Online broker eToro is to launch a stock lending program, a new feature enabling eToro users based in the UK and Europe to earn passive income by lending out their stocks.

eToro is working with BNY, which will act as the custodian, and stock lending platform EquiLend, which will identify borrowers and facilitate the stock lending process.

The feature will be rolled out gradually to members of the eToro Club, starting with Platinum, Platinum+ and Diamond Club members, followed at a later date by lower-tier Club members.

“Stock lending has traditionally been the preserve of large financial institutions and it’s been much harder for retail investors to earn passive income in this way. Yet it is an important practice that helps to support liquidity in financial markets. Leveraging BNY’s Global Clearing services, we want to level the playing field by enabling millions of eToro users across the UK and Europe to engage with stock lending in an easy and transparent way,” said Yossi Brandes, VP Execution Services at eToro.

Eligible eToro users will be given the option to opt into the programme, at which point their entire portfolio of stock positions will be considered for lending. Once opted in, they will begin receiving monthly statements if their stock is successfully lent to keep track of the income they earned in the specific period.

Only whole unit ‘real’ stock positions are eligible for lending, meaning that CFDs and fractional shares are excluded, with eligible shares rounded down to the nearest whole share. Stocks with low market liquidity, high volatility and high demand are more likely to be borrowed and generate higher earnings, with loaned-out stocks backed by collateral.

eToro users who lend their stock temporarily give ownership of the stocks to the borrower and lose voting rights while the stock is on loan. However, they can still receive dividends, sell the stocks or opt out of the programme at any time at no cost.

This launch of stock lending represents an expansion of the growing clearing relationship between eToro and BNY which leverages BNY’s Global Clearing platform, offering integrated solutions across US and international clearing, custody, settlement, execution, and financing. Through a jointly-created value proposition, the firms have developed a scalable global operating model enabling eToro’s underlying client base to access over 19 exchanges globally.

“We are pleased to expand our relationship with eToro, supporting a holistic solution set across clearing, settlement, custody, foreign exchange, cash management. This development represents the very best of eToro, Equilend and the heritage and innovation of BNY’s world-class platform, as investors look to access a cutting edge feature in their investing journey,” said Victor O’Laughlen, Head of Global Clearing at BNY.

“The collaboration between EquiLend Spire and eToro marks a significant advancement in the securities lending market, enabling eToro to enhance its services with a fully paid lending program that benefits from cutting-edge technology. This move not only demonstrates EquiLend Spire’s commitment to innovation but also eToro’s dedication to providing efficient and modern financial solutions to its users,” said Dan Dougherty, Managing Director, Global Head of Sales & Account Management at EquiLend.