Securities Finance Industry News | Robinhood confirms the release of a “fully paid” dry loan service
Robinhood has confirmed the launch this week of its fully paid securities lending product to what it describes as “a small group of customers”.
The e-commerce company says this step will offer retail customers the opportunity to “generate additional revenue on inventory they already own” [i.e. fully paid for]thus adding a new source of passive income to their investment portfolios.
In a statement released yesterday, the company said the stock loan is currently being rolled out to customers and should be available to all customers by the end of May.
Through this principal-based program, securities lending is offered to clients through Robinhood Financial LLC, with the securities loaned to Robinhood Securities LLC.
According to the firm, this service will complement the securities lending services that the trading platform offers for securities purchased on margin.
In extending this facility, Robinhood says that “unlike other companies” it won’t require customers to have hundreds of thousands of dollars in their account to participate.
“We are making available to clients who have traditionally not had access to it, fully remunerated securities lending and the possibility of passive recurring income that comes with it. It’s the Robinhood way,” he said in yesterday’s statement.
“Our version of stock lending allows clients to grow their investments while keeping it simple,” said Steve Quirk, director of brokerage at Robinhood. “Robinhood does the work of finding borrowers and managing transactions while clients can add a potential source of passive recurring income to their portfolio.”
“We are excited to break down another barrier and democratize a product that has historically been reserved for the wealthy with high barriers to entry,” he adds.
The company warns that stock lending is not appropriate for all customers. “There are operational risks associated with securities lending that could affect, for example, if or when your securities are loaned or recalled, collateral is collected or payments are made,” it says. “There is a risk that Robinhood Securities will default on its obligations to you under the stock lending program and may not return the securities it has borrowed. If Robinhood Securities defaults and is unable to return securities on loan, you will not be able to trade these securities as usual.
The release of this service was reported in Robinhood Markets’ Fourth quarter 2021 and full year 2021 resultswhere it indicated that it continues to discuss the launch of a fully remunerated securities lending service with regulators and that it hopes to launch this program in the first half of 2022.
Robinhood Markets took this step to expand and diversify the revenue opportunities available through its trading platform at a time when total first-quarter net revenue fell 43% year-over-year to $299 million.
Transaction-based revenue fell 48% to US$218 million for the first quarter of 2022 compared to the first quarter of 2021. This was fueled by a 73% year-on-year decline in equity trading revenue at US$36 million.
Trade-based revenue from options contracted 36% to US$127 million for the first quarter, with cryptocurrency revenue also down significantly, falling 39% to US$54 million.
This contributed to a net loss of US$392 million, or US$0.45 per diluted share, for Robinhood Markets in the first quarter of 2022 – although a net loss reduction of $1.4 billion US, or US$6.26 per diluted share, which it suffered in the first quarter of 2021. .
Robinhood Markets’ senior management cast a positive light on the longer-term outlook and development strategy for the business.
Jason Warnick, Chief Financial Officer of Robinhood Markets, said, “We see our clients being affected by the macroeconomic environment which has reflected our results this quarter. At the same time, we have also made progress on our long-term plans and continue to pursue them aggressively. »
Vlad Tenev, CEO and Co-Founder of Robinhood Markets, comments, “This quarter saw our product development engine gain momentum with the rollout of some of our most requested features and capabilities.
“With the introduction of the Robinhood Cash Card, the release of crypto wallets for all customers, the addition of new coins to our platform and our agreement to acquire [UK-based cryptoasset and electronic money institution] Ziglu Limited, we have made tremendous progress against our roadmap.