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Comment by gibybo | Hacker News Reader

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gibybo·

This only applies if you have a margin account, right?

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No, they often lend out from cash accounts.

No, this is about lending stock you own to short sellers because they’re not supposed to short naked.

No you can only lend out the securities of clients that are themselves on margin or have an explicit borrow agreement (which grants you a kickback of the money made from the stock loan).

Cash accounts without a margin balance cannot be lent out.

Ok, but where do my holdings in a mutual fund or ETF fit?

ETFs are treated like stocks. That's kind of the point. They can be lent out by your broker if you're on margin.

Mutual funds are opaque. It's up to the fund to decide if they want to make some extra money lending their securities out to speculators. As they're holding the stocks long term and standard securities lending is over collateralized, the risk profile is relatively low compared to the extra return.

Your shares can only be lent if you have a margin account and have a negative cash balance (or collateral placed with other parties in excess of your cash balance), or if you have opted into a securities lending program like the one at IB.

I've seen this oft repeated bit about only margin account holdings can be lent out to shorts. Do you happen to know the regulation or law that says this is the case? Or is this another instance of drinking 8 glasses of water a day?

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