Why Regulated Brokers in the UK, EU and Australia Can't Offer Deposit Bonuses

If a broker offers you a 100% deposit bonus, you are almost certainly not dealing with its UK, EU or Australian entity. Regulators in those regions banned trading bonuses for retail CFD clients. Here is why, and what to check if you are offered one elsewhere.

The rules

• EU: ESMA's 2018 product intervention measures, later adopted permanently by national regulators, prohibit monetary and non-monetary benefits that encourage retail clients to trade CFDs.
• UK: the FCA applies the same prohibition to CFDs sold to retail clients.
• Australia: ASIC's CFD product intervention order restricts inducements to trade.

Exceptions exist for things like information and research tools that do not depend on trading volume.

Why regulators banned them

Because bonuses work. They encourage people to deposit more and trade more often, and most retail CFD accounts lose money. Regulated brokers publish the share of retail accounts that lose money when trading CFDs with them; the figures are commonly between about 60% and 80%.

How bonus terms trap withdrawals

Offshore bonuses usually come with conditions buried in the terms:

1. Volume requirements. You must trade a set number of lots before the bonus, and sometimes your own profits, can be withdrawn.
2. Bonus as margin, not money. The bonus props up your margin but disappears if you withdraw anything, which can trigger a stop-out on open positions.
3. Cancellation clauses. Withdrawing before meeting the conditions forfeits the bonus and sometimes the profits made with it.
4. Expiry dates that reset your progress.

A worked example

You deposit 1,000 dollars and receive a 1,000-dollar bonus. Conditions: trade 40 standard lots before withdrawing. On gold at a 3-pip spread, 40 lots costs about 1,200 dollars in spread alone. The bonus pays for the turnover it requires, and the turnover is likely to cost you more than that.

What to read before accepting any bonus

• Can I withdraw my own deposit at any time without losing anything except the bonus?
• What volume is required, and over what period?
• Does the bonus count towards margin, and what happens to open positions if it is removed?
• Which company offers it, and which regulator? See which company holds your account.

Questions traders ask

Are all bonus brokers scams? No. But bonuses are only offered by entities outside the strictest regulatory regimes, and bonus terms are a common source of withdrawal disputes.

Can I decline a bonus? Usually yes, and if you plan to withdraw freely it is often the better choice.

Do rebates and cashback count? Volume-based cashback is also an inducement to trade and is restricted for retail CFD clients in the UK, EU and Australia.