Margin close-out on a CFD account, also called stop-out, is the regulatory mechanism that forces a broker to automatically close a client’s open positions once available funds fall below 50% of the total initial margin required. This threshold was set by ESMA in 2018 as part of its CFD intervention measures, then made permanent in the United Kingdom by the FCA in its decision PS19/18.
Before reaching that point, a trader usually receives a warning from the broker: the margin call. This signal carries no harmonized regulatory value comparable to the stop-out; it depends on each broker’s contractual practices. The stop-out, by contrast, is a floor set by European and British texts, and it applies automatically, with no human intervention.
What the ESMA text actually says
ESMA’s document specifies that the margin close-out rule applies on a per account basis, not position by position. The trigger occurs when the sum of funds in the CFD account and the unrealized net profits of all open positions linked to that account falls below half of the total initial margin protection required for those open positions:
“A margin close-out rule will be imposed on a per account basis (rather than a per position basis)… when the sum of funds in the CFD trading account and the unrealised net profits of all open CFDs connected to that account falls to less than half of the total initial margin protection for all those open CFDs.” (ESMA35-43-1000)
This wording has a direct consequence: it is not the loss on a single position that counts, but the account’s overall balance measured against the sum of initial margins committed across all positions open at the same time.
The British confirmation from the FCA
In the United Kingdom, the FCA adopted this same 50% threshold in its final decision PS19/18 restricting the sale of CFDs to retail clients, and made it permanent after the end of ESMA’s temporary measures:
“Close out a customer’s position when their funds fall to 50% of the margin needed to maintain their open positions on their CFD account.” (FCA, PS19/18)
Both texts agree on the figure and on the scope: 50% of the required initial margin, calculated across the entire CFD account.
What these texts do not specify
Neither ESMA nor the FCA specify the exact order in which a broker must close positions once the threshold is breached and several positions are open at the same time. Is the most unprofitable position closed first, the largest one, or the most recently opened one? This operational choice depends on each broker’s own contractual terms. ESMA’s document is not silent, however, on how this close-out must be conducted: it specifies that a CFD provider must close out one or more of a retail client’s open positions “on terms most favourable to the client in accordance with Articles 24 and 27 of MiFID II” (ESMA35-43-1000), meaning on the terms most favorable to the client, in accordance with Articles 24 and 27 of the MiFID II directive. This conduct standard, however, does not impose a precise closing order among several simultaneous positions: a trader who wants to know how their account will be handled at the moment of stop-out must therefore consult their broker’s terms and conditions in addition to the European or British text.
Why margin level is monitored before it gets there
The stop-out is not a comfortable safety net: it closes positions at the market price available at the moment of the trigger, with no guarantee that this price will be favorable. This is why managing the CFD and Forex spread and choosing the right order type, whether a stop-limit order or a dynamic trailing stop, matter as much as available margin itself. These mechanisms act upstream of the stop-out, not as a replacement for it.
Negative balance protection, another ESMA measure, steps in after the stop-out: it guarantees that the account balance does not fall below zero, but it does not replace margin close-out itself, which acts earlier in the sequence.
Frequently asked questions
Does the stop-out close all positions at once?
Not necessarily. ESMA’s rule sets the trigger threshold at the level of the entire account, but does not specify whether a single position is closed or all of them simultaneously. This depends on the broker’s system.
What is the difference between a margin call and a stop-out?
A margin call is a warning sent by the broker before the situation becomes critical, with no harmonized regulatory threshold. The stop-out is the automatic close-out imposed by the 50% rule from ESMA and the FCA, with no action required from the trader.
Is the 50% threshold the same across all European brokers?
ESMA set this floor for CFDs sold to retail clients in the European Union, and the FCA made it permanent in the United Kingdom. A broker may apply a threshold more protective of the client, but never one less protective than this regulatory floor.
Does the stop-out guarantee a precise closing price?
No. The ESMA and FCA texts set the trigger threshold, not the execution price. The close-out happens at the market price available at the moment of the trigger, which connects to the already documented limits of market orders.