Robinhood bolsters trading app with stock lending service

Robinhood Markets said on May 4 that it was adding stock lending to its trading app, the latest in a series of products to bolster its business.

Clients who authorize stock lending authorize Robinhood to lend all fully paid stocks in their portfolio and will be paid when matched with a borrower. The brokerage has a dashboard to enroll in the program and track earnings.

“Robinhood does the work of finding borrowers and managing deals while clients can add a potential source of passive recurring income to their portfolio,” said Steve Quirk, Robinhood’s chief brokerage.

To be eligible, clients must have an account value of $5,000 or more, income of $25,000, and some trading experience. The program will be fully rolled out by the end of May, the company said.

The securities lending business is booming. Global securities lenders earned $828 million in revenue last month, a 20% increase from April 2021, according to research firm DataLend.

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Robinhood competes in a crowded market with many established players focused on the same customers. Other brokerage firms, including Fidelity Investments, Charles Schwab, TD Ameritrade and Webull, also offer securities lending to individual investors.

Robinhood bled active investors and revenue fell 43% in the first quarter, the fifth consecutive quarterly decline. Last week, the brokerage said it was laying off 9% of its workforce.

The company has focused on introducing new products – including crypto wallets and auto-invest services – to diversify its revenue streams and recruit new investors.

The brokerage soared to new heights at the start of the Covid-19 pandemic as individual investors flooded the rising market, making a name for themselves with a slick interface and fee-free transactions.

It sends customer orders to high-speed trading companies in exchange for cash in a practice called payment for order flow. Fewer investors trading means Robinhood’s transaction-based revenue halved in the first quarter.

Write to Jenna Telesca at jenna.telesca@wsj.com

This article was published by The Wall Street Journal, part of the Dow Jones

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