- NBP: the account doesn't go below zero. It protects against a debt to the broker, but not against losing the deposit.
- The compensation scheme: payouts if the broker collapses. It doesn't cover trading losses.
- In the EU, NBP is mandatory. At offshore entities it's a voluntary condition of the specific broker.
- In the shortlist's offshore jurisdictions there are no compensation funds.
Negative balance protection
A strong gap can jump over the stop-out level, and the position closes with a negative account balance: formally that's the client's debt to the broker. NBP means the broker zeroes out that negative balance at its own expense. In the EU, negative balance protection has been mandatory for retail accounts since the ESMA measures of 2018; at offshore companies it's a voluntary condition each broker decides for itself. At some brokers in the shortlist NBP is on by default: this is visible on the cards. What NBP doesn't do: it doesn't save the deposit within the account, and trading losses stay yours.
The compensation scheme
This is protection against a different disaster: the broker has gone bankrupt or hasn't returned client money. In strict jurisdictions state funds operate: up to £85,000 per client in the UK (FSCS), up to €20,000 in Cyprus (ICF), up to AUD 150,000 in Australia (CSLR). In the offshore jurisdictions under which clients from Mexico are served there are no such funds: on a broker's bankruptcy there's no guaranteed reimbursement, and protection rests only on the requirement to keep client money separate from the company's money. Details for each jurisdiction: the Regulators page.
The private analogue for members of The Financial Commission: the commission's fund, up to €20,000 per complaint, and only in the situation where a member broker has refused to comply with a dispute ruling.
Who protects against what
| Situation | What covers it |
|---|---|
| Trading loss on your own trades | Nothing. That's market risk |
| A negative account balance after a gap | NBP, if the broker has it |
| A FinaCom member broker doesn't comply with a dispute ruling | The FinaCom fund, up to €20,000 per complaint |
| Broker bankruptcy | The compensation scheme, if one exists in the licence's jurisdiction |
- ESMA: measures on CFDs (2018): mandatory NBP for retail accounts in the EU.
- The Financial Commission: Compensation Fund.
- The site's Regulators page: compensation schemes and limits for each jurisdiction.