Fully paid securities lending launches to enable passive income on idle stock holdings

Your brokerage account is about to start pulling double duty. Fully paid securities lending, a mechanism that lets investors lend out stocks and ETFs they fully own to borrowers like short sellers and market makers, is gaining serious traction across the brokerage industry as firms race to offer their clients a new stream of passive income.

How fully paid securities lending actually works

In a fully paid securities lending arrangement, investors who hold stocks or ETFs in their brokerage accounts can opt in to lend those securities to borrowers. The borrowers are typically short sellers who need to borrow shares to sell them, or market makers looking to facilitate trading activity.

The lending generates fees, which are then split between the brokerage and the investor. Most programs feature a 50/50 revenue split between the broker and the client. Income accrues daily and gets credited to investors on a monthly basis.

Alpaca launched its fully paid securities lending program for its Broker API on May 13, 2025, giving partner brokerages the infrastructure to offer the service and share revenue with their users. Tradier Brokerage followed with its own program on August 21, 2025, allowing eligible clients to lend fully paid equities and ETFs.

Major brokerages including Fidelity, Charles Schwab, and Robinhood have all adopted fully paid securities lending programs, with some sharing at least 50% of the revenue with clients.

The mechanics and the fine print

The amount you earn depends on demand. Securities that are heavily shorted or hard to borrow command higher lending fees. A blue-chip stock with minimal short interest might generate negligible income, while a volatile small-cap with heavy short demand could produce meaningful returns.

But there are risks worth understanding. Counterparty exposure is the primary concern. If a borrower defaults and collateralization hasn’t been handled properly, investors could face losses. There’s also the matter of voting rights. When your shares are on loan, you may temporarily lose the ability to vote on shareholder proposals.

Collateral requirements are designed to mitigate the biggest risks. Borrowers typically must post collateral equal to or exceeding the value of the borrowed securities.

What this means for investors

One notable absence in the fully paid securities lending landscape: crypto. None of the major programs have incorporated digital assets or tokens into their lending structures. This is a purely traditional finance product, built on equities and ETFs, operating within established regulatory frameworks.

Investors considering these programs should evaluate three things: the revenue split their brokerage offers, the collateral requirements protecting their securities, and whether the temporary loss of voting rights matters for their specific holdings.

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