The ESMA leverage cap CFD rule sets a ceiling that drops from 30:1 to 2:1 depending on the underlying asset, for retail clients in Europe: 30 to 1 on major currency pairs, and only 2 to 1 on cryptocurrencies. This measure from the European Securities and Markets Authority (ESMA) has applied since August 1, 2018, as confirmed by the official ESMA announcement.
Before this restriction, a broker could offer much higher leverage on a CFD. The French Autorité des marchés financiers (AMF) states this plainly: a broker could offer leverage of up to 400, according to its educational factsheet, before detailing the multiplying effect on both gains and losses, per the AMF. The ESMA measure ended that freedom for retail clients.
Why the cap varies by asset
ESMA explicitly justifies the hierarchy of five tiers by the volatility of the underlying asset. The official text states that the limits vary “according to the volatility of the underlying”. The more an asset can move strongly and quickly, the lower the allowed leverage, in order to limit how fast an account can be fully consumed by losses.
A 2 percent move on a major currency pair is already significant, while the same move on an individual stock or a cryptocurrency can happen within minutes. The leverage cap does not eliminate this risk, it reduces its amplification.
The five tiers set by ESMA
ESMA lays out five precise categories, each with its own cap for opening a position as a retail client:
- 30 to 1 on major currency pairs;
- 20 to 1 on non major currency pairs, gold and major equity indices;
- 10 to 1 on commodities other than gold and non major equity indices;
- 5 to 1 on individual equities and other reference values;
- 2 to 1 on cryptocurrencies.
This hierarchy comes with a standardized margin close out rule: brokers must close a client’s open CFD position or positions as soon as the available margin reaches 50 percent of the minimum required margin, according to the ESMA announcement.
| Asset category | Maximum leverage |
|---|---|
| Major currency pairs | 30 to 1 |
| Non major currency pairs, gold, major equity indices | 20 to 1 |
| Commodities (excluding gold), non major equity indices | 10 to 1 |
| Individual equities and other reference values | 5 to 1 |
| Cryptocurrencies | 2 to 1 |
What the AMF confirms in France
The AMF applies this same classification to the French market and gives a concrete calculation example. It states that leverage is now limited according to the nature of the underlying, with, in its own words, “30 for CFDs on the most important Forex currencies, 5 for CFDs on equities and 2 for CFDs on cryptocurrencies”. The AMF also illustrates the mechanism: with a leverage of 20, a deposit of 100 euros allows a position of 2,000 euros to be opened, that is 20 times 100.
This data specifically concerns CFDs offered to retail clients in Europe. It says nothing about the conditions applied to professional clients, who may benefit from different limits depending on their status, nor about the rules in force outside the European Union.
What this means for a trader comparing several asset classes
A trader who switches from a CFD on a major currency pair to a CFD on an individual stock or a cryptocurrency also changes the required margin for the same exposure size. With equal capital, the maximum allowed exposure is six times lower on a cryptocurrency than on a major currency pair, since leverage drops from 30 to 1 down to 2 to 1. This is not a minor technical detail: it is the variable that determines how much real capital must be tied up to hold a given position, and therefore how fast a margin can reach the 50 percent close out threshold mentioned above.
Understanding this hierarchy is also useful for reading an order execution correctly, a topic covered in our article on the market order and limit order, or for assessing the real risk of a CFD account before a forced close out, as we detail in our article on negative balance protection on a CFD account.
Frequently asked questions
Since when has the ESMA leverage cap CFD rule applied?
It has applied since August 1, 2018, a date confirmed both by ESMA and by the AMF for the French market. Before that date, brokers could offer significantly higher leverage, up to 400 to 1 according to the AMF.
Why is leverage on cryptocurrencies the lowest?
Because ESMA sets the caps according to the volatility of the underlying asset, and cryptocurrencies are among the most volatile assets covered by the measure. The 2 to 1 cap is the most restrictive of the five tiers defined by the regulator.
Does this leverage limit apply to all clients?
No, it specifically concerns retail clients, according to ESMA’s own terms. The rules for clients classified as professional are not covered by this measure and may differ.
What happens if a CFD account’s margin drops too low?
ESMA imposes a margin close out rule per account: as soon as the available margin reaches 50 percent of the minimum required margin, the broker must close one or more of the client’s open positions. This rule applies in addition to the leverage caps.