DEGIRO operates a securities lending program, meaning that shares held in Basic accounts can be loaned out to third parties, typically to facilitate short selling and market liquidity.
However, Custody accounts, which were discontinued for new clients in 2021, did not allow stock lending.
While DEGIRO ensures asset segregation to protect clients’ holdings, investors using a Basic account should be aware that their shares may be lent out as part of the brokerage’s lending framework.
Does DEGIRO lend investors’ shares?
In 2021, DEGIRO removed the option for new customers to open a Custody account.
The DEGIRO Custody Account was the most common among investors, as contractually it was not possible for DEGIRO to allow stock lending.
However, the only account available now is the Basic account, which instead permits share lending.
So as of today, DEGIRO allows stock loans. However, old custody account holders will not have their shares loaned out.
What is the difference between a DEGIRO Basic account and Custody account?
When it comes to shares lending at DEGIRO as mentioned above, the most impactful thing is the type of account chosen during the DEGIRO registration (Investing involves risk of loss).
With the DEGIRO Basic account, the broker does have the right to lend out shares you have purchased. The benefit to you will be an account with more flexible features, and even lower fees than the custody account where the fees will be slightly higher but DEGIRO can’t lend out your shares.
Comparatively speaking, even though the fees on a custody account may be just a little higher, they remain very low compared with other brokers.
Just remember that you cannot change your choice. A basic account cannot be converted to a custody, and vice versa. You can though still hold two separate accounts.
What exactly happens when DEGIRO Lends Shares in your Basic Account?
With the fact that your shares can be lent out, you may wonder how this guarantees your own security and your holdings. Rest assured that the broker does everything in a transparent and secure way.
DEGIRO is your counterparty in these trades and therefore they guarantee your assets with their own equity when they are lent out. Further than that, they also require security from the borrower in case the positions change.
With that in mind, the only possible way your holdings could be negatively impacted would be if the borrower, and DEGIRO both were unable to repay and meet their obligations. This is an extraordinarily unlikely case if not almost impossible as a retail trader.
Even in this hugely unlikely event, the loss incurred would be less the security provided by the borrower, so your holdings are further protected in that regard.
What is DEGIRO Assets Segregation?
Asset segregation is another key factor in place to bolster trust in this process. Whether or not the broker lends your shares out in the first place, they are securely stored and separate from DEGIRO’s own assets.
SPV is the legal entity used by DEGIRO for the safe holding of your assets. The only function of SPV is the administration and safeguarding of these assets. They do not provide any commercial function.
This means that even in the case that DEGIRO was bankrupt, your assets are, and still would be held safely with SPV and could be returned to you without loss.