In Taiwan’s stock market, cash settlement stocks are a special settlement mechanism. When investors purchase these types of stocks, they must pay the full purchase amount at once and cannot use credit trading tools such as margin financing or short selling. This system was introduced as a regulatory measure by market supervisory authorities when listed companies face operational difficulties, financial deterioration, or commit major violations.
Generally, stocks with net asset value per share below NT$5 or companies involved in major violations are designated as cash settlement stocks. This is a risk warning mechanism designed to protect retail investors from excessive speculation.
Can Cash Settlement Stocks Make a Comeback
Many investors want to know whether companies listed as cash settlement stocks have a chance to get back on track. The answer is yes—cash settlement stocks are not an irreversible judgment.
When a listed company’s operational situation improves, there is indeed an opportunity to lift the cash settlement restrictions and return to normal stock trading mechanisms. However, this requires meeting quite stringent conditions:
Standards that listed companies need to achieve: In financial reports for two consecutive quarters, the net asset value per share must exceed NT$5, and shareholders’ equity must be maintained above NT$300 million for two consecutive quarters.
OTC-listed companies have slightly different requirements: Only a single quarter’s financial report showing net asset value per share exceeding NT$5 and increasing shareholders’ equity is needed to file an application.
The entire review process is relatively standardized. After receiving seasonal reports from all listed and OTC companies, the Taiwan Stock Exchange will conduct a formal review on the first business day, and two business days after the review announcement is published, companies whose cash settlement restrictions are lifted can resume normal trading.
How to Check the Cash Settlement Stock List
Investors who want to stay updated on cash settlement stock information can query through official channels. After entering the Taiwan Stock Exchange website, click on “Trading Information,” then enter the “Trading Changes” page to see the complete cash settlement stock list and related explanations.
What Are the Special Features of Trading Cash Settlement Stocks
Because cash settlement stocks cannot engage in credit trading, their trading process differs significantly from ordinary stocks, and investors need to work with brokers for special handling.
Buying procedure:
Investors must first deposit the full amount of the stocks they wish to purchase (including brokerage fees) into a dedicated settlement account designated by the broker. Then provide the broker’s sales representative with the stock code and quantity desired. To avoid order failure due to insufficient funds, investors typically deposit a higher amount as a buffer. If not fully used on that day, the dedicated account will generally automatically return the excess funds to the personal account at 3:30 PM.
Selling procedure:
Investors wishing to sell cash settlement stocks need to actively contact their broker’s sales representative to request circumscription of their holdings (pre-registration of stocks intended for sale). The sales representative will conduct a recording procedure as evidence, and some brokers allow investors to apply self-service through their APP. After circumscription is successful, investors can independently place orders to sell. If the stock does not trade by market close, reselling the next day requires a new circumscription application.
Investment Risks and Precautions for Cash Settlement Stocks
Investing in cash settlement stocks requires recognizing that their risk characteristics are significantly higher than ordinary stocks:
Nature of risk sources: When a stock is designated as a cash settlement stock, it typically reflects the company facing operational crises, financial difficulties, or legal compliance issues. This means the investment target itself carries higher risk.
Large price fluctuations: Stocks near the NT$5 per share threshold show particularly severe volatility. This is because whether a stock maintains cash settlement status depends on whether it breaks through this threshold. Once a company fails to meet requirements, the stock may experience consecutive limit-down movements, and investors face substantial losses in a short period.
Absence of dividend mechanism: Unlike ordinary stocks with stable dividends and stock dividends, cash settlement stocks receive neither distribution nor stock dividend rights during the restriction period. Investors can only hope the company ultimately succeeds in turning around and returns to ordinary stock status.
Notably insufficient liquidity: Cash settlement stocks are matched for trading once every 30 minutes, with typically limited trading volume. This causes both buyers and sellers to face potential lack of counterparties, widening bid-ask spreads, ultimately increasing trading costs and reducing trading efficiency.
Before considering investing in cash settlement stocks, investors should thoroughly evaluate their own risk tolerance and be mentally prepared for long-term holding or potential loss of principal.
全額交割株はまだ救いがあるのか？台湾株式市場のこの特殊な決済制度を深く分析
What Are Cash Settlement Stocks
In Taiwan’s stock market, cash settlement stocks are a special settlement mechanism. When investors purchase these types of stocks, they must pay the full purchase amount at once and cannot use credit trading tools such as margin financing or short selling. This system was introduced as a regulatory measure by market supervisory authorities when listed companies face operational difficulties, financial deterioration, or commit major violations.
Generally, stocks with net asset value per share below NT$5 or companies involved in major violations are designated as cash settlement stocks. This is a risk warning mechanism designed to protect retail investors from excessive speculation.
Can Cash Settlement Stocks Make a Comeback
Many investors want to know whether companies listed as cash settlement stocks have a chance to get back on track. The answer is yes—cash settlement stocks are not an irreversible judgment.
When a listed company’s operational situation improves, there is indeed an opportunity to lift the cash settlement restrictions and return to normal stock trading mechanisms. However, this requires meeting quite stringent conditions:
Standards that listed companies need to achieve: In financial reports for two consecutive quarters, the net asset value per share must exceed NT$5, and shareholders’ equity must be maintained above NT$300 million for two consecutive quarters.
OTC-listed companies have slightly different requirements: Only a single quarter’s financial report showing net asset value per share exceeding NT$5 and increasing shareholders’ equity is needed to file an application.
The entire review process is relatively standardized. After receiving seasonal reports from all listed and OTC companies, the Taiwan Stock Exchange will conduct a formal review on the first business day, and two business days after the review announcement is published, companies whose cash settlement restrictions are lifted can resume normal trading.
How to Check the Cash Settlement Stock List
Investors who want to stay updated on cash settlement stock information can query through official channels. After entering the Taiwan Stock Exchange website, click on “Trading Information,” then enter the “Trading Changes” page to see the complete cash settlement stock list and related explanations.
What Are the Special Features of Trading Cash Settlement Stocks
Because cash settlement stocks cannot engage in credit trading, their trading process differs significantly from ordinary stocks, and investors need to work with brokers for special handling.
Buying procedure:
Investors must first deposit the full amount of the stocks they wish to purchase (including brokerage fees) into a dedicated settlement account designated by the broker. Then provide the broker’s sales representative with the stock code and quantity desired. To avoid order failure due to insufficient funds, investors typically deposit a higher amount as a buffer. If not fully used on that day, the dedicated account will generally automatically return the excess funds to the personal account at 3:30 PM.
Selling procedure:
Investors wishing to sell cash settlement stocks need to actively contact their broker’s sales representative to request circumscription of their holdings (pre-registration of stocks intended for sale). The sales representative will conduct a recording procedure as evidence, and some brokers allow investors to apply self-service through their APP. After circumscription is successful, investors can independently place orders to sell. If the stock does not trade by market close, reselling the next day requires a new circumscription application.
Investment Risks and Precautions for Cash Settlement Stocks
Investing in cash settlement stocks requires recognizing that their risk characteristics are significantly higher than ordinary stocks:
Nature of risk sources: When a stock is designated as a cash settlement stock, it typically reflects the company facing operational crises, financial difficulties, or legal compliance issues. This means the investment target itself carries higher risk.
Large price fluctuations: Stocks near the NT$5 per share threshold show particularly severe volatility. This is because whether a stock maintains cash settlement status depends on whether it breaks through this threshold. Once a company fails to meet requirements, the stock may experience consecutive limit-down movements, and investors face substantial losses in a short period.
Absence of dividend mechanism: Unlike ordinary stocks with stable dividends and stock dividends, cash settlement stocks receive neither distribution nor stock dividend rights during the restriction period. Investors can only hope the company ultimately succeeds in turning around and returns to ordinary stock status.
Notably insufficient liquidity: Cash settlement stocks are matched for trading once every 30 minutes, with typically limited trading volume. This causes both buyers and sellers to face potential lack of counterparties, widening bid-ask spreads, ultimately increasing trading costs and reducing trading efficiency.
Before considering investing in cash settlement stocks, investors should thoroughly evaluate their own risk tolerance and be mentally prepared for long-term holding or potential loss of principal.