Brokers Are High-Risk Because of Reversal, Not Solvency
A licensed forex or CFD broker is a regulated financial firm, frequently better capitalised and more heavily supervised than the merchants a bank onboards without discussion. It is still classified high-risk, and the reason is arithmetic rather than prejudice: most retail clients lose money, and a losing client has a route to reverse the payment.
The published figures are consistent across supervisors. ESMA found 74–89% of retail CFD accounts loss-making in the work behind its 2018 intervention measures.[1] The UK FCA put the share at approximately 80% in December 2022, and the Australian ASIC found that 68% of retail CFD investors lost money in the 2024 financial year.[2]
Two further factors compound it. Deposits are frequently funded by card, which imports the full chargeback right into a product where the client may later regret the outcome. And the sector carries a legacy: the unlicensed and offshore-only operators that dominated the market a decade ago trained acquirers to treat the whole category as suspect, which licensed brokers still pay for at boarding.
Client Money Is the Structural Requirement
Client money segregation is the defining banking requirement for a broker, and it is a harder placement than the operating account. The funds are held for clients, must be legally isolated from the firm’s own assets, and must sit at institutions the regulator will accept.
Under the FCA’s client assets regime, client money is held in trust in segregated accounts at approved institutions, with daily reconciliation and defined diversification expectations.[3] CySEC applies the MiFID II safeguarding rules through its Directive DI87-01: a Cyprus investment firm places client funds, separately from its own, with a central bank, a credit institution, a third-country bank, or a qualifying money-market fund.[4] In Australia, the Corporations Act client money provisions that ASIC administers require client money to be held on trust in an account with an authorised deposit-taking institution, an approved foreign bank, a cash management trust, or a cash common fund.[9]
For a UK firm within FCA CASS 7, the banking consequence is specific: client money must be placed with a central bank, CRD credit institution, authorised third-country bank, or qualifying money-market fund. An EMI is not one of CASS 7.13.3R’s listed institutions, and the Cyprus and Australian lists above leave EMIs out as well; any other broker regime’s client-money rule must be checked on its own terms.
The Licence Decides Whether a Client-Money Account Is Available at All
| Licence | Bank and EMI appetite | Card acquiring | Practical constraint |
|---|---|---|---|
| FCA (UK) | Broad for operating accounts; client money only at CASS 7.13.3R institutions | Available | Leverage caps and negative balance protection; strict promotion rules |
| CySEC (Cyprus) | Broad within EEA; MiFID II passport | Available | Cypriot bank onboarding for a licensed forex broker requires a case-specific assessment; the ordinary-company 4–8-week estimate is not a broker timeline. Correspondent USD access is a separate constraint. |
| ASIC (Australia) | Broad domestically | Available, narrower panel offshore | Product intervention order on retail CFDs |
| Other EEA (BaFin, CNMV, CONSOB) | Broad; same passport | Available | Local conduct rules layered on MiFID II |
| Offshore-only (SVG registration; Vanuatu licence; Comoros private certificate) | Restricted; tier-1 declines | Specialist processors only | Scheme and acquirer treatment depends on actual activity and licensing evidence |
Merchant category code and scheme treatment affect the economics, not merely the paperwork. Visa’s merchant data standards place licensed foreign-exchange trading under MCC 6211 (Security Brokers/Dealers), which covers merchants licensed in every jurisdiction they sell into and which Visa lists as high-integrity-risk for card-absent trading platforms; unlicensed foreign-exchange trading and binary options belong under MCC 7995, the betting code.[5] Mastercard requires acquirers to register merchants offering CFDs or forex options as high-risk securities merchants under MCC 6211, with a copy of the licence for each country where the trading is offered.[8] The acquirer applies these rules to the merchant’s actual activity and licensing evidence.
Product rules also feed the dispute ratio directly. ESMA’s intervention measures, made permanent in national regimes across the EEA, cap retail leverage by asset class and require negative balance protection, alongside standardised risk warnings.[1] A broker operating inside those limits produces fewer catastrophic client outcomes, and fewer catastrophic outcomes is what an acquirer is buying.
Funding and Withdrawal Rails Decide Durability More Than the Institution
Deposit and withdrawal design does more to determine a broker’s banking durability than the choice of institution. The objective is to reduce the share of funding that carries a reversal right, without damaging conversion.
Card deposits convert best and cost most in risk terms, because the chargeback right travels with them for the full dispute window. Account-to-account payments under open banking settle without a chargeback right in most implementations and are well suited to a funded-account model where the client is already verified. Bank transfer suits larger initial deposits. Local methods dominate their home markets and frequently outperform cards outright.
On withdrawals, the operative rule is return to source. Sending funds back to the instrument they arrived on is both an anti-money-laundering control and one of the most effective chargeback defences available, because it removes the client’s claim that the money was not returned. It also means the payout stack has to reach every rail the deposit stack accepts, which brokers commonly discover after building the deposit side alone.
Strong Customer Authentication matters for deposits in the EEA and UK: under PSD2 and the UK Payment Services Regulations, a payee or its payment service provider that does not accept it where it is required must compensate the issuer for the resulting losses.[6] For brokers, over-applying exemptions to protect deposit conversion is a false economy: it moves liability back precisely on the transactions most likely to be disputed later.
What Broker Banking and Acquiring Costs
| Component | Licensed (FCA, CySEC, ASIC, EEA) | Offshore-only |
|---|---|---|
| Card discount rate | 4–8% | 8–12% |
| Rolling reserve | 5–10% held 180 days | 10–20% held 180 days or more |
| Client-money bank account | Available; 8–16 weeks onboarding | Rarely available at a credit institution |
| Operating EMI | €100–€500 monthly | €500–€1,000+ monthly |
| Chargeback fee | €25–€50 | €30–€50 |
Ranges are indicative across the partner network as of and move with processing history and client mix, and above all with the dispute ratio. As in gambling, the licensing delta dominates: the same broker under a recognised licence moves from the right-hand column to the left one, and the client-money account becomes available at all rather than merely cheaper.
Through the placement model the pricing on the broker’s agreements is the institutional rate. Jagelski & Partners is paid by the institution, not by the client, and does not mark up banking or acquiring pricing.
How Jagelski & Partners Helps
Broker placement is sequenced around the client-money account, because it is the slowest and most selective component and everything else can be arranged in parallel with it. Jagelski & Partners scopes the client-money, operating, treasury, and acquiring requirements in writing and introduces an independent specialist. The specialist assesses which institutions have appetite for the firm’s regulatory status and client-money structure and carries out the placement; each institution decides whether to accept the application. The written scope also covers the parts of the file acquirers actually price: merchant category code and whether it survives review, licensing sufficiency for every market served, deposit and withdrawal rail mix, return-to-source policy, and the fraud and dispute controls that keep the ratio clear of Visa’s merchant Excessive threshold under its Acquirer Monitoring Programme (1.5% in the AP, Canada, EU, and US regions from , already 1.5% in LAC, and 2.2% in CEMEA).[7] These Visa merchant thresholds apply where the acquirer is neither Above Standard nor Excessive; Visa’s public fact sheet excludes Brazil, Chile, and India; their programmes are announced separately. Monthly floors are 1,500 fraud-and-dispute events, or in CEMEA at least 150 events and USD 75,000. Licensing pathways themselves are covered on the forex broker licensing page.
What we do not do. We do not scope or introduce brokers for markets they are not licensed for, and our written scope never presents trading activity under a merchant category code that misdescribes it. Both are terminable at scheme level.
Frequently Asked Questions
Because the risk to an acquirer is reversal, not solvency. Regulators require brokers to publish the share of their own retail accounts that lose money, and supervisors’ studies put that share at roughly 68% to 89% across major regimes: ESMA found 74–89% of retail CFD accounts loss-making, the FCA put it at approximately 80% in December 2022, and ASIC found 68% in FY2024. Those figures are regulatory risk warnings. Card-funded deposits separately import the full chargeback right into the transaction.
For a UK firm within FCA CASS 7, client money must be placed with the institutions listed in CASS 7.13.3R; an EMI is not one of them, nor of the MiFID II list that CySEC applies or the Australian one. Any other broker regime must be checked on its own rule.
Operating accounts, payouts and treasury can run through EMIs. A CASS 7 broker needs a client-money institution that meets the rule’s listed categories.
The client-money bank account. It is the slowest component, typically 8 to 16 weeks, and has the shortest list of willing counterparties, while operating accounts, treasury and acquiring can all be arranged in parallel around it.
Brokers who solve operating banking first and treat client money as an afterthought discover the constraint at the worst point in the launch schedule, because the regulator will not accept the structure without it.
By activity and licence status, under the acquirer’s current scheme rules. Visa places licensed foreign-exchange trading under MCC 6211 (Security Brokers/Dealers), for merchants licensed in every jurisdiction they sell into, and unlicensed foreign-exchange trading or binary options under MCC 7995, the betting code. Mastercard requires acquirers to register CFD and forex-options merchants as high-risk securities merchants under MCC 6211, with the licence for each country served.
FCA, CySEC, ASIC, and the EEA regimes all open broad bank, EMI, and acquiring markets, with CySEC and the EEA licences carrying the MiFID II passport. The differences between them are conduct rules and onboarding speed rather than banking appetite.
Offshore registrations in Saint Vincent (whose FSA does not license forex activity at all) and offshore-only licences from Vanuatu, or private Comoros (Anjouan) certificates that are not licences at all, are the sharp break: tier-1 institutions decline, acquiring runs through specialist processors, and a client-money account at a credit institution is rarely available at all.
Directly, through the dispute ratio. ESMA’s intervention measures, now permanent in national EEA regimes, cap retail leverage by asset class, require negative balance protection, and mandate standardised risk warnings.
A broker operating inside those limits produces fewer catastrophic client outcomes, and fewer catastrophic outcomes is what an acquirer is buying. Brokers offering uncapped leverage to retail clients in regulated markets present the opposite profile and are priced accordingly.
It means sending withdrawals back to the instrument the deposit arrived on. It is an anti-money-laundering control and simultaneously one of the most effective chargeback defences available, because it removes the client’s claim that funds were not returned.
The design consequence is that the payout stack has to reach every rail the deposit stack accepts, which brokers commonly discover after building the deposit side alone.
For a licensed broker, card rates run 4–8% with rolling reserves of 5–10% held 180 days, operating EMI maintenance of €100–€500 a month, and chargeback fees of €25–€50. The client-money bank account is available with 8 to 16 week onboarding.
For offshore-only licences, card rates run 8–12% with reserves of 10–20%, and a client-money account at a credit institution is rarely available. Ranges are indicative across the partner network as of June 2026.
Usually, and the first step is diagnosis rather than placement. A scheme-level exclusion cannot be documented around; an acquirer decline on dispute ratio is a controls and structure problem; a PSP decline often means only that its panel does not cover the vertical.
Terminated merchants can carry a listing in Mastercard’s MATCH Pro system for five years,[8] which narrows the acquirer set sharply, so the assessment establishes which route is realistic before any new application is made.
No. Jagelski & Partners is paid by the institution that takes the business, through a referral or revenue-share arrangement, not by a fee billed to the client. The pricing on the broker’s agreements is the institutional rate, with no markup and no onboarding fee.
Ready to Place Client Money and Acquiring That Hold?
Send a written brief for an assessment. We pre-qualify credit institutions against the firm’s regulatory status and client-money structure, then introduce an independent specialist for operating and treasury accounts and acquiring. You contract directly with that specialist. No markup on institutional pricing. No onboarding fee.
References
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- European Securities and Markets Authority, Decision (EU) 2018/796 temporarily restricting contracts for differences for retail clients (2018, product intervention under Article 40 of Regulation (EU) No 600/2014) and press release of , citing NCA analyses finding 74–89% of retail CFD accounts loss-making; leverage caps by asset class, negative balance protection, and standardised risk warnings, subsequently made permanent in national EEA regimes, esma.europa.eu, accessed .
- Financial Conduct Authority, press release FCA highlights continuing concerns about problem firms in the CFD sector (): approximately 80% of customers lose money when investing in CFDs, fca.org.uk, accessed ; Australian Securities and Investments Commission, REP 828 Risky business: Driving change in CFD issuers’ distribution practices and media release 26-004MR (January 2026), finding 68% of retail CFD investors lost money in FY2024, asic.gov.au, accessed .
- Financial Conduct Authority, Client Assets Sourcebook (CASS) 7, client money segregation (the CASS 7.13.3R institutions and the 20% group-entity limit in CASS 7.13.20R), daily internal reconciliation (CASS 7.15.15R), and the statutory trust (CASS 7.17.2R), handbook.fca.org.uk CASS, accessed .
- European Union, Directive 2014/65/EU (MiFID II) and Commission Delegated Directive (EU) 2017/593, Article 4(1) (client funds placed with a central bank, a credit institution, a third-country bank, or a qualifying money market fund), eur-lex.europa.eu; Cyprus Securities and Exchange Commission, Directive DI87-01 for the safeguarding of financial instruments and funds belonging to clients (unofficial consolidation with DI87-01(A) of 2022, Greek only), paragraph 6(1), cysec.gov.cy, accessed .
- Visa Inc., Visa Merchant Data Standards Manual (April 2026 edition), high-integrity-risk MCC list (MCC 6211 for card-absent financial trading platforms) and the MCC 6211 and 7995 definitions (licensed foreign-exchange trading under 6211; unlicensed foreign-exchange trading or binary options under 7995), usa.visa.com, accessed .
- European Union, Commission Delegated Regulation (EU) 2018/389 (regulatory technical standards on strong customer authentication under PSD2), including the exemption regime (the loss allocation where strong customer authentication is not required or not accepted sits in PSD2 itself, Directive (EU) 2015/2366 Article 74(2); UK equivalent: Payment Services Regulations 2017, regulation 77(6)), SCA RTS; PSD2 Article 74(2), accessed .
- Visa Inc., Visa Acquirer Monitoring Programme (VAMP) Fact Sheet (2025); merchant Excessive threshold 150 basis points in AP, Canada, the EU, and the US from , CEMEA retained at 220 basis points and LAC at 150; monthly floor of 1,500 fraud and dispute counts (CEMEA 150 and USD 75,000); acquirer Above Standard 0.50% and Excessive 0.70%, corporate.visa.com, accessed .
- Mastercard Inc., Security Rules and Procedures—Merchant Edition (), section 9.4.8 (high-risk securities merchants: acquirers register merchants offering CFDs or forex options, code them MCC 6211, and hold the licence for each country where trading is offered) and section 11.10 (MATCH Pro records kept for five years before automatic purge), mastercard.com, accessed .
- Australian Securities and Investments Commission, RG 212 Client money relating to dealing in OTC derivatives (April 2018), RG 212.6–212.7: client money held on trust in an account with an Australian authorised deposit-taking institution, an approved foreign bank, a cash management trust, or a cash common fund under Part 7.8 Division 2 of the Corporations Act 2001 (s981B), asic.gov.au, accessed .