Saxo Bank has announced that it is introducing a stock lending service for customers in the Middle East and North Africa. With the aim of enabling investors to generate additional passive income towards their portfolios, through allowing them to lend out their stocks and exchange-traded funds (ETFs) while still allowing them to sell at any time. The move has emerged as an alternative revenue stream to let retail investors in the region build on their portfolios, given the global economic uncertainty and volatility trends prevalent in the financial markets, as well as weaken the impact of inflation within the Investments. Saxo Bank believes that stock lending, which is considered riskier, is a viable option that could allow retail investors to earn more, adding that this strategy lets them lend out their stocks or ETFs to third-party market participants. They often do this to make a quick profit when they see that a security is poised to fall in price, or to borrow assets to satisfy delivery requirements for other financial instruments they hold.
Damian Hitchen, CEO of Saxo Bank Mena, said, “With macroeconomic uncertainty and an inflationary environment, most investors want to make their money work harder for them.” The bank believes that stock lending service provides an alternative income stream for investors and resulting in boosting their savings.
Economic uncertainties have been triggered by the Russia-Ukraine conflict, raising inflation, and increasing interest rates as central banks work to control the cost of living, culminating in volatile stock markets. Last month, the UAE Central Bank raised its base rate for the overnight deposit facility by a quarter of a percentage point to 4.65 per cent from 4.4 per cent, while the US Federal Reserve raised its policy rate by 25 basis points. Banks have been slow to pass benefits to savers with rising borrowing costs and decreasing investors’ portfolios. To deal with this, digital wealth managers Sarwa and StashAway attribute no-fee cash accounts of 3 per cent and 4 per cent, correspondingly, to help clients improve their savings power.
Saxo Bank’s stock lending service provides an interest rate depending on which stocks are lend out. Clients will receive a payment based on the market demand for shares on loan. The service provides collateral in the account of clients during the duration of the loan, ensuring a secure and safe way of managing stocks lending. Saxo Bank also takes 50 per cent on the interest repayment, and the interest rate is based on demand and supply.
Robinhood, a zero-commission trading app, initiated a stock lending service in May 2020. There is a risk of default and operational concerns regarding securities lending, which could affect the loaning or withdrawal of securities, the collection of collateral or the delay rate.
عبدالرحمان زمین پیما
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آرمان جعفری
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