CASS 7: how a UK CFD broker segregates client money

The Financial Conduct Authority's (FCA) CASS 7 requires a UK contracts-for-difference (CFD) broker to segregate client money from the firm's own cash, on terms the United States and Australia express through different statutes. The segregation rule is already in force; an instrument that takes effect on 25 October 2027 adjusts who sits inside the chapter and does not replace the client-bank-account requirement.

The receipt rule is CASS 7.13.6R in the September 2026 Client Assets sourcebook. Under the normal approach, client money goes straight into a client bank account, not into the firm's own account first. CASS 7.11.1R bars a title transfer collateral arrangement (TTCA) over a retail client's money, and one made before 3 January 2018 had to end. This explainer covers who the chapter catches, the daily reconciliation and the 20% group-entity cap, where US futures rules and the Australian regime differ, the 25 May 2010 J.P.Morgan Securities Ltd notice, and the 25 October 2027 instrument. Money that never reaches an authorised firm, as in an unregistered forex pool, stays outside the chapter.

Key facts

• CASS 7.10.1R applies where a firm holds client money in Markets in Financial Instruments Directive (MiFID) business and/or designated investment business (September 2026 sourcebook).
• CASS 7.11.1R bars a retail TTCA. An arrangement entered before 3 January 2018 had to be terminated. A non-retail TTCA means the money is not client money.
• CASS 7.13.6R pays client money directly into a client bank account at a central bank, a Capital Requirements Directive (CRD) credit institution, or a third-country bank.
• CASS 7.13.20R caps funds with a relevant group entity, or a combination of them, at 20% of client money held under CASS 7.13.3R.
• J.P.Morgan Securities Ltd, Financial Services Authority (FSA) Final Notice 25 May 2010, reference 155240: £33.32 million for unsegregated futures and options client money from 1 November 2002 to 8 July 2009, under predecessor rules.
• FCA release, 21 May 2025: 2,799 permissions to hold and control client money as of 1 April 2025. The integer 197,350,838,012 is printed with no unit, so it is not turned into a sterling total.

Methodology and sources

Primary text is the FCA Client Assets sourcebook, last updated in September 2026, in the CASS PDF and on the pages for CASS 7 and CASS 7.13. Comparison uses 17 CFR 1.20 on the Electronic Code of Federal Regulations as of 5 October 2026, Australian Securities and Investments Commission (ASIC) Regulatory Guide 212 of 4 April 2018, media release 18-089MR, and CFTC Release 8443-21 of 6 October 2021. The penalty is the J.P.Morgan Securities Ltd final notice. The forward view is FCA 2026/43, made on 25 June 2026 and in force on 25 October 2027. Permissions come from the FCA release of 21 May 2025. Scope is UK CFD client money, beside US futures customer funds and Australian derivative retail client money. The 2010 penalty used predecessor rules, not today's CASS 7.13 numbers. The unlabelled integer is not a sterling sum, and 2,799 is not a CFD-sector census. No page opened here states a Financial Services Compensation Scheme limit.

Related:Regulation CTX would route a leverage offer onto a DCM

What CASS 7 requires of a UK CFD broker

CASS 7.10.1R covers money a firm receives or holds in MiFID business, designated investment business, or specified ISA business. A non-bank CFD broker taking retail margin is inside it. CASS 7.10.16R is the exclusion a broker cannot use: a CRD deposit held by a CRD credit institution, or money an approved bank holds with itself, is not client money, and CASS 7.10.19R tells that bank's client the money is held as banker, not trustee.

CASS 7.10.8R switches off the professional-client opt-out for MiFID business. Where CASS 7.10.10R applies, the firm needs a written acknowledgement that the money will be used in the firm's own business and the client will rank as a general creditor. That is a different test from a knowledge-and-wealth gate. CASS 7.11.1R(3) bans a new retail TTCA and required pre-3 January 2018 retail TTCAs to end.

CASS 7 requires a UK contracts-for-difference broker that receives retail margin in connection with designated investment business to treat that money as client money and keep it out of the firm's own account. CASS 7.11.1R, which deals with arrangements before 3 January 2018, forbids a title transfer collateral arrangement over a retail client's money and required earlier retail arrangements to be terminated. The normal approach in CASS 7.13.6R pays client money directly into a client bank account at a central bank, a CRD credit institution or a third-country bank, rather than into the firm's own account first. Because the book is margined, CASS 7.16.11R bars net negative add-back as a standard method, so the firm uses the individual client balance method in CASS 7.16.16R. Each business day it reconciles under CASS 7.15.15R and, if there is a shortfall, pays that shortfall into a client bank account by close of business that day under CASS 7.15.29R.

CASS 7.13.3R also allows a qualifying money market fund. The normal approach still uses a client bank account at one of the first three, kept separate from the firm's own money (CASS 7.13.12R). Withdrawal is within one business day, or up to 30 days, or 31 to 95 days where CASS 7.13.14AR is met (CASS 7.13.13R). Section 137B(1) of the Financial Services and Markets Act 2000 supports a trust in England, Wales and Northern Ireland, or agency in Scotland. CASS 7.17.5G bars pre-funding one client with another's money.

External reconciliation is at least monthly (CASS 7.15.22R). A daily external check is guidance in CASS 7.15.25G, not the rule. Before a non-standard method, CASS 7.15.18R requires FCA notice and an auditor's reasonable-assurance report. CASS 7.18.2R bars client money until the bank countersigns, and CASS 7.18.6R leaves the letter's fixed text intact.

How the UK, the United States and Australia split the same risk

The 20% figure in CASS 7.13.20R caps client money held with a relevant group entity, or a combination of them, against the total held under CASS 7.13.3R. CASS 7.13.21R defines that entity as a CRD credit institution, a third-country bank, a qualifying money market fund, or the fund's operator, inside the firm's group. It is not a 20% ceiling on an unrelated bank. CASS 7.13.21AR allows a carve-out only where the cap is not proportionate given a small balance, the firm's scale and the third parties' safety, and the firm must notify the FCA. In the United States, 17 CFR 1.20(h) requires bank deposits of futures customer funds to be withdrawable on demand. In Australia, regulation 7.8.02A(1), as Regulatory Guide 212.32 explains it, bars withdrawal of derivative retail client money for use as the licensee's working capital.

Sources: FCA CASS sourcebook, September 2026; FSA Final Notice, 25 May 2010; 17 CFR 1.20; CFTC Release 8443-21; ASIC Regulatory Guide 212. Last updated: 7 October 2026.

Release 8443-21 does not cite 17 CFR 1.20(g)(4). It records six accounts opened from 17 February 2015 to 12 August 2019 without acknowledgment letters, two holding more than $500 million at one time. A designated contract market is a separate question, and a CFTC no-action letter for UK swaps does not segregate CFD margin. Regulatory Guide 212.7 puts Australian client money on trust under section 981H.

"The FSA has repeatedly emphasised the importance of ensuring that client money is adequately protected. Despite being one of the largest holders of client money in the UK, JP Morgan Securities failed to do so."

— Margaret Cole, director of enforcement and financial crime, Financial Services Authority (The Independent, reporting the 2010 notice)

What the J.P.Morgan Securities notice still shows

The anchoring penalty is the FSA final notice to J.P.Morgan Securities Ltd, reference 155240, dated 25 May 2010. From 1 November 2002 to 8 July 2009 the firm's futures and options client money was not in a segregated trust account at JPMorgan Chase Bank N.A. The unsegregated sum ran from US $1.96 billion to US $23 billion, averaging about US $8.55 billion. The penalty was £33.32 million under section 206 of the Financial Services and Markets Act 2000. The decision notice was dated 24 May 2010, and the firm did not refer the case to the Upper Tribunal. Before the stage one discount, the sum was 1% of that average.

The named rules were COB 9.3.37R, then CASS 4.3.3R, then CASS 7.4.11R from 1 November 2007. They are not today's CASS 7.13. The notice quotes Principle 10: "A firm must arrange adequate protection for clients' assets when it is responsible for them." On a failure those clients would have been unsecured creditors. The breach was not deliberate. The firm reported it and repaired the segregation. Clients lost nothing. From 23 March 2007 a JPMorgan Chase Bank N.A. guarantee covered client obligations. The FSA said that guarantee was not a substitute for segregation, even if it reduced the damage.

What this means for CFD brokers, clearing firms and compliance teams

A UK CFD broker, and an introducing broker that receives retail margin as an FCA firm, uses the same order. The acknowledgement letter is countersigned before money sits in the client bank account. CASS 7.15.29R moves a shortfall in, or an excess out, on the day of the internal reconciliation. There is no retail TTCA. Retail interest waits on both limbs of CASS 7.11.32R. Group deposits stay inside 20% unless CASS 7.13.21AR is notified. Futures customer funds under 17 CFR 1.20 are a different pool.

An exchange, clearing house or crypto-asset service provider is inside CASS 7 only where the chapter says so. CASS 7.14.2R lets an exchange, clearing house or intermediate broker hold client money for a transaction or collateral, with notice to a retail client. The crypto-asset label alone does not create a CASS 7.10.1R duty.

A fund manager meets a different sum. CASS 7.16.11R allows net negative add-back, as a standard method, only for a CASS 7 asset manager or loan-based crowdfunding firm with no margined transactions. After failure, distribution is CASS 7A. CASS 7A.2.2R treats the firm's failure as a primary pooling event, with section 55P assets requirements, a stop on holding all client money, and a CASS 7.15.33R notice of a secondary pooling event, subject to CASS 7A.2.3R. The trust does not insure the bank. CASS 7.13.11G points to overseas deposit schemes. No sterling cap was on the pages used here.

The compliance file holds countersigned letters for five years after the account closes (CASS 7.18.10R), any non-retail TTCA, and the CASS 7.13.55R papers if the alternative approach is used. Firm type is notified by the 15th business day of January (CASS 1A.2.9R). CASS 1A.2.7R puts a large firm above £1 billion of client money or £100 billion of safe custody assets. CASS 7.15.2R is the record test: one client's money can be separated, at any time and without delay, from another's and from the firm's.

"ASIC has engaged with industry and there has been a sufficient transition period to ensure that AFS licensees that hold derivative retail client money are aware of the new regime and understand the obligations it imposes. From 4 April 2018, we expect licensees to know and comply with the new client money regime."

— Cathie Armour, Commissioner, Australian Securities and Investments Commission (ASIC media release 18-089MR, 4 April 2018)

Armour states the case for a transition, then compliance. The UK record states the limits. The 2010 notice found no intent and no client loss, and still imposed £33.32 million rather than treat a parent guarantee as segregation. CASS 7.13.54G allows another approach where the normal one creates operational risk. CASS 7.11.1R still permits title transfer for a non-retail client. A client bank account does not remove the bank's failure.

What changes on 25 October 2027, and what does not

The dated instrument is FCA 2026/43, made by Board order on 25 June 2026 and in force on 25 October 2027. It carves issuing a qualifying stablecoin out of the CASS 7.10.1R(2) limb, and new CASS 7.10.8AR disapplies CASS 7.10.9G to CASS 7.10.15G where the designated investment business is qualifying cryptoasset activity. The alternative-approach example in CASS 7.13.54G(1) will refer to currencies or classes of cryptoasset, not only currencies. CASS 1.2.11R will keep CASS 16 money out of accounts used for another listed chapter, and CASS 15 funds out of accounts used for any other chapter. CASS 7.14 is also amended for money arising from safeguarding client cryptoassets.

The instrument does not repeal CASS 7.13.6R, the 20% cap, the retail TTCA ban, the individual client balance method, or the acknowledgement letter. The CASS 7.13 page already shows a future version of 25 October 2027. No consultation rewriting those mechanics before that date turned up in the documents opened here. CASS 7.11.32R and CASS 7.13.14AR are already in the September 2026 text. Retail CFD margin stays client money, paid to a client bank account under the normal approach and reconciled each business day. A group deposit, a parent guarantee, or a retail title transfer is not a substitute. The failure the chapter already defines is a primary pooling event under CASS 7A.2.2R.

TL;DR

CASS 7 applies when a UK CFD broker holds client money in MiFID or designated investment business. CASS 7.13.6R pays that money straight into a client bank account, on statutory trust, with an internal reconciliation each business day and a same-day top-up under CASS 7.15.29R. A retail TTCA is barred. CASS 7.13.20R caps a group entity at 20%. The account does not insure the deposit bank. On 25 May 2010 the FSA fined J.P.Morgan Securities Ltd £33.32 million under predecessor rules, on an average unsegregated balance of about US $8.55 billion. The FCA's 21 May 2025 release recorded 2,799 permissions to hold and control client money as of 1 April 2025. FCA 2026/43, in force on 25 October 2027, narrows the edge of the chapter and leaves the client bank account in place.

FAQ

Does CASS 7 allow a retail CFD client to opt out of segregation?

No. CASS 7.11.1R bars a title transfer collateral arrangement over a retail client's money, and one made before 3 January 2018 had to end. A TTCA takes money outside the pool only for a non-retail client. The professional opt-out in CASS 7.10.10R needs a written acknowledgement that the firm will use the money in its own business, and CASS 7.10.8R turns that opt-out off for MiFID business.

Is the 20% rule a cap on every bank a broker uses?

No. CASS 7.13.20R limits money at a relevant group entity, or a combination of them, to 20% of client money held under CASS 7.13.3R. CASS 7.13.21R defines the entity as a group CRD credit institution, third-country bank, qualifying money market fund, or the fund's operator. An unrelated bank is outside that percentage. CASS 7.13.8R still requires due skill, care and diligence, including diversification, for every bank. A carve-out exists only under CASS 7.13.21AR, and the firm must notify the FCA.

How often must the broker reconcile client money?

Internal reconciliation is each business day, on the previous close, under CASS 7.15.15R. CASS 7.15.29R pays a shortfall into a client bank account by the close of that day and withdraws an excess in the same window. External reconciliation is separate. CASS 7.15.22R requires it at least monthly. CASS 7.15.25G says daily transactors should in most circumstances also reconcile externally each business day. That daily external step is guidance. The monthly outside check is the rule.

Does a segregated account remove the risk that the bank fails?

It addresses the firm's failure, not the bank's. CASS 7.17 holds the money on trust, and CASS 7A.2.2R treats the firm's failure as a primary pooling event, so clients claim on the pool rather than as unsecured creditors. The rules do not make the deposit good if the bank fails. CASS 7.13.11G tells the firm to weigh deposit-protection schemes for a bank incorporated outside the UK. No compensation figure was on the pages used here.

Was the £33.32 million penalty decided under today's CASS 7.13?

No. The FSA notice of 25 May 2010, reference 155240, fined J.P.Morgan Securities Ltd £33.32 million for 1 November 2002 to 8 July 2009 under Principle 10 and the client money rules then in force: COB 9.3.37R, then CASS 4.3.3R, then CASS 7.4.11R. The average unsegregated balance was about US $8.55 billion. A JPMorgan Chase Bank N.A. guarantee from 23 March 2007 was not, the notice says, an acceptable alternative to segregation. The case shows the stakes. It does not construe today's section numbers.

This article is informational analysis only and does not constitute legal, regulatory, tax, or investment advice. Regulatory frameworks change frequently and interpretation depends on facts and circumstances; primary documents and official regulator guidance always supersede summaries. Firms should consult qualified legal counsel and their relevant supervisory authority before taking any action based on the analysis above.