Can I sell fractional shares? The complete guide to fractional share trading that small investors must know

Odd lots can be sold, and they are becoming easier to sell. Since the Taiwan Stock Exchange implemented reforms on October 26, 2020, allowing odd-lot trading during regular trading hours, investors can now trade odd lots both during the day and after hours. This provides small investors with more flexibility and opportunities. Below is a comprehensive guide to odd-lot trading, including what odd lots are, trading rules, fee calculations, and tips for more effective buying and selling.

Basic Concepts of Odd-Lot Trading

What are odd lots?

A standard stock trading unit is one lot, which equals 1,000 shares. When investors hold less than 1,000 shares, these are called “odd lots,” with a minimum of 1 share. Odd lots typically arise from:

• Unfilled original orders due to price fluctuations or volume limits
• Natural leftovers from dividend or stock split distributions
• Investors actively purchasing small quantities

Difference between odd lots and round lots

Odd-lot trading involves transactions of fewer than 1,000 shares, with each order between 1 and 999 shares. In contrast, round lots are traded in units of one lot (1,000 shares). The lower threshold for odd lots makes stock investment more accessible for investors with limited funds.

Trading Hours and Rules for Odd Lots

To meet the diverse needs of small investors, odd-lot trading is no longer limited to after-hours. Since the 2020 reform, odd-lot trading is divided into two periods:

【Source: Taiwan Stock Exchange】

Features of during-market trading

Investors can submit odd-lot orders starting at 9:00 AM, but only electronic orders via brokerage platforms are accepted during market hours. Trading during the day follows the same schedule as regular stocks, ending at 1:30 PM. Note that unfilled orders during market hours do not automatically carry over to after-hours; investors need to resubmit after hours.

Flexibility of after-hours trading

From 13:40 to 14:30, investors can place orders electronically or via phone with brokers. The exchange conducts a single call auction at 14:30, and any unfilled orders are automatically canceled, not carried over to the next day.

Fee Calculation for Odd-Lot Trading

Fee rate standards

The transaction fee for odd lots is the same as for regular stocks, at 0.1425% of the transaction amount. However, different brokerages set varying “minimum fee” thresholds and offer discounts for online orders, with the latter encouraging digital trading.

Fee calculation example

Suppose you buy 200 shares of TSMC (2330.TW) at a closing price of NT$1,065:

• Basic fee: 200 × 1,065 × 0.1425% = NT$303.53
• With a 50% discount from the broker: NT$303.53 × 50% = NT$151.77

Comparison of major brokerages

Strategies to reduce fees

Since the minimum fee is often NT$20, small single trades may incur higher relative costs. It’s recommended for small investors to adopt a dollar-cost averaging approach, investing at least NT$10,000 per transaction to keep fees proportionate.

Tips to Improve Odd-Lot Trading Success

Although odd-lot trading has become more convenient, less popular stocks may have limited liquidity, making immediate transactions difficult. Here are some practical tips:

“Combine odd lots into round lots” strategy

If you hold 700 shares of a less-traded stock and face difficulty selling during the day, consider:

1. Buying an additional 300 shares of the same stock
2. Merging your holdings into 1,000 shares (one round lot)
3. Selling the round lot via more active regular trading

Round lots have higher liquidity and easier execution than odd lots.

Pricing tactics for after-hours trading

Since after-hours trading involves only one call auction, follow the “maximize trading volume” principle:

• Buying quickly: Place a bid at the limit-up price to increase chances of execution
• Selling quickly: Place an order at the limit-down price to ensure the trade completes

While this may sacrifice some price, it significantly improves the certainty of execution.

Patience with multiple attempts

If your order doesn’t execute during the day, you can re-enter after hours or the next day. Monitoring order book activity and timing your orders can improve success rates.

Advantages and Limitations of Odd-Lot Trading

Advantages

• Low capital requirement: Invest from as little as 1 share, suitable for small investors
• Regular dollar-cost averaging: Supports small, ongoing investments, ideal for testing the waters
• Flexible allocation: Adjust holdings based on available funds, maintaining liquidity for daily needs
• Dividend benefits: Holders can receive dividends, and odd lots can be converted to cash or sold in bulk

Limitations

• Lower liquidity: Less active stocks may have limited odd-lot trading volume, requiring multiple attempts or days
• Higher relative costs: Fees and minimum charges can make small trades less economical
• Operational restrictions: Only sell orders are allowed; buying in parts isn’t possible, and sales must be in one go
• Liquidity risk: Broker inventories may be limited, making it hard to acquire desired odd lots

Alternative Options for Small Investors

If liquidity or fees are concerns, consider:

Contracts for Difference (CFDs)

CFDs are derivative instruments that allow profit from price movements without owning the underlying stock. For example:

• Buying 5 shares of Google at $400 each costs NT$2,000
• Buying 5 CFD contracts with a 5% margin requires only NT$100

Advantages include transparent spreads, high liquidity, and no additional commissions, but overnight positions incur interest costs.

Choosing the right investment method

• Long-term investors: Opt for odd-lot trading to hold and receive dividends
• Short-term traders: CFDs are more suitable for quick trades, with same-day settlement and avoiding overnight risks

Summary

Odd-lot trading can now be sold more easily than before. With ongoing improvements by the Taiwan Stock Exchange, odd-lot trading has become an important avenue for small investors. Compared to traditional round-lot investing, odd-lot trading offers lower barriers and greater flexibility, allowing investors to tailor their investments to their financial situation.

To succeed in odd-lot trading, investors should:

1. Understand trading rules thoroughly: Know the schedules, fees, and matching methods for both during and after hours
2. Calculate costs and benefits carefully: Ensure that the investment amount covers fees to avoid losses
3. Apply effective techniques: Use strategies like combining lots and strategic pricing to improve execution
4. Assess personal risk tolerance: Choose suitable investment strategies to avoid impulsive decisions

Whether engaging in odd-lot trading or other methods, maintaining a rational investment mindset is key to long-term profitability. Odd-lot trading provides an accessible entry point for the public to participate in the stock market and share in economic growth.