Essential knowledge for small investors: Complete guide to fractional trading, master timing and transaction fees for precise entry

What Are Fractional Shares? Why Should Small Investors Know About Them?

In Taiwan’s stock market, the trading unit for whole shares is 1 lot (1000 shares), but investors often hold fractional shares due to unfilled orders, which are less than 1000 shares. These are called fractional shares, with a minimum trading unit of 1 share.

Fractional shares usually arise from several reasons: rapid stock price fluctuations causing orders not to be fully executed, transactions exceeding the target price before reaching the order price, or leftover small holdings during stock issuance or dividend distribution. In recent years, fractional share trading has become an important tool for small investors to make regular fixed investments, with each order limited to 999 shares, allowing investors with limited funds to participate in the market.

Trading Hours and Rules for Fractional Shares: Grasping the Trading Windows Is Key

Differences Between Intraday and After-Hours Fractional Share Trading

Starting October 26, 2020, the Taiwan Stock Exchange opened intraday fractional share trading, greatly enhancing trading convenience. Now, investors can trade fractional shares during two periods:

Intraday Period (9:00-13:30): Investors can place orders via broker electronic trading platforms. The first matching occurs at 9:10, followed by a collection of bids every minute through auction. Orders are matched based on “price priority, then time priority.”

After-Hours Period (13:40-14:30): Investors can place manual orders via electronic trading or by calling broker customer service. The exchange conducts a single auction match at 14:30. Order matching follows “price priority, then random order for same price.”

Note that unfilled orders during intraday trading do not carry over to after-hours; investors must resubmit. Unfilled after-hours orders are automatically canceled and do not carry over to the next day.

Core Regulations for Fractional Share Trading

Fractional shareholders enjoy rights similar to full shareholders: they can receive dividends, and during stock issuance or dividend distribution, fractional parts less than one share can be converted into cash dividends or sold collectively and proportionally distributed. The minimum trading unit is 1 share, requiring only NT$1000 to participate, making it ideal for fixed investment strategies.

Most importantly, fractional shares can be sold. As investment needs diversify, acceptance of fractional share trading is increasing, and liquidity continues to improve, making fractional shares a long-term investment tool suitable for small investors.

How to Buy Fractional Shares? Account Opening and Fee Breakdown

Account Opening Process and Operation

Buying and selling fractional shares is the same as whole shares. Investors only need to switch to the “Fractional Share Trading” mode in the broker app’s trading interface, changing the unit from “lots” to “shares” (enter a number between 0-999). Most brokers require only a national ID card, a second ID (health insurance card or driver’s license), and a personal bank account for account opening.

Fee Calculation and Promotional Offers

Fees for fractional share trading are the same as for whole shares, at 0.1425% of the transaction amount. However, different brokers set minimum fee thresholds, usually NT$1, and offer discounts for online orders to encourage digital trading.

For example, purchasing 200 shares of TSMC (assuming a price of NT$1065):

• Calculation: 200 × 1065 × 0.1425% = NT$303.53
• With a 50% discount: NT$303.53 × 50% = NT$151.77

Major brokers vary in fee discounts: Fubon Securities has a minimum fee of NT$1 and an online order discount of 82%; Yuanta Securities NT$1 and 20%; KGI Securities NT$1 and 60%; Shin Kong Securities NT$1 and 10%; and Uni-President Securities NT$1 and 33%.

Is It Difficult to Sell Fractional Shares? Tips to Improve Transaction Success

Accelerate Transactions by Converting Fractions to Whole Shares

For less popular stocks, fractional share trading volume is often low, making it difficult to execute orders. For example, if an investor holds 700 shares of Shin-Kong (1582.TW) but cannot sell them, they might consider buying 300 more shares to make a full lot (1000 shares), then quickly selling the full lot in the more active whole share market. This can significantly increase the likelihood of successful sale.

Use Price Limits Strategically

Since after-hours fractional share trading only occurs once at 14:30 via auction, investors eager to buy a specific stock can place a buy order at the limit price of the daily price limit (e.g., the upper limit), which, under the “maximum transaction principle,” greatly increases the chance of execution. Conversely, when selling, placing a sell order at the lower limit price can also prioritize execution under the same principle.

Opportunities and Challenges of Fractional Share Investment

Advantages

Low Entry Barrier: Compared to whole shares costing thousands of NT dollars, fractional shares allow starting with NT$1000, suitable for investors with limited funds. They also provide a “test the waters” opportunity, enabling investors to experience the stock market without large capital, making them an ideal tool for fixed investment strategies.

Risks and Limitations

Lower Liquidity: Trading volume for fractional shares is much lower than for whole shares, requiring more time for matching, and orders may remain unfilled for a long time.

Higher Costs: Besides minimum fee restrictions, investors should evaluate fee rates before buying to avoid losses from high costs. It is recommended that single purchase amounts be above NT$10,000; otherwise, high fee ratios may offset gains.

Trading Restrictions: Fractional shares can only be sold, not bought; they must be sold in full at once; converting fractional shares into whole shares is time-limited and may expire. Additionally, because fractional shares are generated randomly, broker inventories are unpredictable, and investors may sometimes be unable to buy the desired amount.

Essential Mindset for Small Investors

Although fractional share trading has a low threshold, successful investing requires sufficient knowledge and discipline. Investors should first understand their risk tolerance, choose strategies aligned with their financial goals, and learn basic investment analysis methods. Most importantly, maintaining a rational mindset—avoiding herd mentality and impulsive trades—is crucial to steadily profit in the fractional share market.

With technological advances, the trading hours for fractional shares are becoming more flexible, and trading channels are more convenient, whether through securities firms or online platforms. For small investors, fractional share trading has become an effective way to participate in the stock market and accumulate assets.