Small Investor's Practical Guide to Fractional Share Investing: Trading Rules, Cost Analysis, and After-Hours Fractional Share Price Order Tips

Fractional share investing has become the preferred choice for many small investors, as it has lower barriers compared to full share trading and better meets the needs of investors with limited funds. This article provides a comprehensive guide to fractional share trading, including trading mechanisms, fee calculations, how to place orders for after-hours fractional shares, and practical buying and selling tips.

Basic Concepts and Causes of Fractional Shares

One share equals 1,000 units, which is the minimum for full share trading. When investors hold less than 1,000 shares, this portion is called a fractional share, with a minimum unit of 1 share.

Fractional shares are usually generated during buying and selling processes. If an investor’s order is not fully executed (for example, the bid price is too high or too low, or the transaction volume does not meet the target), the unfilled part becomes a fractional share. Additionally, fractional shares may also occur during dividend distribution or stock splits.

Buying and selling fractional shares refers to transactions within 999 shares, which can be understood as stock remainder trading. The main target audience is investors with smaller capital.

Trading Hours and Matching Rules Explained

From Single Session to Dual Session System

Previously, fractional share trading was only available after market hours, limiting trading opportunities and liquidity. Since October 26, 2020, the Taiwan Stock Exchange launched intraday fractional share trading, providing investors with more trading time options and greatly improving trading convenience.

Differences Between the Two Trading Sessions

Intraday Trading Session (09:00-13:30)

• Orders can only be placed via broker trading platforms through electronic orders
• The first matching occurs at 09:10, followed by continuous matching every minute via call auction
• Transaction priority follows “price priority, time priority at the same price”
• Unfilled orders on the day are not carried over to after-hours; they must be re-entered

After-Hours Trading Session (13:40-14:30)

• Supports electronic orders, phone orders, or in-person manual orders
• A single call auction matching occurs at 14:30
• Transaction priority is “price priority, then random order at the same price”
• Unfilled orders are automatically canceled and do not carry over to the next day

Five Essential Trading Rules for Fractional Share Investors

Dividend Rights Are Not Discounted Fractional shareholders are entitled to dividends. Although the dividend amount may be smaller, they receive corresponding returns during company profit distributions.

Dividend Payment Methods For fractional shares less than one share, dividends are usually paid out in cash or the listed company consolidates and sells fractional shares to redistribute proceeds.

1 Share as the Minimum Trading Unit Fractional shares are traded in units of 1 share, with a single transaction not exceeding 999 shares. This suits regular fixed-amount investments. Compared to buying full shares requiring six-figure capital, you can participate in the fractional market with just 1,000 yuan.

Fractional Shares Can Be Freely Traded Taiwan Stock Exchange recognizes fractional share trading. As investor demand diversifies, the popularity of fractional trading has increased year by year, with relatively stable liquidity, making it suitable for long-term small investors.

How to Open an Account and Calculate Trading Costs

Account Opening Process and Minimum Requirements

Opening a fractional share account is the same as for full shares. Simply switch to the “Fractional Share Trading” mode on your broker app’s order page and enter the number of shares between 0 and 999. Basic documents include national ID, a second ID (health insurance card or driver’s license), and your bank account.

Fee Calculation Method

The fee rate for fractional shares is the same as for full shares, at 0.1425% of the transaction amount. However, each broker sets a minimum fee (usually 1 yuan) and offers discounts for electronic orders.

For example, buying 200 shares of TSMC (2330.TW) with a closing price of 1065 yuan:

• Basic fee: 200 × 1065 × 0.1425% = 303.53 yuan
• With a 50% electronic order discount: 303.53 × 50% = 151.77 yuan

Major Broker Fee Comparison

How to Achieve Better Execution: Practical Buying and Selling Tips

Less popular stocks tend to have lower fractional share trading volume, so investors may not be able to complete trades smoothly on the same day. Here are some methods to improve execution rates:

Convert Fractions to Whole Shares to Speed Up Execution

If a stock’s fractional sell order remains unfilled (e.g., selling 700 shares of Xinjin 1582.TW), consider buying 300 shares to make a full 1000 shares (1 lot), then sell the full lot through more liquid full share trading. This can significantly shorten transaction time.

Order Placement Strategy: Using After-Hours Fractional Share Price Mechanism

How to place orders for after-hours fractional shares is a common question. Since after-hours only involves one call auction, following the maximum transaction principle, investors can adopt the following strategies:

• When eager to buy: Place orders at the limit up price to increase chances of execution
• When eager to sell: Place orders at the limit down price to increase the likelihood of being matched

The after-hours call auction occurs at 14:30. Placing orders at the most favorable price levels maximizes success under the maximum transaction principle.

Timing Strategies

• Unfilled intraday orders must be resubmitted before 13:40
• After-hours orders can be placed until 14:30 at the latest
• If orders remain unfilled for consecutive days, consider adjusting the order price or waiting for market changes

Pros and Cons of Fractional Share Investing

Advantages

Significantly lowers capital barriers; with just 1,000 yuan, you can invest in popular stocks like TSMC. Suitable for working individuals with limited income. Fractional shares serve as a testing tool, allowing small investments to understand the stock market, and can be used for regular fixed investments to cultivate financial habits.

Disadvantages

Compared to full shares, fractional shares have smaller units and lower liquidity, leading to longer matching times. Although fee rates are the same, the minimum fee limit means very small transactions may be relatively costly; generally, a single purchase of over 10,000 yuan is more cost-effective.

The process is time-limited; unfilled intraday orders are not automatically retained and must be manually re-entered. Additionally, fractional shares can only be sold, not bought, and must be sold in one go, limiting operational flexibility.

Summary: An Ideal Investment for Small Investors

Fractional share trading has become an important tool for small investors in Taiwan, breaking the traditional high barriers of full share trading. With the dual intraday and after-hours system, combined with strategic order placement and fee discounts, investors can engage in stock trading more flexibly.

Mastering after-hours fractional share order techniques, understanding transaction costs, choosing suitable broker discounts, and exercising patience and discipline will enable small investors to grow steadily in the stock market. The key lies in thorough preparation, rational decision-making, and avoiding impulsive follow-the-leader actions to achieve long-term investment goals.