Interactive Brokers Group (Nasdaq: IBKR), a popular American electronic trading platform with a global presence, has launched the Stock Yield Enhancement Program (SYEP) Derivatives for traders and investors from Australia. It aims to provide additional income opportunities for eligible clients.
Interactive Brokers Introduces New Investing Program
Interactive Brokers Australia's SYEP Derivatives program offers clients the opportunity to loan their stock shares in exchange for cash collateral deposits that mirror the potential earnings from lending out the shares.
The program is available only to eligible clients who hold either a margin account with approval or a cash account with a minimum equity of $50,000 or equivalent. The company assumes complete responsibility upon granting Interactive Brokers Australia permission to participate in the program. Interactive Brokers Australia thoroughly analyzes clients' stock holdings and initiates SYEP Derivatives with those who meet the criteria. This results in depositing cash collateral into clients' accounts, accompanied by interest payments in the form of fees.
"We are always looking for ways to deliver more value to our clients, and the SYEP Derivatives program fits that bill," Steve Sanders, the EVP of Marketing and Product Development at Interactive Broker, said.
"Our clients can enjoy extra income without having to sacrifice control over their stock, and we are proud to offer this innovative program."
Watch the recent FMLS22 panel on post-covid challenges and opportunities for retail traders.
Details of SYEP Derivatives by Interactive Brokers
According to the press release published on Tuesday, clients participating in Interactive Brokers Australia's SYEP Derivatives program will have clear visibility of the compensation they receive for the collateral value, as well as the fee charged by the company for its services. This fee typically does not exceed half of the potential revenue that could have been generated through traditional share lending.
While their shares are loaned out as part of the SYEP Derivatives program, clients remain the rightful owners, retaining market exposure and any profits or losses resulting from stock price fluctuations. The loaned shares are clearly reflected in clients' account statements, and clients retain the freedom to sell them or terminate their participation in the program at any moment, without any limitations.
An Example published on the Interactive Brokers website shows how the program works:
"XYZ is currently trading at $75.00/share. You are long 5,000 shares of XYZ, with a market value of $375,000.00. XYZ is in demand and commands a loan interest rate of 9%. You grant IBKR-Australia authority to enter into SYEP Derivatives and IBKR-Australia may then loan out your 5,000 shares of XYZ at 9%. IBKR-Australia will pay interest on the cash collateral of $375,000.00 x 4.5% = $16,875.00. You could earn $16,875.00/year on stock you already own," the company's website stated.
Interactive Brokers Shows a Strong Beginning of 2023
The American online broker published its brokerage metric for January 2023 last week, reporting an increase of 14% on a monthly basis in its Daily Average Revenue Trades (DARTs), which reached 1.988 million. On top of that, Interactive Brokers reported an increase in client accounts by 2% to 2.13 million. Compared to the same period a year earlier, it translates to a 23% jump.
The numbers came just two weeks after the publicly-listed company presented record-breaking profits for the fourth quarter of 2022. The three-month period between October and December brought earnings of $1.31 per share (EPS), which was significantly higher than the market consensus of $1.16 EPS.
The net revenues came in at $976 million, while the adjusted figure reached $958 million, translating to a 62% and 40% percent jump, respectively, from the same period of the previous year.
