Stock Yield Enhancement Program FAQs

What is the purpose of the Stock Yield Enhancement Program?

The Stock Yield Enhancement program provides customers with the opportunity to earn additional income on securities positions which would otherwise be segregated (i.e., fully-paid and excess margin securities) by permitting IBKR to lend out those securities to third parties. Customers who participate in the program will receive collateral (either U.S. Treasuries or cash) to secure the return of the stock loan at its termination.

What are fully-paid and excess margin securities?

Fully-paid securities are securities in a customer’s account that have been completely paid for. Excess margin securities are securities that have not been completely paid for, but whose market value exceeds 140% of the customer’s margin debit balance.

How is the income received by a customer on any given Stock Yield Enhancement Program loan transaction determined?

The income which a customer receives in exchange for shares lent depend upon rates in the over-the-counter securities lending market. These rates can vary significantly not only by the particular security loaned but also by the loan date. In general, IBKR pays interest to participants on their collateral at 50% of a market-based rate.

How is the amount of collateral for a given loan determined?

The collateral (either U.S. Treasuries or cash) underlying the security loan and used for determining interest payments is determined using industry convention whereby the closing price of the stock is multiplied by a certain percentage (generally 102-105%) and then rounded up to the nearest dollar/cent/pence/etc. There are different industry conventions per currency. For example, a loan of 100 shares of a USD stock which closes at $59.24 would be equal to $6,100 ($59.24 * 1.02 = $60.4248; round to $61, multiply by 100). Below is a chart of the various industry conventions per currency:

USD 102%; rounded up to the nearest dollar
CAD 102%; rounded up to the nearest dollar
EUR 105%; rounded up to the nearest cent
CHF 105%; rounded up to the nearest rappen
GBP 105%; rounded up to the nearest pence
HKD 105%; rounded up to the nearest cent

Find out more information on closing stock prices.

How and where is the collateral held for loans in the Stock Yield Enhancement Program?

For IBLLC customers the collateral will be held in the form of either cash or U.S. Treasury securities and will be transferred for safekeeping to IBLLC’s affiliate, IBKR Securities Services LLC (“IBKRSS”). The collateral for your loans under the Program will be held by IBKRSS in an account for your benefit over which you will have a perfected first priority security interest. In the event of a default by IBLLC, you will be able to obtain access to the collateral through IBKRSS directly, without going through IBLLC. Please reference the Securities Account Control Agreement for additional details here. For non-IBLLC customers the collateral will be held and protected by the entity carrying the account. For example, IBIE accounts will have their collateral held and protected at IBIE.

How do long sales, transfers of securities lent via the IBKR Stock Yield Enhancement Program or un-enrollment affect interest?

Interest ceases to accrue on the next business day after the trade date (T+1). Interest also ceases to accrue on the next business day after the transfer input or un-enrollment date.

What are the eligibility requirements for participation in the IBKR Stock Yield Enhancement Program?

ELIGIBLE ENTITIES*

  • IB LLC

  • IB UK (excluding SIPP accounts)

  • IB IE

  • IB CE

  • IB HK

  • IB Canada (excluding RRSP/TFSA accounts)

  • IB Singapore

ELIGIBLE ACCOUNT TYPES

  • Cash (minimum equity over $50,000 on enrollment date)

  • Margin

  • Financial Advisor Client Accounts*

  • Introducing Broker Clients Accounts: Fully Disclosed and Non-Disclosed*

  • Introducing Broker Omnibus Accounts

  • Separate Trading Limit (STL)

*Enrolled account must meet requirements in regards to margin account or cash account minimum equity.

IB Japan, IB Europe SARL, IBKR Australia and IB India customers are not eligible. Japanese and Indian clients maintaining accounts with IB LLC are eligible.

In addition, Financial Advisor client accounts, fully disclosed IBroker clients and Omnibus Brokers who meet the above requirements can participate. In the case of Financial Advisors and fully disclosed IBrokers, the clients themselves must sign the agreements. For Omnibus Brokers, the broker signs the agreement.

Are IRA accounts eligible to participate in the Stock Yield Enhancement Program?

Yes.

Are partitions of IRA accounts managed by Interactive Brokers Asset Management eligible to participate in the Stock Yield Enhancement Program?

No.

Are UK SIPP accounts eligible to participate in the Stock Yield Enhancement Program?

No.

What happens if equity in a participating cash account falls below the $50,000 qualifying threshold?

The cash account must meet this minimum equity requirement solely at the point of signing up for the program. If the equity falls below that level thereafter there is no impact upon existing loans or the ability to initiate new loans.

How do I enroll in the IBKR Stock Yield Enhancement Program?

To enroll, please login to the Client Portal. Once logged in, click the User menu (head and shoulders icon in the top right corner) followed by Settings. Then, under Account Settings, find the Trading section and click Stock Yield Enhancement Program to enroll. You will then be presented with the requisite forms and disclosures needed to enroll in the program. Once you have reviewed and signed the forms, your request will be submitted for processing. Please allow 24-48 hours for enrollment to become active.

How does one terminate Stock Yield Enhancement Program participation?

To un-enroll, please log into the Client Portal. Once logged in, click the User menu (head and shoulders icon in the top right corner) followed by Settings. Under the Account Settings section you will find Trading, then click on Stock Yield Enhancement Program and follow the required steps. Your request will then be submitted for processing. Requests to terminate are typically processed at the end of the day.

If an account signs up and un-enrolls at a later time, when can it be re-enrolled into the program?

After un-enrollment, the account may not re-enroll for 90 calendar days.

What types of securities positions are eligible to be lent?

US Markets EU Markets HK Markets CAD Market
Common Stock (exchange listed, PINK and OTCBB) Common Stock (exchange listed) Common Stock (exchange listed) Common Stock (exchange listed)
ETF ETF ETF ETF
Preferred Stock Preferred Stock Preferred Stock Preferred Stock
Corporate Bonds*      

*Municipal bonds are not eligible.

Is there any restriction on lending stocks which are trading in the secondary market following an IPO?

No, as long as the account does not have any restrictions in place for eligible securities held in the account.

How does Interactive Brokers LLC determine the amount of shares which are eligible to be loaned?

The first step is to determine whether securities are considered fully-paid for or if they are rehypothecated as collateral for a margin loan balance. A broker who finances client purchases of securities via margin loan is allowed by regulation to loan or pledge as collateral that client’s securities in an amount of 140% of the cash debit balance. For example, if a client maintaining a cash balance of $50,000 buys securities with a market value of $100,000, the debit balance will be $50,000. The broker holds a lien on 140% of that balance or $70,000 of securities. Any securities held by the client in excess of that amount are referred to as excess margin securities ($30,000 in this example) and are required to be segregated unless the client provides authorization to Interactive Brokers LLC to lend through the Stock Yield Enhancement Program. Note that only $30,000 of securities is eligible to be lent via SYEP.

The cash debit balance is determined by first converting all non-USD denominated cash balances to USD and subtracting any short stock sale proceeds (converted to USD as necessary). If the cash balance is negative, then Interactive Brokers LLC will rehypothecate 140% of that balance as collateral for the margin loan. Interactive Brokers LLC does not take into account cash balances maintained in the commodities segment for the purpose of this calculation. For a more detailed explanation, please see here.

The previous day’s settled cash balances are used to determine the amount of the margin lien. Holding certain options positions may increase the amount of the margin lien. The calculation of excess margin securities takes into account settled positions from the previous day and changes in those positions for the current settlement date.

Example 1: Account without a margin lien

Assume that an account holds $100,000 in cash and no other positions. The trader purchases stock valued at $90,000. All securities will be deemed fully paid because the account will have a positive settled cash balance of $10,000.

Example 2: Account with a margin lien

Assume that an account holds $80,000, long stock worth $100,000 and short stock worth $100,000. Long securities totaling $28,000 are deemed margin securities and the remainder of $72,000 are deemed to be excess margin securities.

This is determined by subtracting the long stock value and short sale proceeds from the cash balance ($180,000 – $100,000 - $100,000 = -$20,000) and multiplying the resulting debit by 140% ($20,000 * 1.40 = $28,000).

Will IBKR lend out all eligible shares?

There is no guarantee that all eligible shares in a given account will be loaned through the Stock Yield Enhancement Program as there may not be a market at an advantageous rate for certain securities, IBKR may not have access to a market with willing borrowers or IBKR may not want to loan your shares.

Are Stock Yield Enhancement Program loans made only in increments of 100?

No. Loans can be made in any whole share amount although externally we only lend in multiples of 100 shares. Thus the possibility exists that we would lend 75 shares from one client and 25 from another should there be external demand to borrow 100 shares.

How are loans allocated among clients when the supply of shares available to lend exceeds the borrow demand?

In the event that the demand for borrowing a given security is less than the supply of shares available to lend from participants in the Stock Yield Enhancement Program, loans will be allocated on a pro rata basis. For example, if the aggregate Stock Yield Enhancement Program supply is 20,000 shares of XYZ and demand is for 10,000 XYZ, each client will lend 50% of their eligible shares.

Are shares loaned only to other IBKR clients or to other third parties?

Shares may be loaned to both IBKR clients and to third parties.

Can the Stock Yield Enhancement Program participant determine which shares IBKR can lend?

No. The program is entirely managed by IBKR who, after determining those securities, if any, which IBKR is authorized to lend by virtue of a margin loan lien, has the discretion to determine whether any of the fully-paid or excess margin securities can be loaned out and to initiate the loans.

Are there any restrictions placed upon the sale of securities which have been lent through the Stock Yield Enhancement Program?

Loaned shares may be sold at any time, without restriction. The shares do not need to be returned in time to settle your sale of the share and proceeds from the sale are credited to the client’s account on the normal settlement date. In addition, the loan will be terminated on the open of the business day following the security sale date.

Can a client write covered calls against stock which has been loaned out through the Stock Yield Enhancement Program and receive the covered call margin treatment?

Yes. A loan of stock has no impact upon its margin requirement on an uncovered or hedged basis since the lender retains exposure to any gains or losses associated with the loaned position.

What happens to stock which is the subject of a loan and which is subsequently delivered against a call assignment or put exercise?

The loan will be terminated on T+1 of the action (trade, assignment, exercise) which closed or decreased the position.

What happens to stock which is the subject of a loan and which is subsequently halted from trading?

A halt has no direct impact upon the ability to lend the stock and as long as IBKR can continue to loan the stock, such loan will remain in place regardless of whether the stock is halted.

Can the collateral from a loan be swept to the commodities segment to cover margin and/or variation?

No. The collateral securing the loan never impacts margin or financing.

What happens if a program participant initiates a margin loan or increases an existing loan balance?

If a client maintains fully-paid securities which have been loaned through the Stock Yield Enhancement Program and subsequently initiates a margin loan, the loan will be terminated to the extent that the securities do not qualify as excess margin securities. Similarly, if a client maintaining excess margin securities which have been loaned through the program increases the existing margin loan, the loan may again be terminated to the extent that the securities no longer qualify as excess margin securities.

Under what circumstances will a given stock loan be terminated?

In the event of any of (but not limited to) the following, a stock loan will be automatically terminated:

  • If the client elects to terminate program participation

  • Transfer of shares

  • Borrowing of a certain amount against the shares

  • Sale of shares

  • Call assignment/put exercise

  • Account closure

Do participants in the Stock Yield Enhancement Program receive dividends on shares loaned?

Stock Yield Enhancement Program shares that are lent out are generally recalled from the borrower before ex-date in order to capture the dividend and avoid payments in lieu (PIL) of dividends. However, it is still possible to receive a PIL.

Do participants in the Stock Yield Enhancement Program retain voting rights for shares loaned?

No. The borrower of the securities has the right to vote or provide any consent with respect to the securities if the Record Date or deadline for voting, providing consent or taking other action falls within the loan term.

Do participants in the Stock Yield Enhancement Program receive rights, warrants and spin-off shares on shares loaned?

Yes. The lender of the securities will receive any rights, warrants, spin-off shares and distributions made on loaned securities.

How are loans reflected on the activity statement?

Loan collateral, shares outstanding, activity and income is reflected in the following 8 statement sections:

  1. Cash Report – This shows the starting collateral (either U.S. Treasuries or cash) balance, net change resulting from loan activity (positive if new loans initiated; negative if net returns) and ending collateral balance.

  2. Net Stock Position Summary – This section displays the borrowing and lending details for each stock. Net Shares (=Shares at IBKR + Shares Borrowed - Shares Lent).

  3. Interest Accruals – SYEP income is included in the Interest Accrued and is treated like any other interest accrual (aggregated but only displayed as an accrual when exceeding $1 and credited to cash monthly). For year-end reporting purposes, this interest income will be reported on Form 1099 issued to U.S. taxpayers.

  4. Stock Yield Enhancement Program Securities Lent – This section displays all securities the account is lending as of the statement date, along with the interest rate and collateral amount.

  5. Stock Yield Enhancement Program Securities Held at IBKRSS – Clients of Interactive Brokers LLC will see an additional section on their statement showing the specific US Treasury held as collateral, including the quantity, price and total value securing the stock loan.

  6. Stock Yield Enhancement Program Securities Lent Activity – Displays the loan activity for each security including newly initiated loans (New Loan Allocation), terminated loans (Loan Return Allocation), the quantities and collateral amounts.

  7. Stock Yield Enhancement Program Securities Lent Interest Details – Shows the income received on an individual loan basis including the security, quantity lent, collateral amount, the market-based rate and the interest amount paid to the account. Interest Paid to Customer is calculated by multiplying the Collateral Amount by the Interest Rate on Customer Collateral and dividing by 360 days.

    Please note that this section will only be displayed if the interest accrual earned by the client exceeds USD 1 for the statement period.

  8. Interest – Income from SYEP for the current month is accrued daily and credited the next month. The credit will appear in the Interest section of the statement, along with other interest credits or charges.