Alpaca, an API-first stock and crypto brokerage platform, announced the launch of its Fully Paid Securities Lending (FPSL) program for its Broker API, marking a significant milestone in its mission to democratize access to financial services.
This offering enables Alpaca’s fintech partners to diversify revenue streams while providing end-users with an opportunity to earn passive income from their securities holdings.
The announcement, shared by Alpaca’s CEO Yoshi Yokokawa, underscores the company’s steady pace of product development, following the recent launch of fixed-income products.
The FPSL program allows investors to lend fully paid securities—stocks or ETFs owned outright without margin loans—to Alpaca, which then lends them to other market participants, such as short sellers.
In return, lenders earn interest based on the demand for the loaned securities, credited monthly to their accounts.
This mechanism not only supports market liquidity by facilitating short selling but also enables investors to retain ownership of their assets, benefiting from potential appreciation and dividends.
Alpaca’s program is designed to be seamless, with partners able to integrate FPSL into their platforms via the Broker API, offering a frictionless experience for end-users.
For fintech companies leveraging Alpaca’s infrastructure, the FPSL program presents a worthwhile value proposition.
By embedding securities lending into their apps, partners can generate additional revenue through a revenue-sharing model with Alpaca, diversifying beyond traditional income sources like payment for order flow (PFOF) or margin interest.
This aligns with Alpaca’s B2B2C model, which serves over 5 million brokerage accounts across 200 financial clients in 40 countries.
The program’s flexibility allows partners to customize the lending experience, enhancing user engagement and retention.
However, the FPSL program comes with risks that Alpaca transparently outlines.
There’s no guarantee that all eligible securities will be lent, as demand depends on market conditions.
Lenders temporarily lose voting rights on loaned shares, which could impact those keen on corporate governance.
Additionally, while Alpaca mitigates counterparty risk by holding collateral (currently cash at BMO bank) and offers SIPC protection up to $500,000 (plus excess coverage up to $30 million), a broker bankruptcy could pose challenges.
Margin traders should note that lent securities may affect margin calculations, potentially triggering close-outs if shares are recalled.
Alpaca’s FPSL launch reflects its broader vision of building a global standard for investment infrastructure.
Since becoming a fully self-clearing broker-dealer in 2024, Alpaca has quadrupled trading volume and tripled assets under custody, fueled by innovations like options trading and international expansion.
The program’s integration into the Broker API empowers developers “to create sophisticated, automated trading solutions, reinforcing Alpaca’s developer-first ethos.”
As fintech competition increases, Alpaca’s FPSL program positions its partners to offer “differentiated services, tapping into the growing demand for passive income opportunities.”
By combining accessibility, automation, and regulatory compliance, Alpaca says it continues to enhance how fintech platforms connect users to the U.S. capital markets, paving the way for a more inclusive financial ecosystem.