When an account goes below zero: the limits of the safety net

[FXS London Scalper]

Negative balance protection means a retail client can't lose more than the money in the account. In the EU and UK it's required for retail clients. It's worth knowing the limits.

What it covers:

• If a gap or flash move takes the account below zero, the broker writes off the negative balance.
• It applies per account, or sometimes per client across accounts, depending on the broker.

What it doesn't cover:

• Professional clients, who often give up this protection.
• Some offshore entities of the same group.
• Losses within the account balance. It only stops losses beyond zero.

Why it matters: events like the Swiss franc move in January 2015 left some traders owing brokers money. Rules introduced afterwards in Europe aim to prevent that for retail clients.

Practical points: check which entity your account is with, and whether protection applies. It's usually stated in the client agreement or the key information document.

Does your broker apply it per account or per client?