Recently, more and more novice investors are asking me what a cross-trade account is and how to buy U.S. stocks through a cross-trade. Honestly, this is the easiest way to enter overseas investing, but there are also many pitfalls to watch out for. Today, I will share my years of experience with everyone.

The full name of a cross-trade account is "Trustee Buying and Selling Foreign Securities Business," which simply means you open an account with a Taiwanese broker, and the broker then forwards your orders to overseas partner brokers for execution. Because the order is transferred through multiple parties, it’s called a cross-trade. With this cross-trade account, you can invest in U.S., Hong Kong, Japanese, and Chinese stocks, as well as ETFs and foreign bonds. Basically, you can access all major markets.

Compared to directly opening an overseas broker account, a cross-trade account has obvious advantages. First, you can settle in New Taiwan Dollars, avoiding the hassle of foreign exchange remittance. Dividends are directly credited to your domestic account, and tax issues are handled by professionals. Most importantly, the entire process is more secure, just like trading locally. But there are also many downsides—higher transaction fees, limited product options, and no automatic dividend reinvestment. However, if you are a long-term investor with large capital but infrequent trading, a cross-trade account is sufficient.

The operation of a cross-trade account is actually very simple: you place an order via your Taiwanese broker app, the broker forwards the order to the overseas partner broker, the overseas broker executes the trade on the exchange, then reports the result back to your Taiwanese broker, and your account is updated accordingly. The purchased stocks are held in the broker’s overseas custody account, nominally owned by the broker, but you hold all rights. This system is common in international markets and is completely legal.

Regarding the costs of a cross-trade account, this is a concern for many people. The transaction fee is about 0.1% to 1% of the transaction amount, with a minimum fee usually between $25 and $50. Recently, some brokers have reformed their fee structures; for example, Cathay Securities has eliminated the minimum fee, which is a significant change. Besides the commission, you also need to account for the US SEC trading fee (0.00278%, charged on sales), the Trading Activity Fee (TAF, $0.000119 per share, capped at $5.95). Dividends involve a 30% income tax, which can be reclaimed but is more complicated. Overseas income tax applies only if the basic income exceeds NT$6.7 million; the basic tax is calculated as (basic income minus NT$6.7 million) times 20%.

The trading rules for cross-trade accounts also need attention. First, only limit orders are accepted; you cannot place market orders at the current price—you must set a price first. If your account doesn’t have enough funds, the order won’t execute, but you can still place it. The pre-deposited funds are usually more than the actual transaction amount to account for exchange rate fluctuations; the excess will be refunded after the trade. Cross-trade accounts do not support margin trading, but most can be used for day trading. U.S. stock trading hours are from 9:30 a.m. to 4:00 p.m. Eastern Time; during daylight saving time, that’s 9:30 p.m. to 4:00 a.m. Taiwan time, and during standard time, 10:30 p.m. to 5:00 a.m. Taiwan time. Buying stocks deducts funds on T+1, selling stocks settle on T+3, and the market’s delivery date is T+2. Cross-trade accounts use the broker’s fixed exchange rate for settlement, so there is an exchange rate risk.

To open a cross-trade account, you need to prepare your original ID card, a second ID (health insurance card or driver’s license), a seal (required for in-person applications), and a bank account copy. You can apply in person at a broker branch or directly online. Taiwanese residents aged 18 or older can open an account. When signing the agreement, you need to inform the broker of the broker code, choose the settlement currency (NT$ or USD), and after completing the account setup, you can transfer funds and start trading.

Mainstream Taiwanese brokers’ fees are similar; Cathay Securities is currently the most affordable since it eliminated the minimum fee, at just 0.10%. Others like Fubon, Yuanta, E.SUN, and KGI charge between 0.5% and 1%. These rates are negotiable, but even with discounts, they are still more expensive than overseas brokers, making them less suitable for frequent traders.

A cross-trade account is suitable for investors who trade infrequently and want to hold long-term. It’s simple and convenient but comes with higher costs. If you want lower fees, you can consider opening an overseas broker account directly, but the entry barrier is higher, and most platforms are in English. Another option is trading U.S. stock CFDs, which have very low rates (0.01%-0.015%), zero commissions, and only charge spreads and overnight fees. This is suitable for high-frequency traders or those using leverage. Choose based on your investment style— for beginners, a cross-trade account is indeed the easiest way.