Want to invest in US stocks but worried about the hassle? Re-entrustment makes it easy for you to get started

Many Taiwanese novice investors are both curious about overseas investments and hesitant due to the complicated account opening process and cumbersome remittance procedures. Actually, there is a simpler way—re-entrusted trading. This investment method allows you to buy US stocks with TWD, and there are dedicated personnel to handle tax issues. How does re-entrusted trading work? Are the fees really expensive? Which investors are most suitable for re-entrusted trading? This article will answer these questions one by one.

What is re-entrusted trading? Why is it called “re” entrustment?

The full name of re-entrusted trading is “Trustee Buying and Selling of Foreign Securities Business”, simply put, it means Taiwanese brokerages place orders for you overseas.

Normally, if you want to buy US stocks, you need to open an overseas brokerage account yourself, handle foreign exchange issues, and fill out overseas tax forms. But through re-entrusted trading, you only need to open an account with a domestic broker, and the rest of the complex matters are handled by the broker.

The reason it’s called “re” entrustment is because the entrustment goes through two layers: you → domestic broker → overseas partner broker → US stock exchange. Your order does not go directly to the exchange but is transferred layer by layer (Sub-brokerage), which is the meaning of “re.”

Through a re-entrusted account, you can invest in multiple overseas markets such as US stocks, ETFs, Hong Kong stocks, and Japanese stocks. In Taiwan, using re-entrusted trading to buy US stock ETFs is the most traded overseas investment method.

Re-entrusted trading VS opening an overseas broker account, which one should you choose?

These two methods suit different investors. Let’s look at the main differences:

Account opening process comparison: Re-entrusted trading only requires in-person document presentation or online application, which can be completed in a few days at most. Overseas broker accounts require online registration, filling out English forms, sometimes video verification, and the whole process can take two weeks.

Fee differences: This is a key difference. Re-entrusted trading fees are about 0.1% to 1% of the transaction amount, but usually with a minimum fee (USD 25 to USD 50). Overseas brokers have lower fee rates (0% to 0.1%), and many have eliminated minimum fees, making the overall cost significantly cheaper.

Fund transfer: Re-entrusted uses TWD for settlement, dividends are directly remitted back to your Taiwan account, and you don’t need to handle foreign currency. Overseas brokers require managing USD accounts, cross-border remittances, and tax reporting yourself.

Trading experience: Re-entrusted trading can only place limit orders (pre-set prices), cannot place market orders, and order execution may be delayed. Overseas brokers offer real-time order execution, and also support margin trading, short selling, and options trading.

Investment products: Re-entrusted trading can only buy stocks, ETFs, and bonds. Overseas brokers can trade futures, options, and various derivatives.

Recommended user groups: If you are a long-term investor, trade infrequently, do not need leverage, and only want to buy ETFs for periodic investment, re-entrusted trading is sufficient. Its advantages are peace of mind, convenience, and tax assistance. But if you are a short-term trader or trade large amounts, opening an overseas broker account is more cost-effective.

How does re-entrusted trading work? Four steps to understand the entire process

The entire re-entrusted trading process is not complicated:

Step 1: You place an order via the domestic broker’s app. Select the US stocks or ETFs you want to buy, input quantity and price, and submit the order. At this point, the domestic broker’s system checks if your account has sufficient funds.

Step 2: The domestic broker transfers the order to the overseas partner broker. After your order enters the broker’s system, they transfer it to their overseas partner registered on the US stock exchange, who will execute the buy/sell in the US market.

Step 3: After execution, the result is reported back to the domestic broker. Once the overseas broker successfully executes your order, they send the result back, and the domestic broker updates your holdings and balance accordingly.

Step 4: Stock custody and settlement. The purchased stocks are not directly in your name but are held in the broker’s overseas custody account. The stocks you see are held in the broker’s name, but you enjoy all rights (dividends, voting rights, etc.). This custody system is common and fully legal internationally, just like holding stocks in a broker’s account in Taiwan.

What fees are involved in re-entrusted trading? Know them clearly to avoid being overcharged

Although convenient, re-entrusted trading costs more than directly opening an overseas broker account. Key fees include:

Domestic broker’s commission fee is the largest cost. Usually charged at 0.1% to 1% of the transaction amount, but each broker varies. For example, some brokers charge 0.5% to 1% for electronic orders, plus a minimum fee (USD 35 to USD 50). In other words, even if you buy only USD 100 worth of stocks, you might be charged USD 25 in fees. Recently, some brokers have reformed and eliminated minimum fees, making costs more affordable.

US stock exchange fees are small but important to know. The US SEC charges 0.00278% on sales; the exchanges may charge around 0.00565% for both buy and sell; and there is a Trading Activity Fee (TAF) of USD 0.000119 per share (up to USD 5.95). These fees usually total less than 0.01% of the transaction amount.

Exchange rate spread is also a cost. Re-entrusted trading uses a fixed exchange rate for settlement, so you cannot enjoy the best rate at the time, and the spread is the broker’s profit margin.

Tax costs are worth noting. US dividends are subject to 30% withholding tax, which can theoretically be reclaimed, but the process is cumbersome. Taiwanese investors only need to worry if their basic income exceeds NT$6.7 million; the basic tax = (Basic income – NT$6.7 million) × 20%. Most small retail investors do not need to worry about this.

Bank remittance fees depend on your bank. Some banks offer free same-day cross-border remittance, others charge fees, so check with your bank.

Rules and restrictions you must know about re-entrusted trading

When operating re-entrusted trading, several important rules must be followed:

Only limit orders. This is a major restriction of re-entrusted trading. You cannot place market orders (buy/sell at current market price); only pre-set prices are allowed. The advantage is avoiding slippage, but the downside is orders may never execute.

Account funds must be sufficient. Before placing an order, your account must have enough funds; otherwise, the order will be rejected. Due to exchange rate fluctuations, you should deposit more than the actual transaction amount. For example, to buy USD 1,000 worth of stocks, you might need to deposit USD 1,050 to account for exchange rate changes. The excess will be refunded after the transaction.

No margin trading. Re-entrusted trading does not allow margin trading; you can only use your own funds to buy stocks, no borrowing.

US stock trading hours must be observed. US stock market hours are 9:30 AM to 4:00 PM Eastern Time. In Taiwan time, during daylight saving, it’s 9:30 PM to 4:00 AM; during standard time, it’s 10:30 PM to 5:00 AM. So, for Taiwanese investors, trading occurs late at night.

Settlement times are fixed. After buying US stocks, settlement is T+1 (next day); after selling, it’s T+3. This is standard for US markets, not specific to re-entrusted trading.

Bank foreign exchange holidays affect operations. Re-entrusted services operate 24/7 in principle, but if Taiwan’s banks have foreign exchange holidays, remittance cannot be processed, affecting fund in/out.

Day trading is allowed but with restrictions. Most brokers permit day trading (buying and selling on the same day), but certain conditions must be met, and rules vary by broker.

How to open a re-entrusted account? Practical guide

Opening a re-entrusted account is simple, divided into three steps:

Step 1: Prepare documents. Prepare double ID (ID card + passport or residence permit), secondary ID (health insurance card or driver’s license), seal (may not be needed online), and bank account copy.

Step 2: Choose the account opening method. You can apply in person or online. In-person has the benefit of direct assistance; online is more convenient. When applying, inform the broker of the code, and choose the settlement currency—most choose TWD.

Step 3: Complete the account opening. After signing the relevant agreements, the account is usually activated within a few working days. Then transfer funds into the re-entrusted settlement account, and you can start investing.

Major Taiwanese brokerages’ fees comparison for re-entrusted trading

Fees are similar across major Taiwanese brokerages, with slight differences. Here are the electronic order rates:

Recommendation: While fees are similar, Cathay has eliminated minimum fees, making it more friendly for small investors. In practice, you can negotiate with brokers if your funds are large. Remember, total re-entrusted costs include “domestic broker’s fee + overseas exchange fees + spread,” and the commission fee is just one part.

Besides re-entrusted trading, what other ways are there to invest in US stocks?

Directly opening an overseas broker account. This is the lowest-cost method; many overseas brokers offer commission-free US stock trading, with only minimal exchange fees. However, account opening has high thresholds, and the interface is mostly in English, suitable for experienced investors.

Trading US stock CFDs. CFDs are Contracts for Difference, trading based on US stocks, allowing two-way trading, leverage, and shorting. Advantages include very low fees (0.01%-0.015%), zero commissions, and small initial capital. Disadvantages are higher risk, suitable for frequent traders seeking leverage.

Buying US stock funds. Purchasing US-related funds through Taiwanese fund companies is the simplest but most expensive method, with ongoing management fees.

Is re-entrusted trading suitable for you? One sentence summary

Re-entrusted trading is suitable for small investors who do not trade frequently, only want to invest in ETFs periodically, are willing to hold long-term, and do not need leverage. Its advantages are peace of mind, safety, and tax assistance. The downside is higher fees and limited investment products.

If you have large capital, trade frequently, or need leverage, opening an overseas broker account is more cost-effective. If you want low costs but find the entry barrier high, US stock CFDs are also an option.

There is no absolute best way to invest in US stocks; the key is to understand your investment needs and choose the most suitable tool. The existence of re-entrusted trading is to allow retail investors to easily access the US stock market.

【Common Terms in Re-Entrusted Trading】

ETF — Exchange-Traded Fund, a basket of stocks bundled into an index fund, such as ETFs containing tech giants, allowing investors to diversify risk with one purchase.

Limit order — An order with a pre-set price; it only executes when the stock reaches that price. Re-entrusted trading only supports this type.

T+1, T+2, T+3 — Settlement days. T is the trading day; T+1 means next day, T+3 means three days later. In US markets, T+1 deducts funds after purchase, and T+3 credits after sale.

Day trading — Buying and selling the same stock within the same trading day.

Custody account — Your stocks are held in a broker’s custody account under their name, but you enjoy all rights (dividends, voting, etc.).