Taiwan Stock Trading System Gets Major Upgrade! What Investors Should Truly Pay Attention To

In recent years, Taiwan's stock market has continuously set new historical records, driven by the AI industry. Not only has its market capitalization risen to the global top tier, but the number of high-priced stocks exceeding NT$1,000 has also rapidly increased. The market's trading structure and investment habits are quietly transforming. While market attention focuses on AI supply chains, foreign investor movements, and index highs, the Taiwan Stock Exchange is simultaneously rolling out its most significant trading reform in years, scheduled to be implemented gradually from the end of this year to next year.

This reform includes three key points: advancing the opening time of intraday odd-lot trading to 9:00 AM, shortening the odd-lot matching frequency from every 5 seconds to every 1 second, and reducing the minimum price increment for stocks priced over NT$1,000 from NT$5 to NT$1. The adjustment for high-priced stocks is expected to be implemented as early as July 2027. On the surface, these appear to be minor adjustments to trading mechanisms. However, what truly deserves attention is not how many minutes trading starts earlier or how many dollars the price increments are reduced, but how these optimizations will change investor trading behaviors, market liquidity, and overall price discovery efficiency.

Odd-lot trading upgrade further lowers the investment threshold

Since its introduction, odd-lot trading has gradually become a primary investment method for many investors. With the popularity of ETFs and the increasing number of high-priced stocks, more and more investors are using odd-lot trading to gradually build positions and accumulate holdings over time. However, current intraday odd-lot trading still has some limitations. The first matching occurs only at 9:10 AM, ten minutes after the market opens, and trades are executed only every 5 seconds. During periods of high market volatility, this often leads to delayed executions, widened bid-ask spreads, and even transaction prices that deviate from the broader market.

Therefore, the core of the exchange's reform is to align odd-lot trading more closely with regular trading. In the future, intraday odd-lot trading will begin simultaneously with regular trading at 9:00 AM, and the matching frequency will be shortened to every second. Although the batch auction mechanism will still be used, both execution efficiency and liquidity are expected to significantly improve. This means odd-lot trading will no longer be just a tool for small investors but will gradually become an essential part of market trading, making long-term dollar-cost averaging and phased investment in high-priced stocks and ETFs more convenient.

High-priced stocks switching to 1-dollar increments improves more than just pricing

Another highly anticipated reform is reducing the minimum price increment for stocks priced over NT$1,000 from NT$5 to NT$1. For a stock priced at NT$2,000, current orders can only be placed at NT$1,995, NT$2,000, or NT$2,005, lacking finer price intervals. This often results in large bid-ask spreads and reduced trading efficiency.

After switching to 1-dollar increments, investors will be able to place orders at prices like NT$1,999, NT$2,000, and NT$2,001. Market prices will more accurately reflect supply and demand changes, helping to narrow bid-ask spreads, improve price discovery efficiency, and allow investors to complete transactions closer to their ideal prices. For individual investors, the impact per trade may seem limited, but for institutional investors, large funds, and high-frequency traders, the cumulative reduction in transaction costs will help enhance overall market liquidity.

What changes will the market see after the new system is implemented?

Any institutional reform comes with not only benefits but also new adjustments that market participants must adapt to. First, with improved odd-lot trading efficiency, more small investors are expected to participate, leading to continued growth in trading volume for high-priced stocks and ETFs, and potentially increasing overall market activity. Second, with high-priced stocks adopting 1-dollar increments, prices will better reflect real-time supply and demand. Long-term investors may see reduced trading costs, and institutions adjusting large positions can minimize transaction friction caused by price spreads, further enhancing market liquidity.

However, an upgraded trading system also means faster data updates and more transaction records. For brokers, information providers, and trading systems, ensuring stable operation during high-volume trading—avoiding delays or congestion—will be a critical challenge in the early stages of reform. Therefore, comprehensive stress testing and system validation before the official launch will be key to the successful implementation of the new system.

On the other hand, increased trading convenience may lead some investors to increase short-term trading frequency. However, trading system improvements enhance market efficiency, not corporate value. Mistaking institutional reforms for short-term market catalysts could lead to excessive trading and increased investment costs. For most investors, what truly determines long-term returns remains corporate profitability, industry development trends, and establishing asset allocation strategies aligned with personal needs—not how many seconds faster an order is executed.

System upgrades truly enhance Taiwan's market competitiveness

Looking at mature global markets, continuous optimization of trading systems is a common trend. While institutional reforms may not immediately reflect in stock prices, they gradually reduce transaction costs, improve price discovery efficiency, enhance market liquidity, and further attract international capital participation.

For Taiwan's stock market, the true importance of this reform lies not in whether investors can execute trades slightly faster, but in the fact that market mechanisms are steadily aligning with international standards. As the trading environment becomes more mature and efficient, the market's competitiveness and resilience will also rise in tandem.

For investors, while system upgrades are certainly worth noting, what truly determines investment outcomes has always been the presence of sound investment strategies, proper capital allocation, and the discipline to hold quality assets long-term—not faster order execution speeds. Markets will continue to evolve, and systems will keep changing. What will accompany investors through economic cycles is always rational investment thinking, not faster order speeds.

(Written by: Financial Advisory Team, Yongcheng Asset Management Division)