Want to invest in US stocks through entrusted trading? Understand these costs and rules first before deciding!

Many Taiwanese investors want to expand their asset allocation and turn their attention to overseas stock markets, among which purchasing US stocks through cross-border entrusted trading has become the first choice for many. But how to open a cross-border entrusted account, what are the actual costs, and how are trading rules restricted—if these questions are not clarified, your investment costs may be unknowingly inflated.

Cross-border Entrusted Trading Logic: Two-way Transmission via Intermediaries

The full name of cross-border entrusted trading is “Trustee Buying and Selling of Foreign Securities Business,” which simply means allowing domestic securities firms to act as a bridge between you and the overseas markets. You open an account with a domestic securities firm qualified for cross-border securities trading, and when placing an order, the domestic broker will transfer your order to a partner overseas broker, who will execute the buy or sell on the actual exchange. Because the order passes through the “domestic securities firm → overseas broker” transfer process, rather than being directly entrusted, it is called “cross-border entrusted trading”(Sub-brokerage).

Through cross-border entrusted trading, you can access stocks, ETFs, and foreign bonds in multiple markets such as the US, Hong Kong, Japan, and China. In Taiwan, buying US stock ETFs via cross-border entrusted trading has become the most mainstream method of overseas investment.

Cross-border Entrusted Trading vs Overseas Brokers: Cost and Convenience Trade-offs

The two investment paths each have their advantages and disadvantages:

Advantages of cross-border entrusted trading: Transactions settle in TWD, overseas dividends are directly remitted back to the domestic account, and tax issues are handled by professionals, providing peace of mind. However, the handling fee is generally higher (0.1%-0.5%), the range of investable products is limited, and automatic dividend reinvestment is not supported.

Advantages of overseas brokers: Lower handling fees (0.01%-0.1%), comprehensive products (stocks, futures, derivatives, etc.), support for margin trading and short selling. But you need to open an overseas account yourself, handle cross-border remittances, and the entry barrier is higher for beginners.

Practical suggestion: If you are a long-term investor with sufficient funds but low trading frequency, cross-border entrusted trading is sufficient; if you trade frequently or have large capital, switching to overseas brokers may be more cost-effective.

Four-step Trading Process of Cross-border Entrusted Trading

Understanding how trades are actually executed can help you anticipate time costs:

1. Order placement: Submit an overseas stock order via the Taiwan securities app

2. Overseas execution: The Taiwan broker entrusts the order to an overseas partner registered on a US exchange, who executes the trade

3. Settlement report: After the overseas broker matches the trade, they report the result back to the Taiwan broker, and your account is updated accordingly

4. Custody of holdings: After the trade, stocks are stored in the broker’s overseas custody account. The holdings you see are actually held in the broker’s name, but you enjoy full rights, which is a common practice in international markets

Eight Major Rules and Restrictions of Cross-border Entrusted Trading

Before investing, you must be aware of these mandatory requirements:

1. Only limit orders are accepted; market orders are not allowed, and you must set the transaction price in advance

2. Insufficient account funds will prevent the order from being executed, even if the order is successfully placed

3. Pre-deposited funds often exceed the actual transaction amount to reserve for exchange rate fluctuations; the excess will be refunded after the transaction

4. Margin trading and short selling are prohibited, but most support day trading

5. Cross-border entrusted business operates year-round (foreign markets do not close), but if banks’ foreign exchange holidays occur, processing is unavailable

6. US stock trading hours: 09:30 am - 4:00 pm US time, which converts to Taiwan time in winter 22:30 - 05:00, in summer 21:30 - 04:00

7. Exchange rates are fixed but involve spread, which is an invisible cost

8. Fund settlement: T+1 deduction after buying, T+3 deposit after selling, with the market settlement date on T+2

Breakdown of Cross-border Entrusted Trading Costs: More Than You Think

The seemingly simple handling fee of cross-border entrusted trading actually involves multiple cost components:

Commission fee

Domestic securities firms charge about 0.1%-1% of the transaction amount, usually with a minimum fee (USD 25-50), but recent reforms by some brokers like Cathay have eliminated the minimum fee.

Transaction levies

• US market: SEC charges 0.00278% on sales
• Hong Kong market: When involving foreign exchange, both buyer and seller pay 0.00015% of the transaction amount
• Exchange fees: Vary by market, typically around 0.00565% for both buy and sell

( TAF fee (Transaction Activity Fee)
Charged per share when selling stocks, USD 0.000119 per share, with a cap of USD 5.95

) Tax and fee handling

• Dividends involve a 30% income tax, which can be reclaimed but the process is complicated
• Overseas income is taxed only if certain conditions are met: basic income exceeding 6.7 million TWD and higher basic tax than general income tax
• Calculation formula: Basic tax = ###Basic income - 6.7 million TWD### × 20%

( Bank remittance fees
Fees for cross-border remittance vary by bank; CTBC Bank’s cross-border entrusted service is free, others need to be confirmed individually

Comparison and Selection of Cross-border Entrusted Brokers’ Fees

Below are the electronic order fee rates for major Taiwanese cross-border entrusted brokers:

Cost observation: The differences among brokers are minor, and most can negotiate discounts. Overall, cross-border entrusted trading costs are higher than overseas brokers, so it’s not recommended for frequent traders. Cathay’s recent reform removing the minimum fee makes it a more competitive option.

The main costs of cross-border entrusted trading come from two parts: domestic broker fees + overseas exchange and broker fees. Among these, US stock fees are the lowest, while Hong Kong and Chinese stocks may reach 1%-2%.

Cross-border Entrusted Account Opening Process: What Documents Are Needed?

Opening an account requires establishing both a domestic cross-border entrusted account and a foreign currency account. The steps are as follows:

) Eligibility requirements
Must be a natural person aged 18 or above in Taiwan

Required documents

• Double identification: original ID card + passport or residence permit
• Second ID: health insurance card or driver’s license, etc.
• Seal (needed when applying in person)
• Bank account copy (to prove funds capability)

Account opening methods

In-person application: Visit the broker’s branch to sign the contract
Online application: Submit the application directly via the broker’s website

Key steps for opening an account

1. Inform the staff of the broker code you want
2. Choose the settlement currency (TWD or USD)
3. Sign the cross-border entrusted trading agreement
4. After opening, transfer funds into the settlement account

Once the account is successfully opened, the funds and stocks are managed by the broker, and you only need to operate trading via the app.

Beyond Cross-border Entrusted Trading: What Other Ways Are There to Invest in US Stocks?

Direct purchase through overseas brokers

Opening an account with US-based brokers like FirstTrade allows trading US stocks, futures, options, ETFs, and US bonds. The commission for US stock purchases is zero, only transaction exchange fees are charged, making it the lowest-cost option. However, the account opening threshold is higher, and the interface is mostly in English, suitable for experienced investors.

US Stock CFD Trading

Trading contracts for difference (CFDs) based on US stocks, supporting two-way trading and leverage, requires only a small amount of capital to open an account. The fee rate is extremely low (0.01%-0.015%), with zero trading commissions, only spreads and overnight fees. Suitable for high-frequency traders or investors with special strategies.

Is Cross-border Entrusted Trading Suitable for You?

Cross-border entrusted trading is most suitable for investors who:

• Do not trade frequently and prefer long-term holding
• Have relatively simple investment targets (mainly stocks and ETFs)
• Want settlement in TWD to avoid currency operations
• Are new to overseas investment and need localized service support

But if you are a frequent trader or want to minimize costs, consider overseas brokers or US stock CFDs.

Glossary

• ETF: Exchange-Traded Fund, a basket of stocks packaged into an index fund, such as FANG ETFs
• Lot: Trading unit in Hong Kong stock market, varies by company (usually 200 shares to tens of thousands), mainland China standard is 100 shares; US stocks are traded per share
• In-transit funds: Funds from sales that have not yet settled, can be used for buying within the same market, but withdrawal requires actual settlement completion