Want to invest in U.S. stocks but don't want to open an overseas brokerage account directly? Then sub-brokerage might be your solution. I recently gathered some practical information about sub-brokerage and shared it with beginner investors who are still considering it.

Sub-brokerage (called Sub-brokerage in English) is basically when a Taiwanese broker places orders for you overseas. Simply put, you open an account with a domestic broker, and the broker then forwards your orders to partner overseas brokers for execution, which is why it's called "sub" brokerage. The advantage of this method is that you can settle in TWD, dividends are directly transferred back to your domestic account, and tax issues are handled by professionals, making the whole process more hassle-free.

But the drawbacks are also obvious: the commission fees are higher than overseas brokers, the range of investment products is limited, and automatic dividend reinvestment isn't available. However, if you're a long-term investor with large capital but infrequent trading, sub-brokerage is actually sufficient.

Regarding costs, the main components of sub-brokerage expenses include three parts. First is the domestic broker's commission fee, usually 0.1% to 1% of the transaction amount, with a minimum fee (ranging from $25 to $50). Some brokers have already eliminated the minimum fee. Second is the SEC transaction fee, charged at 0.00278% when selling. Third is the Trading Activity Fee (TAF), which is $0.000119 per share, with a cap of $5.95.

On the tax side, dividends are subject to a 30% withholding tax, and you can apply for a tax refund, but the process is a bit complicated. Overseas income is only taxed if the basic income exceeds NT$6.7 million and the basic tax exceeds the regular income tax. Also, investing in mainland Chinese stocks counts as domestic investment, while Hong Kong stocks are considered overseas investments, so be aware of this.

There are also some trading restrictions with sub-brokerage. First, only limit orders are allowed; market orders are not permitted. Your account must have sufficient pre-deposited funds to execute trades, and pre-deposits are usually larger than the actual transaction amount (to account for exchange rate fluctuations). Sub-brokerage does not support margin trading or short selling. U.S. stock trading hours are from 9:30 PM to 4:00 AM Taiwan time (Daylight Saving Time). Payment settlement is T+1 for purchases and T+3 for sales.

To open an account, you'll need an ID card, a second ID, a seal/stamp, and a bank account copy. You can apply in person or online; anyone over 18 can open an account. When opening, tell the staff the broker code and choose the settlement currency—TWD or USD.

Compared to other Taiwanese sub-brokerage firms, the commission fees are quite similar. Cathay Securities recently eliminated the minimum fee, with a 0.1% commission, making it more favorable. Fubon, Yuanta, and E.SUN are around 0.5-1%. But honestly, compared to opening an account directly with an overseas broker, the costs of sub-brokerage are still higher, and it's less suitable for frequent traders.

If you want lower costs, consider using overseas brokers directly. U.S. stock commissions are often free, with only exchange fees, which are negligible. However, account opening is more challenging, and most interfaces are in English. Another option is trading U.S. stock CFDs, with rates of 0.01-0.015%, zero commission, suitable for high-frequency traders or those needing leverage.

In summary, sub-brokerage is suitable for investors who trade infrequently, want to hold long-term, and prefer simple operations. Although the fees are higher, it offers convenience and peace of mind. If you fit this profile, sub-brokerage is indeed a good choice.