Understanding Full Delivery Stocks: Trading Rules, Risks, and Mechanisms Analysis

What Are Fully Settled Shares?

Fully settled shares are a special trading system in the Taiwan stock market. When a listed company’s operations are poor, financially distressed, or involved in major violations, causing the net asset value per share to fall below the par value (less than 5 NT dollars), the stock will be classified as a fully settled share.

The core feature of this system is: Buyers must pay the full amount for the shares purchased, and cannot use margin trading or other credit transactions. In simple terms, it is a “cash and spot” trading model, which makes the trading process of fully settled shares significantly different from regular stocks.

Can Fully Settled Shares Turn Around?

Being classified as a fully settled share is not a permanent judgment. When the company’s operations improve, the stock can revert to a regular share and return to normal trading mechanisms. However, certain conditions must be met:

For listed companies:

• Consecutive two quarters with net asset value per share exceeding 5 NT dollars
• Shareholders’ equity in the same period exceeding 300 million NT dollars for two consecutive quarters

For OTC (Over-the-Counter) companies:

• Net asset value per share greater than 5 NT dollars in a single quarterly report
• Growth in shareholders’ equity

The procedure to exit the fully settled share status is usually conducted on the first working day after the Taiwan Stock Exchange (TWSE) completes the collection of full quarterly reports, with formal approval announced the next day.

What Are the Special Aspects of the Trading Process for Fully Settled Shares?

The buying and selling process for fully settled shares is much more complex than for regular stocks, mainly because margin trading is not permitted.

Purchase Procedure

Investors need to first transfer the full purchase amount (including fees) into the broker’s designated settlement account, and provide the broker with the stock code and quantity they wish to buy. Due to the risk involved in fund transfer, investors usually deposit slightly more than needed to ensure order success. Any unused balance on the same day is generally refunded to the investor’s account before 3:30 PM.

Selling Procedure

Selling also requires contacting the broker. Investors must call the broker to request “stock reservation” (pre-collection of stocks), which will be recorded via a recording. Some brokers also allow application through an app. After completing the application, investors can instruct the broker to sell. If the order is not executed by the close of trading, they need to reapply for stock reservation the next day to sell again.

How to Check Information About Fully Settled Shares?

Investors can directly visit the official website of the Taiwan Stock Exchange (TWSE) and follow these steps:

Enter the Trading Information section → Click on “Change Trading” → View the complete list of fully settled shares and related updates.

This official channel provides real-time updates on stock status. Investors should regularly check for the latest information.

Risks to Consider When Investing in Fully Settled Shares

Fully settled shares are included due to operational or financial difficulties, which significantly increases the risks compared to regular stocks. Investors should exercise caution:

High-Risk Targets: Being classified as a fully settled share usually stems from company operational issues, financial distress, or legal risks. These fundamental factors determine a higher basic risk level.

Severe Price Fluctuations: Stocks with net asset value near critical points tend to fluctuate greatly. Since transitioning from credit to full settlement involves a change in trading mode, short-term volatility can be intense. Once a stock switches from margin trading to full settlement, it may even experience consecutive limit-down days.

No Dividends or Rights Issues: Fully settled shares do not pay dividends nor participate in rights offerings during their holding period. Investors’ returns depend solely on the stock price appreciation or the company’s return to regular stock status.

Limited Liquidity: Fully settled shares trade once every 30 minutes, which is much less frequent than continuous trading of regular stocks. Some stocks may face severe shortages of buyers or sellers, leading to difficulty in trading and higher transaction costs.

Due to these risks, investors should carefully assess their risk tolerance and fully understand the mechanisms involved before engaging in trading fully settled shares.