Your Lending revenue is calculated daily using the following formula:
Market lending rate – The ‘price’ borrowers are paying to borrow securities on the given date. This is quoted in basis points (annually). In order to convert this to a percentage, we divide by 10,000.
Quantity – The number of nominal units of the loaned security.
Price – The daily price of the security at the close of business.
Days on Loan – The number of calendar days the security was on loan, on an actual/360 basis.
For example:
If you wanted to calculate the lending returns for Tesla Inc., assuming the following data doesn’t change for the duration of the 112-day loan (inc. price):
Lending Rate = 100bps, Quantity = 100,000, Price = $350, and Days on Loan = 112.
Please note that your lending revenue accrues on a daily basis, based on each day’s lending rate and market price, and is paid monthly in arrears.
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