How costly are US stock brokerage commissions? An in-depth guide to opening accounts, fees, and choosing the right broker

Many people interested in entering overseas investments will hear the term “sub-brokerage” at first. But what exactly is sub-brokerage, are the fees unreasonable, and how to choose a cost-effective option? These questions often leave beginners confused. Instead of blindly opening accounts, it’s better to first build a solid foundation.

What Does Sub-brokerage Actually Do? The Operating Logic Is Not That Complex

Agency trading of foreign securities—this is the formal name of sub-brokerage. It sounds impressive, but it simply means Taiwan brokers handle your overseas transactions on your behalf.

Specifically, the entire process is as follows: you place an order with a domestic broker → the broker forwards the order to an overseas partner broker → the overseas broker executes the trade directly on the local exchange → the results are sent back to you. Since the order passes through an intermediary, it’s called “sub-brokerage,” or in English, Sub-brokerage.

Why go through all this trouble? Because opening an overseas account directly involves foreign exchange, taxes, account custody, and a bunch of hassles for Taiwanese investors. The advantage of sub-brokerage is— you only settle in TWD, dividends are automatically remitted, and tax matters are handled for you. Sounds appealing, right?

Through sub-brokerage, you can invest in stocks, ETFs, and bonds in markets like the US, Japan, Hong Kong, and China. Among these, buying US ETFs via sub-brokerage is the most common overseas investment method for Taiwanese.

Sub-brokerage vs Overseas Brokers: Which Is More Cost-Effective?

This is a common dilemma. Let’s compare simply:

Account opening threshold: Overseas brokers can be opened online directly; sub-brokerage accounts require visiting a broker in person or filling out info on their website.

Handling fees: Overseas brokers charge about 0.1% or less per trade, while sub-brokerage fees range from 0.1% to 1%, with minimum charges (usually $25 to $50). Cathay Securities recently reformed and eliminated the minimum, making it slightly cheaper.

Settlement methods: Overseas brokers settle in USD or other foreign currencies; sub-brokerage accounts can settle directly in NT$. While this seems convenient, it also means you bear exchange rate fluctuations and spread risks.

** tradable products:** Overseas brokers offer everything—stocks, corporate bonds, futures, derivatives. Sub-brokerage is more limited, mainly stocks, ETFs, bonds.

Trading methods: Overseas brokers support market orders, conditional orders, margin trading, short selling. Sub-brokerage only allows limit orders and prohibits margin trading.

Chinese language support: Both have services, but sub-brokerage often provides dedicated support, making communication more direct.

Honestly: If you’re a beginner, trade infrequently, sub-brokerage is the most hassle-free. As your trading frequency and amounts grow, the cost advantages of overseas brokers become more apparent.

How Much Are Sub-brokerage Fees? You Need to Know These Details

While sub-brokerage seems convenient, costs are unavoidable. The main expenses include three parts:

First: Domestic broker commission fees

Most common is 0.1% to 1% of the transaction amount, plus minimum charges. US stocks are relatively cheap; mainland China and Hong Kong stocks can be more expensive, even reaching 1% to 2%.

For example: buying $10,000 worth of US stocks with a 0.5% fee costs $50. But if there’s a $35 minimum fee, you pay at least $35. If you buy $5,000 worth, the fee is normally $25, but since the minimum is $35, you pay $35. Small investors lose out in this case.

Second: Fees from overseas exchanges—transaction fees and TAF

The SEC charges 0.00278% on stock sales. The exchange also charges fees—buy and sell each 0.00565%, plus transaction levies of 0.0027%. The Trading Activity Fee (TAF) is charged at $0.000119 per share on sales, with a cap of $5.95.

Though these are small decimals, they add up with frequent trading.

Third: Tax and foreign exchange costs

Dividends are subject to 30% income tax; refunds are possible but complicated, so most people skip it. Overseas income is only taxed if the basic income exceeds NT$6.7 million, with a basic tax rate of (basic income – 6.7 million) × 20%.

Cross-border remittance fees depend on the bank; Taishin Bank waives fees, others have different policies.

Trading Rules You Must Understand for Sub-brokerage

1. Only limit orders—market orders are not allowed; you must set a price beforehand. This means your order may or may not be executed.

2. Account must have pre-deposited funds—enough money must be in the account to execute trades. To hedge against exchange rate fluctuations, deposits are often larger than the actual trade amount, and any difference is refunded after settlement.

3. No margin trading or short selling—sub-brokerage strictly prohibits borrowing money. Most brokers allow same-day trading (day trading), but with restrictions.

4. Timing rules—sub-brokerage accounts operate on trading days, but when banks are closed for forex, trading is halted. US stock trading hours are 09:30–16:00 US time, summer about 21:30–04:00 Taiwan time, winter about 22:30–05:00.

5. Exchange rate spread exists—sub-brokerage uses fixed broker rates for settlement, so there’s an implicit exchange rate cost.

6. Funds deposit is slow—after buying US stocks, settlement is T+1; after selling, funds are available T+3; actual delivery occurs on T+2. If you want to withdraw, you must wait until settlement completes.

What Do You Need to Prepare to Open a US Stock Sub-brokerage Account?

You need two things: a domestic sub-brokerage account + a foreign currency account.

Required documents:

• Original copies of dual ID (ID card, passport, or residence permit)
• A second ID (health insurance card, driver’s license, etc.)
• Seal/stamp (required for in-person application)
• Bank account statement

Account opening steps:

Visit any domestic broker branch in person to sign up, or apply directly online. During the process, inform the staff of the broker code, select the settlement currency (TWD or USD), and sign the agreement. The minimum age is 18, and you must be a natural person of Taiwan.

Once the account is successfully opened, transfer funds into the sub-brokerage settlement account to start trading. Your stocks and funds are held in custody by the broker; the shares are technically in the broker’s name, but you hold all rights. This system is common internationally and is fully legal.

Cost Comparison of Taiwan Sub-brokerage Brokers

Popular sub-brokerage brokers include Fubon, Yuanta, Cathay, E.SUN, KGI, etc. For electronic trading:

Honestly: The differences are minor, and discounts are negotiable. Compared to overseas brokers, costs are still higher. Currently, Cathay Securities, after reforms removing the minimum, is the most affordable choice.

The real cost is local broker fees + overseas exchange fees. US stocks have the lowest costs; mainland China and Hong Kong stocks can reach 1% or even 2%.

Who Is Suitable for US Stock Sub-brokerage?

Suitable for:

• Infrequent traders, only a few trades per month
• Focused on a single asset class, mainly US ETFs
• Long-term investors, not wanting frequent buy/sell
• Prefer settling in TWD, avoiding foreign exchange hassle

Not suitable for:

• High-frequency traders, as fees eat into profits
• Those needing margin, short selling, futures
• Cost-sensitive investors

Are There Other Ways to Invest in US Stocks?

1. Open an overseas broker account directly

Use US-based brokers like FirstTrade to buy US stocks, futures, options, ETFs, US bonds. Commissions are free, only paying exchange fees, very low cost. But interfaces are mostly in English, and account opening has higher thresholds—may be challenging for beginners.

2. US Stock CFD Trading

Similar to futures, with US stocks as underlying assets, allowing two-way trading, leverage, long/short positions, small account minimums. Fees as low as 0.01%, with zero commission, only small spreads and overnight fees. Suitable for frequent traders seeking leverage.

Conclusion

Sub-brokerage is suitable for beginners, infrequent traders, and those seeking convenience, but costs are relatively high. If your trading frequency and volume increase, consider switching to overseas brokers or US stock CFDs, each with pros and cons, complementing each other.

Glossary:

• ETF (Exchange-Traded Fund): A basket of stocks packaged as an index fund, e.g., tech sector ETFs that periodically rebalance to track an index.
• Lot: Trading unit; in Hong Kong, lot sizes vary (from 200 shares to tens of thousands), in mainland China, 100 shares per lot, US stocks are priced per share.
• On-the-way funds: Funds from sold securities that haven’t yet settled; can be used to buy other securities in the same market and currency, but withdrawal requires actual settlement completion.