Tax consequences of IB Stock Yield Enhancement program?

[sean.mcgrath]

Do you pay any fees to IB in order to utilize this feature?

No, you don't. IB earns their money by taking half of the loan interest that is charged to the borrower.

[YRT70]

I'm also using the SYEP. I read in another thread that there can be problems with dividend pay outs. Anyone experience that?

viewtopic.php?p=2330599&sid=2fa77a1732b ... f#p2330599

[sean.mcgrath]

I'm also using the SYEP. I read in another thread that there can be problems with dividend pay outs. Anyone experience that?

viewtopic.php?p=2330599&sid=2fa77a1732b ... f#p2330599

Hi YRT, that was the original point of this post. It seems they can't guarantee, but as far as I have experienced, no problems. In any case, you will get the dividend, the only question is the tax treatment.

[YRT70]

I'm also using the SYEP. I read in another thread that there can be problems with dividend pay outs. Anyone experience that?

viewtopic.php?p=2330599&sid=2fa77a1732b ... f#p2330599

Hi YRT, that was the original point of this post. It seems they can't guarantee, but as far as I have experienced, no problems. In any case, you will get the dividend, the only question is the tax treatment.

Thank you Sean.

[AlohaJoe]

I'm also using the SYEP. I read in another thread that there can be problems with dividend pay outs. Anyone experience that?

viewtopic.php?p=2330599&sid=2fa77a1732b ... f#p2330599

Hi YRT, that was the original point of this post. It seems they can't guarantee, but as far as I have experienced, no problems. In any case, you will get the dividend, the only question is the tax treatment.

I did receive a payment-in-lieu for a portion of a dividend earlier this year. But so far the payment-in-lieu accounts for 1.2% of all the dividends I've received so far this year so it is pretty much a non-event. (And after Q3 & Q4 dividends are paid out it will almost certainly be under 0.5%.)

[Neus]

What stocks are you lending? How much do you earn from lending?

I don't hold any stocks, only ETFs.

In that account I have EMGF, GSLC, IEMG, REET, RZV. I earn anywhere from $3 a month to $380 a month. But it depends massively on your portfolio size (obviously) and what you hold. I don't think my IEMG has ever been borrowed, for instance. What gets borrowed also changes substantially over time. From February to April EMGF was borrowed heavily. But no one has borrowed any of it since September.

Does ETF also get borrowed, or just stock?

[tj]

What stocks are you lending? How much do you earn from lending?

I don't hold any stocks, only ETFs.

In that account I have EMGF, GSLC, IEMG, REET, RZV. I earn anywhere from $3 a month to $380 a month. But it depends massively on your portfolio size (obviously) and what you hold. I don't think my IEMG has ever been borrowed, for instance. What gets borrowed also changes substantially over time. From February to April EMGF was borrowed heavily. But no one has borrowed any of it since September.

Does ETF also get borrowed, or just stock?

You literally quoted someone who said their ETFs get borrowed.

[Neus]

What stocks are you lending? How much do you earn from lending?

I don't hold any stocks, only ETFs.

In that account I have EMGF, GSLC, IEMG, REET, RZV. I earn anywhere from $3 a month to $380 a month. But it depends massively on your portfolio size (obviously) and what you hold. I don't think my IEMG has ever been borrowed, for instance. What gets borrowed also changes substantially over time. From February to April EMGF was borrowed heavily. But no one has borrowed any of it since September.

Does ETF also get borrowed, or just stock?

You literally quoted someone who said their ETFs get borrowed.

Thanks for the clarification

[sean.mcgrath]

Resurrecting my ancient thread for a fun update: the IBKR fee rate for FNDE is currently 64%.

I really hope someone wants to borrow my shares!

[occambogle]

Resurrecting my ancient thread for a fun update: the IBKR fee rate for FNDE is currently 64%.

I really hope someone wants to borrow my shares!

Damn, I think that's about the highest I've seen. And I hope someone does borrow them! Of the stuff I own (and had borrowed from time to time) the max I've seen is 20-ish %.
But on my watchlist (created long ago, and I don't own any) I'm seeing SMLF has an IBKR fee rate of 138.29% (!)

[occambogle]

I have both taxable and Roth IRA accounts at IB, with the taxable having SYEP turned on. IB has a $50k minimum requirement to turn on SYEP and it is annoyingly per account - not per customer - which has meant I haven't been able to use SYEP on my smaller Roth IRA.
But I've just realised there is an exception to the $50k rule, and that is if your account is a margin type, not cash. So if you switch your account to margin type, rather than cash, even if you don't ever use the margin, you can then enable SYEP even if the account total is less than $50k, and it works on a Roth IRA too. I'm not sure why I never noticed this....

"The program is available to eligible IBKR clients who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000 (or equivalent)."
https://www.interactivebrokers.com/en/p ... rogram.php

Margin IRAs are a special type at IB as they don't allow you to borrow, but the advantage is you can trade with unsettled funds.. so you can sell an ETF and rebuy another on the same day without being stuck in cash during a T+2 settlement period:
https://ibkr.info/node/1380

[occambogle]

I have never received a payment in lieu of dividend since I started SYEP on my taxable account more than a year ago. But since I started SYEP on my Roth IRA a month ago I received a payment in lieu of dividend for some units of TMF that were borrowed.
Am I correct in saying that whether I receive the actual dividend or a payment in lieu doesn't make any difference at all in a Roth IRA, given that the dividend/payment isn't taxed anyway?

[stressed]

Is'nt there a risk in lending, it is not insured, besides IB being the borrower and unless they go under, that is all the insurance?

Hi annu,
I believe there is a theoretical risk, but the short-seller has to put up cash that is segregated at IB.


As I posted above:

As to the mechanics, according to Interactive Brokers:

- Clients maintain full control of loaned shares with no impairment as to: Market exposure; The ability to sell at any time without prior notice; The representation of holdings in statements and the trading platform; and Cost basis.

However
- Loaned shares may not be protected by SIPC, however, the cash collateral received for the loaned securities is segregated within the 15c3-3 Reserve Account and therefore subject to the same investment restrictions;

And another FAQ.

I think the risk is similar to having assets at a broker to begin with. I.e., extremely small.

The risk is theoretically higher than simply having assets at a broker because of the probability that the collateral value doesn't keep up with the value of the borrowed stock. Consider the following hypothetical scenario: you have 1000 shares of MEME stock worth $50 each. You lend them out via this program to a hedge fund that shorts them. They post $50k of treasuries as collateral. Next day the stock doubles in value. The hedge fund goes bust. You keep the $50k of collateral plus a claim against the hedge fund for the balance. Realistically this won't happen because even in that scenario, IBKR will probably cover the shortfall themselves and keep the claim against the bankrupt hedge fund, but nevertheless this is a risk to keep in mind.
I personally use the program but I only hold passive Vanguard ETFs, that I do not expect to double overnight. Even if I did hold and lend out single stocks though, I think on balance this is an attractive reward for the assumed risk.

[Tabulator]

But it depends massively on your portfolio size (obviously) and what you hold. I don't think my IEMG has ever been borrowed, for instance. What gets borrowed also changes substantially over time.

Does anyone know of short-term fixed income funds that are frequently borrowed?

[tj]

But it depends massively on your portfolio size (obviously) and what you hold. I don't think my IEMG has ever been borrowed, for instance. What gets borrowed also changes substantially over time.

Does anyone know of short-term fixed income funds that are frequently borrowed?

Not aware of any. Why would people trade options on those?