IBKR Managed Securities Lent (Stock Yield Enhancement Program) How safe/risky is it?

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Topic Author
YRT70
Posts: 525
Joined: Sat Apr 27, 2019 8:51 am

IBKR Managed Securities Lent (Stock Yield Enhancement Program) How safe/risky is it?

Post by YRT70 » Sun Dec 22, 2019 11:35 am

I'm making some money with the securities that IB lends out. I have no idea about how risky/safe this is. What do you think? Should I use this?

Or do you have any good resources for me to read about the risks?

saver007
Posts: 166
Joined: Fri Nov 07, 2014 9:18 pm

Re: IBKR Managed Securities Lent (Stock Yield Enhancement Program) How safe/risky is it?

Post by saver007 » Sun Dec 22, 2019 2:07 pm

It's low risk as you are getting cash as collateral for the securities lend out. So if for any reasons security is not returned, you keep the cash. Collateral is marked to marked daily meaning cash collateral value is adjusted depending on the daily changes in security prices.

There is a risk that counterparty that IB lend out security may go bankrupt and the specific security goes up in value so you may end up with under collateralized loan.

There is operational risk..if IB did not properly collateralize your loan..there is operational risk in any financial service activities.

Overall I would say risk is pretty low..

Topic Author
YRT70
Posts: 525
Joined: Sat Apr 27, 2019 8:51 am

Re: IBKR Managed Securities Lent (Stock Yield Enhancement Program) How safe/risky is it?

Post by YRT70 » Sun Dec 22, 2019 2:42 pm

Thank you saver007.

fallingeggs
Posts: 115
Joined: Sat May 04, 2019 7:11 am

Re: IBKR Managed Securities Lent (Stock Yield Enhancement Program) How safe/risky is it?

Post by fallingeggs » Mon Dec 23, 2019 1:46 pm

saver007 wrote:
Sun Dec 22, 2019 2:07 pm
It's low risk as you are getting cash as collateral for the securities lend out. So if for any reasons security is not returned, you keep the cash. Collateral is marked to marked daily meaning cash collateral value is adjusted depending on the daily changes in security prices.

There is a risk that counterparty that IB lend out security may go bankrupt and the specific security goes up in value so you may end up with under collateralized loan.

There is operational risk..if IB did not properly collateralize your loan..there is operational risk in any financial service activities.

Overall I would say risk is pretty low..
I'd concur. Pension funds and the like are the largest security lenders and they wouldn't do it if it were risky. The risk is with the hedge fund borrowing the security and selling it short :-)

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