Must-read for investing in US stocks in Taiwan: Custodian brokerage recommendations and practical guide

Looking to invest in US stocks through domestic brokers but don’t know where to start? Is the full agency trading route worth it? This article整理了投資新手必須了解的full agency trading core knowledge, covering account opening, fee structures, trading rules, and the latest broker recommendations to help you get started quickly.

Before choosing full agency trading: What is full agency trading?

Full agency trading, officially called “Agency Business for Buying and Selling Foreign Securities,” essentially means domestic brokers acting as agents for your orders in overseas markets. You open an account with a local broker qualified for full agency trading, and the broker then forwards your orders to overseas partner brokers, who execute the trades directly in markets like the US, Hong Kong, Japan, etc.

Because orders go through “one layer of transfer” before reaching foreign brokers, it is called “full agency trading.” This mechanism allows Taiwanese investors to avoid opening overseas accounts or handling currency exchanges directly, enabling them to buy US stocks, ETFs, and foreign bonds using only TWD.

The biggest convenience of full agency trading is:

• Funds settled in TWD, overseas dividends paid directly back to local banks
• Tax matters handled by professionals, saving the hassle of self-reporting
• Support in Chinese customer service, low trading barriers

The drawbacks are: higher transaction fees compared to overseas brokers, limited investment products, inability to automatically reinvest dividends, and no margin trading support.

Full agency trading vs. overseas brokers: How to choose

Recommendation: Beginners, low-frequency traders, or small capital investors are suited for full agency trading; for frequent traders or larger investments, overseas brokers generally have lower costs; if you want leverage trading or more derivatives, you should switch to overseas brokers.

How full agency trading works: Four clear steps

Step 1: Place Order — You submit an overseas stock order via the domestic broker app

Step 2: Overseas Execution — The domestic broker forwards the order to a registered overseas partner broker in the US, which matches and executes the trade directly in the market

Step 3: Settlement and Reporting — After the overseas broker completes the trade, it sends back the transaction results, and the domestic broker updates your account holdings and funds simultaneously

Step 4: Asset Custody — Purchased stocks are stored in an overseas custody account under the broker’s name, with the broker acting as custodian. The stocks you see are actually held in the broker’s name, but you hold full beneficial rights. This system is legal and common in international markets.

Full agency trading fee details: Investment costs cannot be ignored

Although convenient, full agency trading has a complex fee structure. The main costs you need to pay are:

Transaction Fees

• Commission: Calculated based on transaction amount, approximately 0.1%-1%, usually with a minimum of $25-$50 USD. Recently, some Taiwanese brokers (e.g., Cathay Securities) have eliminated minimums, greatly reducing small trades
• SEC Fee: US Securities and Exchange Commission charges 0.00278% on sales
• TAF Fee: Trading activity fee, $0.000119 per share on sales, capped at $5.95

Tax-related Fees

• Overseas dividends involve a 30% withholding tax, which can be reclaimed but is cumbersome
• Personal overseas income is taxed only if the basic income exceeds 6.7 million TWD and the basic tax exceeds comprehensive income tax
• Calculation: Basic tax = ( Basic income - 6.7 million ) × 20%

Bank Currency Exchange Fees

• Cross-border remittance fees on the transaction day are set by each bank; some banks like Taishin Bank waive fees, others need to confirm

Important trading rules for full agency trading

1. Only limit orders supported — Market orders are not allowed; you must set a limit price beforehand
2. Sufficient funds required for execution — Insufficient balance will cause order rejection; ensure ample funds
3. Pre-deposited amount > actual transaction amount — Due to exchange rate fluctuations, excess funds are returned after settlement
4. Margin trading prohibited — Full agency trading does not support credit trading, but most support day trading
5. Trading hours — Follow overseas market calendar; US stock trading hours are 09:30am-4:00pm Eastern Time (Taiwan summer time 21:30-04:00; winter time 22:30-05:00)
6. Fixed exchange rate settlement — Brokers use fixed exchange rates, which may involve some spread costs
7. Settlement schedule — T+1 for buy, T+3 for sell; standard market settlement is T+2

Recommended Taiwanese brokers for full agency trading: Fee comparison

Below are popular full agency brokers in Taiwan, with electronic order fee comparisons:

Analysis: Cathay Securities, by removing minimum fees and offering a 0.10% rate, is currently the most competitive. In reality, most brokers are willing to negotiate fees, but overall costs are still higher than direct overseas trading. If you plan frequent trading, overseas brokers offer better cost efficiency.

Full agency trading account opening guide

Taiwanese investors need to open both a domestic full agency trading account and an overseas settlement currency account.

Qualification and required documents

• Eligibility: Taiwanese residents aged 18 or above
• Documents: Double ID (ID card + passport or residence permit), second ID (health insurance card or driver’s license), stamp (for in-person applications), bank account copy

Opening process

Step 1: Prepare documents — Gather the above materials

Step 2: Choose application method — Visit a broker branch in person or apply online via the broker’s website

Step 3: Sign agreement — Inform the staff of the broker code and select settlement currency (TWD or USD), complete account opening

Step 4: Transfer funds — After successful opening, transfer funds into the full agency trading account to start trading. All funds and holdings are managed by the broker.

Other ways to invest in US stocks besides full agency trading

1. Open accounts directly with overseas brokers

US-based brokers (e.g., FirstTrade) offer 0 commission US stock trading, with fees only for exchange costs (negligible). They support stocks, futures, options, ETFs, US bonds, etc. The downside is higher account opening barriers and mostly English interfaces.

2. US stock CFDs trading

Contracts for difference (CFDs) based on US stocks, allowing two-way trading, leverage, long and short positions. Very low fees (0.01-0.015%), no commissions, only spreads and overnight fees, suitable for high-frequency traders and investors with special needs.

Summary: Who is full agency trading suitable for?

Full agency trading is recommended for investors with: low trading frequency, simple investment products, long-term holding preferences, and desire to simplify tax procedures. Its advantages are ease of operation and risk control, but costs are relatively higher.

If you want to reduce trading costs without the hassle of overseas account opening, consider US stock CFDs as a supplementary tool. But regardless of the method chosen, tailor your investment strategy based on your trading style, capital size, and expected holding period.

Appendix: Common terms in full agency trading

ETF (Exchange-Traded Fund): A basket of stocks packaged by fund companies to track an index, allowing investors to buy and sell. For example, FANNG ETFs track tech giants, periodically adjusting holdings to match the index.

Lot: Trading unit. In Hong Kong, lot sizes vary by company (usually 200 to tens of thousands shares); in mainland China, a standard lot is 100 shares; in US markets, trading is per single share.

In transit funds: The amount from stocks sold on the same day but not yet settled, which can be used for repurchasing within the same market and currency (commonly called “sell and buy immediately”), but cash withdrawal requires actual settlement completion.