Required margin on a CFD is the percentage of the total position value that a trader must deposit to open it, and this percentage depends directly on the category of the underlying asset. According to FCA instrument 2019/78 published by the UK regulator, this rate ranges from 3.33% for major currency pairs to 50% for cryptocurrencies.
Why the margin percentage varies by asset
The margin percentage is not an arbitrary figure set by each broker: it follows from a maximum leverage ratio defined by asset category. In 2018, ESMA justified this hierarchy by the volatility it considered specific to each underlying asset, as stated in its official announcement: “30:1 for major currency pairs; 20:1 for non-major currency pairs, gold and major indices; 10:1 for commodities other than gold and non-major equity indices; 5:1 for individual equities and other reference values; 2:1 for cryptocurrencies” (ESMA, 2018 announcement). The higher the maximum leverage allowed, the lower the required margin percentage, and vice versa.
The breakdown by asset category according to the FCA
The FCA translated this principle into precise initial margin percentages in its 2019 instrument. For a major currency pair or relevant government debt, the text specifies that the broker must require “3.33% of the value of the exposure that the trade provides” (FCA 2019/78, COBS 22.5.11R), which corresponds to a maximum leverage of 30 to 1. For a major equity index, a minor currency pair or gold, the required margin rises to 5%, meaning leverage of 20 to 1. For a minor equity index or a commodity other than gold, it reaches 10%. For an equity or an asset not otherwise listed, it climbs to 20%. Finally, for a cryptocurrency, the category the regulator considers riskiest, the required margin rises to 50% of the exposure value, capping leverage at 2 to 1.
| Asset category | Required initial margin | Corresponding maximum leverage |
|---|---|---|
| Major currency pair or relevant government debt | 3.33% | 30 to 1 |
| Major equity index, minor currency pair, gold | 5% | 20 to 1 |
| Minor equity index, commodity other than gold | 10% | 10 to 1 |
| Equity or asset not otherwise listed | 20% | 5 to 1 |
| Cryptocurrency | 50% | 2 to 1 |
How to calculate the notional exposure of the position
The margin percentage applies to the value of the exposure that the position provides, not to the cash amount invested. The FCA illustrates this calculation with a worked example in its text: “A firm offers a restricted speculative investment when the underlying asset is a 5 x leveraged index on gold. The value of the index is £800. The value of the exposure that the trade provides is therefore £800 x 5, or £4000” (FCA 2019/78). If this same gold index fell under the “major index or gold” category subject to a 5% margin, the deposit required to open the position would be £200, or 5% of £4000, not 5% of £800.
What required margin on opening does not cover
The required margin described here concerns only the opening of the position: it sets the minimum deposit needed to enter the market, based on the asset category involved. It should not be confused with the threshold for automatic position closure when available margin deteriorates during the life of the trade, nor with how stop orders or a stop-loss trigger order work to protect a position once it is open.
Frequently asked questions
Is required margin the same at every broker?
No, the percentages cited by the FCA are regulatory minimums for retail clients in Europe and the UK. A broker may require a higher margin than this floor, but not below it, according to instrument 2019/78.
Why do cryptocurrencies require such high margin?
ESMA justifies this 50% rate by the volatility it considers the highest among the covered asset categories, which limits the maximum allowed leverage to 2 to 1 against 30 to 1 for major currencies.
Is margin calculated on the amount invested or on total exposure?
It is calculated on the value of the exposure that the position provides, meaning the value of the underlying asset multiplied by the leverage applied, as shown in the FCA’s worked example on a gold index.
Does this initial margin protect against a negative balance?
No, it only sets the deposit needed to open the position. The question of a negative balance is covered by a separate rule, detailed in the article on negative balance protection on CFDs.