Negative balance protection means a retail client cannot lose more than the funds in their trading account. If a sudden price move pushes the account below zero, the broker must reset it to zero and absorb the difference.
Where is it a legal requirement?
Negative balance protection is required for retail CFD clients in the United Kingdom, the European Economic Area and Australia. It applies per account, and it does not apply to clients who have chosen to be classified as professional.
What about offshore entities?
At offshore entities negative balance protection is a commercial policy, not a legal right. Many brokers offer it, but the terms are theirs to write and to change, and some exclude specific situations such as price gaps or suspected abuse.
When does it matter?
It matters in gaps: weekend openings, surprise central bank decisions and flash crashes, when prices jump past stop-loss levels. With high leverage, a gap of one or two percent can exceed the entire account balance.
How do I check?
Read the client agreement of the entity you are signing with and search for “negative balance”. Our broker reviews show the status per entity where we have it on file.