Share-lending ‘50%’ offers do not share the same denominator

A brokerage promise to pay customers “50%” of share-lending income can describe materially different calculations. Trading 212 says it passes 50% of the interest it receives. eToro says it pays 50% of net revenue after third-party facilitation and maintenance costs. Interactive Brokers says it pays 50% of a market-based rate applied to collateral. Robinhood’s United States programme says customers can receive up to 15% of the gross revenue Robinhood earns. The percentages cannot be ranked until the denominator is identified.[1][3][4][5][6]

This is not a small-print distinction. Using eToro’s current worked example, $100 of gross lending revenue is reduced by a 15% third-party cost, leaving $85 of net revenue. The customer receives half of that, or $42.50. The headline share is 50%, but the customer’s share of the original gross amount is 42.5% in that example. Trading 212’s and Interactive Brokers’ published formulations do not allow the same gross-to-customer calculation without additional data about what the broker received and how its market-based rate was constructed.[1][3][4][5]

Four programmes, four revenue bases

Trading 212 describes the arrangement as an equal split of the interest it receives and says lending availability depends on market demand. That wording is relatively direct at the broker-receipt level, but it does not prove that the amount received by Trading 212 equals the full fee paid by the end borrower. Securities-lending chains can involve an agent, clearing or custody provider, borrower and broker. A payment can be “50% of what we receive” while upstream participants have already taken amounts that are not visible in the customer-facing percentage.[1][2]

Interactive Brokers uses a different reference point. Its programme says customers receive 50% of a market-based rate on the collateral value of loaned shares. The broker’s example applies a 4.5% customer rate where the market-based rate is 9%. That explains the calculation offered to the customer, but it is not phrased as a split of every dollar paid by the ultimate borrower. Collateral value, market conventions and loan-rate volatility all affect the result.[5]

Robinhood’s “up to 15%” avoids implying a fixed equal split, but the ceiling still does not state what a given security will earn. The programme says payments depend on the revenue Robinhood receives and that customers cannot choose which eligible shares are loaned. A comparison based only on 15 versus 50 would therefore compare a gross-revenue ceiling with percentages of two other bases.[6]

The customer gives up more than temporary possession

When shares are on loan, voting rights generally move with the borrowed securities. Trading 212 says the customer cannot vote loaned shares. eToro says voting rights pass to the borrower during the loan. Interactive Brokers also describes the loss of voting rights while shares are lent. A customer interested in a takeover vote, shareholder resolution or corporate governance event may value recall and voting more than a small lending payment. The revenue percentage says nothing about that trade-off.[1][3][5]

Dividend treatment also changes form. Instead of the issuer’s ordinary dividend, a customer may receive a manufactured or substitute payment from the lending chain. Trading 212 and eToro warn that the tax treatment can differ. The economic amount may resemble the dividend while the legal source and tax character do not. A gross lending yield that ignores a less favourable tax outcome could overstate the customer’s net benefit.[1][3][4]

Collateral reduces counterparty risk but does not erase it

Trading 212 says loans are collateralised at no less than 102% and adjusted daily. Interactive Brokers and Robinhood also describe collateral arrangements, with Robinhood saying loaned securities are backed by cash collateral held at a third-party bank. These structures are designed to cover the value of shares if a borrower fails to return them. They do not make the programme identical to holding unloaned securities. Prices can move rapidly, collateral can require liquidation and recovery may take time.[2][5][6]

Robinhood expressly says securities on loan are not covered by Securities Investor Protection Corporation protection while loaned, although collateral is maintained. Interactive Brokers similarly warns that SIPC treatment differs for loaned shares. The relevant protection becomes the lending agreement and collateral structure rather than the ordinary custody position alone. Customers comparing revenue shares should therefore compare the failure mechanics alongside the payout.[5][6]

A 50% headline does not guarantee any loan

All four programmes depend on borrower demand. A heavily shorted or difficult-to-borrow share may command a high fee; a widely available share may earn little or nothing. The same portfolio can generate different income from month to month without a change in the advertised split. Loan utilisation matters as much as the rate: a security earning an annualised 20% while loaned for two days can produce less than a 2% rate applied for most of the year.[1][3][5][6]

Providers may also exclude particular holdings. eToro says its programme applies to eligible fully paid whole shares and excludes fractional holdings. Account type, jurisdiction and customer classification can change eligibility at other brokers. A headline payout percentage therefore cannot be applied to the customer’s portfolio value without knowing which shares were lent, for how long, at what rate and under which entity.[3][4]

The calculation investors actually need

A useful monthly statement would begin with the quantity and value of each security lent, the number of loan days, the gross fee paid by the borrower, payments to lending agents or partners, the broker’s retained amount, the customer’s amount, collateral type and value, and any substitute dividend. From those fields, the customer could calculate both a gross utilisation yield and a net after-cost yield. The current public pages explain the programmes but do not provide a common disclosure template across providers.[1][2][3][4][5][6]

The eToro example shows why gross detail matters. With $100 gross, a 15% third-party cost and a 50:50 split of the remaining $85, the third party receives $15, the customer $42.50 and eToro $42.50. If the third-party cost were lower or higher, the customer’s gross share would change even though “50% of net revenue” stayed constant. A customer cannot infer the outcome from the percentage alone.[3][4]

What the evidence does not prove

The comparison does not establish that any provider’s programme is unfair or that one necessarily pays less. A broker with a smaller stated share could negotiate higher borrower fees, lend a greater proportion of the portfolio or operate at lower agent cost. A broker advertising 50% could still generate less customer income if its inventory rarely goes on loan. Actual account statements over a matched portfolio and period would be needed for a performance ranking.[1][3][4][5][6]

It also does not establish a single industry definition of “gross.” The borrower may pay one rate while an intermediary remits another amount to the retail broker. The defensible comparison is contractual: identify the point in the chain at which the percentage is applied. Any review that removes the words “received,” “net,” “market-based” or “up to” removes the information needed to understand the offer.[1][3][4][5][6]

The denominator is the product

Share lending can turn otherwise idle securities into income, and collateralised programmes can be valuable. But the customer is selling a temporary use right and accepting changes in voting, tax treatment and insolvency mechanics. The commercial bargain is not captured by a large percentage in isolation.[1][2][3][4][5][6]

Trading 212, eToro and Interactive Brokers can each accurately use the number 50% while describing different bases. Robinhood can accurately advertise up to 15% of gross revenue while producing a result that cannot be inferred in advance. The first question in any comparison should therefore be the one marketing percentages tend to omit: fifty percent—or fifteen percent—of what?[1][3][4][5][6]

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