Complete Guide to Full Settlement Stock Investment: System, Trading Process, and Risks in One Go

What are full-settlement stocks? Why should you understand them?

If you see a particular trading method for a stock in Taiwan’s stock market, you might be encountering full-settlement stocks. Full-settlement stocks refer to a trading system where the buyer must pay the entire purchase amount of the stock. This is a unique arrangement in Taiwan’s stock market.

Under what circumstances are stocks classified as full-settlement stocks? There are mainly two: one is when the company is poorly managed or facing financial difficulties, causing the net asset value per share to fall below the face value of 5 NT dollars; the other is when the company commits a major violation. Once classified as full-settlement stocks, trading methods become strictly restricted, bringing noticeable differences to investors’ operations.

Can full-settlement stocks turn around? Conditions for returning to regular stocks

Being classified as a full-settlement stock is not a permanent sentence. When the company’s operations improve, there is indeed a chance to exit this status and return to normal trading mechanisms.

The delisting conditions for listed companies are: two consecutive quarters with a net asset value per share greater than 5 NT dollars, and shareholder equity exceeding 300 million NT dollars for two consecutive quarters.

The standards for OTC companies are relatively lenient: only requiring that in one quarter, the net asset value per share exceeds 5 NT dollars, and shareholder equity has increased.

These review processes are usually conducted as a formal review on the first working day after the Taiwan Stock Exchange (TWSE) collects all quarterly reports. The review announcement becomes effective after 2 days. In other words, from meeting financial data standards to actually resuming normal stock trading, the entire process takes about 1 to 2 weeks.

How to check and confirm full-settlement stocks?

To verify whether a stock is a full-settlement stock, you can directly check on the official website of the Taiwan Stock Exchange. Click sequentially on “Trading Information” → “Trading Changes,” and you will see the complete list of full-settlement stocks and related information.

Trading process of full-settlement stocks: What’s different in buying and selling?

Full-settlement stocks cannot use margin trading or securities lending, so the buying and selling process differs significantly from regular stocks.

When purchasing full-settlement stocks, investors cannot place orders directly in their personal accounts. The correct procedure is: first transfer all the required funds (including fees) to the broker’s designated settlement account, then provide the stock code and quantity to the broker. To avoid order failures due to insufficient funds, investors usually transfer a higher amount. Any unused or surplus funds on the day will be returned to the investor’s account around 3:30 PM.

When selling full-settlement stocks, investors need to contact their broker to apply for “stock reservation” (i.e., pre-freezing the stocks). The broker will record this via a recorded message (some brokers also allow application through an app). After approval, investors can then instruct the broker to sell the stocks. If the sale does not execute on the same day, they need to reapply for stock reservation the next day. This entire process is much more complicated than trading regular stocks.

How to choose a suitable broker for full-settlement stock trading?

Several major brokers in Taiwan offer full-settlement stock trading services. When choosing, investors should consider:

• Whether the broker provides an online trading platform and complete full-settlement stock trading tools
• Whether there is a professional customer service team to assist with complex procedures
• Reasonableness of transaction fees and related costs
• Platform stability and trading execution efficiency

Investors can compare service features and cost structures of different brokers based on their habits and needs.

How high are the risks of investing in full-settlement stocks? What should you pay attention to?

Once a stock is classified as a full-settlement stock, liquidity is restricted, and trading methods change, often accompanied by a significant drop in stock price. Compared to regular stocks, full-settlement stocks carry higher risks, mainly in these aspects:

The company itself has issues. A net asset value below 5 NT dollars usually indicates operational difficulties, financial crises, or suspected violations or illegal activities. These are high-risk signals. Holding such stocks involves greater potential losses.

Price volatility is intense. When the net asset value fluctuates around 5 NT dollars, investors worry whether the stock will be converted to full-settlement or remain on credit settlement. This expectation causes short-term volatility. Sometimes, stocks just classified as full-settlement may hit limit-down repeatedly, leading to rapid losses.

No cash dividends or distributions. Unlike regular stocks, full-settlement stocks do not pay dividends or stock dividends. Investors can only passively wait for the company’s turnaround, without any cash flow income during the period.

Market liquidity is extremely poor. Full-settlement stocks trade only once every 30 minutes (not continuous trading), with low trading volume. Buyers or sellers may be severely lacking. This makes buying and selling difficult, and the actual transaction prices may be far below expectations, increasing transaction costs.

Overall, full-settlement stocks are indeed high-risk assets and unsuitable for investors with low risk tolerance. Before entering, you must fully understand the company’s specific situation and be psychologically prepared for potential losses.