Robinhood to launch feature that lets users loan out stocks

Robinhood Markets Inc.’s fully paid securities lending program is taking shape, Bloomberg News reports.

The program, which will let users loan out their stocks to other financial institutions, is part of Robinhood’s push to compete with more conventional brokerages.

The feature could be available in coming months, Robinhood said. The feature has appeared in a beta version of its iPhone app.

Code describing the service — dubbed Stock Loan Income Program, or SLIP — was discovered by developer Steve Moser and shared with Bloomberg.

Robinhood, a financial upstart best known for commission-free stock and cryptocurrency trading, is gradually becoming more of a full-service platform.

Bloomberg reported earlier this month that Robinhood is working on a spending-account service and cash-spending card. It’s also planning a spare-change investing feature.

The lending program would rival similar features offered by Fidelity Investments, Morgan Stanley’s E*Trade and Charles Schwab Corp., which already allow customers to earn passive income by loaning stocks they own.

Chief Executive Officer Vlad Tenev said in January that Robinhood was working on such a feature, without offering specifics.

Based on the wording in the app, Robinhood plans to tell users that passive income generated by loaning shares “isn’t guaranteed” and that income is dependent on investor demand.

The feature won’t have Securities Investor Protection Corp., or SIPC, protection and won’t allow voting on proposals for companies.

The shares will be “secured by cash collateral we hold on your behalf,” Robinhood says in the description.

The income will be paid by borrowers instead of the issuing company, according to the app’s wording, adding that such payments are often taxed at a different rate than typical stock-selling income.

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