Understanding Full Margin Trading: Essential Risks and Mechanisms Investors Must Know

What Are Fully Settled Stocks?

Fully settled stocks are a unique system exclusive to the Taiwan stock market. When a listed company faces operational difficulties, deteriorating financial conditions, causing its net asset value per share to fall below par value (less than 5 NT dollars), or commits major violations, its stock will be included in the fully settled stock list. Unlike ordinary stocks, buyers of fully settled stocks must pay the full purchase amount prior to trading and cannot use credit transactions such as margin or short selling.

Overview of Investment Risks in Fully Settled Stocks

Before investing in fully settled stocks, it is essential to fully understand their risk characteristics:

Higher Operational Risks
Stocks designated as fully settled usually reflect companies facing operational difficulties, financial vulnerabilities, or legal disputes. Compared to regular stocks, these securities carry a significantly higher risk level.

Severe Price Volatility
Especially when the net asset value is near the critical 5 NT dollars threshold, investors pay close attention to whether the stock will regain its credit trading privileges, leading to extreme short-term fluctuations. Once a company is transitioned to a fully settled trading system, its stock price may even face consecutive limit-downs.

Severely Limited Liquidity
Fully settled stocks trade only once every 30 minutes, resulting in scarce buying and selling opportunities, which can easily lead to a situation of high price but low market activity, increasing transaction costs.

No Dividend or Rights Entitlements
Holding fully settled stocks does not entitle the holder to dividends or rights issues. The only way out is to wait for the company to turn around and restore its status as a regular stock.

Can Fully Settled Stocks Be Rescued? Conditions for Reversal

The good news is that the status of fully settled stocks is not permanent. When a company’s operational situation improves, there is indeed a chance to revert to the regular trading system:

Delisting Conditions for Listed Companies
Consecutive two quarters with net asset value per share exceeding 5 NT dollars and shareholder equity maintaining above 300 million NT dollars for two consecutive quarters can apply for reclassification.

Delisting Conditions for OTC Companies
If in a single quarter, the net asset value per share exceeds 5 NT dollars and shareholder equity has increased, the conditions are relatively more lenient.

Reversal Procedures and Timeline
The Taiwan Stock Exchange conducts a formal review on the next business day after collecting complete quarterly reports. Once the review announcement is published, the reversal takes effect on the second business day thereafter.

How to Find the List of Fully Settled Stocks?

Investors can check the complete list via the Taiwan Stock Exchange official website. The steps are: go to the official site → click on “Trading Information” → select “Change Trading System,” and all relevant information about fully settled stocks can be viewed.

Trading Mechanism for Fully Settled Stocks

Since credit transactions are not possible, the trading process for fully settled stocks differs significantly from that of regular stocks:

Purchase Procedure
Investors cannot place orders directly. They must transfer the full amount (including fees) to the broker’s designated account and call the broker to provide stock name and quantity. To avoid insufficient funds causing transaction failure, a higher amount is usually transferred. Any unused balance after the day’s trading will be automatically refunded at 3:30 PM.

Sale Procedure
Investors need to proactively call the broker to request “frozen stocks” (i.e., stocks that are temporarily locked for sale) for the day. The broker will record the confirmation (some brokers allow this via app). After approval, investors can place sell orders themselves. If the order is not executed by market close, they must re-freeze the stocks the next day to continue selling.

Major Brokers Offering Fully Settled Stock Trading Services

Many licensed brokers in Taiwan provide services for trading fully settled stocks:

Fubon Securities
One of Taiwan’s largest securities firms, with a comprehensive online trading platform, full suite of trading tools, supporting fully settled stock transactions.

Yuan Ta Securities
With the widest branch network across Taiwan, supporting synchronized mobile and cloud trading, also offering fully settled stock trading.

CITIC Securities
With extensive experience in financial markets, equipped with a team of senior investment advisors, supporting fully settled stock transactions.

KGI Securities
An established broker, with user-friendly “One Account” features, supporting sub-account management, providing complete fully settled stock trading services.

Final Advice for Investing in Fully Settled Stocks

While fully settled stocks carry higher risks, they may also present turnaround opportunities for investors with high risk tolerance. However, before investing, you must: thoroughly understand the specific difficulties faced by individual companies, assess their potential for turnaround, control the size of each investment, and be mentally prepared for long-term holding or accepting losses.