What is stock lending? How is interest calculated? A complete analysis of the risks and returns of borrowing securities.

Question

Have you ever thought that the stocks held in your account for a long time can create additional returns besides waiting for the stock price to rise? In the environment of increased Fluctuation in the A-share market in 2025, stock lending is becoming a choice for more and more rational investors to activate their assets. As of August 2025, the financing balance of the Shanghai and Shenzhen stock markets has significantly risen, and the demand for stock sources from brokerage firms continues to climb, bringing new opportunities for individual investors in stock lending.

What is stock lending?

Securities Lending refers to investors lending stocks that they hold long-term in their securities accounts and do not plan to sell for the time being, through a brokerage platform to investors who need these stocks (usually those engaging in short selling or arbitrage trading). The borrowing party must pay interest, while the lending party can earn additional income from the borrowed stocks during the holding period.

The core logic of this operation is:

Activate frozen assets: Obtain cash flow without selling holdings.
Hedging holding costs: Interest income can offset part of the opportunity cost of holding positions.
Maintain shareholder equity: enjoy dividend distribution rights during the lending period (the broker will collect compensation on behalf)

##Four-step operational process, pay attention to the thresholds and restrictions.

open a lending account

You need to apply for a securities lending (lending) account with the broker. After submitting identity and account information, the review will take approximately 1-3 working days. Note: You must first apply for the "Action Browser Certificate" from designated brokers such as Yu Shan Securities to operate online.

entrust lending settings

Log in to the brokerage App → Enter the "Stock Lending" feature → Select the stocks available for lending:

Minimum unit: 1 share (1000 shares), fractional shares cannot be lent out.
Input expected rate: annualized 0.01%–16% freely set

##Transaction and Recall

After the order is successfully placed, the stock will be transferred out of the inventory.
When a recall is needed, the App submits a request → complete the recall within 5 working days

receives interest

After the transaction, the broker charges 20% of the lending income as a fee, and the remainder is credited to the funds account.

##How is interest calculated? The rate strategy determines the level of returns. Core formula for interest calculation: Lending interest income = Lending stock market value × Agreed rate × Lending days / 365

##Key Factors Affecting Actual Returns:

Fee Setting Strategy:
- Low liquidity stocks (such as small and mid-cap stocks) can set higher fees (8%-16%)
- Blue chip stocks usually range from 0.01% to 3% due to the abundance of available shares.
Market Supply and Demand Dynamics: In August 2025, the demand for margin trading is concentrated in the AI and new energy sectors, with lending rates reaching up to twice that of general stocks.
Brokerage commission ratio: Most charge 20%-30% of the interest as a fee.

##Returns vs Risks: Rational Assessment of Three Key Points

profit advantage

Zero-cost income increase: Long-term holders can obtain additional cash flow without risk.
Protecting shareholder rights: During the ex-dividend period, dividends are still received, and the borrower must compensate the equivalent amount.
Borrow and repay as needed: stocks can be recalled when there is an urgent need to sell, providing greater liquidity.

Risk Warning

Liquidity risk: Stocks require T+5 days for recall, and if the stock price plummets during this period, it cannot be sold in time to stop losses.
Counterparty default risk (extremely low): The broker acts as an intermediary and guarantees the settlement, with the actual risk borne by the broker.
Opportunity Cost Risk

Setting excessively high fees may result in long-term failure to execute transactions, causing funds to remain idle with zero returns.
Data from August 2025 shows that the transaction rate for orders with a fee rate exceeding 12% is below 15%.

##Practical Suggestions for 2025: Key Strategies to Maximize Returns

Target Selection Principles

Choose stocks with high Fluctuation and high margin demand (such as popular theme stocks)
Avoid lending liquidity to illiquid stocks that have been stagnant for a long time.

Dynamic Fee Rate Setting

Refer to the "Securities Source Scarcity Indicator" provided by the brokerage app
During market fluctuation periods, the fee rate can be adjusted (for example, when the Shanghai and Shenzhen 300 volatility is 18% in August, a 5%-8% fee rate results in the fastest transactions).

Diversified lending: Avoid having a single stock account for more than 30% of the lending position to prevent fund freeze due to individual stock suspension.
Make use of automatic renewal: Check "Agree to automatic renewal" when placing an order to avoid repeated operations after expiration.

##Conclusion: Activate Stock Value with Risk Control Thinking The essence of stock lending is a yield enhancement tool based on controllable risk. As of August 14, 2025, with the expansion of the A-share margin financing targets to 800 stocks, the opportunities for individual lenders have significantly increased. However, it is essential to remember: always prioritize asset safety, lend only on high-quality stocks that are held for the long term, and strictly control the proportion of a single stock.

For rational investors, stock lending is not a means of making huge profits, but rather a way to exchange time and idle resources for "passive income" amid market fluctuations. When used properly, every share of stock you hold can potentially become a seed for "sleeping income."

APP1.8%

View Original