Why do the rules on CFDs differ so much by country?
Few retail products have a more fragmented regulatory map. The same contract is prohibited for retail clients in one major market, tightly capped in another, and freely available offshore. That fragmentation is not random — it reflects what different regulators concluded after looking at the same kind of data.
This lesson describes the landscape generically. Rules differ by jurisdiction, change over time, and none of this is legal advice — verify the current position for your own jurisdiction and entity.
The three broad regimes
Prohibited for retail. In the United States, CFDs are not offered to retail clients. Off-exchange derivatives of this type on securities fall outside the permitted framework under US securities and commodities law. Retail leveraged FX does exist in the US, but only through registered dealers and under CFTC/NFA limits of broadly 50:1 on major currency pairs and 20:1 on others — far tighter than the offshore market, though not tighter than the EU/UK caps described below. Several other jurisdictions have banned or heavily curtailed retail CFD marketing outright.
Permitted with hard limits. The EU and the UK allow CFDs for retail clients under intervention measures introduced around 2018–2019 and made permanent. The package is consistent in shape:
- Leverage caps by asset class — broadly 30:1 for major currency pairs, stepping down through major indices and gold, non-major pairs and other commodities, to 5:1 for individual equities and 2:1 for cryptoassets (which the UK subsequently banned for retail entirely).
- A 50% margin close-out rule, applied per account.
- Negative balance protection for retail clients.
- A ban on trading incentives — no bonuses or promotional inducements to open or fund an account.
- A standardised risk warning carrying the firm's own client-loss percentage.
Australia introduced a broadly similar product intervention regime from 2021, and other jurisdictions have adopted variations.
The mandated disclosure, and the number in it
The last item deserves its own section, because it is the most unusual disclosure requirement in retail finance. Firms must publish the percentage of their own retail client accounts that lose money, updated periodically, displayed on communications and advertising.
When ESMA analysed samples of retail CFD accounts ahead of the 2018 measures, it reported that between roughly 74% and 89% of retail accounts lost money, with average losses per client running from around €1,600 to €29,000 depending on the sample. Firms' own mandated disclosures have since commonly displayed figures in a similar band — typically somewhere in the 70s or 80s percent, varying by firm, product mix and period.
How to hold that number honestly:
- Each firm publishes its own figure under compulsion, and updates it periodically. It sits on the firm's website because a regulator requires it there, which is why it is neither an estimate nor a number chosen for a campaign.
- It counts accounts over a window. It therefore says nothing about any one person, and it puts a corporate hedger, someone who funded an account once, and a full-time trader in the same bucket.
- It is information, not an argument. It is presented here for the same reason a mortality table appears in an actuarial course: because a decision made without the base rate is a decision made without a key input.
Why regulators reached different conclusions
Broadly, they weighed the same three findings differently: the distribution of client outcomes above, the observation that complexity and leverage were poorly understood by many retail users, and the marketing practices that accompanied the product's growth. Some regulators concluded the product should be capped and disclosed; others concluded it should not reach retail clients at all. Both conclusions came from the same evidence base, which is why the map looks the way it does.
Try it now
- Find the leverage cap that would apply to a single-equity CFD under EU/UK-style rules (5:1) and compute the close-out move at the 50% rule (answer: 10%).
- Do the same for the 30:1 major-FX cap (answer: 1.7%). Then take the chart below and count how many sessions in the year moved more than that — Measure the tall ones rather than guessing, because 1.7% on a currency pair is a very large bar.
- Read the current rules for your own jurisdiction on the regulator's own public website, not in a broker's summary. Note which entity — and which country's regulator — a firm you have heard of actually contracts with.