Offers two ways to trade: Forex, CFDs
The Ultimate Guide to
Choosing a Broker
For Negative Balance Protection
Not sure which broker is right for you?
Don’t worry - we’ve got you covered. In this guide, you’ll learn:
- Why ATFX Global Markets scored high for negative balance protection (Jump to section)
- Who ATFX Global Markets is (and isn’t) suitable for (Jump to section)
- An in-depth feature comparison of the top #3 brokers (Jump to section)
- An overview on negative balance protection (Jump to section)
What is the Best Trading Platform
for Negative Balance Protection?
ATFX Global Markets scored best in our review of the top brokers for negative balance protection, which takes into account 120+ factors across eight categories. Here's the full list of all the brokers we considered.
The following brokers allow negative balance protection on their platform:
- ATFX Global Markets
Here are some areas where ATFX Global Markets scored highly in:
- 4+ years in business
- Offers 57+ instruments
- A range of platform inc. MT4, Mac, Web Trader, Tablet & Mobile apps
- 24/7 customer service
- Tight spreads from 0.5 pips
- Used by + traders
- Allows hedging
- 2 languages
- Leverage up to
ATFX Global Markets offers two ways to trade: Forex, CFDs. If you wanted to trade EURUSD through copy trading or other means, skip to part two.
The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.
ATFX Global Markets have a B trust score, which is low. This is largely down to them being regulated by CySEC, segregating client funds, being established for over 4 years, and much more. For comparison:
Trust Score comparsion
|ATFX Global Markets|
|Uses tier 1 banks|
|Segregates client funds|
The second thing we look for is the competitiveness of the spreads, and what fees they charge. We've compared these in detail in part three of this guide.
Who ATFX Global Markets is (& Isn’t)
As mentioned, ATFX Global Markets allows you to trade in two ways: Forex, CFDs.
- CFD Trading
- Forex Trading
To trade with ATFX Global Markets, you'll need a minimum deposit of $100. ATFX Global Markets offers a range of different account types for different traders including a micro account, mini account, and vip account.
ATFX Global Markets offer over 57 instruments to trade including forex pairs, indices, and many other asset classes. In the following section we’ve listed ATFX Global Markets’s spreads for a range of popular instruments. You can also see a more detailed breakdown of how ATFX Global Markets’s spreads compare in this ATFX Global Markets review
Finally, ATFX Global Markets isn't available in the following countries: DPRK, Canada, Iran, Japan, Brazil, Mexico, Turkey, Cuba, Sudan, Syria, USA, Bosnia and Herzegovina, Ethiopia, Iraq, Sri Lanka, Trinidad and Tobago, Tunisia, Vanuatu, Yemen.. They do not offer islamic accounts either.
A Comparison of ATFX Global Markets vs. vs.
Want to see how ATFX Global Markets stacks up against and ? We've compared their spreads, features, and key information below.
Spread & fee comparsionThe spreads below are illustrative. For more accurate pricing information, click on the names of the brokers at the top of the table to open their websites in a new tab.
|ATFX Global Markets|
|FTSE 100 Spread|
Comparison of account & trading features
|ATFX Global Markets|
|Accounts offered||Micro account, mini account, standard account, VIP account|
|Platforms||MT4, Mac, Web Trader, Tablet & Mobile apps|
|Risk management features||Limit order, take profit, entry order, one click trading, trailing stops, price alerts, limited risk account and negative balance protection|
|Funding methods||Credit cards, Bank transfer, American Express, MasterCard,|
Although they may appear significant on a chart, fluctuations on a particular financial instrument can be quite minor in real terms. Take for example the GBP/USD foreign currency pair, which upon the news of the Bank of England raising interest rates in the UK on the 2nd November 2017, and that limited and gradual policy action would follow, sterling fell around 0.9% or around 120 pips. This was a relatively large price movement for the currency in such as short time span, but the reality is that the average holidaymaker would not really notice the difference between an exchange rate of 1.313 and 1.325 dollars to the pound.
However, to professional Forex traders, with significant sums of money speculating on the market movements of the currency pair, even normal, day to day fluctuations of 1 pip or less can have a huge impact.
Average retail traders do not tend to place such large sums on trades, however many financial brokers do allow clients to trade on margin, using leverage. This enables them to amplify their exposure to the small fluctuations, with a deposit that just covers a fraction of the value of the underlying asset. Leverage can typically be as high as 1:300, which means that for every pound or dollar placed on the trade, the client can be exposed to 300 times as much of the asset.
In the case of the UK interest rate rise news release, a trader opening a GBP/USD trade, with a £1000 initial margin, at a rate of 1.325, would be exposed to around £397,500 worth of sterling. When the market dropped 0.9%, this would have dropped by over £3500 – £2500 more than the deposit originally placed on the trade.
Fluctuations can be much more extreme than this, however. The Swiss franc shock in 2015 gave rise to incidents where private traders lost ruinous amounts of money as a result of leverage on CFDs and currency trades. One such trader had a leverage of 1:400 with a margin of EUR 2,800 on a trade. Because the exchange rate jumped away from the previous price range so quickly following sudden news that the Swiss National Bank was decoupling the Swiss franc from the euro, traders did not have sufficient opportunity to close their positions. This particular trade resulted in a loss of around EUR 280,000. Without the leverage, this would have been closer to £700.
What is Negative Balance Protection?
Such instances inevitably caught the attention of the financial regulators around the world, who subsequently have proposed and/or applied new regulations around leverage and CFDs (contracts for difference) in general. This is to ensure the protection of inexperienced traders who do not fully understand the risks involved when trading on margin.
One of the actions taken by regulators such as BaFin (the German Federal Financial Supervisory Authority) and CySEC (the Cyprus Securities and Exchange Commission) was to abolish the additional payments obligation associated with CFDs and such products. This transfers the negative balance risk from the trader to the CFD provider or Forex broker.
As a risk mitigation tool, the broker may place a margin call, which requires the trader to correct a negative balance by increasing the margin on the trade or by closing the trade themselves within a specified time period. If neither action is taken by the trader, then the broker will close the trade at the price specified on the platform at the end of the grace period. This provides the trader with negative balance protection, as they either have opportunity to extend their trade by adding additional maintenance margin, or the trade will be closed before allowing a negative balance situation to arise.
In the case of a price gap, or abrupt price jump, there will not usually be the opportunity for a margin call. However, if a broker offers true negative balance protection, then they will assume responsibility for the losses, rather than the trader.
Pros & Cons of Negative Balance Protection
The clear advantage of choosing a broker that offers negative balance protection is that a trader will never be liable for losses greater than the balance of their trading account. The broker assumes responsibility for this risk, and will apply a margin call where possible to protect themselves against it.
The reason this can be disadvantageous is that it may result in a trade being closed out by the broker just prior to the markets moving back in favour of the trader. This means that the trader will suffer the losses of the trade, where they could have regained a favourable position by holding on to the trade for longer. However, the margin call should give them the opportunity to make this decision.
Another disadvantage cited by brokers is that this can lead to increased brokerage costs, as they recoup the losses incurred as a result of providing negative balance protection, through their fees.
Some brokers also argue that disposing of the additional payments obligation for traders can lead to more risky trading behaviour, as the trader is not responsible for bearing the full extent of the losses.
CySEC Policy on Negative Balance Protection
Following the publication of a Questions and Answers document from ESMA (European Securities and Markets Authority) in October 2016, regarding the provision of CFDs and such products to retail traders, CySEC released a circular (Circular 168) to provide further guidance to Cyprus Investment Firms (CIFs).
One point that CySEC drew particular attention to was the use of leverage. The circular instructed CIFs to ensure that the default leverage offered on the platform was not above 1:50; that an appropriateness test should determine whether higher leverage should be offered to clients; and that a thorough leverage policy should be put in place.
In addition, firms were required to put negative balance protection in place, ensuring that clients’ losses would never exceed their available funds.
More recently, CySEC have felt the need to reiterate and clarify the requirement. In their announcement on 18th September 2017, they explicate that their maximum loss requirement applies to a client’s particular account, rather than being restricted to a trade. This means that the broker can use a client’s other positions within the same account to offset a negative balance from a leveraged trade.
BaFin Policy on Negative Balance Protection
BaFin consulted at length on the issue of CFDs, eventually issuing their final General Administrative Act on the subject in May 2017.
During the consultation process, there was moderate resistance to the proposed measure of prohibiting the marketing and sale of CFDs with an additional payments obligation to retail traders. However, BaFin disputed the objections and used their product intervention powers to apply the restriction.
The regulator argued that as potential losses were incalculable for clients, inexperienced traders should be sufficiently protected against such losses. They also deemed risk mitigation features such as margin calls and stop loss orders to be insufficient to protect consumers, citing price gapping as a reason. Even guaranteed stop loss features did not offer traders the protection they required according to BaFin, as although they protect against price spikes, they are not compulsory and are therefore not applied by many inexperienced traders.
The rules came into effect for German regulated firms in August 2017, although many were in practice already offering negative balance protection to clients.
FCA Policy on Negative Balance Protection
The FCA’s proposals around CFD products did not include this restriction, however they were much more strict with regards to leverage, capping this at 1:25 for traders with little experience, and 1:50 for more experienced traders.
Brokers That Offer Negative Balance Protection
Many online regulated brokers offer some degree of negative balance protection, although some are more stringent about the requirements than others.
As a BaFin regulated broker, XTB offer true negative balance protection by ensuring that client losses are limited to the available funds in their accounts. This means that clients are not permitted to enter a situation where they owe the broker money. This protection is also offered in the other jurisdictions, such as the UK.
Plus500 offer negative balance protection, however concede that a temporary negative balance situation may occur in the interval following a margin call and prior to any action being taken, either by the client or by the broker.
IG also offer a degree of negative balance protection through their margin call feature. However, although this allows IG to take action to prevent a negative balance occurring by closing a trade, they make it clear that they cannot guarantee against a negative balance occurring and traders should use the guaranteed stop loss feature if they want to be certain that their losses will not exceed the funds in their account.
Jump to top