[sigstoat]

> What's really fun is that Alice and Charlie may not even know that they've lent their stock.

last i checked brokers _cannot_ just loan out random alice and charlie's shares.

only once you've got a margin account and you've gone into debt can they use your shares. if you've got a margin account and you didn't read the contract, well... god help you, nobody else can.

as i understand it, loaned shares generally come from large institutional investors. the folks managing your index funds make extra money by loaning the underlying shares. (maybe that's what you meant? but the prospectuses for index funds make it clear that they do this sort of thing.)

[rspeele]

Yeah, I don't mean to imply that this is necessarily happening to anybody who's holding a stock. It depends on your broker and the terms you've agreed to.

On some brokers it's an opt-in thing and you get to reap the rewards (interest) of lending out your shares. A friend of mine has been doing this with QuantumScape stock and collected a sizeable amount just from lending it through its December run-up, in addition to the direct gains.

My impression is that the zero-fee brokers like RH are the ones more likely to do this without your opt-in consent (of course you do agree to it across the board in their terms), but I'm not an expert.

[klodolph]

I think Robinhood will loan out your stock and keep the money. This and sending order flow to Citadel are how Robinhood makes money, instead of from commissions.

[sokoloff]

> only once you've got a margin account and you've gone into debt can they use your shares.

As I read my customer agreement with ETrade, they are allowed to loan out my shares, even if I do not have a current margin balance. (It reads to me that they are pledged as collateral at all times, but I am not a lawyer.) It seems unlikely and inefficient that if I paid or traded my margin balance down to zero that ETrade would demand delivery of any shares I'd previously lent.