ESMA acted under the product intervention powers in MiFIR, which allow a temporary EU wide prohibition or restriction where there is a significant investor protection concern. The measures came in two parts: a ban on the marketing, distribution and sale of binary options to retail clients, and a package of restrictions on contracts for difference. Both were temporary by design, renewable in three month blocks, and both were intended to be picked up by national regulators in permanent form. That is exactly what happened.
The five restrictions
The CFD package was not one rule. It was five, and they interact.
| Measure | What it required |
|---|---|
| Leverage caps | Initial margin limits by asset class, from 30:1 on major currency pairs down to 2:1 on cryptocurrency CFDs, with tiers in between for minor pairs, major indices, gold, other commodities and individual equities. |
| Margin close-out rule | A per account rule requiring the firm to close open positions when account equity falls to half the total initial margin required for those positions. |
| Negative balance protection | A per account cap on retail client liability, so a client cannot owe the firm more than the funds in the CFD trading account. |
| Incentive ban | A prohibition on monetary and certain non monetary benefits used to promote CFD trading to retail clients, which is what ended deposit bonuses in the EU. |
| Risk warning | A standardised warning stating the percentage of retail client accounts that lose money at that specific firm, calculated on a defined basis and displayed in communications. |
The leverage caps got the headlines. The margin close-out rule changed operations more. Before 2018 close-out levels were set per position and varied by firm and by instrument, and a client could keep a losing position open by parking margin in a way the firm tolerated. A hard 50 percent of initial margin on a per account basis is a deterministic rule that the risk engine has to enforce identically for every retail client, which meant real work for firms whose stop-out logic had grown organically. The detail sits in the leverage caps piece.
Why the firm specific risk warning mattered more than expected
The requirement to publish the percentage of that firm's retail accounts that lost money over the previous twelve months was the measure the industry argued about least in advance and felt most afterwards. It put a comparable, firm specific number in every advertisement, on every landing page and in every email footer. It also created a compliance obligation to recalculate and update it on a set cycle, which is a data exercise rather than a legal one, and firms with weak reporting discovered that quickly.
The number is not a performance statistic about trading and should not be read as one. It is a count of accounts, computed on a defined methodology, and it varies with client mix. But its presence changed marketing permanently, and the surrounding marketing restrictions in national rules built on top of it.
From temporary to permanent
ESMA renewed the measures several times and then let them lapse in 2019 as national competent authorities adopted their own permanent versions under national product intervention powers. That transition is the part people get wrong. The rules did not expire. They fragmented into national law, and the national versions are not identical.
Several regulators went further than the ESMA baseline on specific points, adding restrictions on particular instrument classes or tightening onboarding and appropriateness requirements. Others copied the package almost word for word. For a firm passporting across the EU under passporting rules, that means the product rules follow the client's country, not the licence's country, and a single pan European configuration of margin and marketing does not survive contact with the detail.
The measures apply to retail clients. A client who is correctly categorised as an elective professional is outside the leverage caps, the incentive ban and the mandated risk warning, and in most jurisdictions outside the ombudsman and compensation arrangements too. The opt-up test is a genuine test with quantitative and qualitative limbs, and regulators have treated weak opt-up processes as a serious failing rather than a paperwork slip. See professional client status.
What it did to the industry
Three structural effects are visible in hindsight. Client acquisition costs rose, because the bonus based funnel disappeared and the risk warning sat in every creative. Average deposit sizes rose, because a client wanting the same position size under 30:1 needs more capital than under 200:1. And a meaningful slice of volume moved to non EU entities within the same groups, serving clients who sought those entities out, which pushed regulators into the reverse solicitation questions that are still being argued today.
Negative balance protection is the measure that has aged best. It was already good practice at serious firms and it became a hard line, which removed the category of event where a gap left retail clients owing money after a market dislocation. The mechanics of implementing it, including how the firm bears the residual risk, are covered in negative balance protection.
The 2018 intervention is also the template. Regulators in the UK, Australia and elsewhere copied the shape of it, sometimes with different numbers, and the current debates about prop firm regulation use the same legal machinery. Any firm building product rules in 2026 should treat the ESMA package as the reference architecture for what a retail protection regime looks like, because that is how supervisors think about it.
"The 2018 rules did not kill the CFD business in Europe. They killed one version of it, the one that ran on 400:1 and a deposit bonus, and everyone still operating had already stopped relying on that anyway."
— Roman Onta, Executive Director, SINGUARD
Key Takeaways
- The 2018 package was five separate measures: leverage caps by asset class, a 50 percent margin close-out rule, negative balance protection, an incentive ban and a firm specific risk warning.
- ESMA's measures were temporary under MiFIR product intervention powers and were replaced by national rules, which are similar but not identical across member states.
- Product rules follow the client's country under passporting, so a single EU wide margin and marketing configuration will not comply everywhere.
- The restrictions apply to retail clients only, which makes the professional client opt-up test a genuine compliance control rather than a form.
Frequently Asked Questions
Are the ESMA CFD measures still in force?
The ESMA measures themselves lapsed in 2019, but national regulators across the EU adopted permanent versions under their own product intervention powers. The restrictions remain in effect through national rules that broadly mirror the original package.
What leverage can an EU retail client use on major currency pairs?
The baseline set in 2018 and carried into national rules caps initial margin at 30:1 for major currency pairs, with lower caps for indices, gold, other commodities, equities and cryptocurrency CFDs.
Did the intervention ban CFD trading in the EU?
No. It restricted how CFDs are sold and margined to retail clients. Binary options were prohibited for retail clients, but CFDs remained available under the leverage, close-out, incentive and disclosure conditions.
About the Author
Roman Onta is an Executive Director at SINGUARD. He builds the Prop Firm CRM, the Broker CRM, Scalegram and CopySignals side by side with his brother Alex Onta, and he helped on the design of eTrader, the division Alex built and leads. His ground is worldwide payment processing, AML compliance and the corporate structures brokers are built on, work the two of them carry together, shaped by executive roles in the UAE and international corporates. He lives and works in Dubai for most of the year. Meet the executive duo leading Singuard's five divisions.