On 31 July 2018 a retail client of an EU broker could open EURUSD at 500:1. The next morning the same client, same broker, same pair, was capped at 30:1. The European Securities and Markets Authority had used product intervention powers it had held since MiFIR came into force, and used them on an entire industry at once. Nearly eight years later the caps are still here, and the retail CFD market on three continents has been reshaped around them.
What the intervention actually said
The 2018 measures were a package, and the leverage caps were only the loudest part. Leverage on CFDs for retail clients was tiered by the volatility of the underlying: 30:1 for major currency pairs, 20:1 for non-major pairs, gold and major indices, 10:1 for commodities other than gold and for non-major indices, 5:1 for individual shares, and 2:1 for crypto. Alongside the caps came a margin close-out rule at 50% of required margin per account, negative balance protection so a retail client cannot lose more than the account holds, a ban on deposit bonuses and similar incentives, and a standardised risk warning that forces each firm to publish the percentage of its retail accounts that lose money. Binary options were banned for retail outright.
Why ESMA acted
National regulators had spent years collecting the same statistics: at firm after firm, a large majority of retail CFD accounts lost money, and complaints about high leverage, bonuses and aggressive sales sat behind a growing share of retail detriment cases. Several countries had already moved alone, France with advertising restrictions, Belgium with a ban, and the result was a patchwork that pushed firms towards the loosest member state. A single EU-wide intervention closed that arbitrage in one step. The legal instrument was temporary, renewable in three-month cycles, but during 2019 the national regulators wrote the same measures into their own rulebooks, and the temporary became the baseline. The UK kept the framework after Brexit.
What changed for traders
The mechanical effect is margin. At 500:1, one standard lot of EURUSD needed a couple of hundred dollars of margin; at 30:1 it needs several thousand. Small accounts could no longer trade big sizes, which was precisely the point. Two escape routes appeared immediately. The first is elective professional status, which removes the caps for clients who pass two of three tests on trading frequency, portfolio size and professional experience, at the price of losing retail protections. The second is the one nobody advertises: accounts at offshore entities of the same broker groups, where 500:1 lives on, examined honestly in our pieces on offshore broker licenses and regulated versus unregulated brokers. High leverage did not disappear from the world. It moved jurisdiction.
The margin close-out rule is per account, at 50% of required margin. It reduces the depth of disasters; it does not prevent them. A gap through the close-out level still lands where it lands, which is what negative balance protection exists to absorb.
What changed for brokers
Lower leverage means lower volumes per client, and the industry's response was structural. EU-facing entities became compliance-heavy storefronts for a professional and international business, marketing shifted from bonuses, now banned, towards education and spread competition, and the loss-percentage disclosure quietly became one of the most honest numbers in financial advertising. Firms also learned that the rules travel: Australia's ASIC adopted near-identical caps in 2021, and the pattern is now the template regulators reach for first, as our survey of leverage limits by country shows. Marketing rules tightened in parallel, covered in CFD marketing restrictions.
The scoreboard, years on
Judged by its own goals, the intervention worked: forced deleveraging made retail losses slower and shallower per account, and the bonus-driven acquisition machine died in Europe. Judged by the whole market, the picture is messier, because a meaningful slice of European volume now trades under offshore flags with none of these protections. Both things are true at once, and any debate about leverage caps that admits only one of them is marketing for somebody.
"The caps did what they were designed to do. Clients lose slower at 30:1. The part nobody says out loud is that plenty of traders just moved offshore to get 500:1 back."
— Roman Onta, Executive Director, SINGUARD
Key Takeaways
- Since August 2018, EU retail leverage is tiered: 30:1 majors down to 2:1 crypto, with a 50% close-out rule.
- Negative balance protection and the loss-percentage risk warning came in the same package, with a bonus ban.
- National regulators made the temporary measures permanent in 2019; the UK and Australia followed the template.
- High leverage moved offshore rather than vanishing; the trade-off there is losing every protection in the package.
Frequently Asked Questions
What leverage is allowed in the EU for retail traders?
The caps set in 2018 still apply: 30:1 on major currency pairs, 20:1 on non-major pairs, gold and major indices, 10:1 on other commodities and non-major indices, 5:1 on individual equities and 2:1 on crypto CFDs. The UK carried the same framework over after Brexit.
Can I get higher leverage as a professional client?
Elective professional status removes the caps, but you must meet two of three tests on trading frequency, portfolio size and professional experience. Reclassification also strips retail protections such as negative balance protection at many firms, which is why regulators watch how it is offered.
Did the ESMA measures expire?
ESMA's own powers were temporary and renewed in three-month cycles, but during 2019 national regulators across the EU wrote the same measures into their own rulebooks permanently. The temporary intervention became the permanent baseline.