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Stock Yield Enhancement Program - Highlights

 

 

     Overview          Highlights          FAQs         What is a Short-Sale?

  

 

 

 

How can I earn extra income on my stock investments?

You can actually earn extra income on the fully-paid shares of stock held in your account by joining PT's Stock Yield Enhancement Program. This plan allows PT to borrow shares from you in exchange for cash collateral, and then lend the shares to traders who want to sell them short and are willing to pay a fee to borrow them. Each day that your stock is on loan, you will be paid a loan fee based on market rates. You share a percentage of this with our clearing firm (currently 50%) as a fee for managing the program.

 

 

Who can participate in our Sock Yield Enhancement Program?  

PT clients1 who have been approved for a margin account, or who have a cash account with equity greater than 50,000 USD.

To sign up for PT's Stock Yield Enhancement Program, log into Account Management and check Stock Yield Enhancement Program on the Trading Configuration/Permissions page, available under the Manage Account tab.

 

 

Benefits

  

 

Earn Supplemental Income

Each day that your stock is on loan, PT deposits a percentage of any loan income directly into your account.

 

 

Simple and Automatic

 PT manages all aspects of share lending. Once you register, PT will examine your fully-paid stock portfolio automatically. If you have stocks that are attractive in the securities lending market, PT will borrow the stocks from you, deposit collateral into your account and lend the shares. It's that simple.

 

 

Complete Transparency

As always, Place Trade clients enjoy complete transparency!  When your stock is loaned out, you will see the fee rate that you are being paid on the loan along with the exact management fee you pay to PT. Other brokers with similar programs generally do not disclose the market rates to you, which allows them to pay you a small piece of the pie while holding on to most of the profits.  Its a fact!  

 

 

Trade Your Loaned Stock with No Restrictions

You will see the loaned shares on your account statement, indicating that they are being loaned out. You are still the owner of the stock, which means you continue to have market risk and will recognize any profit (or any loss) if the stock price moves. You can sell your shares at any time without any restriction. If you are not happy with the extra yield you are receiving from the program, you can terminate your participation at any time. 

 

  

     
 

Example:

 
 

XYZ is currently trading at $75.00/share. If you are long 5000 shares of XYZ, with a market value of $375,000.00. XYZ is in demand and commands a loan fee of 9%.then

 
 

 

You Could Earn $16,875.00/year on Stock You Already Own

 

 
 

You sign up for PT's Stock Yield Enhancement Program, and PT loans out your 5000 shares of XYZ at 9%. The loan income on the transaction is $375,000.00 x 9% = $33,750.00, minus the 50% PT Management Fee = $16,875.00 to you.

 
     

 

 

 

Eligibility
The Stock Yield Enhancement Program is available to eligible PT clients1 who have been approved for a margin account, or who have a cash account with equity greater than USD 50,000.

 

Stocks that are eligible to be loaned out are all "fully-paid" stocks (stocks not held on margin) and "excess-margin" stocks (stocks held on margin but whose market value exceeds 140% of your margin debit balance).

 



Considerations and Risks

 

         
 
  • Shares loaned out may not be protected by SIPC
    The Securities Investor Protection Act of 1970 may not protect shares loaned out. This is why under SEC rules PT must provide you with cash collateral in the same amount as the value of your shares to protect you in the very unlikely event that the stock is not returned to you. 

  • Shares loaned out are typically used to facilitate short sales
    Shares are attractive in the stock loan market because other traders want to borrow and sell them short, possibly affecting the value of the shares.

  • Potential adverse tax consequences from receiving cash Payments in Lieu of Dividends on loaned shares
    When you lend stocks, you receive the full equivalent of all dividends. However, because you have loaned the stock, the cash you receive "in lieu of" dividends may be taxed as ordinary income instead of at the qualified dividend rate of 15%.2 PT will try to return shares to you prior to a dividend to reduce or avoid any potential negative tax consequences.
 
  • Loan rates (and the fees you will receive) change frequently and may go down (or up) by 50% or more

 

  • Loans may be terminated at any time by PT
  • PLEASE NOTE that PT does not guarantee that it will lend all eligible shares.

 

  • Voting rights go to the borrower
  • During any period in which your securities are loaned out, you will forfeit your right to vote those shares by proxy.

 

  • Selling your shares or borrowing against them or withdrawing cash in a margin account will terminate the loan transaction
  • If you sell the fully paid shares that have been lent out, or if you borrow the shares or withdraw cash in a margin account (such that the securities become margin securities and are no longer fully paid or excess margin securities) the loan will terminate and you will stop receiving the loan fee.
 
         

 

 

For More Information

For more information, please visit our Stock Yield Enhancement Program FAQ page.

For a complete discussion of the risks and characteristics of the program please be sure to review our Stock Yield Enhancement Program disclosure.

Stocks that are eligible to be loaned out are all "fully-paid" stocks (stocks not held on margin) and "excess-margin" stocks (stocks held on margin but whose market value exceeds 140% of your margin debit balance).

To sign up for PT's Stock Yield Enhancement Program, log into Account Management and check Stock Yield Enhancement Program on the Trading Permissions section which is located under the Manage Account menu tab (choose Trading Configuration Trading Permissions).

Clients can only lend in one program at a time. If, for example, a client signs up for the Stock Yield Enhancement program and is already approved for AQS lending, we will disable their ability to lend at AQS and recall their loans. They will still, however, retain the ability to borrow through AQS and can see market data. If the client disables the Stock Yield Enhancement Program, their AQS loan permissions will be re-enabled. The Stock Yield Enhancement Program always takes precedence. For more information, see our Stock Yield Enhancement Program FAQ page.

 


Please Note:


1Not all clients are eligible to participate in our Stock Yield Enhancement Program at the present time. Currently clients in Canada, India and Japan are NOT eligible. 

2US federal tax rates that are quoted in the example above are based upon 2011 rates and are subject to change.


 

Any symbols displayed are for illustrative purposes only and do not portray a recommendation of any security or securities product.

 

For more information, see our FAQ page.

 

 

 

 

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