The five core protections
- Leverage limits by asset class
- Margin close-out at 50% per account
- Negative balance protection per account
- No bonuses or trading incentives
- Standardised risk warning with the provider's % of losing accounts
Background
In 2018 the European Securities and Markets Authority (ESMA) introduced EU-wide product intervention measures for contracts for difference sold to retail clients, after finding that most retail accounts were losing money. National regulators — such as BaFin, AMF, CONSOB, CNMV and CySEC — then adopted permanent rules at least as strict in their own countries.
Leverage limits
| Underlying | Max leverage | Initial margin |
|---|---|---|
| Major currency pairs | 1:30 | 3.33% |
| Non-major currency pairs, gold, major indices | 1:20 | 5% |
| Commodities (excl. gold), non-major indices | 1:10 | 10% |
| Individual equities and other underlyings | 1:5 | 20% |
| Cryptocurrencies | 1:2 | 50% |
Major currency pairs are any combination of the US dollar, euro, Japanese yen, British pound, Canadian dollar and Swiss franc.
Margin close-out
If your account's equity falls to 50% of the margin required for your open CFD positions, the broker must close one or more positions. This limits how far losses can run against you.
Negative balance protection
Your total losses are limited to the funds in your CFD account. If a sudden gap pushes your balance below zero, the broker must absorb the deficit.
No incentives
Brokers can't offer retail clients monetary or non-monetary benefits to trade CFDs — no deposit bonuses, trading credits or gifts. Information services and tools are still allowed.
Risk warning
Every CFD provider must show a standardised warning including the percentage of its own retail accounts that lost money over the previous 12 months, updated every quarter.
What it means for you
With 1:30 leverage, opening a €100,000 EUR/USD position needs about €3,333 of margin. That limits position sizes on small accounts — which is the point. If a broker offers you much higher leverage as an EU retail client, check which entity you're dealing with.
Margin needed for common positions
Illustrative margin at ESMA retail limits, with EUR/USD at 1.0874:
| Position | Notional | Leverage | Margin |
|---|---|---|---|
| 0.1 lot EUR/USD | €10,000 | 1:30 | ≈ €333 |
| 1 lot EUR/USD | €100,000 | 1:30 | ≈ €3,333 |
| 0.1 lot EUR/NOK | €10,000 | 1:20 | €500 |
| 1 Germany 40 CFD at 20,000 | €20,000 | 1:20 | €1,000 |
National variations
National regulators implemented the ESMA measures permanently and some added their own requirements — for example, stricter rules on how CFDs can be marketed or on the wording of risk warnings. Your broker must follow the rules of its home regulator and, where applicable, the conduct rules of the country where you live.
Why the rules exist
Before 2018, regulators found that most retail CFD accounts lost money and that high leverage, bonuses and aggressive marketing were contributing factors. The measures were designed to limit the speed and size of losses — not to stop people trading. Brokers' own published loss percentages show that most retail accounts still lose money, so the limits are a floor of protection, not a guarantee.
Checklist: is your broker applying ESMA rules?
- Maximum leverage of 1:30 on major pairs for your retail account
- A risk warning with a specific percentage of losing accounts
- No deposit bonuses or trading credits
- Negative balance protection stated in the client agreement
- An EU-authorised legal entity named in your documents
Frequently asked questions
What is the maximum leverage for forex in the EU?
For retail clients, 1:30 on major currency pairs and 1:20 on other pairs.
Why do some brokers offer 1:500 to EU residents?
Those offers usually come from offshore entities that aren't authorised in the EU, so ESMA-based protections don't apply.
Do the ESMA rules apply to professional clients?
No. The leverage limits and other product rules apply to retail clients. Professional clients can access higher leverage but lose those protections.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.