Freetrade ‘postpones’ securities lending plan

By Daniel Lanyon on Friday 29 July 2022

Savings and Investment

The neobroker previously said it it wanted users to ‘opt in’ to lend out their securities to help it continue to offer lower costs on stocks and ETFs.

Freetrade ‘postpones’ securities lending plan
Image source: Adam Dodds/Freetrade.

Freetrade is postponing its plans to offer securities lending.

This is where the holders of securities such as individuals, pension funds, ETFs issuers or brokers enter into an agreement with a borrower such as banks or hedge funds that agree to repay the security by a given date and pay a small fee. This could be to ‘short’ a security or for a number of other risk management or investment strategy reasons.

Freetrade asked users to opt in to this heavily regulated activity in March citing it's importance in helping it reach a sustainable financial footing when offering low cost investing services.

In a letter to users, however, it now says this plan - while still part of its long term strategy is on hold.

"Earlier this year, we announced our plans to start lending securities as part of our mission to build a sustainable business," Freetrade said.

"While we still plan to launch this in the future, the rollout is being postponed and we will not commence securities lending at this point in time."

"We’ll update you and provide you with the relevant information and plenty of notice before introducing any changes in the future."

While securities lending is relatively common, with the likes of Revolut and Trading 212 participants in it, it is also not without risks that can occur when a borrower defaults.

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