The Big Reveal of US Stock Investment Costs: Custodian Delegation vs. Overseas Brokers, Have You Made the Right Choice?

Taiwanese investors looking to enter the US stock market often find that the key issue isn’t “which stock to choose,” but rather “which trading channel to use.” Different trading methods directly impact your investment costs. This article will analyze the two main routes for Taiwanese investors trading US stocks and reveal the hidden costs of US stock commission fees within each route.

Two Main Paths for Taiwanese Investors Trading US Stocks

If you want to buy US stocks in Taiwan, there are essentially two options: through domestic broker-sub-broker channels or by opening accounts directly with overseas brokers. Both methods have their advantages, but the cost differences can be quite significant.

Path 1: Sub-Brokerage — Convenient but Higher Fees

Simply put, sub-brokerage (Sub-Brokerage) means outsourcing your US stock buying tasks to a domestic broker. After opening a sub-brokerage account with a Taiwanese broker, investors place orders through their system to buy US stocks or ETFs. Since the buy/sell instructions go through the domestic broker before being forwarded to the US market, it’s called “sub-brokerage.”

The benefits are clear: no need to handle overseas account opening procedures, no English communication with foreign brokers, and transactions can be made directly with New Taiwan Dollars (NTD) with the Taiwan Financial Supervisory Commission oversight. But what’s the cost? The fees tend to be higher, usually between 0.15% and 1% of the transaction amount.

Core advantages of sub-brokerage:

• Simple account opening process, no hassle with overseas account applications
• Direct NTD deduction, broker handles currency exchange automatically
• Funds are protected under Taiwanese regulation, with channels for dispute resolution

Path 2: Overseas Brokers — Lower Fees but More Complex Process

Trading directly with overseas brokers is much easier to understand. Investors skip domestic brokers and open accounts directly with foreign brokers, placing orders to trade US stocks directly. The logic is similar to buying Taiwanese stocks through a Taiwanese broker.

Most major overseas brokers now offer extremely low or zero commission policies, very friendly for frequent traders. However, this method requires investors to handle currency exchange from NTD to USD themselves, and the deposit process is relatively more complicated.

Main features of overseas brokers:

• Very low or zero trading commissions
• Fast order execution, supports real-time trading
• Wide range of trading products

What Does the US Stock Sub-Brokerage Fee Include?

When trading via sub-brokerage, your costs are divided into two parts: fees directly charged by the broker and hidden third-party regulatory fees.

Direct Fees of Sub-Brokerage

Trading commissions are the main component. Different sub-brokerage brokers charge between 0.25% and 1%, but there’s a catch: almost all set a minimum fee per order, typically between $25 and $100 USD.

For example, if you buy US stocks worth $1,000 and the commission rate is 0.3%, you’d pay $3 in fees. But since the minimum fee is $25, the effective rate becomes 2.5%! The smaller the transaction, the more significant this issue.

Other service fees (usually negligible) include remittance fees, paper statement fees, dormant account fees, etc., which vary by broker.

Hidden Costs of Sub-Brokerage

Third-party regulatory fees are invisible costs you still need to pay. These include two parts:

• Exchange fees: Collected by the US SEC from brokers, charged only when selling, at a rate of 0.00051% of the transaction amount, paid by the broker to the SEC
• Transaction Activity Fee (TAF): Collected by FINRA, also only on sales, at $0.000119 per share, with a minimum of $0.01 and a maximum of $5.95

Most sub-brokerage brokers do not list these fees separately; they are usually integrated into the overall fee quote.

Cost Structure of Overseas Brokers

Choosing an overseas broker involves costs such as:

• Trading commissions: Most major brokers now offer commission-free trading, but some still charge fees
• Margin interest: When using margin accounts
• Currency exchange fees: Banks charge when converting NTD to USD, usually around 0.05% of the exchanged amount, with minimum fees to watch out for
• Deposit fees: Banks in Taiwan charge between NT$100 and NT$900 per transfer to overseas brokers
• Withdrawal fees: Some brokers charge US$10 to US$35 per withdrawal

Third-party regulatory fees (exchange fees and TAF) are the same as in sub-brokerage.

Additionally, for stocks that pay dividends, a 30% withholding tax on cash dividends applies (some can be refunded).

Cost Summary Table

Comparison of Major Sub-Brokerage Fees

Below are the 2025 fee standards for major sub-brokerage brokers. Please confirm the latest rates with the broker before actual trading:

Overseas Brokers and Bank Fee Tables

Major overseas brokers’ fees

Major bank currency exchange and deposit rates (NTD)

Practical Cost Comparison: Sub-Brokerage vs Overseas Broker

Calculating with the lowest fee combination:

Sub-brokerage setup: Fubon Securities (0.25% commission) + Bank of Taiwan currency exchange
Overseas broker setup: Mitrade (zero commission) + Bank of Taiwan currency exchange and deposit

(Note: USD to TWD exchange rate assumed at 1:30)

Data Interpretation

From the table, it’s clear that when a single transaction exceeds US$6,000, the cost advantage of overseas brokers begins to show. Before that, sub-brokerage is more cost-effective.

However, this conclusion assumes only a single transaction. If you are a frequent trader, the situation changes dramatically.

Suppose the same US$10,000 is split into four trades (two buys and two sells):

• Sub-brokerage: pays $25×4 = $100 in fees
• Overseas broker: with zero commission, only pays the deposit fee once at $11.67, regardless of the number of trades

In this case, the advantage of overseas brokers becomes obvious.

Choosing Guidance

Based on trading characteristics, investors should choose accordingly:

Suitable for sub-brokerage if:

• Capital is less than US$6,000
• Trading frequency is low (a few times a year)
• Want to trade directly in NTD without currency exchange hassle

Suitable for overseas brokers if:

• Single transaction exceeds US$6,000
• High trading frequency (monthly or weekly)
• Larger capital scale
• Willing to accept more complex account opening and currency exchange processes

Summary

Taiwanese investors have two main channels into the US stock market, each suitable for different scenarios:

• Sub-brokerage is ideal for small amounts and low frequency, offering the most convenient NTD trading method with full local regulation protection
• Overseas brokers are better for large amounts and high-frequency trading, with zero commissions and a wide range of trading products
• US stock sub-brokerage fees are indeed higher, but considering convenience and security, it remains valuable for investors with limited funds
• Amount and trading frequency are key factors; choose based on your actual situation to truly reduce costs