New Investment Option for Small Investors: The Complete Guide to Fractional Share Trading, from Introduction to Practical Application

In recent years, fractional share trading has become a stepping stone for small investors in Taiwan to enter the stock market. Compared to the investment threshold of hundreds of thousands for full shares, fractional share trading attracts many novice investors with its flexibility and low costs. This article will provide an in-depth understanding of all aspects of fractional share trading, including basic concepts, trading rules, fee structures, and practical tips on how to sell stocks more quickly.

What are fractional shares? Why do they exist?

Definition and origin of fractional shares

The basic unit of stock trading is a “lot,” which equals 1,000 shares. When investors hold less than 1,000 shares, these scattered shares are called “fractional shares,” with the minimum trading unit being 1 share.

Fractional shares are usually generated during stock transactions. For example, if you place an order to buy 1,500 shares of a stock, but only 1,000 shares are executed at your target price in the market, the remaining 500 shares become fractional shares. Additionally, fractional shares often arise during stock dividends and rights issues. In the past, fractional shares could only be traded after hours, but since October 26, 2020, the Taiwan Stock Exchange officially launched the “Intraday Fractional Share Trading” system, greatly improving trading convenience.

Fractional share trading rules: time, methods, and restrictions

Comparison of intraday and after-hours trading sessions

Taiwan’s fractional share trading is divided into two periods:

Key points for intraday trading

Intraday fractional share trading occurs during the same hours as full shares, starting from 9:00 AM. Note that only electronic orders (via broker trading platforms) are accepted; manual or phone orders are not permitted. If your order is not fully executed during intraday trading, the system will not automatically carry it over to after-hours; you must resubmit the order.

Key points for after-hours trading

The after-hours session offers more flexibility, allowing electronic, phone, or manual orders. However, only one call auction occurs at 14:30, and unfilled orders are automatically canceled—they will not carry over to the next day.

Important regulations for fractional share trading

Fractional shareholders enjoy the same rights as full shareholders:

• Dividends and distributions: Fractional shareholders can receive dividends, usually paid out in cash or by consolidating fractional shares for sale and distributing the proceeds.
• Trading rights: Fractional shares can be bought and sold freely, but each order cannot exceed 999 shares.
• Minimum trading volume: Starting from 1 share, suitable for dollar-cost averaging strategies.

How are transaction fees for fractional shares calculated? Comparison of broker discounts

Fee calculation method

Transaction fees for fractional shares are identical to those for full shares, at 0.1425% of the transaction amount. Different brokers set minimum fee standards and often encourage electronic orders with discounts.

Practical example calculation

Suppose you want to buy 200 shares of TSMC (2330.TW), with a closing price of NT$1,065:

Basic fee = 200 × 1,065 × 0.1425% = NT$303.53

If the broker offers a 50% discount, the actual fee = NT$303.53 × 50% = NT$151.77

Comparison of main brokers’ fractional share trading fees

Strategies to reduce fees

It is recommended to make single transactions of at least NT$10,000 to keep relative fee costs reasonable. Small transactions with very low amounts can have disproportionately high fee rates, significantly eroding investment returns.

How to sell stocks faster? Detailed tips for fractional share selling

Diagnosing the problem: Why is it hard to sell fractional shares?

Compared to popular stocks, many less-traded stocks have lower fractional share trading volume, making it difficult for sell orders to be executed promptly. For example, stock 1582 (Xinjing) may have low trading activity; even if you want to sell 700 shares, it might not be executed smoothly during the day. In such cases, employing certain trading techniques can improve the chances of successful sale.

Tip 1: Convert fractional shares into full shares

When fractional shares are hard to sell, consider consolidating them into full shares for trading. For example, with stock 1582:

1. Observe the fractional share market during the day, confirming there are many unfilled buy orders.
2. Buy 300 shares of 1582 and combine with your existing 700 shares to form 1,000 shares (one lot).
3. Use full share trading to sell, which generally has higher liquidity and faster execution.

This method is especially suitable for less popular stocks.

Tip 2: Extreme price strategies during after-hours

In after-hours trading, only one call auction occurs at 14:30, following the “maximize transaction volume” principle— the system prioritizes matching orders that achieve the largest volume. Based on this mechanism:

• When eager to buy: Place a buy order at the limit-up price to maximize the chance of execution.
• When eager to sell: Place a sell order at the limit-down price to increase the likelihood of execution.

However, this approach may result in less favorable prices; investors need to balance speed and price.

Tip 3: Choose the right trading time

• During intraday hours, trading activity is higher, making it easier to execute orders for popular stocks. For less active stocks, multiple order resubmissions may be necessary.
• If not executed during the day, try again the next trading day during intraday hours.

Pros and cons of fractional share investing

Advantages: Small entry barrier

Disadvantages: Cost and liquidity considerations

Cost optimization tips

Avoid frequent small trades; making single purchases of NT$10,000 or more makes the fee proportion more reasonable. For short-term high-frequency trading, fractional shares may not be the best choice.

Practical process for fractional share trading

Account opening and placing orders

You can trade fractional shares through any licensed broker. Opening an account requires ID card, second ID (health insurance card or driver’s license), and bank account. After opening, switch to “Fractional Share Trading” mode in the broker app, enter the stock code, number of shares (1-999), and target price.

Order confirmation

After placing an order, monitor the execution time: intraday trades are matched at 9:10 and every minute thereafter; after-hours trades are matched once at 14:30. Investors can confirm holdings the next day after execution.

Summary: Is fractional share trading suitable for you?

Fractional share trading has opened the door for small investors in Taiwan. Compared to traditional full-share investing, fractional trading allows flexible investment amounts without needing to buy 1,000 shares at once. For long-term value investors, the low entry barrier of fractional shares is particularly attractive.

However, investors still need basic market knowledge and risk awareness when deciding how to buy or sell stocks. Successful fractional share investors typically:

1. Choose stocks with higher liquidity to reduce trading difficulty
2. Control individual transaction amounts reasonably to avoid high fees eating into profits
3. Be patient during intraday hours to improve execution chances
4. Use techniques like converting fractional to full shares when necessary to speed up transactions

As long as you understand trading rules, evaluate risks rationally, and select suitable investment targets, fractional share trading can indeed be a stepping stone for small investors to enter the market steadily.