Trading and investment platform eToro has partnered with investment bank BNY to launch a stock lending programme.

The new feature will enable eToro users based in the UK and Europe to earn passive income by lending out their stocks.

While BNY will act as the custodian, the companies will work with stock lending platform EquiLend to identify borrowers and facilitate the stock lending process.

Eligible eToro users will be given the option to opt into the programme, with their entire portfolio of stock positions will be considered for lending.

Once opted in, eToro said users will begin receiving monthly statements if their stock is successfully lent to keep track of the income they earn in the specified period.

Only whole unit stock positions are eligible for lending and eToro said that fractional shares are excluded, with eligible shares rounded down to the nearest whole share.

The company added that stocks with low market liquidity, high volatility and high demand are more likely to be borrowed and generate higher earnings, with loaned-out stocks backed by collateral.

Users who lend their stock temporarily give ownership of the stocks to the borrower and lose voting rights while the stock is on loan. However, eToro said they can still receive dividends, sell the stocks or opt out of the programme at any time at no cost.

The feature will be rolled out gradually to members of the eToro Club, starting with Platinum, Platinum+ and Diamond Club members, with this followed at a later date by lower-tier Club members.

“Stock lending has traditionally been the preserve of large financial institutions and it’s been much harder for retail investors to earn passive income in this way, yet it is an important practice that helps to support liquidity in financial markets,” said Yossi Brandes, VP execution services at eToro. “Leveraging BNY’s Global Clearing services, we want to level the playing field by enabling millions of eToro users across the UK and Europe to engage with stock lending in an easy and transparent way,”

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