Want to buy US stocks through a margin account? First, understand these key points—A Beginner's Guide to Essential Tips

If you are a beginner investor in Taiwan, wanting to enter the US stock market but afraid of the complicated overseas account opening process, sub-brokerage might be your first choice. But before deciding, you need to understand what sub-brokerage is, its fee structure, operation mechanism, and whether it is suitable for you.

What is Sub-brokerage: The Bridge for Taiwanese Investors to Invest in Overseas Markets

The formal name of sub-brokerage is “Foreign Securities Trading on Behalf of Clients.” Simply put, you open an account with a domestic broker, who acts as your agent to place orders with overseas securities firms to buy foreign stocks. The entire process is not direct delegation but involves the domestic broker forwarding your orders to overseas partner brokers, hence the term “sub-brokerage” (Sub-brokerage).

Through a sub-brokerage account, you can invest in stocks, ETFs, bonds, and other financial products in overseas markets such as the US, China, Japan, and Hong Kong. In Taiwan, using sub-brokerage to buy US stock ETFs is the most traded method of overseas investment.

Core Advantages of Sub-brokerage vs Hidden Costs

Benefits of choosing sub-brokerage:

• No need to handle overseas bank accounts and international remittances
• Supports TWD settlement, dividends are directly transferred back to the domestic account
• Tax issues are handled by professionals
• Easy to operate, safe and reliable, suitable for long-term investors

Costs you need to bear:

• Higher commission fees than overseas brokers
• Limited investment products
• Cannot use automatic dividend reinvestment
• Order execution may have delays

Conclusion: If you are a long-term investor with low trading frequency and large capital, sub-brokerage is sufficient. But if you trade frequently or have smaller funds, overseas brokers may be more cost-effective.

Sub-brokerage vs Overseas Brokers: Comprehensive Comparison Table

How Does Sub-brokerage Work? Four Steps to Master the Entire Trading Process

Step 1: Placing an Order
Investors place orders via Taiwan broker’s app or website, selecting the overseas stock to buy.

Step 2: Overseas Transaction
Taiwan broker receives the order and forwards it to an overseas partner broker registered on US exchanges, who executes the trade in the overseas market.

Step 3: Settlement and Reporting
After the overseas broker completes the trade, they report the transaction results back to the Taiwan broker, who updates your account holdings accordingly.

Step 4: Custody and Safekeeping
The purchased stocks are held in the broker’s overseas custody account. The stocks you see are held in the broker’s name, but you enjoy full shareholder rights. This system is legal and common in international markets.

Cost Structure of Sub-brokerage: Every Cost You Must Know

Although convenient, the cost structure of sub-brokerage is complex. The main costs include three parts:

Commission Fee

Domestic broker’s sub-brokerage fee is about 0.1% to 1% of the transaction amount, usually with a minimum fee (between 25 to 50 USD). Recently, some brokers like Cathay Securities have eliminated the minimum fee, greatly reducing entry costs for beginners.

Exchange Fees

These vary depending on the trading market:

• US Stocks: SEC charges 0.00278% on sales, exchange fees are 0.00565% for buy and sell, TAF fee is $0.000119 per share (up to $5.95)
• Hong Kong Stocks: Forex trading involves 0.00015% of the transaction amount
• Other Markets: Varies by exchange regulations

Tax and Remittance Costs

• Dividends are subject to 30% income tax, which can be reclaimed if eligible (but procedures are complicated)
• Overseas income is taxed only if it exceeds NT$6.7 million and the basic tax exceeds comprehensive income tax
• International remittance fees depend on the bank; Taishin Bank is free, others need to check individually

Seven Key Rules for Sub-brokerage Trading

1. Only accept limit orders: Cannot place market orders; must set the order price in advance
2. Account funds must be sufficient to execute: Insufficient balance will prevent order execution, but you can place orders first
3. Pre-deposited funds are usually more than needed: Due to exchange rate fluctuations, excess funds are refunded after execution
4. Margin trading is prohibited: Credit trading is strictly forbidden, but most support day trading
5. No holidays for operations: Follow overseas market trading days, but if banks’ forex holidays occur, processing is halted
6. US stock trading hours: 09:30 am - 4:00 pm (Taiwan summer time 21:30 - 04:00; winter time 22:30 - 05:00)
7. Fixed exchange rate settlement: Uses broker’s fixed exchange rate, with exchange rate risk
8. Funds settlement times: T+1 deduction for buy, T+3 deposit for sell, with T+2 as the market settlement date

Complete Guide to Opening a Sub-brokerage Account: Three Quick Steps

Taiwan investors need to open two accounts for sub-brokerage US stocks: Domestic sub-brokerage account + Foreign currency account.

Account Opening Conditions

Must be a Taiwanese individual aged 18 or above

Step 1: Prepare Necessary Documents

✓ Double ID: Original ID card + Passport or Residence Permit (one of the two)
✓ Second ID: Health insurance card, driver’s license, etc.
✓ Seal: Needed for in-person application, used for signing contracts
✓ Bank account copy: Proof of funds

Step 2: Sign the Account Opening Agreement

Visit the broker’s branch in person or apply online, submit the above documents, and sign the sub-brokerage agreement. Be sure to inform the staff of the broker code and select the settlement currency (TWD or USD). After successful opening, transfer funds into the settlement account.

Major Broker Sub-brokerage Fee Comparison (US Stock Electronic Orders)

Tip: Fees are similar across brokers and often negotiable for better discounts. Compared to overseas brokers, sub-brokerage fees are still relatively high; frequent traders are not recommended. Currently, Cathay Securities offers the largest discount after removing the minimum spend requirement.

Actual Costs of Sub-brokerage: Local Fees + Overseas Fees

Sub-brokerage costs mainly consist of two parts: local broker fees and overseas exchange (and possibly overseas broker) fees.

US stocks generally have the lowest fees, but investing in China or Hong Kong stocks can cost 1% or even 2%, so investors should evaluate carefully.

Alternatives to Sub-brokerage: Three Ways to Invest in US Stocks

Method 1: Open an overseas broker account directly

Use US-based brokers like FirstTrade to buy US stocks directly, with zero commissions and minimal exchange fees. The advantage is the lowest cost, but the drawbacks are high account opening barriers and mostly English interfaces.

Method 2: Buy US stock CFDs through a broker

US stock CFDs are similar to futures, with US stocks as underlying assets, allowing two-way trading with leverage. Fees are as low as 0.01-0.015%, with zero commission, only spread and overnight fees. Suitable for high-frequency traders or those needing special features.

Method 3: Combine sub-brokerage and CFDs

Depending on investment needs, investors can mix the stability of sub-brokerage with the flexibility of CFDs to build a diversified portfolio.

Summary: Who Is Sub-brokerage Suitable For?

Sub-brokerage is most suitable for investors who:

• Trade infrequently and prefer long-term holding
• Have relatively simple investment targets (mainly stocks and ETFs)
• Want to avoid the hassle of opening overseas accounts
• Have moderate or larger funds and do not mind higher fees

However, if you are a high-frequency trader or have limited funds, opening an overseas broker account directly or trying US stock CFDs may be more cost-effective.

【Common Terms in Sub-brokerage at a Glance】

ETF (Exchange-Traded Fund)
A basket of stocks packaged into a fund product that tracks a specific index. For example, ETFs tracking FANG tech stocks, with companies weighted and periodically rebalanced to optimize tracking.

Lot
The trading unit in Asian stock markets. In Hong Kong, lot sizes vary by company (from 200 shares to tens of thousands), while in China, it is standardized at 100 shares. US stocks are traded per share.

In-Transit Funds
Funds from stocks sold on the same day but not yet settled can be used immediately to buy other stocks in the same market, but withdrawal requires actual settlement.

Extension of Sub-brokerage Meaning
The core meaning of sub-brokerage is “agency delegation,” where investors entrust domestic intermediaries (brokers) to delegate foreign entities (overseas brokers) to execute trades, offering safety, convenience, and compliance advantages.