How to Sell Fractional Shares? Complete Guide to Trading Hours, Strategies, and Costs

In recent years, small investors’ interest in investing and managing finances has remained strong, with fractional share trading gaining popularity due to its low barrier to entry. However, many investors find that, rather than “how to buy,” the bigger challenge is often “how to sell fractional shares.” Unlike smooth transactions of full shares, selling fractional shares frequently faces issues like low liquidity and difficulty timing the sale. This article will systematically outline the complete process of fractional share trading, focusing on how to make the sale process smoother.

Basic Understanding of Fractional Share Trading

To successfully sell fractional shares, you first need to understand their nature and trading characteristics.

Fractional shares are small portions of stocks less than 1,000 shares (one standard lot). The minimum trading unit is 1 share. They typically arise when investors place buy or sell orders that are only partially filled—possibly due to rapid price fluctuations, orders not reaching the target price, or leftover shares from dividend or stock split processes.

Unlike full share trading, fractional share transactions have their own rules and time restrictions. Understanding these rules is fundamental to timing your sell orders effectively.

How to Sell Fractional Shares: Timing Is Key

Trading hours for fractional shares are divided into two periods, each with distinct features and matching mechanisms.

During Market Hours: 9:00-13:30

• Order placement: Only via electronic trading platforms provided by brokers
• Matching process: First match at 9:10, then every minute via auction
• Order priority: Price priority, then submission time at the same price
• Characteristics: Frequent trading; if not filled during the day, orders are not automatically carried over to after-hours and must be resubmitted

After-Hours Trading: 13:40-14:30

• Order placement: Via electronic or phone manual orders
• Matching process: Single auction at 14:30
• Order priority: Price priority, then random order at the same price
• Characteristics: Liquidity is more concentrated; unfilled orders are automatically canceled and do not carry over to the next day

For investors aiming to sell fractional shares, choosing the right trading period is crucial. Popular stocks tend to have higher trading opportunities during market hours, while less active stocks may require specific strategies to achieve a successful sale.

Four Strategies to Improve Success in Selling Fractional Shares

Given the reality of low liquidity in fractional shares, investors can adopt the following methods to increase their chances of successful sales.

1. Convert Fractions into Whole Shares

This is the most direct way to improve transaction success. If you hold fractional shares and your sell orders during market hours remain unfilled, you can buy additional shares to round up to a full lot (1,000 shares). Then, sell the full lot through more active full-share trading channels. For example, if you hold 700 shares of Xinjin (1582.TW), you can buy 300 more to make a full lot, then sell via full-share trading, which generally has higher liquidity than fractional trading.

2. Use Limit Orders at Price Limits (e.g., Limit Up or Limit Down)

During after-hours trading, only one auction occurs, following the “maximum volume first” principle. If you are sure to sell your fractional shares, you can place a limit order at the limit-down price—since under the maximum volume rule, such orders are more likely to be matched. Conversely, if you want to buy quickly, you can set a limit order at the limit-up price. This method is especially effective after hours.

3. Focus on Popular Stocks for Fractional Trading

Stocks like TSMC (2330.TW) have higher liquidity in their fractional shares, with much better chances of execution compared to less popular stocks. Prioritizing well-known, actively traded stocks can significantly improve your chances of successful sales.

4. Be Patient and Try Multiple Times

If your order during market hours isn’t filled, you can resubmit after hours; if still unfilled, try again the next day during market hours. Sometimes, market liquidity needs to be released before a successful transaction occurs. Patience and flexible order strategies are key to successfully selling fractional shares.

Costs of Selling Fractional Shares

When planning to sell fractional shares, you should consider transaction costs.

Commission Fees

Fees are calculated similarly to full shares—0.1425% of the transaction amount. However, brokers set minimum fees (usually around NT$1) and offer various discounts for electronic orders.

For example, buying 200 shares at NT$100 each (total NT$20,000):

• Basic fee: 20,000 × 0.1425% = NT$28.5
• With a 50% discount: NT$14.25

Major brokers vary in discounts:

• Fubon Securities: Minimum NT$1, electronic order 18% of standard rate
• E.SUN Securities: Minimum NT$1, electronic order 20%
• KGI Securities: Minimum NT$1, electronic order 60%
• Shin Kong Securities: Minimum NT$1, electronic order 10%
• Union Securities: Minimum NT$1, electronic order 16.8%

Liquidity Costs and Hidden Costs

Beyond explicit fees, low liquidity can lead to selling at lower prices, potentially incurring greater losses than the fee savings. If you rush to sell at a low price, the actual loss may far exceed the commission. Therefore, when deciding when to sell, weigh the certainty of execution against the best possible price.

Risks and Limitations of Fractional Share Trading

Understanding the limitations helps in formulating realistic strategies.

Liquidity Risk

Compared to full shares, fractional shares have lower trading volume and longer wait times. Less popular stocks may have fractional shares that are rarely traded or even untraded, requiring multiple attempts to complete a sale.

Time Restrictions

Converting fractional shares into full shares has a time limit. If the conversion isn’t completed within the specified period, the order automatically expires, and the broker will not process it. This adds time pressure to the selling process.

Operational Limitations

Fractional shares can only be sold; they cannot be bought directly. To hold fractional shares, you must first acquire them via partial orders or convert full shares into fractional parts. This one-way operation reduces flexibility.

The Advantages of Fractional Share Trading

Despite the risks, fractional shares still offer attractive features for small investors.

Low Capital Barrier

You can start with as little as 1 share, meaning some stocks can be purchased with NT$1,000 or less, making it accessible for investors with limited funds.

Suitable for Dollar-Cost Averaging

Fractional trading naturally supports “dollar-cost averaging,” allowing small, regular investments to participate in the market over time, helping to diversify investment costs.

Dividend and Rights Entitlement

Fractional shareholders are entitled to dividends and rights proportionally, making it a viable long-term asset accumulation method, even with small amounts.

Alternatives for Faster Transactions: CFDs

If liquidity issues are a concern, Contracts for Difference (CFDs) are another tool worth considering.

CFDs are derivative contracts where you speculate on the price movement of an asset without owning the underlying stock. Advantages include:

Lower Entry Costs

Buying 5 shares of Google at $100 each costs $500, but with CFDs (requiring only a small margin, e.g., 5%), you might only need $25. Leverage significantly reduces capital requirements.

Better Liquidity and Transparent Spreads

CFD markets are highly liquid, with quick execution. Most brokers charge only the spread (difference between buy and sell prices), with no additional commissions, offering transparency.

Short-Term Focus

CFDs are settled daily; holding positions overnight incurs interest costs. They are more suitable for short-term trading rather than long-term investing.

While fractional shares are ideal for long-term holding and dividend participation, CFDs cater to traders seeking quick entry and exit. Choosing the right tool depends on your investment goals.

Summary

Selling fractional shares is no longer a difficult task. By understanding trading hours, mastering execution strategies, and evaluating costs, investors can optimize their selling process. The key is to select trading periods based on stock liquidity, employ techniques like converting fractions into whole shares or using limit orders at price limits, and exercise patience to wait for the best timing.

Although fractional share trading involves risks, it remains an excellent entry point for small investors. Success depends on mastering core rules and strategies. Continuous learning and prudent decisions are essential to achieving your investment goals in fractional share trading.