Ask what leverage you can use, whether you can hedge, or whether a broker will even accept you, and there is no single answer. There are four broadly different regimes, and the one that applies to you is decided by where you live, not by where the broker is based.
That is the point most people get backwards. A broker holding seven licences does not get to pick which one covers you. Your residence determines which of its entities may onboard you, and that entity's regulator sets your terms.
The Four Regimes at a Glance
| EEA | United Kingdom | Australia | United States | |
|---|---|---|---|---|
| Max retail leverage, major FX | 30:1 | 30:1 | 30:1 | Margin floor, not a ratio |
| Negative balance protection | Yes | Yes | Yes | Not equivalent |
| Hedging same pair | Allowed | Allowed | Allowed | Prohibited |
| CFDs for retail | Yes | Yes | Yes | No |
| Deposit bonuses | Banned | Banned | Banned | Restricted |
| Set by | ESMA, then national regulators | FCA | ASIC | CFTC and NFA |
Offshore jurisdictions are the fifth category, and they are defined by the absence of all of the above.
The EEA: ESMA's Caps, Enforced Nationally
The European Securities and Markets Authority used its product-intervention powers in 2018 to cap retail CFD leverage and ban binary options for retail investors. The caps run from 30:1 on major currency pairs down to 2:1 on cryptocurrencies, with negative balance protection, a standardised margin close-out rule and a ban on trading incentives attached.
The nuance that trips people up: ESMA does not enforce these rules and has not since 2019. Its powers only allowed temporary measures renewable in three-month blocks, and it stopped renewing once national regulators adopted their own permanent versions. The rules are real and permanent; the body enforcing them is your national regulator, not ESMA. We set the detail out in the ESMA rules explained.
The United Kingdom: The Same Caps, a Different Regulator
The FCA implemented equivalent restrictions and kept them after the UK left the EU. For a retail forex trader the practical terms are the same as the EEA: 30:1 on majors, negative balance protection, margin close-out, no bonuses.
Where the UK differs is in supervision and redress rather than in the caps, including access to the Financial Ombudsman Service and, for eligible claims, the Financial Services Compensation Scheme. What FCA authorisation does and does not cover is in what is FCA regulation.
Australia: ASIC's Product Intervention Order
ASIC imposed its own order after reviews found most retail clients lose money on CFDs. In ASIC's own wording it applies "leverage ratio limits ranging from 30:1 to 2:1", together with negative balance protection, "standardisation of margin close-out rules" and "prohibitions on offering or giving of certain inducements".
The order took effect in 2021 and ASIC has extended it "for a further five years to 23 May 2027". In substance an Australian retail trader gets close to the same deal as a European one — which is worth knowing, because ASIC-regulated brokers are often marketed as the looser alternative to European ones. For retail clients they are not.
The United States: A Different Mechanism Entirely
The US is not a stricter version of the European rules. It is a different system, and three things about it surprise people.
First, registration. The CFTC requires "the registration of counterparties offering retail foreign currency contracts as either futures commission merchants (FCMs) or retail foreign exchange dealers (RFEDs)". A foreign licence, however impressive, does not permit a broker to take US retail clients. This is why most comparison tables are inapplicable to an American reader.
Second, leverage is a margin floor rather than a ratio. The CFTC's originally proposed 10-to-1 restriction was dropped and replaced with a mechanism in which the Commission sets parameters — "a minimum 2 percent security deposit in the case of major currencies and 5 percent of the notional value of the transaction for all other currencies" — with the NFA setting specific levels within them and required to review them periodically, including which currencies count as major. Two percent works out to a maximum of about 50:1, which is why you see that number quoted, but it is an effect of the rule rather than the rule itself, and it can change.
Third, you cannot hedge. NFA Compliance Rule 2-43(b) states that Forex Dealer Members "may not carry offsetting positions in a customer account but must offset them on a first-in, first-out basis". Holding a long and a short in the same pair is simply not possible, and partial closes take the oldest entry first. Expert Advisors built around opposing positions do not work. The full picture is in MetaTrader brokers for US traders.
So an American trader gets more leverage on majors than a European one, and fewer structural protections and far fewer brokers.
Offshore: What the Extra Leverage Actually Costs
The fifth category is everything else — Vanuatu, the Cayman Islands, Saint Vincent, Belize and similar. Leverage of 500:1 and beyond is normal there, there are no mandated caps, usually no negative balance protection, no bonus ban and no equivalent of the ombudsman schemes.
This is where the regimes above stop being abstract. A broker showing you an FCA badge may still onboard an EEA resident to a Vanuatu entity, because it holds no EU licence. Two brokers on our own file work exactly this way: Vantage and EBC hold no EU or CySEC licence, so an EEA client is onboarded offshore, outside ESMA and MiFID protections. EBC's FCA registration covers professional clients only, never retail.
None of this makes them unusable — for a reader outside the EEA and UK an offshore entity may be exactly right. It makes reading the entity name essential. What the extra zeros cost is set out in 1000:1 leverage.
How to Find Out Which Regime Applies to You
- Start from your own residence, not the broker's homepage. The entity that may accept you follows from where you live.
- Read the entity name on the account agreement, then look the licence number up on that regulator's own public register. A badge is a picture; a register entry is a fact.
- Check what happens on the sign-up form, since geo-routing to an offshore entity often happens silently at that step.
- If you are in the US, search NFA BASIC first. No FCM or RFED registration means the firm cannot lawfully take you.
The two-minute version of that check is in how to check if a forex broker is regulated. If you are in Norway specifically, is forex trading legal in Norway covers Finanstilsynet.
Sources: the ASIC wording and the 23 May 2027 extension are from ASIC's own media release on extending the CFD product intervention order; the US registration requirement is from the CFTC's "Foreign Currency Trading" page; the security deposit mechanism and the dropped 10-to-1 proposal are from the CFTC's final-rule fact sheet; the offsetting-positions rule is quoted verbatim from NFA Compliance Rule 2-43(b). Broker entity footprints are from this site's own dataset.
