Retail foreign exchange trading

In the United States, the Commodity Futures Trading Commission (CFTC) limited leverage available to retail forex traders to 50:1 on major currency pairs and 20:1 for all others.[3] Major currencies include the Australian dollar, the British pound, the Canadian dollar, the Danish Krone, the euro, the Japanese yen, the New Zealand dollar, the Norwegian Krone, the Swedish Krona, the Swiss franc and the US dollar. The National Futures Association (NFA) is authorized to periodically review the list of major currencies, in light of changes in volatility.[4]

The initial version of the CFTC's 2010 regulations proposed lowering leverage limits to 10:1.[5] But the CFTC adopted the higher 50:1 and 20:1 leverage limits described following criticism from Forex market participants. No such restrictions existed prior to 2010, when these rules came into effect.

In Europe, the European Securities and Markets Authority (ESMA) caped the amount of leverage that brokers and CFD providers could offer retail investors. These limits, which came into effect in 2018, vary between 30:1 and just 2:1, depending on the asset class.[6] More volatile asset classes, like crypto-currencies, tend to attract lower limits.

ESMA’s limits on leverage are as follows:

• 30:1 for major currency pairs;
• 20:1 for non-major currency pairs, gold and major equity 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 crypto-currencies.

ESMA's major currency pairs comprise any two of the following currencies: the US dollar, the euro, the Japanese yen, the pound sterling, the Canadian dollar or the Swiss franc.[7] All other currencies are deemed non-major.

ESMA's major indices are any of the following equity indices: FTSE 100, CAC 40, DAX30, DJIA, S&P 500, NASDAQ, NASDAQ 100, Nikkei 225, ASX 200, EURO STOXX 50.[8] All other indices are deemed non-major.

The UK's Financial Conduct Authority (FCA) followed ESMA's restrictions on leverage in 2019.[9] This means that ESMA's measures outlined above became part of UK domestic law when the UK left the EU. These measures remain in place to this day.

In Japan, the Financial Services Agency (FSA) restricted leverage available to retail traders across foreign exchange transactions as early as 2010. Maximum leverage was capped at 50:1 in August 2010, and was subsequently reduced to 25:1 in August 2011.[10]. In early 2000s, housewives of Japan collectively called Mrs Watanabe, started in currency trading to improve their financial situation.

In Australia, the Australian Securities & Investments Commission (ASIC) introduced a product intervention order in March 2021 that included leverage limits that brokers and CFD providers could offer retail investors. This included limiting currency leverage to a maximum of 30:1.[11]