How a retail broker actually works, end to end — the chain it sits inside, what its desk does with your flow, where the price is really made, what it really costs you, the edge that survives the machine, and the rules that bind it in every major jurisdiction. New to the jargon? Every term is defined in plain English in the last tab.
Four real layers: you, the broker, the Prime-of-Primes, and the tier-1 banks. ("Prime broker" isn't a separate tier — it's a credit service the banks sell; "LP" is just whoever streams price to the layer below.) The broker is one commercial entity — its trading server, bridge and dealing desk are internal, not separate tiers. A-booked flow (the broker passes your trade out to a bigger provider) leaves it for one of the LPs its bridge aggregates — mostly PoPs; B-booked flow (the broker keeps your trade in-house and is the other side of it) stays inside.
Orders & risk ↓ Price feed ↑ Credit / buy-side price made spread marked up
Four real layers — and two of these words aren't layers at all. Your broker aggregates a basket of Prime-of-Primes (PoPs) — Finalto, IS Prime, iSAM, LMAX, StoneX — through its own bridge tech (not a separate party). Each PoP rents a prime-broker (PB) line from a tier-1 bank; the PB is a service the banks sell — credit + give-up — not a separate company. Those same tier-1 banks — JPMorgan, UBS, Citi, Deutsche, Barclays, plus non-bank market-makers XTX, Citadel, Jump — then make the actual price. So the only distinct company-layers are PoP and tier-1 bank: "LP" is just a role (each layer is the LP of the one below) and "PB" is the banks' credit desk. Hedge funds and asset managers rent their own bank-PB line too — peers of the PoPs, not customers downstream of your broker. Every layer marks the spread up before the price reaches you, which is why you trade well above the tier-1 floor below.
Where the spread comes from
Illustrative EUR/USD, standard account, pips. Tier-1 raw is the floor; each layer stacks markup. (ECN / raw-spread accounts compress this to near-zero spread + a commission instead.)
Every order hits a routing decision: A-book (hedge out to an LP, keep the spread, no market risk) or B-book (become counterparty, keep client losses, warehouse risk). A real-time risk-oversight system sits across both, consolidating exposure and flagging sharp flow to switch over to A-book.
A-book — hedged, no risk B-book — warehoused risk Risk oversight / control
Who gets B-booked — and the trap in winning
Routing isn't random. The classifier leans on a base rate: most retail accounts lose, so most new flow is warehoused by default. You graduate to the A-book by proving you win — which the desk reads as toxicity.
A brand-new small-deposit accountB-booked by default — the base rate says it loses
It keeps winning, with a clean mark-out"promoted" to A-book — i.e. hedged out as a threat
Many brokers run a C-book (hybrid)a set ratio warehoused, the rest hedged — risk dialled by client grade
The inversion: you're kept in-house because you're expected to lose, and the reward for being good is to be quietly moved to the side of the book where the broker no longer profits from your losses. On B-booked flow, your skill is the broker's cost.
Risk oversight — B-book exposure (intraday)
The broker's own leftover position from B-booked trades, by instrument, in US-dollar terms. It's the mirror image of how clients are positioned — when clients are net long, the broker is net short. The rows add up to the headline net delta (overall size and direction of the bet). Illustrative figures for a broker running a few hundred yards/month.
Net B-book delta
−$36M
net short, USD notional
Open P&L (today)
+$0.42M
B-book mark-to-market
VaR 95% / 1d
$1.9M
limit $3.0M · 63% used
Open alerts
3
1 critical · 2 watch
Net warehoused exposure · USD notionalillustrative · static
Acct #4471 — XAUUSD, +3.2 lots added in 40s, win-rate 91% over 12 trades. Pattern matches latency / stale-quote arbitrage on the gold feed. → recommend reclassify to A-book; breach of B-book per-account delta limit.
14:18:50 · watch
Group "VIP-2" — aggregate BTCUSD long building, net long trending one-way with news. → partial hedge suggested; VaR contribution rising.
13:55:11 · watch
Acct #2207 — behavioural shift: avg hold time collapsed 4h → 90s post-NFP. → flag for review, possible toxic flow.
auto
LP Reconciler — A-book vs LP positions reconciled, 0 breaks. Expected vs actual routing aligned.
The whole retail chain is OTC — bilateral at every link. But the underlying price a CFD references is discovered differently by asset: currencies have no central exchange; gold and most commodities do.
Global market turnover — to scale
Average daily volume, US$ trillion. In each group the top bar is the total; the indented — bars below break it into venues/instruments. FX = BIS Triennial, Apr 2025 (net-net = adjusted for double-counting); the three largest instruments are shown — ~$1.2T of options/other isn't broken out, so they don't fully re-add to the total. Gold = total across both its venues: the exchange (COMEX futures) plus the OTC market (LBMA London spot), Oct 2025 — a record-high month, so typical is lower, which only widens the gap.
Retail broker volumes — how the industry counts it
Brokers measure in yards/month (1 yard = $1 billion of notional). These are the Q4 2025 top five by CFD volume from Finance Magnates (FM), an industry data provider; the long tail of brokers runs ~40–300 yards/month. Read these as monthly activity, not money at risk: CFD notional is leverage-inflated (a 1:500 position books 500× its margin) and double-counted (every open and every close is tallied), so these monthly figures are not comparable to the BIS daily, net-net turnover in the chart above.
Why this matters — retail is price-taking noise. Real interbank FX turns over ~$9.6T net-net every single day; the retail CFD volumes above look large only because they're leverage-inflated and double-counted. Strip that back and the actual risk capital retail puts up is a sliver of the real market — and it never sets price, it only references it. That's the structural reason B-booking works: in aggregate your flow is statistical noise a broker can warehouse without ever touching a real venue.
Where the price is actually made
"What does the market maker watch?" — three answers. Blue = OTC venue · amber = exchange venue. All feed the same OTC CFD at the bottom.
The structural distinction: gold and commodity market makers anchor to a real exchange print (COMEX front-month + the EFP basis). FX has no central spot venue, so the reference price is a consensus constructed across OTC platforms; CME FX futures serve only as a secondary cross-check, not the source of price.
Nobody in this chain puts up the full value of a trade — everyone trades on borrowed buying power (leverage), backed by a deposit called margin (retail) or collateral (institutional). Each layer posts collateral to the layer above it. When prices move the wrong way, margin calls cascade back down toward the client.
Collateral posted toward the market ↓ Margin calls cascade toward the client ↑
The leverage asymmetry
The leverage a broker grants its clients and the leverage it receives from the market are two very different numbers — and the gap between them is the business model.
What the client is offered1:30 regulated · up to 1:2000 offshore
Offshore leverage is usually dynamictiered down as equity grows — e.g. 1:2000 under ~$1k, stepping to 1:1000 / 1:500 / 1:200 on bigger balances
What the broker itself gets from its LP / PoP~1:30 on the collateral it posts
So how can a broker hand out 1:2000 while only getting ~1:30 itself? It doesn't pass that leverage upstream. B-booked trades are never hedged, so the broker posts no collateral to an LP on them — it just holds regulatory capital and leans on the statistical edge that most retail accounts lose. Only the A-booked slice is funded at the market, where the broker must post institutional margin at roughly 1:30. High client leverage is therefore largely synthetic — backed by the broker's own balance sheet and risk appetite, not by matching leverage from the banks.
Try it — a gold trade at your leverage
1 lot of XAU/USD = 100 troy ounces — that's the fixed contract size; the lot defines it, not your deposit. Drag the sliders and watch how the leverage you pick decides how little margin holds that gold — and how small a move it takes to stop you out. Gold price is illustrative; set it where you like.
$2,000
1.00 lots · 100 oz
1:500
$2,650
Contract size
100 oz
100 oz × lots
Notional value
$265,000
what you control
Required margin
$530
notional ÷ leverage
Margin level
377%
equity ÷ margin
P&L per $1 move
$100
per $1/oz in gold
Move to stop-out
$17.35
against you, at 50%
…as a % move
0.65%
how little it takes
Free margin
$1,470
deposit − margin
Drag a slider to begin.
How a retail margin call actually works
The numbers a retail trader sees on MT4/MT5. Margin level = Equity ÷ Used Margin × 100. The broker watches this percentage.
You deposit (equity)$2,000
You open 1 mini-lot EUR/USD @ 1.0800notional ≈ $10,800
Required (used) margin at 1:30 leverage$10,800 ÷ 30 = $360
Margin call = the warning (often 100% level). Stop-out = automatic liquidation (often 50% level) so your loss can't run past your deposit. In the EU/UK/AU, retail clients also get negative-balance protection — you can't lose more than you put in.
When the cascade breaks — Swiss franc, 15 Jan 2015. The Swiss central bank scrapped its EUR/CHF floor with no warning; the franc jumped ~30% in minutes. Prices gapped straight through stop-out levels, so brokers couldn't close client positions at the trigger price — clients went deeply negative, beyond what the brokers could collect. But those brokers still owed their own LPs and prime brokers the collateral on the other side. The mismatch sank several firms (FXCM needed an emergency rescue; Alpari UK went insolvent). This is the whole reason every layer demands collateral and watches margin in real time.
An LP doesn't just stream prices — it grades the flow it gets back, trade by trade, and re-prices you on it. Flow that consistently costs the LP money (sharp or toxic) sets off a remediation ladder that runs the whole way down: LP → broker → your individual login.
How an LP grades your flow — the mark-out
The decisive metric is mark-out: the LP's profit or loss on your fill, measured at fixed horizons after it (+1s, +5s, +30s, +1m…). If the price keeps moving your way right after you trade, the LP is underwater — your flow is toxic. Benign flow drifts back toward zero; toxic flow runs against the LP and stays there.
Mark-out is the headline, but the LP scores it alongside other tells: very short hold times (seconds), trades clustered on price updates (latency / stale-quote signatures), one-sided bursts around news, an abnormal win-rate, and the broker's fill ratio & reject pattern.
Sharp vs toxic
Two shades of the same problem for the LP — informed skill versus structural extraction.
Sharp
Informed, skilled flow — news, macro, genuinely good timing. The LP loses, but to skill. Often tolerated if it isn't too fast or too one-sided.
Toxic
Flow that extracts from the LP's own pricing rather than the market — latency / stale-quote arbitrage, last-look gaming, feed-lag picking. There's no genuine edge for the LP to price around.
In practice the LP doesn't moralise the difference: if your mark-out is negative for it, you're priced out either way.
Last look — the reject you never see
The quote an LP streams isn't a firm promise. Last look is a brief window — milliseconds — in which the LP, after you've hit its price, checks where the market has moved before deciding whether to fill you. It's the defining feature of OTC FX execution, and it's asymmetric by design.
Market moved in the LP's favour after you clickedfilled — at the price that now suits the LP
Market moved in your favourrejected — re-quote, try again at a worse price
Toxic flow getsa longer hold window + a higher reject rate
Why it makes your edge fragile: an exchange fill is firm — hit the price, it's yours. A last-look fill is conditional on you not having been right too fast. The cleaner your timing, the more your winners get rejected and your losers get filled — the spread you beat on screen is quietly handed back at the point of execution.
The LP's remediation ladder
What the LP does to the broker's stream as toxicity rises. Each rung is cheaper than the last resort of pulling the line — but they escalate fast.
1 · Skew & widenworse, asymmetric pricing on that stream
2 · Last lookmore rejects and a longer hold window on your orders
3 · Added hold / latencya deliberate delay before the fill — kills speed edges
4 · Lower fill ratiopartial fills and more outright rejections
5 · Demand taggingbroker must split toxic flow onto a separate, tagged stream
6 · Mark-out chargesthe PoP bills the broker for the toxicity, per $1M
7 · Yellow card → cutpull the stream and terminate the relationship
What rolls downhill to your login
The broker is now being charged — or cut — for your flow, and can't pass you to an LP cleanly. So it acts on the specific login: A-book is off the table, leaving the B-book's hostile-execution toolkit.
execution
Execution delay — a "virtual dealer" plugin adds latency to your orders, so stale-quote and speed edges miss.
fills
Slippage & requotes — asymmetric: worse fills going in, requotes on the trades that would have won.
pricing
Spread widening — your login is quoted a wider markup than the public book.
limits
Caps & bans — max lot cut, EAs disabled, news-trading windows blocked.
money
Profit clawback — winning trades voided under the "latency / arbitrage" clause in the T&Cs.
account
Withdrawal friction → closure — payouts stalled, then the account is restricted or closed.
The asymmetry that ends most arbitrage: you can be consistently profitable and still get throttled or shut down — because your edge is, line for line, the LP's and the broker's loss. The faster and more reliable the edge, the sooner the mark-out flags it, and the sooner the ladder reaches your login. Durable edges tend to be the ones that look less sharp on a mark-out curve.
A retail broker has four revenue taps, and the biggest one is usually you losing. The mix depends on how much flow it B-books (keeps in-house) versus A-books (hedges out) — but on a typical retail book, internalised client losses dwarf the rest.
Retail accounts that lose
74–89%
broker-disclosed, ESMA/FCA
Biggest revenue tap
B-book
internalised client losses
Spread vs tier-1 floor
≈6×
see Tab 01
Held positions bleed
nightly
swaps — see Tab 07
The four revenue taps
Illustrative share of a retail broker's gross revenue, split by mechanism. The exact split is the business model — a pure A-book / STP broker lives on spread + commission; a B-book-heavy broker lives on client losses. Note: B-booked trades also earn the spread-markup slice above, so the B-book's true contribution to revenue is higher than the client-losses bar alone.
Why losing clients are the product
On B-booked flow the broker is your counterparty, so your loss is its revenue directly — no spread required. It leans on the published statistic that most retail accounts lose over time.
You trade a B-booked accountbroker is the counterparty
You lose $1,000+$1,000 to the broker's book
You win $1,000−$1,000 from the broker's book
Across a large book of clients74–89% lose → positive expectancy
Sharp / toxic winnershedged out to A-book (see Tab 02)
The acquisition machine — why they spend so hard to win you
A B-booked loser has high lifetime value — so brokers pay heavily to acquire you, and the marketing you can't escape is just that economics running downstream.
Introducing Broker (IB) rebatea slice of the spread on every lot you trade — for as long as you trade
Deposit bonus"credit" you can't withdraw until you trade many times its value
Why the spend is rationalon B-booked flow your losses are the revenue — acquisition pays for itself
The funnel feeds the book. Aggressive marketing, IB armies and bonus offers all make sense the moment you see the model: the broker is your counterparty, the average acquired client is net-negative, so every dollar spent winning you is recovered from the same losses the B-book is built on. The bonus that "boosts" your account usually just locks you into the trading volume that grinds it down.
The structural conflict: when your broker B-books you it profits when you lose and pays when you win — it is on the other side of your trade, not a neutral venue. That isn't necessarily fraud (it's a disclosed, regulated model), but on that flow "your broker" and "your interests" are opposed. Always know who your counterparty actually is.
The spread is the cost you see. It's rarely the cost you pay. A held position bleeds through several separate channels — and the one nobody quotes you, the overnight swap, compounds every night you hold.
The all-in cost of a round trip
Illustrative: 1 standard lot EUR/USD ($100k notional), standard account, held 5 nights. Your real numbers vary by broker, account type and instrument.
Spread — 1.2 pips × $10/pip$12.00
Commission (a raw account would add)$0 standard / ~$7 raw
Swap — 5 nights × ~$4.50/night (short)$22.50
Slippage on entry + exit (asymmetric)~$5–15
Total to open, hold 5 nights, close≈ $40–50
What you "saw" — the spread$12, a quarter of it
Swaps — the cost nobody quotes you
Hold past the daily rollover (usually 5pm New York) and you pay or receive a swap: the interest-rate difference between the two currencies, plus the broker's markup. Charged every night — and tripled on Wednesday to cover the weekend's value date.
Where it comes fromrate differential of the pair ± markup
Long the higher-yielding currencyyou may receive (positive carry)
Short it / hold the low-yielderyou pay (negative carry)
The broker's markupoften makes both sides net negative
Triple-swap Wednesday3× the nightly charge
Why it matters for holding strategies: a swing or carry position held for weeks can pay more in swaps than in spread — and a strategy that's break-even before financing is a loser after it. Price the swap before you size the trade.
Beyond FX — financing on index, share & crypto CFDs
FX charges a swap. A CFD on an index, share or crypto charges overnight financing instead: a daily rate on the full position value — not your margin. Because it scales with notional, it's the cost that quietly dwarfs the spread on anything you hold.
How it's charged(benchmark rate + broker markup) × full notional ÷ 360, every night
$2,000 margin → $100k index CFD at 1:50financing on the $100k, not the $2k
~8%/yr all-in (rate + markup)≈ $22 per night — on a $2,000 stake
Hold it a month≈ $660 — a third of your deposit, before the price moves
Short positionsmay receive or pay, but the markup usually tilts it against you
The leverage trap in reverse: leverage lets a small deposit hold a large position — and financing is billed on that large position. The same 1:50 that makes the trade feel cheap to open makes it expensive to hold. Day-trade and you barely see it; hold for weeks and financing, not the spread, becomes your biggest cost.
Tab 05 showed how the LP and broker grade and kill profitable flow. So which edges actually survive that machine? Rule of thumb: the faster and more mechanical the edge, the sooner the mark-out flags it and the ladder reaches your login. Durable edges look less sharp.
Edge types by kill speed
How quickly each tends to get throttled, skewed, requoted or banned. Not advice — a map of where the broker's incentives point.
dies fastest
Latency / stale-quote arb — mechanical, one-sided, screaming mark-out. Flagged in trades, not days. A-booked or execution-delayed almost immediately.
banned in T&Cs
Two-broker locking / hedge arb — opposite positions across brokers to harvest swap or bonus. Explicitly prohibited; profits clawed back.
throttled
News-spike trading — bursty and obvious around NFP / CPI. Slippage, requotes and news-window blocks get applied.
slower to flag
Swap / carry arb — the edge accrues quietly over nights, not ticks. Harder to mark out, but capped by swap markups and dynamic leverage.
survives longest
Diffuse directional skill — modest hit-rate, held over time, spread across venues and accounts. Looks like ordinary flow on a mark-out curve.
What "durable" actually looks like
Mark-out signatureflat / noisy, not a clean one-way ramp
Hold timelong enough not to scream "latency"
Footprint per accountsmall relative to the broker's book
Distributionspread across brokers, accounts, symbols
Why spreading thin defeats the mark-out
The same profitable edge, booked two ways. Concentrated in one broker it draws a clean toxic mark-out and gets killed; diffused across many it dissolves into each book's noise and survives. This is the structural problem — and the reason an edge has to be distributed to last.
The uncomfortable truth: the cleanest, fastest, most "obvious" edges are exactly the ones the system is built to detect and shut down. Survivability comes from being diffuse — spread thin enough across venues and time that no single book ever sees a toxic mark-out. That's a structural problem, and it's the one this site exists to solve.
Many brokers are several companies wearing one brand. The regulated onshore entity runs the marketing and the trust badges; a separate offshore entity holds your account, your money and the 1:2000 leverage. Same logo — very different rulebook.
Same broker, two rulebooks
What changes when your account sits with the onshore entity (FCA, ASIC, CySEC / ESMA) versus an offshore one (St. Vincent, Seychelles, Mauritius, Vanuatu).
Onshore
Max leverage — 1:30 (ESMA / FCA / ASIC retail). Negative-balance protection — mandatory. Client funds — segregated and audited. Compensation — e.g. FSCS up to £85k if the broker fails. Recourse — a real regulator + ombudsman. The cost — lower leverage, more friction.
Offshore
Max leverage — 1:500 to 1:2000+. Negative-balance protection — usually none. Client funds — often not segregated. Compensation — none. Recourse — minimal; the regulator may not cover forex at all. The cost — your protection.
The entity shell game
You see the brand & its FCA licencethe trust signal
You sign up for 1:1000 leverageonboarded to the offshore entity
Your money is actually held byan SVG / Seychelles company
It goes wrong → you call the FCA"that entity isn't ours"
Check the entity, not the logo. The leverage you were sold is the tell: 1:30 is regulated; 1:500–2000 means you're with an offshore entity that almost certainly carries no negative-balance protection, no segregation guarantee and no compensation scheme. The footer of the broker's own site lists which company actually holds your account — read it before you deposit.
The United States — the market that's "banned" and trades anyway
The clearest case of the offshore split: an entire country pushed off the regulated grid. Retail CFDs — gold, indices, stocks, crypto — are effectively prohibited for US persons; the SEC / CFTC don't allow off-exchange retail CFDs at all. Spot forex is allowed, but only through an NFA-registered, CFTC-regulated dealer, capped at 50:1 (majors) / 20:1 (minors) under Dodd-Frank. That regime pushed almost every foreign broker out — most just stopped accepting Americans rather than register.
A US trader wants 1:500 gold CFDsno onshore broker can legally offer them
So they open an offshore accountSVG · Seychelles · Vanuatu · Belize
The broker's T&Cs say "no US clients"rarely verified — a non-US address + VPN closes the gap
It goes wrong → they call the CFTC"that firm isn't registered with us — we can't help"
The trade isn't the crime — the exposure is. US persons trading offshore CFDs are circumventing the rules, not usually committing a prosecutable offence; the prohibition falls on the broker that solicits them. But they've stepped entirely outside the system built to protect them — no NFA recourse, no fund segregation, no compensation scheme. If the money disappears, no US regulator has a lever to pull.
Every other tab is a cross-section of the machine. This one runs a single trade straight through it — one EUR/USD long, from the quote you see to the moment your winning streak becomes a problem. Each step links back to the tab that explains it.
One EUR/USD long, end to end
01 · the quote
You see EUR/USD 1.08000 / 1.08012 — a 1.2-pip spread. The interbank floor is ~0.2 pip; the rest is PoP + broker markup stacked down the chain. → Tab 01, Liquidity Chain.
02 · the routing
You click buy 1 lot. The bridge classifies you: small deposit, no toxic history → B-booked. The broker is now your counterparty; nothing touches a real venue. → Tab 02, the A/B-book desk.
03 · the margin
Your $360 margin holds a $108,000 notional position at 1:30. The leverage is real — and so is the stop-out level sitting just below you. → Tab 04, Margin.
04 · the carry
You hold 3 nights. Each night a swap is debited — tripled on Wednesday — so you're down ~$13.50 in financing before the price has done anything. → Tab 07, What It Costs.
05 · the win
EUR/USD runs your way; you're +$800. On the B-book that's −$800 to the broker. The risk desk's mark-out flags your win-rate and hold pattern. → Tab 05 + Tab 02 oversight.
06 · the reclassify
You're promoted to A-book — quietly hedged out — and your login is tagged. The reward for winning is to be managed as toxic flow. → Tab 02 + Tab 08, the edge that survives.
07 · the exit
You close the winner and meet slippage on the way out; the next clean signal gets a requote. The withdrawal clears — but the account is now on a watchlist. → Tab 05, what rolls downhill.
What the trade actually cost
The cost you sawthe 1.2-pip spread — ~$12
Spread + 3 nights swap + slippage≈ $35–45 — three to four times what you saw
The moment you started winningyou stopped being a customer and became a risk to manage
The whole machine in one trade: the spread is marked up six-fold before you click; you're warehoused because you're expected to lose; you bleed financing just for holding; and the instant your edge shows up on a mark-out curve, the same broker that profited from your losses moves to the other side of your wins. None of it is hidden — it's just spread across ten tabs. This is the one that connects them.
Retail CFDs are a regulated product, and the rulebook changes at every border. The same instrument that's capped at 30:1 with guaranteed loss limits in one country is effectively banned in another, or sold at 500:1 with no safety net in a third. This is the map — who regulates it, how much leverage retail clients can get, what protection comes with it, and the link to the actual rule. Strictest at the bottom.
The retail-leverage map
Each card is the onshore, licensed rulebook for that country. The offshore arm of the same broker (Tab 09) is bound by none of it — that's the entire point of the shell.
🇪🇺 European Union — ESMA + national NCAs
The EU-wide floor every other strict regime copies. ESMA's 2018 product-intervention measures were made permanent by each national regulator (BaFin, AMF, CySEC…). Retail CFD leverage is capped by asset: 30:1 major FX · 20:1 minor FX / gold / major indices · 10:1 other commodities & minor indices · 5:1 single shares · 2:1 crypto. Mandatory negative-balance protection, 50% margin close-out, no trading bonuses.
Mirrors the ESMA bands and made them permanent from Aug 2019 (PS19/18): 30:1 → 2:1 by asset class, mandatory negative-balance protection, 50% margin close-out. Client money must be segregated, and the FSCS compensates eligible clients up to £85,000 if an FCA-authorised broker fails.
Product Intervention Order in force since 29 Mar 2021, extended five years in 2022. Same banding as the EU: 30:1 major FX · 20:1 minor FX / gold / major index · 10:1 other commodities · 5:1 shares · 2:1 crypto. Mandatory negative-balance protection and margin close-out; binary options banned outright.
CFDs and leveraged FX are regulated capital-markets products under the Securities and Futures Act; the broker must hold a CMS licence. Retail leverage is capped indirectly through margin requirements — roughly 20:1 major FX / indices, 10:1 commodities, 5:1 shares. Accredited investors can reach ~50:1 with fewer protections.
No single statutory leverage cap — limits are set by margin rates per instrument (CIRO, formerly IIROC; provincial CSA oversight). In practice ~50:1 on USD/CAD, lower on other pairs, ~10:1 commodities, ~5:1 shares. Crypto CFDs are effectively off-limits to retail. Brokers must join the CIPF — compensation up to CAD 1 million on insolvency.
Derivatives issuers must be FMA-licensed under the FMC Act 2013, but no hard leverage cap currently applies — some issuers cap CFDs at 30:1, others advertise up to 500:1. The FMA consulted in 2024 on standard conditions that would impose 30:1 / 20:1 / 10:1 retail limits; not yet in force as of mid-2026.
The strictest regime of all. Off-exchange retail CFDs are effectively prohibited under the Dodd-Frank Act — they may only trade on a registered exchange. Spot forex is allowed only through an NFA-registered FCM/RFED, capped at 50:1 majors / 20:1 minors. Most offshore brokers simply refuse US clients rather than register.
Read the entity, not the badge. Every rule above binds only the licensed entity in that country. The leverage you were offered is the tell: 1:30 is an onshore, regulated book; 1:500–2000 means your account sits with an offshore arm bound by none of these — no leverage cap, usually no negative-balance protection, no segregation guarantee, no compensation scheme. Figures are current as of June 2026 and change often — check the regulator's own page before you deposit. This is general information, not legal or financial advice.
Plain-English definitions for every term used in the other tabs. No prior knowledge assumed.
Units & pricing
Pip
The smallest standard step a price moves. For EUR/USD it's the 4th decimal — 0.0001. Profit and loss are usually counted in pips.
Lot
A standard trade size. 1 standard lot of a currency pair = 100,000 units of the first currency (mini = 10,000, micro = 1,000). For gold (XAUUSD), 1 lot = 100 troy ounces.
Notional value
The full market value of what you control — not what you put down.
1 lot of EUR/USD at 1.08 ≈ $108,000 notional, even if your deposit was only a few hundred dollars.
Leverage
How much notional you control per dollar of your own money. Amplifies gains and losses equally.
The gap between the price you can sell at (bid) and buy at (ask). It's the built-in fee on every trade — the broker widens it to make money.
Yard
Trader slang for one billion (from the French "milliard"). Brokers report monthly turnover in yards.
"500 yards/month" = $500 billion of notional traded.
ECN / raw-spread account
An account type that passes near-raw market prices through — tiny or zero spread — and charges a separate commission, instead of widening the spread to make money.
Swap / rollover
A daily charge or credit for holding a position overnight — the interest-rate difference between the two currencies, plus the broker's markup. Tripled on Wednesday to cover the weekend value date.
Carry
The yield you earn (or pay) simply for holding a position, from the rate differential between its two currencies. Positive carry pays you to hold; negative carry bleeds you.
Inactivity fee
A monthly charge some brokers levy on dormant accounts — a non-trading fee that quietly erodes a balance you've stopped watching.
Overnight financing (CFD)
The daily charge for holding a non-FX CFD (index, share, crypto) past rollover — a benchmark interest rate plus the broker's markup, applied to the position's full notional, not your margin. The CFD equivalent of a swap.
Market structure — who's who
OTC (over-the-counter)
A private, bilateral deal between two parties — not traded on a public exchange. Most FX and all retail CFDs are OTC.
Exchange
A central, regulated venue where many participants trade standardised contracts (e.g. COMEX for gold futures). The opposite of OTC.
CFD (Contract for Difference)
A cash-settled bet on a price moving. You never own the euro or the gold — you hold a contract with your broker that tracks its price.
Liquidity Provider (LP)
Any firm that streams live buy/sell prices a broker can trade on — a role, not a tier. Tier-1 banks, non-bank market makers, MTF/ECN venues and prime-of-primes are all LPs, at different depths. A retail broker's own LP is usually a PoP.
Prime of Prime (PoP)
A "broker's broker": it packages big-bank liquidity and credit and resells it to retail brokers too small to face the banks directly. A PoP is itself an LP to the broker — one sitting on top of deeper LPs. Examples: Finalto, IS Prime, iSAM Securities.
Prime Broker (PB)
The prime-brokerage service a tier-1 bank sells: it lends its balance sheet and credit so a client (a PoP or a fund) can trade the interbank in the bank's name and settle later (give-up). It's a service, not a separate tier — the PB is the same tier-1 bank, wearing a credit hat.
Tier-1
The top banks and non-bank market makers (JPMorgan, UBS, Citi, Deutsche, XTX, Citadel Securities) where the real underlying price is made. These same banks also run the prime-broker desks that bankroll the PoPs.
Interbank
The wholesale market where tier-1 banks and non-bank market makers trade currencies with each other — a decentralised network of bilateral relationships and primary venues (EBS, LSEG Matching), not one central exchange. Where the real FX price is made.
STP (straight-through processing)
Passing a client order straight out to an LP for execution, with no dealing-desk intervention — the A-book ideal. The opposite of a B-book that holds the trade in-house.
Spot / spot FX
A trade for near-immediate settlement at the current price — the everyday FX price, as opposed to a future or forward. Retail CFDs reference spot.
MTF venue
A regulated, multi-participant marketplace with a central order book and firm, no-"last-look" pricing (e.g. LMAX Exchange) — an ECN-style venue. A different kind of LP from a PoP: a neutral marketplace, not a credit-reselling intermediary.
Bridge
Software (oneZero, PrimeXM, Gold-i) that connects a broker's platform to its LPs and decides where each order goes.
MT4 / MT5
MetaTrader 4 and 5 — the dominant retail trading platforms; the screen most retail traders actually use.
Market maker (MM)
A firm that continuously quotes both a buy and a sell price and stands ready to trade either side, earning the spread. Banks and non-banks (XTX, Citadel) make markets in FX; the broker itself makes the market to you.
Single-dealer platform (SDP)
One bank's own pricing portal — its proprietary stream of quotes, not a multi-dealer venue. Brokers tap several SDPs to build a price.
Loco London
Gold quoted for settlement as bullion held in London vaults — the OTC benchmark location for spot gold, run through the LBMA.
Booking & risk
A-book
The broker passes (hedges) your trade out to a real LP. It earns the spread and takes no market risk — it doesn't care whether you win.
B-book
The broker keeps your trade in-house and becomes your counterparty. You lose → it keeps the money; you win → it pays. Profitable because most retail loses, but risky if flow is one-way.
C-book (hybrid)
A middle setting between A and B: the broker warehouses a set ratio of a client's flow and hedges the rest, dialling its risk by client grade instead of routing each trade fully one way or the other.
Internalisation
Matching opposing client trades against each other (or warehousing them) instead of sending them to the market.
Sharp / toxic flow
Clients who consistently win — often arbitrage or fast news traders. Brokers want this hedged out of the B-book quickly.
Give-up
An institutional setup where a trade is executed with one party but "given up" to your prime broker to clear and hold.
Slippage
Being filled at a worse price than you clicked — common in fast or thin markets.
Hedge
Taking an opposite, offsetting position so a price move can't hurt you. When a broker A-books, it places your same trade with an LP — its risk cancels out and it just keeps the spread.
Counterparty
The party on the other side of a trade. In a B-book the broker is your counterparty: when you lose it gains, and when you win it pays.
Netting
Combining many offsetting trades into one net figure, so only the difference is settled or hedged — not every individual ticket.
VaR (Value at Risk)
A standard risk gauge: the most a book is expected to lose over a set period, at a given confidence level.
"VaR 95% / 1d = $1.9M" → on a normal day it shouldn't lose more than $1.9M, ~19 days out of 20.
Delta / net delta
The size and direction of a position's exposure — how much it gains or loses as the price moves.
"Net short $36M" = the broker profits if prices fall, loses if they rise.
Mark-to-market
Revaluing an open position at the current market price to show its running profit or loss before it's actually closed.
Mark-out
The LP's profit or loss on a fill, measured at fixed times after it (+1s, +5s, +1m…). Persistently negative mark-out means the flow is picking the LP off — the core toxicity gauge.
Last look
A brief window in which an LP can reject a trade after the broker hits its quote — used to avoid being filled on stale prices by fast flow. Longer windows and higher reject rates are applied to toxic flow.
Fill ratio
The share of a broker's orders an LP actually fills. LPs cut it for toxic flow — more rejects and partial fills.
Flow tagging / segmentation
Splitting a broker's order flow into labelled streams (by client profile) so an LP can price, or refuse, the toxic part separately from the rest.
Locking / hedge arbitrage
Holding offsetting long and short positions — often across two brokers — to harvest a swap, bonus or pricing gap rather than a market move. Explicitly banned in most retail T&Cs.
Skew
Tilting quotes or risk to one side — e.g. a desk that's net-long shades its price to attract sellers, or an LP widens one side against flow it expects to lose to.
Margin & collateral
Margin
The deposit you post to open and hold a leveraged trade. Initial margin opens it; maintenance margin keeps it open.
Margin level
Your equity divided by the margin in use, as a %. The number the broker watches.
Equity $2,000 ÷ used margin $360 = 556%.
Margin call
A warning (often at 100% margin level) that your equity is getting too thin to support your open positions.
Stop-out
The broker automatically closes positions (often at 50% margin level) so your loss can't exceed your deposit.
Negative-balance protection
A rule (mandatory for EU/UK/AU retail) that you can't lose more than you deposited.
Collateral / variation margin
What an institution posts to its LP/PB to back open positions — topped up as positions move against it (that top-up is variation margin).
Dynamic leverage
Offshore brokers tie max leverage to account equity, lowering it as the balance grows. Small accounts may get 1:2000+; larger ones are stepped down to 1:500, 1:200 or less — limiting the broker's tail risk on big positions.
$500 account → 1:2000; same client at $50k → maybe 1:200.
Credit line
Permission to trade now and settle later, up to a limit, instead of paying the full value upfront. PoPs and prime brokers extend credit lines down the chain so each layer can trade on collateral rather than cash.
Segregated funds
Client money kept in a separate bank account from the broker's own, so it can't be used as working capital and is protected if the broker fails. Mandatory onshore; often absent offshore.
Compensation scheme (FSCS)
A statutory backstop that repays clients up to a cap (e.g. £85k under the UK's FSCS) if a regulated broker becomes insolvent. Offshore entities typically have none.
Data & benchmarks
BIS Triennial Survey
The Bank for International Settlements polls central banks every three years (each April) to measure global FX turnover — the authoritative size of the market.
2025: $9.6 trillion traded per day.
LBMA
London Bullion Market Association — runs the OTC London gold market and sets the twice-daily LBMA Gold Price benchmark.
COMEX
The New York gold & metals futures exchange (part of CME) — the main exchange-traded gold price.
EFP (Exchange for Physical)
A deal that swaps an OTC gold position for a COMEX futures position — the plumbing that keeps London spot and New York futures in line.
Finance Magnates / QIR
An industry news & data provider; its Quarterly Intelligence Report (QIR) publishes the broker volume rankings used in Tab 03.
NFP (Non-Farm Payrolls)
The big monthly US jobs report — a scheduled news event that sharply moves FX prices and draws fast "news" traders the B-book wants to avoid.
CME
Chicago Mercantile Exchange — the largest US futures exchange; runs COMEX (gold & metals) and the listed FX futures that cross-check OTC spot.
CPI (Consumer Price Index)
The monthly inflation report — like NFP, a scheduled news event that jolts FX prices and draws fast news traders.
Regulation & jurisdiction
CFTC
Commodity Futures Trading Commission — the US federal regulator for futures, options and retail forex. Off-exchange retail CFDs fall outside what it permits, so they can't be lawfully offered to US persons.
NFA
National Futures Association — the CFTC-overseen self-regulatory body that registers and supervises US forex/futures dealers. A US-facing retail forex broker must be an NFA member; offshore brokers taking US clients are not.
Dodd-Frank Act
The 2010 US financial-reform law. For retail forex it imposed NFA/CFTC registration and capped leverage at 50:1 (majors) / 20:1 (minors) — terms strict enough that most foreign brokers stopped accepting Americans rather than comply.
FCA
Financial Conduct Authority — the UK regulator. Caps retail CFD leverage at 30:1 down to 2:1, mandates negative-balance protection, and backs clients with the FSCS. The onshore gold standard.
ESMA
European Securities and Markets Authority — set the EU-wide retail-CFD floor (30:1→2:1, negative-balance protection, margin close-out) that the UK and Australia copied. Enforced by each national regulator.
ASIC
Australian Securities & Investments Commission — caps retail CFD leverage at 30:1→2:1 (in force since 2021) and bans binary options outright.
CySEC
Cyprus Securities and Exchange Commission — the EU regulator (ESMA rules) that many brokers passport their licence from. Onshore, but lighter-touch and cheaper than the FCA.
MAS
Monetary Authority of Singapore — regulates CFDs and leveraged FX under the Securities and Futures Act. Retail leverage roughly 20:1; accredited investors can reach ~50:1.
CIRO
Canadian Investment Regulatory Organization (formerly IIROC) — sets leverage via margin rates (~50:1 on major FX) rather than a fixed cap; crypto CFDs are effectively barred for retail. CIPF compensation up to CAD 1M.
FMA
Financial Markets Authority — New Zealand's regulator. Licenses derivatives issuers but (as of 2026) sets no hard leverage cap; a 30:1 standard condition was consulted on in 2024.
SEC
US Securities and Exchange Commission — the federal securities regulator. Together with the CFTC, it's why off-exchange retail CFDs can't be lawfully offered to US persons.
Low-regulation island domiciles where many brokers register the entity that actually holds your account. Typically no leverage cap, no negative-balance protection, no fund segregation and no compensation scheme.
Acquisition & incentives
Introducing Broker (IB)
A partner who refers clients to a broker in exchange for a cut of the spread or commission on every trade those clients make — an ongoing rebate, not a one-off.
CPA / affiliate
Cost Per Acquisition — a flat bounty paid to a marketer for each new client who registers and funds an account, regardless of how they then trade.
Deposit bonus
Promotional credit added to your balance that can't be withdrawn until you trade a large multiple of its value — it incentivises volume (and the costs that come with it), not winning.