Taiwan's fractional share day trading is expected to be deregulated; the Financial Supervisory Commission will evaluate the one-share system within one month.

Taiwan’s Financial Supervisory Commission (FSC) Chair Peng Jinlong stated during a hearing at the Legislative Yuan on March 18 that they will submit written assessment reports within a month on two topics: the feasibility of changing the Taiwan stock trading unit from the current 1,000 shares to 1 share, and opening fractional share day trading.

Peng Jinlong emphasized that the core principle of managing the capital market is to “treat every trader fairly, providing equal conditions.”

Core Controversy of the 1-Share System Reform: Fairness vs. System Transition Costs

The background of this reform discussion is the longstanding unfairness in Taiwan’s fractional share market. Under the current system, investors can only initiate their first fractional share trade 10 minutes after the market opens (at 9:10 a.m.), and they cannot conduct same-day offset trades, creating a clear disparity compared to investors holding whole shares.

If Taiwan’s stock trading unit is fully changed to 1 share, the current fractional share trading system will face fundamental transformation:

Matching Time: From a 10-minute delay after opening to synchronization with the main market, allowing investors to seize early trading opportunities.

Day Trading Eligibility: Expected to enjoy the same day offset rules as whole shares, breaking existing prohibitions.

Order Channels: From limited online electronic trading to include phone, computer, and mobile platforms.

Reference Price Mechanism: From being based on whole share trades to being determined by the individual trade to set market standards.

The Taiwan Stock Exchange (TWSE) Chairman Lin Hsiu-ming expressed cautiousness, stating “changing may not necessarily be good,” emphasizing the need to evaluate the actual benefits in aligning Taiwan’s capital market with international standards, increasing market capitalization, and promoting inclusive finance. Securities and Futures Bureau Director Gao Jingping also pointed out that the reform would completely change investors’ trading modes, requiring synchronized adjustments to surveillance systems and backend platforms, with significant transition costs.

Diverging Opinions and Market Context

Regarding the proportion of day trading in Taiwan, Legislator Lin Daihua cited data indicating it reaches 47%, much higher than the US (15%-20%) and Japan (30%-40%). However, OTC (Over-the-Counter) Market Chairman Jian Lizhong clarified that the actual day trading ratio is about 35%-36%, and pointed out that foreign trading accounts for 25% of OTC stocks. The average P/E ratio of Taiwan’s semiconductor industry is about 35 times, indicating the market’s fundamental support.

Additionally, Legislator Luo Mingcai proposed lowering the securities transaction tax to 0.1%. Peng Jinlong explained that since Taiwan currently does not impose a securities transaction income tax, the tax system evaluation must consider the overall picture and not focus solely on the securities transaction tax.

Frequently Asked Questions

After changing Taiwan’s stock trading unit to 1 share, what is the most direct benefit for small retail investors?

Two main benefits stand out: First, matching the market opening time, so they no longer miss early trading opportunities due to fractional share matching delays of 10 minutes; second, if day trading is also opened for fractional shares (1 to 999 shares), investors holding fractional shares can perform same-day offset trades like whole-share investors, greatly increasing operational flexibility. This is especially beneficial for small investors trading high-priced stocks (such as large-cap ETFs or tech giants).

Why has Taiwan been slow to adopt the 1-share system?

The main obstacles are the costs of system transition and market impact assessment. Taiwan’s current system, which uses 1,000 shares as the standard trading unit, has been in place for decades, with broker backend systems, exchange matching engines, and surveillance systems all designed accordingly. A full overhaul would require significant hardware and software upgrades, and a transitional period could disrupt market order. Additionally, managing the day trading ratio is a key consideration—if fractional shares are fully opened for day trading, short-term speculative trading might intensify.

Does this assessment require legislative cooperation?

The FSC has promised to provide a “study report,” indicating that they are still evaluating feasibility and have not yet entered formal policy promotion. If the assessment supports the reform, subsequent legal amendments (such as changes to the Securities and Exchange Act or related regulations) might be necessary, and some modifications could require approval from the Legislative Yuan. However, basic trading rule adjustments could be directly approved by the competent authority without full legislative procedures.