Want to trade US stocks in Taiwan? A delegated account is the convenient choice, but you must clearly understand these costs.

Increasing numbers of investors want to buy US stocks through repurchase entrustment but feel unfamiliar with this investment channel. What exactly is repurchase entrustment? Why do Taiwanese investors choose it for overseas stock investments? This article will delve into the operational logic, hidden costs, and account opening practices of repurchase entrustment to help you make more informed investment decisions.

The Essence of Repurchase Entrustment: Domestic Brokers Place Orders on Your Behalf Overseas

The so-called repurchase entrustment, officially known as “Trust Business for Buying and Selling Foreign Securities,” means you open an account with a domestic broker authorized to handle overseas securities. The broker then places orders with overseas partner brokers on your behalf, completing transactions in international stock markets.

The term “re-” in repurchase entrustment (Sub-brokerage) is key because the order undergoes a second transfer: first from the investor to the domestic broker, then from the domestic broker to the overseas broker. This two-layer agency structure determines all characteristics of repurchase entrustment—high convenience but relatively higher costs.

Through a repurchase entrustment account, you can invest in stock markets in the US, Japan, Hong Kong, China, and more, purchasing stocks, ETFs, foreign bonds, and other assets. Among these, buying US stock ETFs via repurchase entrustment has become the most common way for retail investors in Taiwan to access overseas markets.

Balancing Convenience and Cost: Repurchase Entrustment vs. Overseas Brokers

Target Audience Judgment: Beginners new to overseas investing are suitable for repurchase entrustment—it’s convenient and reassuring. However, for frequent traders or large amounts, the cost advantages of overseas brokers will gradually become apparent.

How Does Repurchase Entrustment Work? Four Steps to Understand the Trading Process

Step 1: Investor Places Order — Submit buy/sell orders for overseas stocks via the domestic broker’s app or platform.

Step 2: Broker Transfers — The domestic broker forwards the order to its partner broker registered on the overseas exchange.

Step 3: Overseas Transaction — The partner broker completes matching in the international market and reports the transaction results back to the domestic broker.

Step 4: Account Settlement — The domestic broker updates your holdings and cash status; stocks purchased are held in the broker’s name on your behalf.

It’s important to note that the “holdings” you see are actually held in the broker’s name, while you enjoy the beneficial ownership of the shares. This proxy shareholding model is common in international markets and protected by regulations.

Repurchase Entrustment Costs Are Not Simple: Comprehensive Analysis of Fees, Taxes, and Currency Exchange

Composition of Repurchase Entrustment Fees

Commission Fees: Domestic brokers charge about 0.1% to 1% of the transaction amount, with minimum thresholds usually between US$25-50. Some brokers, like Cathay Securities, have eliminated minimums.

Transaction Fees: The US SEC(SEC) charges 0.00278% on stock sales; certain exchanges levy trading fees of 0.00015% to 0.0027% for buys and sells; TAF(Trading Activity Fee) is charged at US$0.000119 per share on sales, with a cap of US$5.95.

Hidden Tax Burdens

Dividends are subject to a 30% withholding tax, which can be reclaimed but involves complex procedures. Overseas income is taxed only if certain conditions are met: basic income exceeding NT$6.7 million, and basic tax exceeding the regular income tax, calculated as (Basic Income – 6.7 million) × 20%.

Note that investing in mainland Chinese stocks is considered domestic investment, while Hong Kong stocks are overseas investments, with different tax treatments.

Additional Cost Items

Cross-border remittance fees vary by bank. Taishin Bank waives fees; other banks require confirmation. Account deposits are usually larger than actual transaction amounts to account for exchange rate fluctuations, with the excess refunded after settlement.

Seven Essential Rules Before Trading

1. Limit Orders Only — Repurchase entrustment only accepts pre-set price orders; market orders are not available.

2. Sufficient Pre-Deposit Is a Must — Insufficient account balance will prevent order execution.

3. Exchange Rate Fluctuations Carry Risks — Brokers use fixed exchange rates for settlement; investors bear the risk of exchange rate differences.

4. T+1 Deduction, T+3 Settlement — Funds are deducted the next day after purchase; withdrawal is possible on the third trading day after sale.

5. Day Trading Allowed — Most brokers permit same-day buy and sell, but margin trading is prohibited.

6. Trading Hours Are Limited — US stock trading hours(Taiwan Summer Time) are 21:30 to 04:00 next morning; Winter Time is 22:30 to 05:00.

7. Bank Holidays Affect Operations — Repurchase entrustment services do not close on holidays, but bank foreign exchange departments’ holidays may impact processing.

Complete Guide to Opening a Repurchase Entrustment Account

If you decide to open a repurchase entrustment account, you need to prepare a domestic broker’s repurchase entrustment account and a foreign currency account. You can apply in person or online.

Eligibility: Taiwanese residents aged 18 or above.

Step 1: Prepare Documents

✓ Double IDs: Original ID card + passport or residence permit, or other second ID( such as health insurance card, driver’s license)
✓ Seal: Needed for signing documents in person
✓ Bank account copy: To verify financial capability

Step 2: Sign Contract and Set Up

Visit any branch of the domestic broker or apply online, sign the repurchase entrustment agreement. During the process, inform the staff of the broker code and select the settlement currency(NTD or USD). After successful account opening, transfer funds into the settlement account to start trading. The broker will hold your funds and holdings centrally.

Mainstream Taiwanese Repurchase Entrustment Brokers Fee Comparison (US Stock Electronic Orders)

Fee Observation: The fees among brokers are similar, and discounts are often negotiable. Compared to overseas brokers, repurchase entrustment remains more expensive, making it unsuitable for high-frequency traders. Cathay Securities, having eliminated the minimum, offers the largest current discount.

The fee structure mainly comes from two parts: domestic broker’s commission and fees from overseas exchanges and brokers. The lowest-cost option for US stocks can reach near zero, but costs for mainland Chinese or Hong Kong stocks can be 1% or even 2%.

Other Channels for Investing in US Stocks

Channel 1: Direct Purchase via Overseas Brokers

Using US-based brokers(such as FirstTrade)to buy US stocks, options, futures, etc. The commission for US stocks is zero, with transaction costs only the exchange fees, which are negligible. The downside is higher account opening thresholds and mostly English interfaces.

Channel 2: US Stock CFD Trading

US stock CFD(Contracts for Difference) allows leveraged trading based on US stocks, enabling both long and short positions, with very low fees(0.01-0.015%), zero commissions, only spread and overnight fees. Suitable for high-frequency traders or those needing leverage.

Final Recommendations

Repurchase entrustment is most suitable for investors with low trading frequency, simple investment targets, and willingness for long-term holding. It offers convenience and peace of mind, but high costs are unavoidable. To reduce costs and avoid high entry barriers, US stock CFD provides an alternative middle ground. The final choice should be based on individual trading frequency, capital scale, risk appetite, and learning costs.

Glossary

ETF(Exchange-Traded Fund): Index-based securities investment trust funds that bundle multiple stocks into a single fund. For example, a tech ETF issued by a broker that selects five large tech companies with specific weights, periodically adjusted to track industry trends.

Lot: Trading unit. In Hong Kong, the number of shares per lot varies by company(from 200 to tens of thousands); in mainland China, it is standardized at 100 shares. US stocks are traded per share.

In-Transit Funds: Funds from stocks sold on the same day but not yet settled. These funds can be used to buy again within the same market and currency but cannot be withdrawn until actual settlement is completed.