Recently, more and more novice investors are interested in entering the U.S. stock market, but they still find the concept of cross-border entrusted trading a bit confusing. Actually, what cross-border entrusted trading is not complicated; simply put, it means you go through a domestic broker to place orders overseas to buy U.S. stocks on your behalf. It sounds a bit roundabout, but it’s actually the most convenient method.

The full name of cross-border entrusted trading is "Trust Business for Buying and Selling Foreign Securities," which sounds very formal, but the operating principle is quite straightforward. You open an account with a domestic broker, and the broker will place orders for you through their overseas partner broker. Because it’s not a direct commission but through an intermediary, it’s called cross-border entrusted trading. The benefit? You don’t need to open an overseas account yourself, handle foreign currency remittances, and even dividends are directly transferred back to your Taiwan account. Tax issues are also handled by professionals, making the entire process simple and convenient.

However, the most obvious downside of cross-border entrusted trading is the handling fee. Domestic brokers charge about 0.1% to 1% for cross-border entrusted trading, with a minimum fee usually starting at $25 to $50. Recently, some brokers have started reforming; for example, Cathay Securities has already eliminated the minimum fee, which is a good development for small investors.

How does cross-border entrusted trading work? The process is actually divided into four steps. First, you place an order through the broker’s app. Then, the broker forwards your order to their overseas partner broker, who executes the trade directly on the U.S. stock exchange. Finally, the trade results are sent back to the domestic broker and updated in your account. Throughout the process, your stocks are held in the broker’s overseas custody account, managed on your behalf. This system is common in international markets, is completely legal, and there’s no need to worry.

If you are a long-term investor with a moderate amount of capital and infrequent trading, cross-border entrusted trading is sufficient. But you should be aware of a few trading rules. First, you can only use limit orders; market orders are not allowed. Second, your account must have sufficient pre-deposited funds, or your orders won’t be executed. Third, U.S. stock trading hours are from 9:30 a.m. to 4:00 p.m. U.S. time, which is roughly 9:30 p.m. to 4:00 a.m. Taiwan time (during daylight saving time, it’s 10:30 p.m. to 5:00 a.m.). Fourth, cross-border entrusted trading cannot be used for margin trading or securities lending—remember this.

In addition to the broker’s commission, you also need to consider exchange fees. The U.S. Securities and Exchange Commission charges a fee of 0.00278% on stock sales, and some exchanges also charge a TAF fee of $0.000119 per share, with a cap of $5.95. There’s also the currency exchange rate difference, as cross-border entrusted trading uses the broker’s fixed exchange rate, which can lead to a spread. Payment dates are also important: after buying, funds are deducted T+1; after selling, the proceeds are credited T+3.

Regarding how to open an account for cross-border entrusted trading, the steps are actually simple. You need to prepare two forms of ID, a seal, and a bank account copy, then go to the broker’s branch or apply online. When opening the account, tell the staff whether you want the settlement currency in TWD or USD. Once the account is successfully opened, you can transfer funds and start trading.

Currently, major Taiwanese brokers offering cross-border entrusted trading include Fubon, Yuanta, Cathay, E.SUN, and KGI, with fees generally around 0.5% to 1%. Cathay has eliminated the minimum fee and lowered the rate to 0.1%, making it the cheapest option. But honestly, the fees among brokers are quite similar, and you can even negotiate. Compared to overseas brokers, cross-border entrusted trading costs are higher, but for investors who don’t trade frequently, the convenience outweighs the extra cost.

If you want even lower costs, you can consider using overseas brokers directly. For example, FirstTrade allows you to buy U.S. stocks, futures, and options with zero commissions. The downside is that account opening is more difficult, mostly in English, and not very friendly for beginners. Another option is U.S. stock CFDs, which have very low rates of 0.01% to 0.015%, with zero trading commissions, suitable for high-frequency traders or those wanting leverage.

Overall, cross-border entrusted trading is mainly designed for investors who trade infrequently, hold long-term, and have moderate capital. Its biggest advantages are simplicity and convenience, but the costs are indeed higher than overseas brokers. If you’re just starting to explore overseas investments, cross-border entrusted trading is definitely the easiest and most hassle-free choice.