A must-read for small investors! The complete guide to fractional share trading: How to operate during and after trading hours? How much are the transaction fees?

For many investors with limited funds, fractional share trading opens the door to the stock market. Instead of investing thousands of dollars to buy whole shares at once, you can start investing with just a few hundred dollars in your favorite stocks. But how exactly do you buy and sell fractional shares, and what are the differences between intraday and after-hours trading? Many beginners are still confused.

What Are Fractional Shares? Why Do They Appear?

The standard trading unit for stocks is one lot (1,000 shares). However, when you trade stocks, if your order is not fully executed, it results in scattered shares, known as “fractional shares.” For example, if you want to buy 1,200 shares of a stock, but only 1,000 shares are filled and no further orders are placed, the remaining 200 shares become fractional shares. Fractional shares can be bought and sold in units as small as 1 share, breaking the traditional requirement to purchase a full lot.

Additionally, during stock dividends and distributions, fractional shares may also be generated. For instance, if the dividend amount is less than one full share, the company might pay the remaining amount in cash or consolidate fractional shares for sale and distribute the proceeds.

Different Trading Hours for Fractional Shares: Intraday vs. After-Hours, How to Choose?

Before October 26, 2020, fractional shares could only be traded after hours. However, as market demand increased, the Taiwan Stock Exchange opened up intraday fractional share trading, providing more flexibility for small investors.

Intraday trading hours (9:00-13:30) are the best time for investors to submit fractional share orders. This period’s trading is synchronized with the regular market, and orders must be placed electronically through the broker’s trading platform—phone orders are not accepted. The first matching occurs at 9:10, followed by continuous matching every minute via auction, following the principles of “price priority” and “time priority” for orders at the same price.

Note that if your intraday order for fractional shares is not fully executed (e.g., due to high ask prices or low market liquidity), the unfilled portion will not automatically carry over to after-hours trading—you need to place a new order.

After-hours trading (13:40-14:30) offers a second chance. Investors can place manual orders via electronic or customer service channels, with a single auction matching at 14:30. If still unfilled, the order is automatically canceled and will not carry over to the next day. After-hours trading uses “price priority” and “random order” at the same price, making it less predictable than intraday trading.

How Are Transaction Fees for Fractional Shares Calculated? Major Brokers Fee Comparison

The transaction fee for buying and selling fractional shares is the same as for full shares: 0.1425% of the transaction amount. However, brokers set a minimum fee threshold, usually starting at NT$20, and often offer discounts for online orders to encourage digital trading.

For example, purchasing 200 shares of TSMC (2330.TW) at a closing price of NT$1,065:

Basic fee calculation
200 shares × NT$1,065 × 0.1425% = NT$303.53

If the broker offers a 50% discount, the actual fee paid is:
NT$303.53 × 50% = NT$151.77

Different brokers have varying discount rates. Fubon Securities and E.SUN Securities offer very low rates at 1.8% and 2% discounts respectively, with minimum fees as low as NT$1; Shin Kong Securities also charges NT$1 but with only a 10% discount; KGI Securities requires proof of financial strength but offers a 60% discount; and Uni-President Securities charges around 1.68%. When opening an account, compare multiple brokers to find the one that best suits your trading habits.

How to Sell Fractional Shares for Better Chances of Execution? Practical Tips

Less popular stocks often have limited fractional share trading volume, and investors may face orders remaining unfilled for days. For example, with Xinjing (1582.TW), due to low trading activity, selling 700 shares of fractional shares in one go during intraday trading is nearly impossible. Here are some strategies:

Strategy 1: Consolidate holdings before selling
If you hold 700 shares of Xinjing fractional shares and cannot sell them, consider the reverse—buy an additional 300 shares to reach 1,000 shares (one full lot), then sell the full lot in the more liquid regular market. The liquidity of full lots is much higher, greatly increasing the chance of successful sale.

Strategy 2: Place extreme price orders after hours
After-hours trading involves only one auction matching based on “maximum transaction volume.” If you want to sell quickly, try placing a sell order at the limit down price; if buying, place a buy order at the limit up price. This can significantly increase the chance of execution, though at potentially unfavorable prices.

Strategy 3: Place multiple smaller orders and be patient
For stocks with very low liquidity, try splitting your orders—place some today, some tomorrow—and wait for multiple opportunities to execute. Alternatively, place orders during both intraday and after-hours sessions to increase the chances.

Advantages and Disadvantages of Small Investors Trading Fractional Shares

Advantages

The biggest advantage of fractional share trading is low entry barrier. Traditional full-share trading often requires thousands of dollars, but fractional shares allow you to start with just over NT$1,000. This enables investors with limited capital to participate in the stock market while keeping sufficient liquidity for daily expenses or other investments.

Moreover, fractional shares are suitable for “testing the waters”—you can learn and experience stock market operations without large investments. It also pairs well with dollar-cost averaging strategies, helping small investors gradually accumulate holdings.

Disadvantages

First, poor liquidity. Compared to full shares, the buy and sell orders for fractional shares are much fewer, often requiring more time to execute.

Second, higher costs. Although the fee rate is the same, the minimum fee (usually NT$20) can be a significant percentage of small transactions. For example, buying NT$1,000 worth of fractional shares might incur a NT$20 fee, which is a 2% fee rate—much higher than the standard 0.1425%. Therefore, it’s better to trade fractional shares with amounts over NT$10,000 to avoid disproportionate costs.

Third, trading limitations. You can only place sell orders for fractional shares; buy orders are not allowed. Also, fractional shares must be sold in one go; partial sales are not permitted. Converting fractional shares into full shares has time restrictions, and if overdue, the order expires.

Finally, due to the randomness of fractional share availability, brokers may not always have sufficient stock, and investors might not be able to buy the desired quantity.

Are There Other Options for Small Investors?

If concerned about high transaction costs and liquidity issues with fractional shares, small investors can consider CFD (Contract for Difference) products. CFDs require only a small margin (e.g., 5%) to control the full stock position, significantly lowering the capital barrier. For example, trading five shares of Google stock might normally cost $2,000, but with CFDs, only $100 margin is needed.

However, CFDs are more suitable for short-term traders, as holding overnight incurs overnight financing costs; whereas, fractional share trading is more appropriate for long-term investors. Both have their advantages, and investors should choose based on their investment style.

Summary

Fractional share trading has become an important way for small investors in Taiwan to enter the stock market. The dual intraday and after-hours trading sessions offer more flexibility, and competitive fee structures are gradually lowering trading costs. To profit steadily in the fractional share market, investors should first understand their risk tolerance, select suitable stocks and strategies, and learn basic investment analysis. Most importantly, maintain rationality, avoid chasing trends blindly, and trade with discipline to achieve long-term gains in fractional share investing.