[Asia Economy Reporter Park Jihwan] Financial authorities have warned that, in addition to trading losses due to stock price declines, foreign exchange losses may also occur with the expansion of fractional trading of overseas stocks starting this month, urging caution.
The Financial Supervisory Service (FSS) announced on the 23rd that, as a total of 20 securities firms will be able to start fractional trading services for overseas stocks from this month, it will provide investor precautions related to fractional trading of overseas stocks.
The Financial Services Commission designated fractional trading of overseas stocks as an innovative financial service at its regular meeting on the 12th. Until now, only Korea Investment & Securities and Shinhan Financial Investment allowed fractional trading of overseas stocks. Going forward, fractional trading of overseas stocks will be possible at 20 securities firms, including these two. The securities firms designated for fractional trading of overseas stocks under this innovative financial service include DB Financial Investment, KB Securities, KTB Investment & Securities, NH Investment & Securities, Kyobo Securities, Daishin Securities, Meritz Securities, Mirae Asset Securities, Samsung Securities, Shin Young Securities, Shinhan Financial Investment, Yuanta Securities, Eugene Investment & Securities, Kakao Pay Securities, Kiwoom Securities, Toss Securities, Hana Financial Investment, Hi Investment & Securities, Korea Investment & Securities, and Hanwha Investment & Securities.
Fractional trading of overseas stocks is a system where investors place orders in fractional units, and securities firms aggregate these to submit trading orders in whole shares. For example, to buy one share of Tesla priced at $1,090, approximately 1.28 million KRW is required. However, going forward, investors can buy 0.1 shares of Tesla, allowing them to purchase fractional shares worth 100,000 KRW, 200,000 KRW, or any amount they wish. This is expected to expand accessibility to high-priced stocks and enable the construction of diverse portfolios with small-scale investments.
The FSS emphasized that investors should pay close attention to the differences from whole-share trading and the differences in trading methods among securities firms when subscribing to and using fractional trading services for overseas stocks. Not all stocks are available for fractional trading, so it is necessary to check which stocks can be traded at each securities firm.
Order methods (quantity, amount units, etc.), minimum order units, orderable times, and restrictions on order channels (such as MTS) may vary by securities firm. Securities firms aggregate fractional trading orders from multiple investors and execute them. There may be differences between the order and execution times, causing fluctuations in trading prices or the actual number of shares allocated. It may be difficult for investors to trade at their desired timing.
Regarding exercise of rights, fractional shares differ from whole shares in terms of dividend payments, voting rights, allocation due to stock splits or reverse splits, so it is necessary to check the terms and conditions of each securities firm.
A drawback of fractional shares is that they cannot be transferred to other securities firms. However, fractional share holdings can be converted to whole-share accounts.
Additionally, since overseas stocks do not have domestic disclosures, access to investment-related information is limited, and the FSS pointed out that foreign exchange losses may occur in addition to trading losses due to stock price declines.
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