Regulation & safety

Margin close-out rule

Also calledMCO · margin close-out protection

A margin close-out rule requires a provider to close one or more leveraged positions when account funds fall to a specified margin threshold. For retail CFDs under UK rules, the threshold is 50% of the margin required to maintain the client’s open positions, measured at account level.

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Record updated
August 18, 2026

Margin close-out rule — definition, practical meaning, example, and common interpretation risk checked against the linked reference material

Definition checked

  • Definition and plain-English explanation for “Margin close-out rule”
  • The worked example and the distinction described in the watch-out note
  • Reference material: Financial Conduct Authority — Contract for differences, European Securities and Markets Authority — Margin close-out rule Q&A

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  • Check the broker’s contract specification when applying the term to a particular product
  • Treat examples as explanations of mechanics, not as prices, forecasts, or trading advice

Method. Editorial desk review of the definition, example, related concepts, and 2 linked sources. Calculations are checked directly where the entry contains arithmetic

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  • This glossary entry explains terminology and does not test a broker, trading account, platform, or live market condition
  • Contract wording and practical treatment can differ across brokers, venues, jurisdictions, and products
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  1. Added named authorship, a definition evidence record, application checks, and a concise scope disclosure

What Margin close-out rule means

A margin close-out rule is intended to limit further losses when an account’s equity has fallen sharply relative to required margin. It is different from a margin call: a margin call asks for more funds or action, while close-out means the provider begins closing positions. The rule’s trigger, calculation, and scope vary by jurisdiction, product, and client classification.

Close-out can occur without the market reaching a trader’s preferred exit price, and a provider may close only some positions first. Fast markets, gaps, execution delays, and price changes can affect the result. The rule reduces exposure in specified circumstances but does not guarantee a favorable closing price or eliminate market, execution, or counterparty risk.

Simplified example: a retail CFD account has open positions requiring $2,000 of margin. If the applicable account-level close-out threshold is 50%, the trigger is $1,000. When the account’s relevant funds fall below $1,000, the provider must begin closing one or more positions under the applicable rule and its execution procedures.

Common questions

Is a margin close-out rule the same as negative balance protection?+

No. Margin close-out requires positions to be closed at a threshold. Negative balance protection limits a retail client’s liability to the funds in the CFD account under applicable rules. They are separate protections.

Will every position close at once when the threshold is reached?+

Not necessarily. The applicable rule may require closing one or more positions, while the provider’s terms and execution procedures determine operational details. Account-level calculations can also mean one position is affected by losses on another.

Go to the original material.

01Financial Conduct Authority — Contract for differences02European Securities and Markets Authority — Margin close-out rule Q&A