Must-Read for Small Investors | Understanding Fractional Shares: What They Are, Trading Hours, and Fee Guide

Share trading in Taiwan has become a stepping stone for small investors to enter the stock market. For investors with limited funds, understanding what is fractional share trading, mastering trading rules, and calculating transaction costs are the first steps toward solid investment planning.

What Are Fractional Shares? Why Do They Occur?

The minimum unit for full share trading is one lot, which equals 1,000 shares. However, in actual investing, investors often hold less than 1,000 shares due to unfilled orders, dividend distributions, and other reasons—these are fractional shares.

The minimum trading unit for fractional shares is 1 share, with the main difference from full shares being that each order cannot exceed 999 shares. Simply put, fractional shares are stock leftovers, representing holdings less than one full lot (1,000 shares).

Common reasons for fractional shares include:

• Unfilled orders due to price fluctuations or volume not reaching the target
• When listed companies distribute cash dividends or stock dividends, they cannot allocate whole lots completely
• Investors actively sell part of their holdings, retaining fractional shares

Overview of Fractional Share Trading Hours and Rules

Since October 2020, Taiwan has opened up intraday fractional share trading, allowing investors to trade beyond after-hours, greatly increasing flexibility.

Fractional share trading is divided into two sessions:

During Market Hours

• Time: 09:00–13:30
• Order method: Electronic orders only (via broker platforms)
• Matching mechanism: First match at 09:10, then every minute via call auction
• Order priority: Price priority, then submission time at the same price

After Market Hours

• Time: 13:40–14:30
• Order method: Electronic or manual phone orders
• Matching mechanism: One call auction at 14:30
• Order priority: Price priority, then random order at the same price

Unfilled orders during market hours will not automatically carry over to after-hours; investors need to re-enter orders. Orders not filled after 14:30 will be automatically canceled and will not carry over to the next trading day.

Core rules for buying and selling fractional shares:

Fractional share holders can participate in dividends and dividend distributions, though the payout amount is smaller. Fractional shares can be freely bought and sold. The Taiwan Stock Exchange has officially recognized fractional share trading, and as investment needs diversify, trading volume and liquidity for fractional shares continue to improve.

How Are Transaction Fees for Fractional Shares Calculated?

Transaction fees for fractional shares are the same as for full shares, calculated at 0.1425% of the buy or sell amount. However, different brokers set minimum fee limits (often starting at NT$1) and offer discounts for online orders to encourage digital trading.

For example, purchasing 200 shares at NT$1,065 per share:

• Fee = 200 shares × NT$1,065 × 0.1425% ≈ NT$303.53
• With a 50% discount from the broker: NT$303.53 × 50% ≈ NT$151.77

Comparison of major brokers’ fractional share trading fees:

Most brokers require only an ID card, second ID (health insurance card or driver’s license), and bank account to open an account. Some may require additional proof of financial capability.

Tips for Selling Fractional Shares for Easier Transactions

Less popular stocks have lower liquidity, so immediate execution isn’t guaranteed. Here are some practical trading tips:

Convert fractional shares into full lots to speed up execution

If a stock’s fractional shares face heavy sell pressure and are hard to sell, consider buying enough fractional shares to round up to a full lot (1,000 shares), then sell the full lot through more liquid trading. For example, if you hold 700 shares, buy an additional 300 shares to make 1,000, then sell the full lot.

Use extreme price points to increase chances

Since after-hours trading only involves one call auction, which follows the “maximum transaction principle,” you can set your buy orders at the limit-up price to ensure execution; for quick sale, set at the limit-down price to significantly increase the likelihood.

Distribute orders or place multiple smaller orders

For less popular stocks that remain unfilled, try re-entering orders on subsequent days or splitting orders into smaller quantities to improve matching chances.

Pros and Cons of Buying Fractional Shares

Advantages:

• Low barrier to entry, allowing investors with limited funds to participate
• Starting from under NT$1,000, suitable for dollar-cost averaging strategies
• Enables small investors to “test the waters” on popular stocks
• Keeps more liquidity for other needs or investments

Risks to be aware of:

1. Limited liquidity: Fractional shares trade less frequently than full lots, especially for less popular stocks, leading to longer matching times

2. Higher transaction costs: Due to minimum fee limits, small investments may have a higher percentage cost. For example, investing NT$1,000 with a NT$20 minimum fee results in a 2% cost ratio, which is higher than full lot trading

3. Trading restrictions: You can only sell fractional shares; buying requires selling the entire lot, and converting fractional shares back to full lots involves time limits

4. Uncertain execution: Because fractional shares are generated randomly, brokers may not always have enough inventory, so investors cannot guarantee to buy or sell the desired amount

Investment Advice for Small Investors

Fractional share trading is suitable for long-term investors, allowing flexible operation based on personal funds and goals. Before investing, thoroughly assess your risk tolerance, choose targets aligned with your strategy, and master basic investment analysis to make rational decisions and avoid herd mentality.

The convenience of fractional share trading has greatly improved. Combining cost control, patience, and careful execution, this investment tool can help small investors gradually build wealth. The key is diligent research, cost management, and long-term persistence.