Does the ETF manager just keep it, like a management fee? If so, MOON earns far more for Direxion from stock lending than from the 0.65% management fee. Just the top ten holdings add up to 1.87%.
What do ETFs typically do with the proceeds of lending the underlying securities?
- Thread starter ScroogeMcDuck
- Start date
it varies by provider. Years ago iShares kept it all but vanguard credited it all to the funds. So to be competitive ishares started to share some of it back to their funds. Their argument for keeping some is that they are so good at stock loan that even after keeping some revenue themselves, they were still crediting more back to the funds than vanguard does. I also recall that Blackrock handles their stock loan themselves vs Vanguard outsourced it. not sure if that's still true. but the bottom line is it varies by provider.
Sure thing, why don't you give it a try and let us know how it goes? While you're at it, why not set up a software company to replace microsoft, after all it costs them pretty much nothing to download that copy of MS Office to your computer that you have to pay $120/year for right? And definitely go ahead and set up a retail pharmaceutical company, those jokers package up a couple cents worth of chemicals and sometimes sell them for thousands of dollars!
Or maybe take a couple of business classes or even better start a business. Learn about what it takes to build a brand, how most pricing isn't based on cost plus for the seller, maybe learn a bit about compliance, marketing, and operating costs for an ETF. Talk to an attorney about licensing costs and trademarks. Take a look at the literally hundreds of ETFs that fund companies paid to launch and then had to close down when they didn't take off. And if, after all that, you think you can launch a better mousetrap, then by all means do so. As an entrepreneur myself I highly encourage folks who want to go disrupt an industry with a startup. But I also highly encourage them to at least learn the basics of that industry and running a business first.
It's in the prospectus, not their fault folks can't be bothered to read it. How, exactly, do you see this leading to big problems? Big problems from lending shares would require somehow shares couldn't be returned when requested by the lending entity. That eventuality would require the breakdown of the entire U.S. market clearing function. If the entire clearing function breaks down to the point ETFs can't get their lent shares back, then ETFs not getting their lent shares back will be the least of our concerns!
