Recently, many beginners have been asking how they can invest in U.S. stocks. To be honest, quite a lot of people still feel a bit unclear about the concept of sub-brokerage. Let me put it plainly: sub-brokerage is essentially a service where domestic brokers place orders for you overseas. Its official name is “Foreign Securities Trading on Behalf of Clients,” but everyone calls it sub-brokerage or Sub-brokerage.

In simple terms, you open a sub-brokerage account with a domestic brokerage in Taiwan. The broker then forwards your orders to an overseas partner broker to execute them on your behalf, so you can buy U.S. stocks, Hong Kong stocks, Japanese stocks, Chinese stocks, and even overseas ETFs and bonds. In Taiwan, this is the most common way to invest in U.S. stocks—especially for long-term investors.

The biggest advantage of sub-brokerage is peace of mind. Settlement is done directly in TWD, overseas dividends are remitted back to your domestic account, and tax issues are handled by professionals, so you don’t have to deal with the hassles of managing overseas bank accounts yourself. But the drawbacks are also obvious: the fees are much higher than those of overseas brokers, the range of available investment products is limited, and you can’t automatically reinvest dividends.

Honestly, if you’re a long-term investor with a sizable amount of capital but you don’t trade frequently, sub-brokerage is enough. But if you want to trade often or invest in a wider variety of products, overseas brokers are more cost-effective.

So how does sub-brokerage work? The process is actually very straightforward. First, you place an order through a Taiwanese brokerage app. Then the Taiwanese brokerage forwards the order to the overseas partner broker (usually already registered with a U.S. exchange). After the overseas broker completes the trade, it reports back to the Taiwanese brokerage, and the Taiwanese brokerage then updates your account. After the trade is completed, the stocks are held in the broker’s overseas custody account. In other words, the broker keeps them under the broker’s name, but you enjoy all ownership rights and related benefits. This is a legal and common practice in international markets.

As for fees, while sub-brokerage is convenient, it does have relatively high costs. Brokerage commissions are roughly 0.1% to 1% of the transaction amount, with a minimum charge usually between 25 and 50 dollars. However, some brokers have already removed the minimum charge—for example, Cathay Securities has reformed this policy. In addition to brokerage commissions, you also need to pay SEC transaction fees (0.00278% when selling U.S. stocks) and TAF fees (0.000119 dollars per share, with a cap of 5.95 dollars). If dividends are involved, there is a 30% income tax, but you can apply for a tax refund.

You also need to pay attention to trading rules. With sub-brokerage, you can only place limit orders; you cannot place orders at the current market price. If your account’s pre-deposit funds are insufficient, the trade will fail to execute. Also, the pre-deposits are often higher than the actual transaction amount because you need to leave room for exchange-rate fluctuations. Sub-brokerage does not offer margin trading or short selling. U.S. stock trading hours are from 9:30 a.m. to 4:00 p.m. U.S. time. In Taiwan, daylight saving time is from 9:30 p.m. to 4:00 a.m. the next day, and standard time is from 10:30 p.m. to 5:00 a.m. the next day. After you buy, the funds are deducted on T+1; after you sell, the proceeds are credited on T+3.

To open a sub-brokerage account, you need to prepare your identity card, a second piece of identification, a seal, and a copy of your bank account. You can apply at the brokerage branch in person or apply online directly. Just tell the staff the brokerage code and the settlement currency (TWD or USD). Currently, the most favorable sub-brokerage fee in Taiwan is likely Cathay Securities, because they canceled the minimum commission charge.

In the end, sub-brokerage is best suited for investors who trade infrequently, have simple investment targets, and want to hold long term. It’s simple and convenient, but it comes with higher fees. If you want lower transaction fees, you can consider opening an overseas brokerage account directly, or try U.S. stock CFDs—each has its own pros and cons. Which option to choose still depends on your own investment style and needs.