The leverage allocation of foreign exchange brokers must strictly comply with the regulatory requirements of different jurisdictions. Under the license of the EU CySEC (License No. 362/18), the leverage limit for professional accounts of Cedarfx is 30:1, which complies with the maximum allowable multiple for major currency pairs as stipulated in the new ESMA regulations. Professional clients under the Seychelles Regulatory Framework (License SD038) can apply for a maximum leverage ratio of 500:1. Data shows that 30.7% of the active traders on this platform choose a leverage ratio of 100:1 or above, among which the usage rate in the range of 15:1 to 50:1 accounts for 43.2%. The specific ratio selection needs to be automatically adjusted based on the net asset value of the account. For example, when the account balance is less than $2,000, the default leverage ratio will be reduced to 100:1.
The differentiated leverage Settings of account types and asset classes reflect the logic of risk management. The leverage ratio for commodity futures such as gold and crude oil in cedarfx standard accounts is 66:1 (approximately 1.5% margin rate), while for mainstream currency pairs like EUR/USD, it can reach 500:1 (0.2% margin), while Bitcoin CFDS only offer a leverage ratio of 5:1 (20% margin). According to its 2023 trading report, transactions with a leverage ratio exceeding 200:1 accounted for only 18.3% of the total. 83.6% of the orders were automatically triggered with additional notifications through the real-time margin monitoring system, with a threshold of 50% of the margin required for the position.
The dynamic margin mechanism directly affects the actual available leverage ratio. When the EUR/GBP exchange rate volatility index breaks through 12%, the cedarfx risk control system will temporarily reduce leverage to 150:1. Such adjustment events occurred seven times in a single month during the Bank of England’s intervention in the foreign exchange market in 2022. The system scans the Margin level of customer accounts every 15 minutes. When the margin ratio is lower than 20%, the forced liquidation engine starts at a speed of 0.03 seconds per order. Data from Q1 2023 shows that the trigger rate of margin calls on this platform decreased by 9.7% year-on-year, and the scale of the Margin Call loss compensation fund remained at 23 million US dollars.
The leveraged cost structure contains multiple implicit costs. When trading 10 lots of EUR/USD (with a contract value of 1 million euros) at a leverage ratio of 500:1, the overnight interest of cedarfx is calculated at LIBOR+2.8% of the day, with an average daily extension fee of approximately 47 US dollars. By contrast, the average daily cost for positions of the same scale under a 30:1 leverage is only $2.8. The leverage amplifier effect was evident during the peak period of market volatility in March 2020, when the average daily forced liquidation orders on the platform soared by 320%, but the negative balance protection mechanism saved 99.2% of customers from debt collection.
Industry comparisons show a cautious trend of leverage policies. Compared with the ultra-high leverage of 3000:1 offered by some offshore brokers, the leverage range of cedarfx’s core product remains within the safe range of 50:1 to 100:1 recommended by the Bank for International Settlements (with a margin call probability of less than 4.7% within this range). According to statistics from the Financial Conduct Authority (FCA), the average annual loss rate of retail traders using leverage above 100:1 is 78.4%, while data from cedarfx Investor Education Center shows that users who adopt its recommended risk calculator (with a default leverage limit of 200:1) The account survival period has been extended to an average of 9.3 months (the industry average is 5.1 months).