Beginner's Guide to U.S. Stock Investment: How to Choose Between Overseas Brokers and Domestic Custodian Agencies?

When trading US stocks in Taiwan, investors typically face two main options: using domestic brokerage firms’ omnibus agency services or opening accounts directly with overseas brokers. This article will compare these two methods in depth to help you find the most suitable investment path.

Two Paths to US Stock Investment: Omnibus Agency vs Overseas Broker

For Taiwanese investors, the US stock market offers a wealth of investment opportunities—from tech giants like Apple, Amazon, Google, to S&P 500 index funds, as well as derivatives like futures and CFDs, among others. However, many encounter difficulties when opening accounts: “The account opening process is too complicated,” “I can’t understand the English interface,” “How to minimize transaction fees?”

Core Differences Between Omnibus Agency and Overseas Brokers

How Omnibus Agency Works

Omnibus agency refers to delegating a domestic broker (such as Jih Sun, E.SUN, Yuanta, etc.) to place orders in overseas markets on your behalf. Simply put, the domestic broker submits your trading instructions to an overseas broker for execution—hence the name “omnibus agency.”

Features of omnibus agency include:

• Trading methods: Buy T+1, Sell T+3, meaning purchase shares are confirmed the next day, and you can sell after four days
• Order placement: Electronic and manual order options
• Commission fees: About 0.5%, relatively high
• Tax convenience: Dividends are automatically taxed at 30% (tax refund possible), with the broker assisting with tax matters
• Suitable for: Large single transactions or investors with very low trading frequency

Features of Overseas Brokers

Opening an account directly with an overseas broker means you control your trades independently. The minimum trading unit is 1 share, with T+1 settlement.

Advantages of overseas brokers include:

• Fees: Most have achieved zero trading commissions, but costs include USD exchange spreads, international transfer fees, etc.
• Trading flexibility: Support margin trading, conditional orders, and other advanced features
• Product diversity: Stocks, ETFs, futures, derivatives, and more
• Real-time execution: Orders are executed instantly without delay
• Revenue model: Besides commissions, income also comes from margin interest, spreads, platform management fees, etc.

Suitable for: Investors interested in short-term trading, shorting, or leveraging to amplify gains.

Which one should you choose?

Reasons to Choose Omnibus Agency

If you have sufficient funds but trade infrequently, omnibus agency might be more suitable. Its advantages include a simple process, dedicated account opening guidance, and some platforms even waive currency exchange requirements. For investors valuing convenience and willing to pay higher fees for stable service, this is a good choice.

Reasons to Choose Overseas Brokers

If you want lower trading costs, faster execution, and access to more investment tools, overseas brokers are the top choice. Although you need to open accounts and handle currency exchange yourself (usually only 0.1% fee), using professional trading software and real-time execution provides significant advantages for active traders and frequent investors.

Factors to Consider When Choosing an Overseas Broker

Fee Structure

Different overseas platforms have varying fee compositions. Online brokers generally have lower fees than brick-and-mortar firms, with more relaxed account opening requirements. Costs to compare include:

• Trading commissions (many platforms now offer zero commissions)
• Withdrawal fees
• Spread on currency exchange
• Platform usage fees

Variety of Trading Products

Top-tier overseas brokers typically offer a wide range of products including US stocks, ETFs, funds, futures, options, bonds, forex, and even cryptocurrencies, allowing investors to tailor strategies accordingly.

Platform Usability

For Chinese-speaking investors, whether the platform provides a Chinese interface and customer support is crucial. Additionally, the design of trading software—whether intuitive and feature-rich—affects user experience. Some platforms integrate real-time quotes, economic calendars, trading insights, sentiment indices, and other tools to enhance trading efficiency.

Regulatory Security

Choosing a platform regulated by reputable authorities such as FINRA, SEC, SIPC, or international regulators is vital. Platforms with larger capital and stricter oversight offer higher security. The risk of fund loss due to platform failure is nearly zero for well-regulated firms.

Account Opening Requirements

Minimum deposit requirements vary widely—from zero USD to $25,000. Beginners should select platforms with lower thresholds to ease testing the waters.

Common Questions About Overseas Brokers

Are fees really much lower than omnibus agency?

Yes. Most overseas brokers have achieved zero commissions on stocks and ETFs, with only spreads and withdrawal fees to pay. Compared to the 0.5% fee of omnibus agency, the cost advantage is clear, especially for frequent traders.

How many types of products can I trade?

Top overseas brokers offer far more than domestic omnibus agency. You can trade stocks, ETFs, futures, options, bonds, forex, and even cryptocurrencies. This diversity greatly expands strategic options.

Is platform operation difficult?

While the original English interface may pose some difficulty, many overseas platforms now offer full Chinese support. The trading process is usually straightforward: login → deposit funds → select products → place orders → set stop-loss/take-profit. Once familiar with these steps, operation is not complicated.

Risks to Consider When Choosing an Overseas Broker

Fund Security Risks

Even large companies face the possibility of insolvency. However, brokers with proper licenses are usually well-capitalized, making risks very low. Choosing a platform with large market capitalization and strict regulation further reduces this risk.

Language and Regulatory Barriers

Many investors are unfamiliar with English legal documents and may be misled by false investment information. It’s recommended to thoroughly review platform terms before opening an account and seek professional advice if necessary.

Asset Inheritance Complexity

If an investor passes away, inheritance through domestic omnibus agency is relatively straightforward. Overseas broker accounts involve more complex inheritance procedures, requiring time and effort to verify identity.

Tax Responsibilities

Tax issues for omnibus agency are handled by the broker, but overseas brokers require investors to manage their own tax affairs. Consulting a professional tax advisor is recommended to understand relevant regulations.

Summary: How to Find the Right Overseas Broker for You

Choosing an overseas broker depends on clearly defining your investment goals and risk tolerance. Investors with low trading frequency and ample funds may consider the convenience of omnibus agency; those seeking lower costs, diverse tools, and flexible trading should prefer overseas brokers.

Regardless of the method chosen, before investing, be sure to:

• Fully understand fee structures and trading rules
• Verify the platform’s regulatory status and capital strength
• Assess your trading style and investment horizon
• Prepare for tax and legal matters

The US stock market is full of opportunities—using the right tools and methods will help your investment journey go further.