%Risk & accounts

Negative balance protection

Also calledNBP

Negative balance protection is a policy or regulatory requirement that limits a client’s liability for trading losses to a defined amount, commonly the funds allocated to a specified retail CFD trading account, so the account does not create a debit balance.

Evidence passport

What this page checked.

Sources
2
Record updated
August 18, 2026

Negative balance protection — definition, practical meaning, example, and common interpretation risk checked against the linked reference material

Definition checked

  • Definition and plain-English explanation for “Negative balance protection”
  • The worked example and the distinction described in the watch-out note
  • Reference material: FCA Handbook — COBS 22.5, negative balance protection, FCA — Contract for differences

Use the term correctly

  • Read the connected terms when a definition depends on another market concept
  • 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

Research scope and limits +
  • 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
Page change log +
  1. Added named authorship, a definition evidence record, application checks, and a concise scope disclosure

What Negative balance protection means

This protection matters most in leveraged trading, where a sharp price move or market gap can make losses exceed deposited margin before positions can be closed. Its scope is not universal. It can depend on the product, account type, client classification, legal entity, and jurisdiction. A firm may provide it contractually, be required to provide it under local rules, or not offer it at all.

Negative balance protection can cap what a covered client owes after losses, but it does not prevent losing the full amount in the protected account. It also does not prevent stop-loss slippage, forced close-outs, wide spreads, or losses in accounts and products outside its scope. The account agreement remains essential.

A retail client has $1,000 in a covered CFD account. A sudden market gap causes positions to lose $1,250 before they can be closed. If the applicable negative balance protection limits liability to funds in that account, the client’s loss is capped at $1,000 rather than leaving a $250 debit balance. This is simplified; eligibility and scope vary.

Common questions

Does negative balance protection guarantee that I cannot lose money?+

No. It may limit liability beyond a defined account balance, but the funds allocated to the covered account can still be lost entirely. It does not protect against ordinary trading losses.

Is negative balance protection required in the United States?+

Coverage depends on the product and legal arrangement. Rules cited for retail CFDs are jurisdiction-specific, so a client should check the provider’s applicable entity, terms, and regulatory status rather than assume a universal rule.

Go to the original material.

01FCA Handbook — COBS 22.5, negative balance protection02FCA — Contract for differences