New Investment Options for Small Investors in Taiwan: Complete Guide to Fractional Share Trading, Understanding Fees, Trading Hours, and After-Hours Fractional Share Prices

Building Investment Habits from Fractional Shares

The reason why fractional share trading has become a popular investment option for small investors in recent years is mainly because it breaks the traditional “minimum purchase of 1,000 shares” barrier. Fractional shares refer to stocks less than 1,000 shares; the minimum trading unit is just 1 share, allowing investors with limited funds to participate in the stock market.

How are these fractional shares typically generated? There are mainly three situations: when investors’ buy or sell orders are not fully executed, when rapid stock price fluctuations prevent reaching the target volume, or naturally during the process of rights issues and dividends. For investors, fractional share trading means placing orders with a quantity not exceeding 999 shares; simply put, it is buying and selling “stock leftovers.”

Intraday Trading and After-hours Trading: Mastering Two Major Trading Sessions

Since October 26, 2020, Taiwanese investors can now trade fractional shares during intraday hours, greatly expanding beyond the previous limitation of only after-hours trading. Currently, fractional share trading is divided into two main periods:

Intraday Trading Session (9:00-13:30)

• Orders can only be placed electronically via broker trading apps
• The exchange conducts the first matching at 9:10, followed by a collection of bids every 1 minute
• Trade execution follows the “price priority, then time priority” principle
• Unfilled orders on the day will not be automatically carried over to after-hours

After-hours Trading Session (13:40-14:30)

• Accepts various order methods including electronic, phone, and manual
• The exchange conducts a single collection of bids at 14:30
• Trade execution follows the “price priority, then random order at the same price”
• Unfilled orders are automatically canceled and not carried over to the next trading day

If investors’ orders during intraday trading are not fully executed or only partially filled, they need to resubmit orders during after-hours or the next intraday session.

Understanding the Costs of Fractional Share Trading: Fee Calculation and Discounts

The fee calculation for fractional shares is the same as for full shares, both based on 0.1425% of the buy or sell amount. However, each broker sets a minimum fee threshold and offers discounts for electronic orders.

For example, purchasing 200 shares of TSMC (2330.TW) at a current closing price of NT$1,065:

• 200 shares × NT$1,065 × 0.1425% = NT$303.53
• With a 50% discount, the actual fee is: NT$303.53 × 50% = NT$151.77

Comparison of main brokers’ fees:

Fractional Share Dividends, Dividends, and Trading Rights

As a shareholder, fractional share holders are entitled to dividends and dividend distributions. During dividend distribution, fractional parts less than one share are usually paid out as cash or the listed company may sell fractional shares collectively and distribute the proceeds.

Fractional shares can be bought and sold, and the Taiwan Stock Exchange has officially recognized fractional share trading and established relevant rules. The minimum trading unit is 1 share; theoretically, NT$1,000 can buy fractional shares, but considering transaction costs, it is recommended to invest at least NT$10,000 per transaction. Fractional shares can be sold, but must be sold entirely at once, and sell orders must be submitted through designated channels.

Practical Tips for Fractional Share Trading: Improving Execution Probability

Although fractional share trading is becoming more convenient, trading volume for less popular stocks remains low. Investors often face difficulty executing orders smoothly. Here are some practical techniques:

Consolidate to Whole Shares Strategy

If during intraday trading, the order book shows heavy sell-side accumulation for a stock, investors can consider buying additional shares to round up to a full 1,000 shares, then sell the entire lot through active whole-share trading. For example, holding 700 shares of a stock, buy 300 more to make 1,000 shares, then sell all at once to improve execution chances.

Understand After-hours Fractional Share Price Fluctuations

Since after-hours trading only involves one matching, if investors are eager to buy a stock, they can consider placing a buy order at the limit-up price, which can significantly increase the chance of execution based on the “maximum fill principle.” Conversely, to quickly sell fractional shares, placing a sell order at the limit-down price can also improve the likelihood of execution.

Pros and Cons of Fractional Share Investment

Main Advantages:

Fractional share trading significantly lowers the investment threshold, making it suitable for investors with limited capital. Investors can use smaller amounts to “test the waters,” while maintaining sufficient liquidity for daily expenses. This small-scale, regular investment approach helps more people develop investment habits.

Important Disadvantages:

Fractional shares have lower liquidity, and execution times tend to be longer; although the minimum fee is around NT$1, the fee rate remains relatively high, and small purchase amounts can be eroded by transaction costs. Fractional shares can only be sold, not bought, and must be sold entirely at once, limiting operational flexibility.

Additionally, due to the randomness of fractional share availability, brokers may not always have sufficient inventory, and investors may sometimes be unable to purchase the desired quantity.

Alternative Investment Options for Small Investors

If concerns about transaction costs and liquidity persist, Contracts for Difference (CFDs) offer another option. CFDs require only a small margin deposit, do not involve actual ownership of stocks, and have transparent costs with no additional commissions. For example, buying 5 shares of Google at $2,000 would require $2,000, but through 5 CFDs (with a 5% margin requirement), only $100 is needed.

However, note that fractional shares are suitable for long-term holding, while CFDs are settled daily and are more appropriate for short-term trading. Holding CFDs overnight incurs interest costs.

Future Outlook for Fractional Share Trading

As fractional share trading rules continue to improve, it has become an important way for small investors in Taiwan to build their portfolios. Compared to traditional full-share trading, fractional shares offer more flexible purchasing options, allowing investors to adjust their investment size based on personal funds.

The key to successful fractional share trading lies in: fully understanding your risk tolerance, learning basic investment analysis methods, and maintaining rationality during trading to avoid impulsive decisions. By mastering trading times, fee structures, and the price behavior of fractional shares after-hours, small investors can more effectively utilize fractional share tools and gradually accumulate assets.