Robinhood to launch program allowing users to loan stocks – Bloomberg

Robinhood Markets Inc. is inching closer to the completion of a feature on its application that will allow users to loan out their stocks to other financial institutions, Bloomberg News reported March 17.

Work on the service, known as fully paid securities lending and dubbed stock loan income program, showed up in a beta version of the company's iPhone app, according to the report, citing developer Steve Moser.

The feature is part of Robinhood's plan to compete with more conventional brokerages. The company is targeting to release the product in the first half of 2022, a representative of the company told the news outlet in an emailed statement.

The program will compete with similar features offered by companies that already let customers earn passive income by loaning their stocks. These companies include Fidelity Investments, Morgan Stanley's E*Trade and Charles Schwab Corp.

According to the app's coding, Robinhood intends to inform customers that passive income generated by loaning shares is dependent on investor demand and is not guaranteed. The income will be paid by borrowers and not the issuing company, and such payments are often taxed at a different rate compared to typical stock-selling income.

Moreover, the feature will not be protected by Securities Investor Protection Corp. and will not allow voting on proposals for companies, but the shares will be "secured by cash collateral" that Robinhood holds on the users' behalf.

Robinhood also plans to launch a spending account feature and a cash card that offers rewards, continuing its expansion from its stock and cryptocurrency trading roots, Bloomberg News reported March 7.