Must-Read for Small Investors | Complete Analysis of Odd Lot Opening Hours, Trading Rules, and Selling Strategies

What Are Fractional Shares? Why Understand Fractional Share Trading

Many office workers and small investors are seeking low-threshold investment methods, and fractional share trading is an ideal choice for these investors. Fractional shares refer to stock holdings of less than 1,000 shares (one standard lot), with a minimum trading unit of 1 share. These fractional shares usually originate from unfilled portions of orders or naturally occur during dividend distribution processes.

Essentially, fractional share buying and selling involve trading in small, scattered stock quantities, with each order limited to 999 shares or less. For small investors, fractional shares allow participation in the stock market without having to invest thousands of dollars at once.

Details on Fractional Share Market Opening Hours and Trading Rules

Understanding market opening hours and trading rules for fractional shares is the first step to successful trading. Since October 26, 2020, the Taiwan Stock Exchange has opened up intraday fractional share trading, greatly expanding investors’ trading opportunities.

Two Trading Sessions for Fractional Shares

The intraday session overlaps completely with regular stock trading hours, allowing investors to submit fractional share orders via broker trading platforms starting at 9:00 AM. Note that intraday orders can only be placed electronically. If an order is unfilled or partially filled, the unfilled portion will not automatically carry over to after-hours; it must be resubmitted.

The after-hours session offers both electronic and manual order options. The exchange conducts a single batch auction at 14:30, and any unfilled orders are automatically canceled—they will not carry over to the next day.

Transaction Fees and Account Opening Requirements for Fractional Shares

The transaction fee for fractional shares is calculated the same as for full shares, at 0.1425% of the transaction amount. However, brokers set minimum fee requirements and often offer discounts for electronic orders.

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

200 × 1065 × 0.1425% = 303.53 NT$

If the broker offers a 50% discount, the actual fee would be 151.77 NT$.

Comparison of Mainstream Brokers’ Fractional Share Trading Costs

Required documents for account opening include: national ID card, a second ID (health insurance card or driver’s license), and your bank account. KGI Securities additionally requires proof of financial capability.

Tips for Selling Fractional Shares More Easily

Less popular stocks tend to have lower liquidity, making same-day transactions less certain. For such cases, investors can adopt the following strategies.

Convert Fractions to Whole Shares

Suppose you want to sell 700 shares of Xinjin (1582.TW), but the stock is not actively traded, making intraday sales difficult. You can consider converting fractions into whole shares: buy 300 shares to add to your existing 700 shares, totaling 1000 shares (one standard lot), then sell through more active whole-share channels. This significantly increases the likelihood of a successful sale.

Price Strategies

Since after-hours trading involves only a single batch auction, the matching follows the “maximum transaction principle.” If you want to buy quickly, you can set your order at the limit-up price; if selling, set at the limit-down price. Under the maximum transaction principle, this approach maximizes the chance of a successful trade.

Rights and Limitations of Fractional Share Trading

Investor Rights:

• Fractional shareholders are entitled to dividends, though the dividend amount is smaller compared to full shares.
• During rights issues and dividends, fractional shares can be converted into cash or sold collectively.

Purchase Considerations:

• Low entry barrier: minimum 1 share, starting at around 1000 NT$, suitable for small investors.
• Ideal for dollar-cost averaging strategies.
• It’s recommended to invest in amounts of over NT$10,000 per transaction to reduce the proportion of fees.

Selling Limitations:

• Fractional shares can only be sold; buying is not permitted.
• When selling, all holdings must be sold at once.
• Converting fractional shares into whole shares has time restrictions; overdue conversions are invalid.

Pros and Cons of Fractional Share Trading

Advantages

• Low Capital Requirement: Compared to full shares, fractional shares enable investors with limited funds to participate, preserving more liquidity for daily expenses.
• Testing the Waters: Suitable for beginners to learn about the stock market with small amounts.
• Investment Flexibility: Can adjust holdings flexibly based on available funds.

Disadvantages

• Lower Liquidity: Fewer transactions, longer matching times.
• Fee Impact: Minimum fee requirements make small investments relatively costly; a certain minimum investment amount is needed to be cost-effective.
• Trading Restrictions: Buying and selling procedures are limited; full amount must be sold at once, and converting to whole shares has time limits.

Other Investment Options for Small Investors

If concerned about liquidity and fee issues with fractional shares, consider Contract for Difference (CFD) trading.

CFD is a derivative product that profits from price differences without owning the actual stock. Its advantages include:

• Only a small margin (usually 5%) is required, lowering the entry barrier.
• Many brokers charge no additional commission, only the spread.
• Not limited by liquidity constraints.

For example, buying 5 shares of Google stock worth $2000 would require $2000, but via CFD, only a $100 margin might be needed to participate in the same price movements.

Note that fractional shares are suitable for long-term investors, while CFDs are more appropriate for short-term trading; holding CFDs overnight incurs overnight interest charges.

Summary

With the improvement of fractional share trading systems, this has become an important way for small investors in Taiwan to enter the stock market. By understanding market opening hours, fee structures, and trading strategies, investors can execute their plans more strategically. Successful fractional share trading requires understanding personal risk tolerance, learning basic analysis methods, and maintaining rationality to avoid impulsive decisions. Whether choosing fractional shares or other derivatives, the key is to find a suitable investment approach and stick with it long-term.