Spread betting margin is the money required to support a position, not the most that position can lose. An account close-out happens when the provider closes open bets because the account no longer has enough equity to support them. Confusing those two concepts can turn a manageable trading loss into a much larger account loss.
In financial spread betting, your stake per point determines how quickly profits and losses accumulate. Margin determines how much funding the provider requires against that exposure. Both matter, but they answer different questions: “Can I open this bet?” and “Can I afford the consequences?” are not interchangeable.
This guide concerns UK retail accounts. The FCA’s retail CFD protections also cover spread betting. Professional client classification or contracting with an overseas entity can change the protections available, so check the legal entity and account classification rather than relying on the brand name.
What Spread Betting Margin Actually Covers
Initial margin is the amount required to open a bet. Once the bet is open, the account must continue to support its margin requirement while its profit or loss changes.
Margin is not an entry fee. It is money committed against an open exposure. Closing the bet releases the associated margin requirement, but any realised loss and charges still reduce your account funds. Releasing £800 of margin does not mean receiving £800 of profit.
Nor is margin a maximum-loss figure. A bet requiring £800 can lose more than £800 because losses depend on the price movement and your stake per point. Cash elsewhere in the same trading account can support that losing position until you close it or the provider intervenes.
UK Retail Margin Requirements
The FCA’s margin requirements in COBS 22.5.11R set minimum opening margins by asset category. The following categories cover common financial spread bets.
| Underlying market category | Minimum margin | Exposure relative to margin |
|---|---|---|
| Major currency pairs and relevant sovereign debt | 3.33% | Approximately 30:1 |
| Major stock indices, minor currency pairs and gold | 5% | 20:1 |
| Minor stock indices and commodities other than gold | 10% | 10:1 |
| Individual shares and other assets covered by the residual category | 20% | 5:1 |
These are regulatory floors, not a promise that every provider will offer those rates. Check the instrument’s classification and the actual requirement shown on the order ticket. A provider can require more money than the regulatory minimum.
A lower margin percentage does not reduce the cash loss from a given price movement at an unchanged stake. It reduces the funding needed to open the exposure. That can make a large position look deceptively affordable.
A Worked Margin Calculation
Suppose an index is quoted at 8,000 and you buy at £2 per index point. Assume one betting point equals one full index point and the provider applies a 5% margin rate.
Notional exposure = 8,000 × £2 = £16,000
Opening margin = £16,000 × 5% = £800
If the index then falls 100 points, the price loss is £200 before costs. That is a 1.25% fall in the index but a loss equal to 25% of the opening margin. The smaller deposit has not made the underlying exposure smaller.
Point conventions differ between instruments. Before applying this calculation to currencies or shares, check what the contract calls a point. The guide to stakes per point and spread betting profit calculations covers that distinction.
Balance, Equity, Used Margin and Free Margin
A cash balance alone cannot tell you whether an account is close to forced closure. Read the balance alongside the live value of open positions.
Balance generally records deposited funds, withdrawals, realised trading results and booked charges. Equity adjusts that balance for unrealised profits and losses. Used margin is the amount required to support open positions. Free margin generally means equity minus used margin, although platform labels and adjustments vary.
Using a simplified account with £2,000 balance, £800 used margin and a £500 unrealised loss:
Equity = £2,000 − £500 = £1,500
Free margin = £1,500 − £800 = £700
A platform expressing margin level as equity divided by used margin would show:
Margin level = £1,500 ÷ £800 × 100 = 187.5%
That percentage describes funding coverage, not the probability of surviving the next market move. Another platform may display margin utilisation, which reverses the relationship. Check the formula before deciding whether a rising percentage is good or bad news.
How the 50% Account Close-Out Rule Works
For covered UK retail accounts, the regulatory close-out threshold compares account net equity with the margin requirement supporting open positions. If net equity falls below 50% of that requirement, the provider must close positions as soon as market conditions allow. Providers may apply a higher contractual threshold; the FCA’s policy statement on margin close-out requirements expressly permits this.
The 50% figure does not mean you can lose only half your deposit. It is half the relevant margin requirement, not half your starting balance. The test operates at account level, rather than assigning each bet a separate protected pot of money.
Close-Out Example with One Position
Return to the account holding £2,000 and supporting a bet with £800 required margin. Assume the requirement stays fixed, the provider uses a 50% threshold, and there are no charges, other positions or cash movements.
Close-out threshold = £800 × 50% = £400 equity
The account reaches that boundary after a £1,600 unrealised loss:
£2,000 starting funds − £1,600 loss = £400 equity
At £2 per point, that corresponds to an 800-point adverse move. In this illustration, 80% of the starting account funds have disappeared by the time equity reaches the regulatory boundary. This is arithmetic, not a forecast of the price at which a real provider would execute closure.
A price gap can carry equity past the boundary before execution becomes possible. A contractual threshold above 50% can instead trigger intervention earlier. Neither outcome contradicts the existence of the regulatory rule.
What Changes When Several Bets Are Open?
Suppose two positions require £600 and £400 respectively. With no margin offsets, their combined requirement is £1,000, giving a £500 boundary under the same 50% assumption.
Profits on one position contribute to account equity while losses on another subtract from it. A profitable bet therefore does not create a protected reserve. Its gains may be supporting a losing bet elsewhere in the account.
Read the provider’s liquidation policy to establish which positions it may close, whether partial closure is possible and whether it can close all positions. Do not assume it will preserve the trade you regard as most promising.
A Margin Call Is Not a Guaranteed Grace Period
A margin call is a demand or warning that the account needs more support. Close-out is the execution of trades to remove exposure. Treat them as separate events, not a guaranteed sequence with a comfortable interval between them.
Do not build a trading plan around receiving an email, answering a phone call or transferring money before intervention. Check the account terms for warning thresholds, notification methods and closure rights. A notification is useful, but it is not extra equity.
If funding becomes tight, assess whether to reduce the position, close it or add funds within an already agreed risk budget. Adding cash without reducing the stake leaves the loss per point unchanged. It increases the amount available to absorb losses; it does not improve the trade itself.
For example, adding £500 to a £2-per-point bet provides another 250 points of loss capacity under unchanged assumptions. That may postpone closure, but it also puts another £500 within reach of the losing position.
Why the Margin Buffer Can Shrink Without a Large Price Move
Price losses are only one part of the account calculation. Financing charges, withdrawals and changes to margin requirements also deserve attention. The practical question is how each changes equity, required margin or both.
Charges and Withdrawals Reduce Equity
Consider an account with £1,000 equity and £1,000 used margin. If a £20 financing debit is booked with everything else unchanged, equity falls to £980 and free margin becomes negative £20. This does not, by itself, put the account below a 50% close-out threshold, but it leaves less funding coverage.
Opening spread costs can also create an immediate unrealised loss. Include spread betting spreads, financing and adjustments when estimating the buffer needed for the intended holding period.
A withdrawal has the same direct arithmetic effect on equity: cash leaves while the open exposure remains. Recalculate the account’s funding position before withdrawing money that appears unused.
A Higher Requirement Changes the Calculation
Stress-test the possibility of a higher provider requirement rather than assuming the opening figure will always remain unchanged. Check the terms governing margin changes and any size-based margin tiers.
For illustration, an account with £1,200 equity and £1,000 required margin has a 120% margin level. If its applicable requirement becomes £1,600 while equity stays unchanged, the level falls to 75%. The price need not move for that calculation to deteriorate.
This is why “I have enough margin now” is a weaker test than “I can still support the account under an adverse scenario.”
Stop-Loss Orders and Account Close-Outs Serve Different Purposes
A stop-loss order addresses an individual position at a chosen price. Margin close-out addresses insufficient funding across the account. Do not use the latter as a substitute for deciding where a trade should end.
An ordinary stop can execute at a worse price during a gap or fast market. A guaranteed stop provides its contractual price protection subject to the provider’s terms and any applicable charge. The distinctions between ordinary, guaranteed and trailing stop orders matter when estimating possible losses.
Even a position with a stop can face account-level closure before its stop is reached if other bets consume the funding buffer. Check how the provider treats guaranteed-stop positions within its margin and liquidation calculations.
As a planning test, compare total expected losses at your chosen exits with account equity and required margin. If the account would breach its closure threshold before those exits, the funding plan and trading plan do not agree.
What Negative Balance Protection Does—and Does Not—Protect
For covered retail accounts, negative balance protection caps liability for the relevant speculative investments at the funds dedicated to that trading account. The FCA rules introducing negative balance protection distinguish those funds from assets held for unrelated purposes.
This is not protection of the margin allocated to each bet. If an account contains £2,000 and a position requires £800 margin, do not treat the other £1,200 as ring-fenced against trading losses. Nor does the protection guarantee that close-out occurs with a positive sum left to withdraw.
In a gap scenario, execution may leave a deficit that the protection addresses. It does not reverse losses up to the protected account boundary or restore the original deposit. Repeated deposits followed by further losses can still consume money well beyond your initial funding amount.
Check the Account Before Opening Another Bet
Use margin as an operational constraint, not a target to fill. A disciplined position sizing and trading risk budget starts with acceptable cash loss, then checks whether the account can support the resulting exposure.
- Confirm the contract: point size, stake, margin rate and any size tiers.
- Read the closure policy: threshold, calculation method and position selection.
- Stress-test the account: include simultaneous losses, costs and a higher margin requirement.
- Set funding limits: decide in advance whether additional deposits are permitted within your budget.
A large free-margin figure is not a reason to increase a stake. Before opening another position, calculate what happens if existing bets lose together. The useful margin buffer is the one that remains after a plausible adverse move, not the one displayed before it.