Fidelity Fully Paid Lending program - anyone?

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DJZ
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Fidelity Fully Paid Lending program - anyone?

Post by DJZ »

Anyone have experience with Fidelity’s Fully Paid Lending program? You allow them to borrow your stocks and are paid “interest” in return. It is supposedly fully collateralized and you can exit at any time.

Sounds dicey and safe at the same time.
nalor511
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Re: Fidelity Fully Paid Lending program - anyone?

Post by nalor511 »

I always opt out of these, because you (can) lose qdiv status, I believe
Impatience
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Re: Fidelity Fully Paid Lending program - anyone?

Post by Impatience »

I use the equivalent program at Interactive Brokers. It’s a few extra bucks per month. However it’s for a Roth IRA so having some dividends unqualified is meaningless. Wouldn’t do it in taxable.
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DJZ
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Re: Fidelity Fully Paid Lending program - anyone?

Post by DJZ »

nalor511 wrote: Thu Feb 08, 2024 9:35 pm I always opt out of these, because you (can) lose qdiv status, I believe
In reading their documents they either compensate you for this, or actually hand the shares back briefly as they are going ex-div. If I’m understanding this.
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whodidntante
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Re: Fidelity Fully Paid Lending program - anyone?

Post by whodidntante »

It's fine but not nearly as lucrative as IBKR or E*Trade in my experience. Nothing has beaten IBKR for me.

The Fidelity program used to be invitation only, but now I think it only requires a large amount of assets. Schwab remains invitation only.

If you're a three fund zealot you won't get worthwhile money from it.
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indexfundfan
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Re: Fidelity Fully Paid Lending program - anyone?

Post by indexfundfan »

My experience is that the lending rates are similar at Etrade and Fidelity.

For taxable account, Fidelity does say that they will try to "return shares prior to a dividend record date" to avoid "cash-in-lieu" distributions, but no guarantees.

Nevertheless, in the event you do get a "cash-in-lieu" distribution, "Fidelity will credit participating taxable accounts with an additional credit
adjustment equal to 26.98% of the qualified portion of the distribution. This adjustment will occur annually after all reclassification information is made available."
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DJZ
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Re: Fidelity Fully Paid Lending program - anyone?

Post by DJZ »

indexfundfan wrote: Fri Feb 09, 2024 8:24 am My experience is that the lending rates are similar at Etrade and Fidelity.

For taxable account, Fidelity does say that they will try to "return shares prior to a dividend record date" to avoid "cash-in-lieu" distributions, but no guarantees.

Nevertheless, in the event you do get a "cash-in-lieu" distribution, "Fidelity will credit participating taxable accounts with an additional credit
adjustment equal to 26.98% of the qualified portion of the distribution. This adjustment will occur annually after all reclassification information is made available."
So do I understand correctly that the stocks you have lent could be sold, and you would get that cash? So, in a tax deferred account, the worst case scenario is that during some run-up you might sell prematurely?
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indexfundfan
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Re: Fidelity Fully Paid Lending program - anyone?

Post by indexfundfan »

DJZ wrote: Fri Feb 09, 2024 8:44 am
indexfundfan wrote: Fri Feb 09, 2024 8:24 am My experience is that the lending rates are similar at Etrade and Fidelity.

For taxable account, Fidelity does say that they will try to "return shares prior to a dividend record date" to avoid "cash-in-lieu" distributions, but no guarantees.

Nevertheless, in the event you do get a "cash-in-lieu" distribution, "Fidelity will credit participating taxable accounts with an additional credit
adjustment equal to 26.98% of the qualified portion of the distribution. This adjustment will occur annually after all reclassification information is made available."
So do I understand correctly that the stocks you have lent could be sold, and you would get that cash? So, in a tax deferred account, the worst case scenario is that during some run-up you might sell prematurely?
You lend your shares to Fidelity, which make these shares available to short sellers. If you want to sell the shares, it is the responsibility of Fidelity to return the shares to you to be sold.

Barring some extreme black swan event, your shares will never be sold prematurely.

See Fidelity's FAQ https://www.fidelity.com/trading/fully-paid-lending

How does lending affect my ownership of the securities?

Under the securities lending agreement you maintain full economic ownership of the securities on loan and may sell or recall loans at any time. However, you do relinquish your ability to exercise voting rights if shares are on loan over a proxy record date.
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DJZ
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Re: Fidelity Fully Paid Lending program - anyone?

Post by DJZ »

Hey thanks, very helpful
ttboy
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Re: Fidelity Fully Paid Lending program - anyone?

Post by ttboy »

I highly recommend the Etrade program. Even in my Tira which is being slowly transitioned to 3 Fund, it sometines has paid on VXUS!
ttboy
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Re: Fidelity Fully Paid Lending program - anyone?

Post by ttboy »

I highly recommend the Etrade program. Even in my Tira which is being slowly transitioned to 3 Fund, it sometines has paid on VXUS!
chassis
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Re: Fidelity Fully Paid Lending program - anyone?

Post by chassis »

DJZ wrote: Thu Feb 08, 2024 9:19 pm Anyone have experience with Fidelity’s Fully Paid Lending program? You allow them to borrow your stocks and are paid “interest” in return. It is supposedly fully collateralized and you can exit at any time.

Sounds dicey and safe at the same time.
Waste of time.

Zero practical benefit to the client. Large benefit to Fidelity in aggregate across their client base. It’s a form of skimming.
rustlers
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Re: Fidelity Fully Paid Lending program - anyone?

Post by rustlers »

DJZ wrote: Thu Feb 08, 2024 9:19 pm Anyone have experience with Fidelity’s Fully Paid Lending program? You allow them to borrow your stocks and are paid “interest” in return. It is supposedly fully collateralized and you can exit at any time.

Sounds dicey and safe at the same time.
I had signed up for the Fidelity program a couple of years ago.

I have had no detrimental issues with this, picked up small $ in interest along the way. You will be compensated if dividends are owed to you. The incremental tax burden is minor.

So I say, with the understanding of a low probability event, why not go for it?
san1
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Re: Fidelity Fully Paid Lending program - anyone?

Post by san1 »

Seems interesting...so why not got for this? Any reasons?
Just Trying to stay the course!
Whakamole
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Re: Fidelity Fully Paid Lending program - anyone?

Post by Whakamole »

I'm enrolled. DFSV (DFA small cap value) and their international SCV fund have been lent out a few times. I won't turn down extra money in my Roth. Not enlisted in taxable.
DoubleClick
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Re: Fidelity Fully Paid Lending program - anyone?

Post by DoubleClick »

whodidntante wrote: Fri Feb 09, 2024 12:04 am It's fine but not nearly as lucrative as IBKR or E*Trade in my experience. Nothing has beaten IBKR for me.
Would you mind sharing what you're referring to with IBKR or E-Trade? Sounds interesting.
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Re: Fidelity Fully Paid Lending program - anyone?

Post by chassis »

san1 wrote: Sat Feb 10, 2024 9:29 pm Seems interesting...so why not got for this? Any reasons?
Zero practical benefit to the client (you and me). Large benefit to Fidelity in aggregate across their client base. It's a form of skimming.
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whodidntante
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Re: Fidelity Fully Paid Lending program - anyone?

Post by whodidntante »

DoubleClick wrote: Sat Feb 10, 2024 9:58 pm
whodidntante wrote: Fri Feb 09, 2024 12:04 am It's fine but not nearly as lucrative as IBKR or E*Trade in my experience. Nothing has beaten IBKR for me.
Would you mind sharing what you're referring to with IBKR or E-Trade? Sounds interesting.
Rates to borrow shares depend on supply and demand and brokers charge accordingly. The rates can change each day. There isn't a national market for this kind of thing. In my experience, my holdings were loaned more frequently and at higher rates at IBKR and at E*Trade than at Fidelity. The Fidelity program has paid very little.

Coincidentally, if you want to borrow shares, you might be better off doing so at Fidelity than at IBKR. I've done so at 0%, but it depends on what you are borrowing and when. I had to compensate for dividends received, but that's normal.
MnD
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Re: Fidelity Fully Paid Lending program - anyone?

Post by MnD »

I got around 10% (annualized) at Schwab for a few months on an individual stock (non-dividend paying) under their Securities Lending Fully Paid program. Then the securities were returned and the income stopped.

It's invite only - you get an email if something you hold qualifies.
I still have the security and I hope it gets loaned out again.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
DoubleClick
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Re: Fidelity Fully Paid Lending program - anyone?

Post by DoubleClick »

whodidntante wrote: Sun Feb 11, 2024 8:06 am Rates to borrow shares depend on supply and demand and brokers charge accordingly. The rates can change each day. There isn't a national market for this kind of thing. In my experience, my holdings were loaned more frequently and at higher rates at IBKR and at E*Trade than at Fidelity. The Fidelity program has paid very little.

Interesting, I had no idea at all about any of this. Thanks for sharing!
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