBKR-Australia’s fees.1 IBKR-Australia’s fees will be 50% of the revenue that could have been earned if your shares were onward lent (unless otherwise agreed by you explicitly in writing). Granting authority to IBKR-Australia to enter into Stock Yield Enhancement Program Derivatives does not limit your ability to sell your shares whenever you like and you may rescind this authority whenever you like.
The program is available to eligible IBKR-Australia clients with a regulatory status of either “wholesale” or “professional investor” (refer to this link for more information on regulatory status) who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000 (or equivalent).
Please note that SYEP Derivatives will not be issued over any securities listed in Australia. You must have non-Australian securities in your account to be issued any SYEP Derivatives.
Once you grant IBKR-Australia authority to enter into SYEP Derivatives, IBKR-Australia manages everything from there. Once you enroll, IBKR-Australia will examine your stock portfolio automatically. IBKR-Australia may then decide to enter into a SYEP Derivative and borrow your eligible securities, and in return, IBKR-Australia will deposit cash collateral in your account and pay you a fee. This fee will be reflected as interest in your account.
When your stock is on loan to IBKR-Australia in connection with a SYEP Derivative, you will see the rate that you are being paid on the collateral value along with the fee paid to IBKR-Australia for its services. 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.
If IBKR-Australia borrows your shares in connection with a SYEP Derivative, you will still see the loaned shares on your account statement. This is because you are still the beneficial owner of the stock, which means you continue to have market risk and will recognize any profit (or loss) if the stock price moves. You can sell your shares at any time without restriction and can withdraw the authority to enter into SYEP Derivatives at any time for any reason.
XYZ is currently trading at USD 75.00/share. You are long 1,000 shares of XYZ, with a market value of USD 75,000.00. XYZ is in demand and commands a loan interest rate of 9%.
You grant IBKR-Australia authority to enter into SYEP Derivatives and IBKR-Australia may then loan out your 1,000 shares of XYZ at 9%. IBKR-Australia will pay interest on the cash collateral of USD 75,000.00 x 4.5% = USD 3,375.00.
You could earn USD 3,375.00/year on stock you already own.
Please note that this example is for illustrative purposes only and actual returns are dependent on a variety of factors, including the length of time that your stocks were loaned to IBA in connection with a SYEP Derivative, movements in the underlying reference rate and loan rate volatility. Please refer to the Disclosure Document here for further information.
Stock Yield Enhancement Program Derivatives are available to eligible IBKR-Australia clients with a regulatory status of either “wholesale” or “professional investor” who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000 (or equivalent). Other criteria apply.
Stocks that are eligible to be loaned out are all shares in your account (excluding shares listed on a securities market in Australia) that IBKR-Australia is not otherwise entitled to rehypothecate pursuant to the IBKR-Australia General Terms and Conditions including any addenda thereto.
As you are holding the shares “long” in your account, where IBKR-Australia elects to on-lend your borrowed securities in connection with a SYEP Derivative, those securities may be utilized for the purpose of short selling, which may potentially affect the value of your holdings.
Loan rates in the securities lending market (and therefore the payment that you may receive) are subject to frequent change and can go up or down significantly. Rates for “hard-to-borrow”, and other securities, change frequently and often daily in the securities lending market. This can reduce (or increase) the payment IBKR-Australia agrees to make to you as consideration for entering into a particular SYEP Derivative.
IBKR-Australia is under no obligation to ever actually enter into SYEP Derivatives on your behalf nor is IBKR-Australia obliged to on-lend your securities in connection with any SYEP Derivatives. IF IBKR-AUSTRALIA DOES NOT ENTER INTO ANY SYEP DERIVATIVES ON YOUR BEHALF, YOU WILL NOT RECEIVE ANY BENEFIT.
During any period in which your securities are on loan to IBKR-Australia in connection with a SYEP Derivative, you will forfeit your right to vote those shares by proxy.
If you sell the shares that are connected to a SYEP Derivative, or if IBKR-Australia becomes entitled to rehypothecate the securities, the loan will terminate and you will stop receiving loan interest.
Pursuant to the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019, Interactive Brokers Australia Pty. Ltd. has prepared the following target market determinations relating to certain financial products for which it is deemed to be the issuer. Our Target Market Determinations are located here: Target Market Determinations.
Product Disclosure Statements are also available for each of these products. You should carefully consider these Disclosures in deciding whether to acquire, or to continue to hold, the relevant financial product.