Can a single stock really be split into fractional shares for sale? A complete guide to fractional share trading for small investors

Can fractional shares be sold? Basic concepts every small investor must know

Many novice investors have a question: Can a single stock share be split into fractional shares for sale? The answer is yes. The Taiwan Stock Exchange has long recognized the mechanism of fractional share trading, allowing investors not only to purchase fractional shares but also to sell their held scattered stocks. This is a significant benefit for small investors, as it breaks the traditional “minimum one full share” restriction.

Fractional shares essentially refer to stock holdings of less than 1000 shares. When investors hold fewer than 1000 shares due to partial order executions, stock dividends, stock splits, or other reasons, these holdings become “fractional shares.” The minimum trading unit for fractional shares is 1 share, and each transaction can involve up to 999 shares.

Why are fractional shares easy to produce?

There are three main reasons for the emergence of fractional shares:

1. Partial execution of trading orders. When investors place buy or sell orders, due to stock price fluctuations or insufficient trading volume, the order may only be partially filled, leaving the remaining shares as fractional shares.

2. Stock dividend and stock split processes. When listed companies distribute cash dividends or stock dividends, if the number of shares held is insufficient, fractional shares may result.

3. Systemic factors from brokers or exchanges. Under certain special circumstances, fractional shares naturally appear in investors’ accounts.

Details of fractional share trading hours

Since October 26, 2020, the Taiwan Stock Exchange has significantly expanded the trading hours for fractional shares, and investors are no longer limited to after-hours trading. Fractional share trading is now divided into two main sessions:

During Market Hours

• Trading hours: 9:00-13:30
• Order method: Must be placed via electronic trading platform (broker’s trading system)
• Matching method: First match at 9:10, then every minute via call auction
• Execution priority: Price priority, then submission time at the same price

After-Hours Trading

• Trading hours: 13:40-14:30
• Order method: Electronic or manual phone orders accepted
• Matching method: One call auction at 14:30
• Execution priority: Price priority, then random order by computer at the same price

It is important to note that unfilled orders during market hours will not automatically carry over to after-hours; investors must re-enter orders if they wish to continue trading. Unfilled after-hours orders will be automatically canceled and not carried over to the next trading day.

How are transaction fees for fractional shares calculated?

The fee structure for fractional shares is exactly the same as for full shares, calculated at 0.1425% of the transaction amount. However, since transaction amounts are usually small, brokers generally set a minimum fee threshold, typically 1 NT dollar.

For example, buying 200 shares of TSMC (assuming a closing price of 1065 NT dollars):

• Calculation: 200 × 1065 × 0.1425% = 303.53 NT dollars
• With a 50% discount from the broker: 303.53 × 50% = 151.77 NT dollars

Major brokers’ fee discount schemes vary:

Reminder: When buying small amounts of fractional shares, the transaction fee can constitute a large percentage of the total. For instance, purchasing only 1,000 NT dollars worth of fractional shares may incur fees of over 100 NT dollars, making it less cost-effective. It is recommended to invest at least 10,000 NT dollars per transaction to effectively reduce the impact of fees on returns.

Practical tips for selling fractional shares more easily

Although fractional share trading has become more convenient, trading volume for less popular stocks remains relatively thin. Investors may face difficulties in executing sell orders promptly. Here are two practical selling strategies:

Combination Selling Strategy — Turn Fractions into Whole Shares

If an investor holds 700 shares of a less mainstream stock (e.g., Shinjin 1582.TW), it may be difficult to sell smoothly during market hours. In this case, consider buying an additional 300 shares to round up to 1000 shares (one full lot), then sell through the more active full-share market. Although this requires extra capital, full shares generally have much higher trading volume, making it easier to sell at a desirable price.

Extreme Price Strategy — Use Limit Orders at Limit Up/Down Prices

Since after-hours trading only involves a single call auction at 14:30, investors can increase the likelihood of execution by applying the “maximum trading volume principle”:

• If eager to buy, place a limit order at the limit-up price
• If eager to sell, place a limit order at the limit-down price

While this may not yield the best price, it significantly improves the chances of execution, suitable for investors who prioritize timely transactions.

Pros and cons of investing in fractional shares

Main advantages:

Low capital threshold is the most attractive feature for small investors. No need to invest tens of thousands of NT dollars to buy a full lot; fractional shares allow entry at a lower cost and more flexible capital allocation. Additionally, fractional shares serve as a “trial” tool—investors can use small amounts to understand the stock market and gradually increase their holdings.

Main disadvantages:

First, liquidity is inherently poor. Low trading volume leads to longer matching times, sometimes requiring several days to complete a trade, or facing the risk of failed transactions.

Second, the fee structure is unfavorable. Besides basic fees, fractional share trading may involve additional service charges, making the overall cost higher than full-share trading. The smaller the investment amount, the higher the fee proportion, which can lead to “losing money on fees.”

Third, trading flexibility is limited. Fractional shares can only be sold; buying is not permitted. Selling must be done in one go; fractional shares cannot be converted back to full shares without time restrictions, and expired orders are automatically canceled. These rules reduce operational freedom.

Are there other investment options for small investors?

Besides fractional share trading, small investors can explore other small-scale investment methods, such as ETF dollar-cost averaging or trading with other financial instruments. However, each method has its own suitable scenarios and risks. Investors should choose based on their risk tolerance and investment horizon.

Conclusion

Fractional share trading has become an important way for small investors in Taiwan to enter the stock market. A single stock can indeed be split into fractional shares for sale, breaking the traditional full-share trading limit and allowing more people to participate in the stock market. However, investors should pay attention to trading hours, fee costs, liquidity risks, and other factors.

Successful fractional share investing requires basic financial knowledge, risk awareness, and disciplined trading. Understanding your risk tolerance, selecting stocks with relatively better liquidity, and avoiding chasing high prices or panic selling are key to success. As trading systems continue to improve, the fractional share market will become more mature, providing more opportunities for small investors.