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What is stock lending?

Many ETFs lend the stock it holds to a third party in exchange for a fee which can help to offset some of the fund's management charges, reducing costs. All physical ETFs are permitted to lend stock, though not all currently do. Swap-based ETFs and ETCs generally do not lend stock. At all times the fund remains the beneficial owner of the shares, is entitled to all dividends and has the right to recall the stock at any stage. The ETF is normally given collateral (often cash or a different stock) to hold whilst the stock is on loan, but there is a chance that the ETP could lose money if the loan can't be recovered.

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