[Fractional Investment Guide] Analysis of Transaction Fees and Cost, and Timing of Buying and Selling

What Are Odd Lots? Why Should Small Investors Understand Them?

In recent years, odd lot trading has become a popular option for small investors in Taiwan, but many people still have a vague understanding of the basic concepts. Simply put, odd lots refer to stock positions of fewer than 1000 shares (one standard lot), with the minimum trading unit being 1 share. These scattered stocks usually originate from partially filled buy/sell orders or during dividend and stock distribution processes.

Unlike trading in whole lots (minimum purchase of 1 lot = 1000 shares), odd lot trading allows investors to enter the market with very low thresholds, starting with just 1000 NT dollars. For investors with limited funds, this breaks down the traditional barriers to stock market entry. Starting October 26, 2020, the Taiwan Stock Exchange officially opened intraday odd lot trading, expanding from previous after-hours trading to a full-day session, greatly enhancing trading flexibility.

Overview of Odd Lot Trading Hours and Rules

Today, odd lot trading is divided into two main sessions, and investors should plan according to their needs:

Intraday Trading Session (9:00-13:30)

• Order Placement: Electronic orders only (via broker platforms)
• Matching Mechanism: First match at 9:10, then a call auction every minute
• Transaction Priority: Price priority, then submission time at the same price
• Special Rules: Unfilled positions are not automatically carried over to after-hours; re-entrustment is required

After-Hours Trading Session (13:40-14:30)

• Order Placement: Electronic or telephone/manual orders
• Matching Mechanism: One call auction at 14:30
• Transaction Priority: Price priority, then random order at the same price
• Important Reminder: Unfilled orders are automatically canceled and will not carry over to the next day

Complete Breakdown of Odd Lot Trading Fees

Many investors’ main concern is: how much does it cost to buy and sell odd lots? The answer is: the fee calculation method for odd lot trading is exactly the same as for whole lots.

Basic Fee Structure: The transaction fee for odd lots is 0.1425% of the transaction amount, but brokers usually set a minimum fee threshold (commonly between 1-20 NT dollars). For example, buying 200 shares of TSMC (current price about 1065 NT dollars):

200 shares × 1065 NT dollars × 0.1425% = 303.53 NT dollars

If the broker offers a 50% discount, the actual fee paid would be: 303.53 NT dollars × 50% = 151.77 NT dollars

Comparison of Major Broker Fees:

Investor Tips: Since the minimum fee for odd lot transactions is often 1 NT dollar, small trades have a higher proportion of fees. It’s recommended to trade amounts of 10,000 NT dollars or more per transaction to effectively reduce the cost ratio.

How to Sell Odd Lots for Better Chances of Execution? Practical Trading Tips

Compared to buying, selling odd lots can be more challenging. Less popular stocks tend to have low trading volume in odd lots, and investors may face long delays in order fulfillment. Here are some practical strategies:

Strategy 1: Convert Small Lots into Whole Lots to Accelerate Execution

Suppose you hold 700 shares of Shinjin (1582.TW), but your order remains unfilled during the day. You could consider buying an additional 300 shares to make a total of 1000 shares (one lot), then sell the whole lot through more active whole lot trading. Although this involves extra purchase costs, it can ensure faster execution.

Strategy 2: Use Call Auction Timing Effectively

Since after-hours trading only involves one call auction at 14:30, investors can reverse their approach:

• When eager to buy → place a bid at the limit-up price to increase the chance of execution
• When eager to sell → place a bid at the limit-down price, prioritizing execution under the maximum transaction principle

This method is suitable for very certain buy/sell decisions but involves price fluctuation risks.

Pros and Cons of Investing in Odd Lots

Advantages:

1. Very low entry barrier, starting from just 1000 NT dollars
2. Suitable for dollar-cost averaging strategies
3. Holding odd lots grants rights to dividends and stock distributions, providing passive income even with small amounts
4. Flexible trading hours, available during both intraday and after-hours sessions

Risks:

1. Lower liquidity, especially for small-cap stocks, making it harder to execute trades
2. Higher proportion of transaction fees relative to small amounts, increasing overall costs
3. Selling odd lots typically requires selling all shares at once; limited flexibility to adjust positions
4. For less popular stocks, brokers may have insufficient odd lot inventory, making it difficult to buy the desired quantity

Alternative Options Considering Fees and Liquidity

If investors are concerned about the fee burden and liquidity issues of odd lot trading, Contract for Difference (CFD) offers another option.

CFDs do not require holding actual stocks; they only trade on price movements, with margin requirements as low as 5%. For example, buying 5 shares of Google:

• Direct purchase: requires about $2,000 USD
• CFD trading: only about $100 USD (5% margin)

However, note that odd lot trading is more suitable for long-term investors, while CFDs are better for short-term trading. Overnight positions in CFDs incur overnight financing costs.

Conclusion

Odd lot trading has become an important way for retail investors in Taiwan to access the stock market. Although the transaction fees have a minimum threshold, the overall cost structure remains more transparent than whole lot trading. Small investors should choose brokers according to their capital size, with the best benefits when trading amounts reach 10,000 NT dollars or more per transaction. At the same time, cultivating risk awareness is essential to avoid losses caused by liquidity and fee issues. Whether choosing odd lots or other trading tools, rational decision-making and continuous learning are the keys to successful investing.