Understanding what full delivery means: A must-read guide for Taiwan stock market investors

What Are Fully Settled Stocks? An In-Depth Look at This Special Type of Security

In the Taiwanese stock market, what does full settlement mean? Simply put, fully settled stocks are those where investors must pay the entire purchase amount upfront during a stock transaction, without the option of using margin or credit trading methods. These stocks are designated as fully settled mainly due to the issuing company’s operational difficulties, deteriorating financial condition, causing the net asset value per share to fall below the face value of 5 yuan, or due to major violations that lead to regulatory intervention by the Taiwan Stock Exchange.

Can Fully Settled Stocks Turn Around? An Overview of the Removal Mechanism

Being classified as a fully settled stock is not an absolute judgment. When the company’s operations improve and financial indicators get better, there is still a chance to revert to regular stocks and re-enter normal trading mechanisms. However, certain conditions must be met:

For listed companies: The net asset value per share must exceed 5 yuan for two consecutive quarters, and shareholder equity must remain above 300 million yuan during the same period.

For OTC (Over-the-Counter) companies: The latest quarterly financial report shows a net asset value per share exceeding 5 yuan, and shareholder equity demonstrates growth.

Once these conditions are satisfied, the Taiwan Stock Exchange will conduct a formal review on the first business day after collecting the complete quarterly report. The review notice is issued, and the stock’s status is officially updated on the second business day thereafter, restoring its eligibility for regular stock trading.

How to Find the List of Fully Settled Stocks?

Investors wanting to know which stocks are currently classified as fully settled can visit the official website of the Taiwan Stock Exchange. Navigate through the “Trading Information” section, then select “Trading Changes,” where you can browse the complete list of fully settled stocks and related information.

Detailed Steps for Buying and Selling Fully Settled Stocks

Since fully settled stocks cannot utilize margin or credit trading tools, their trading process differs significantly from regular stocks.

Buying process: Individual investors cannot place orders directly through their accounts. They must first transfer the total funds needed for the purchase (including transaction fees) into a designated settlement account at the broker, and inform the broker of the stock code and quantity they wish to buy. To avoid order failures due to insufficient funds, it is common to transfer a higher amount as a buffer. If there is any remaining balance in the account on the same day, the broker will refund the excess to the investor’s personal account before 3:30 PM.

Selling process: Selling fully settled stocks also requires coordination with the broker. Investors need to proactively call their broker to request “stock freezing” (i.e., pre-committing the shares for sale). The broker will record this (some brokers now use app-based applications), and once confirmed, investors can independently instruct the sale. If the order does not execute by the market close, they must reapply for stock freezing the next day to sell again.

Major Brokers Supporting Fully Settled Stock Transactions

Most established brokers in Taiwan support trading of fully settled stocks:

• Fubon Securities: One of Taiwan’s largest brokers, offering comprehensive investment tools and online trading platforms, supporting fully settled stocks.

• Yuanta Securities: With the widest branch network across Taiwan, providing mobile order placement and cloud account synchronization, also supporting fully settled stocks.

• CITIC Securities: With extensive experience in financial markets and a team of professional investment advisors, offering services for fully settled stocks.

• KGI Securities: An old and reputable broker, with practical “one account management” features, supporting sub-account settings and fully settled stock trading.

Risks and Precautions When Investing in Fully Settled Stocks

Stocks classified as fully settled indicate restricted liquidity and often face significant price declines. Compared to regular stocks, the risk index is notably higher. Main risk factors include:

Operational and legal risks: The status of being fully settled often reflects underlying operational difficulties, financial problems, or legal violations and disputes, making these high-risk investment targets.

Price volatility: Stocks with net asset values near 5 yuan tend to fluctuate greatly, as this directly relates to whether the stock can regain credit trading status. When transitioning from credit trading to full settlement, stocks may even hit multiple consecutive limit-downs, making short-term movements unpredictable.

Inability to generate investment returns: Unlike regular stocks, fully settled stocks do not pay dividends or offer rights issues. Holders mainly hope that the company will turn around and restore normal stock status.

Severely limited liquidity: Fully settled stocks are traded only once every 30 minutes, with few buyers and sellers. Many stocks can become trapped in a situation with no trading counterpart, leading to extremely poor market liquidity and higher transaction costs.

Investors should carefully assess their risk tolerance, fully understand what fully settled stocks are and their mechanisms, before considering involvement in such high-risk securities.