Lending the fully paid stocks and exchange-traded funds you own can generate additional income. And a first direct broker linked to a bank in the country invites you to do so.
Posted at 6:00 a.m.
National Bank Direct Brokerage officially launches this Monday a program in this direction which thus makes it possible to “improve the return of its portfolio without additional effort”.
To participate free of charge in this program allowing the lending of securities in return for 50% of the lending commissions collected, a client must simply join by granting his authorization.
Many institutions offer to lend their securities – mutual fund companies, for example – says Claude-Frédéric Robert, President of National Bank Direct Brokerage.
“We wanted to see how we could offer self-directed investors this source of income historically mainly reserved for institutional investors. »
The amount the client will receive in commission will depend on market conditions.
“Rates can vary every day,” says Claude-Frédéric Robert. “Will it be easy or hard to borrow positions that will be in the client’s account? It is very difficult to predict the income that will be realized. It can vary from less than 1% to 15%, or even more in some cases,” he says.
What is interesting is that the client has nothing to do. Once he grants his authorization, if the positions he holds are in demand in the market, they will be loaned out. At the end of the month, the client will get the details of their loaned positions and the interest rate they have benefited from each day.
Claude-Frederic Robert
A client with securities in their margin account or cash account can enroll in this program. The initiative, however, is currently only available to clients holding more than $100,000 in assets in a non-registered account.
“The reason is simple,” says Claude-Frédéric Robert. We want to test the popularity of this service with our clients and it’s much easier to explain a program like this to seasoned investors. The goal, however, is to offer it to all customers in the not too distant future. »
Guaranteed titles
To ensure clients’ peace of mind, National Bank Direct Brokerage ensures that as long as they are loaned, clients’ securities are guaranteed by the Natcan trust company.
During a trading session, brokers borrow and lend securities to investors for various reasons (short selling, hedging strategies, arbitrage opportunities). Brokers then charge investors a borrowing fee which can vary depending on the availability and demand for these securities.
Claude-Frédéric Robert says that National Bank Direct Brokerage is the first broker associated with a bank to offer such a service in the country. “The only other broker that offers it in Canada is Interactive Brokers,” he says.
The leader does not hide that the objective is to continue to improve the service offer and to gain market share.
A hundred customers have already registered for the program, says Claude-Frédéric Robert. The service was offered to them by invitation to allow the organization to ensure that everything was working well before offering it officially.
National Bank Direct Brokerage is launching its program today because it wanted to do so during a “less busy” period in terms of brokerage so as not to bog down its customer service.
The months of May, June, July and August are generally quieter as far as the online brokerage craze is concerned, points out Claude-Frédéric Robert.
Last summer, National Bank Direct Brokerage was the first broker affiliated with a major Canadian bank to offer $0 commission pricing on stocks and exchange-traded funds for all transactions carried out online on the Canadian and American markets.