Want to buy US stocks through a trust account? Understand these 5 key points first to avoid losses

Taiwanese investors’ interest in overseas markets is growing, and discretionary trading has become the preferred tool for many beginners. But do you really understand what discretionary trading is before opening an account? How are the transaction fees calculated? This article summarizes the core knowledge points of investing in US stocks through discretionary trading to help you get started quickly.

The true identity of discretionary trading: Indirect trading mode

Trustee buying and selling foreign securities business—this is the official name of discretionary trading. In simple terms, you do not deal directly with overseas brokers but go through a Taiwanese broker as an intermediary.

The entire process is as follows: you place an order via the Taiwanese broker’s app → the Taiwanese broker forwards the order to an overseas partner broker → the overseas broker executes the trade on a US exchange. Since the order is transferred rather than directly entrusted, it is called “discretionary trading.”

Through discretionary trading, you can invest in US stocks, US ETFs, Hong Kong stocks, Japanese stocks, and other overseas assets. In Taiwan, the trading volume of US stock ETFs bought via discretionary trading is the largest, reflecting its practicality.

How does discretionary trading work? Four steps to understand clearly

Step 1: Investor places an order
You submit buy/sell instructions through the Taiwanese broker’s app, selecting the desired US stocks or ETFs.

Step 2: Overseas broker executes the order
The Taiwanese broker receives your order and immediately forwards it to an overseas partner broker registered on the US exchange, who performs the actual market matching.

Step 3: Trade confirmation and synchronization
After the overseas broker completes the trade, they send the results back to the Taiwanese broker, and your account is updated with your holdings.

Step 4: Stock custody
The traded stocks are stored in the broker’s overseas custody account, held by the broker on your behalf. The stocks are held in the broker’s name, but you have full beneficial rights—this is standard and fully legal in international markets.

Discretionary trading vs. overseas brokers: How to choose?

Who is suitable for discretionary trading?
Beginners who are new to investing, because it is simple to operate and safe.

Who should consider overseas brokers?
Frequent traders with large amounts, as they can save significant transaction costs in the long run.

Why is discretionary trading more expensive? Full disclosure of fee structure

Discretionary trading seems convenient, but the costs are indeed higher than overseas brokers. Let’s break it down:

Commission fee

Discretionary trading fees charged by Taiwanese brokers are about 0.1% to 1% of the transaction amount, usually with a minimum fee (USD 25-50). Recently, some brokers have abolished minimum fees; for example, Cathay Securities has eliminated the minimum commission, making it quite competitive.

Exchange fees

The US SEC charges 0.00278% on stock transactions, calculated at the time of sale. Some exchanges also charge an additional fee of 0.00565% for buy and sell, and 0.0027% for transaction levies.

TAF trading activity fee

USD 0.000119 per share, capped at USD 5.95, usually charged at the time of sale.

Tax costs

• US stock dividends involve a 30% income tax, which can be reclaimed but is cumbersome
• Overseas income is taxed only if the basic income exceeds 6.7 million TWD and the basic tax amount exceeds the regular income tax
• Basic tax calculation formula: ( Basic income - 6.7 million TWD ) × 20%

Bank remittance fee

Cross-border remittance on the same day, free at Taishin Bank; other banks may charge accordingly.

8 major trading rules for US stocks via discretionary trading

1. Limit order system — Only pre-set buy/sell prices; cannot execute at market price immediately
2. Sufficient funds required — Orders will fail if account funds are insufficient
3. Overfunding often occurs — To hedge against exchange rate fluctuations, excess funds are returned after partial execution
4. Leverage is prohibited — Margin financing and short selling are not allowed, but day trading is generally supported
5. Business does not close on holidays — Taiwanese public holidays do not affect discretionary trading, except for bank foreign exchange holidays
6. US stock trading hours — 09:30 am - 4:00 pm US time; Taiwan summer time 21:30 - 04:00, winter time 22:30 - 05:00
7. Exchange rate spread exists — Brokers use fixed exchange rates for settlement, incurring currency conversion costs
8. Settlement time difference — T+1 deduction after buying, T+3 credit after selling; market settlement date T+2

How to open a discretionary trading account? Three steps to get it done

To invest in US stocks via discretionary trading, you need to prepare two accounts: Taiwanese discretionary trading account + foreign currency account.

Opening conditions

Applicants must be Taiwanese residents aged 18 or above.

Required documents

✓ Dual ID: Original ID card + Passport or Residence Permit
✓ Second ID: Health insurance card or driver’s license, etc.
✓ Seal: Needed for signing documents in person
✓ Bank account copy: Proof of funds

Opening process

Method 1: In-person application
Go to a domestic broker branch, bring the above documents, inform staff that you want to open a discretionary trading account, choose the settlement currency (TWD or USD), and sign the agreement to complete.

Method 2: Online application
Fill out the form on the broker’s official website, submit the same documents, and sign the agreement online to open the account.

After successful account opening, transfer funds into the discretionary trading settlement account to start trading. The funds and stocks in the account are managed by the broker.

Major Taiwanese discretionary trading brokers fee comparison

Using electronic order placement as an example, here are the fee situations of major brokers:

Fee tips — The fees among brokers are not very different; there is room for negotiation to get better discounts. Overall, discretionary trading fees are still higher than directly using overseas brokers, so frequent traders are not recommended to use it. Cathay Securities, having eliminated the minimum fee, is currently the most competitive choice.

Discretionary trading costs mainly come from two parts: local broker fees + overseas exchange fees. The lowest commission for buying US stocks is attractive, but investing in Chinese mainland stocks or Hong Kong stocks may reach 1-2%.

Other US stock investment options besides discretionary trading

Option 1: Direct trading through overseas brokers

Register accounts with US-based brokers (e.g., FirstTrade), which allow purchasing US stocks, futures, options, ETFs, and US bonds. US stock commissions are completely free, only paying exchange fees, with low costs. The downside is high account opening thresholds and mostly English interfaces.

Option 2: US stock CFDs (Contract for Difference)

CFDs based on US stocks involve futures-like trading, supporting two-way trading and leverage, with minimal capital required to open an account. Advantages include a wide range of underlying assets, very low rates (0.01-0.015%), zero commission, only spread and overnight fees. Suitable for high-frequency traders or investors with special needs (e.g., leverage).

Summary: Who is discretionary trading suitable for?

Discretionary trading is most suitable for investors who do not trade frequently, have simple investment targets, and are willing to hold long-term. It is easy to operate and relatively safe, but the fees are comparatively high.

If you want low costs without high account opening barriers, overseas brokers and US stock CFDs are worthwhile alternatives. When choosing investment tools, consider your trading habits, capital scale, and risk tolerance.

Three key concepts you must understand about discretionary trading

ETF (Exchange-Traded Fund)
In discretionary trading, it specifically refers to index-based securities investment trust funds, which bundle multiple stocks into an index fund. For example, an FANG-type ETF selects US stocks and five major Chinese tech giants, with each company occupying a certain weight, periodically adjusted to track the tech sector trend.

Lot (Trading unit)
Similar to Taiwan’s “張”. In Hong Kong, the lot size varies by company (200 shares to tens of thousands), in China uniformly 100 shares, and in the US calculated per share. Trading must be in whole lots.

In transit funds
The amount of securities sold on the same day that has been traded but not yet settled can be used for repurchase in the same market and settlement currency (i.e., sell and immediately buy back), but withdrawal requires waiting for actual settlement.