The live United Kingdom rule change for retail leveraged trading is not a leverage consultation. It is CP26/23, the Financial Conduct Authority (FCA) proposal published on June 29, 2026 that would limit the Consumer Duty to retail customers usually resident in the UK — splitting every FCA-authorised contracts for difference (CFD) book into a protected domestic half and an unprotected offshore half from Q1 2027.

The FCA is consulting until Friday, September 18, 2026 on removing business with non-UK customers from the scope of the Consumer Duty, with final rules expected in the first quarter of 2027 (CP26/23, Consumer Duty: scope and proportionality). The FCA’s own cost-benefit analysis counts 92 CFD providers among roughly 36,000 firms the Duty reaches. This analysis covers what CP26/23 changes, why the leverage caps in COBS 22.5 are not the live question, how five jurisdictions bind retail derivatives rules to client location, and what the carve-out does to the cost lines the FCA itself flagged nine months ago.

Key facts

• CP26/23 published June 29, 2026; closes September 18, 2026; policy statement and final rules expected Q1 2027 (FCA).
• 92 CFD providers sit in the FCA’s own firm population for the cost-benefit analysis, inside a Wholesale Financial Markets bucket of 1,157 firms (CP26/23, Annex 2, Table 2).
• One-off cost of £35.6 million to £106.0 million, central estimate £92.1 million, across approximately 36,000 firms in scope (CP26/23, Annex 2, paragraphs 6 and 17).
• Overseas consumers are excluded from the FCA’s own arithmetic: “We do not consider costs and benefits relating to non-UK consumers in this cost benefit analysis” (CP26/23, Annex 2, paragraph 64).
• November 13, 2025: the FCA’s multi-firm review of CFD providers’ provision of price and value surveyed around 25% of regulated CFD manufacturers and distributors and found overnight funding applied per position “with no offset allowed where retail clients hold long (buy) and short (sell) positions”.
• Leverage is settled, not live: caps of 30:1 to 2:1, 50% margin close-out and negative balance protection took effect on August 1, 2019 for CFDs and September 1, 2019 for CFD-like options under PS19/18, which projected retail savings of £267 million to £451 million a year.
• Enforcement is current: Dinosaur Merchant Bank Limited was fined £338,000 by Final Notice dated March 24, 2026 over surveillance failures affecting 2,194 CFD trades with a notional value of $3.05 billion.

Methodology and sources

This analysis rests on primary FCA documents rather than secondary commentary: CP26/23 read in full including Annex 2; the FCA press release of June 29, 2026; the multi-firm review of CFD providers’ price and value of November 13, 2025; PS19/18 and the resulting COBS 22.5 rules; and the Final Notice issued to Dinosaur Merchant Bank Limited dated March 24, 2026. Firm-level figures come from the providers’ own published results. Comparative material comes from Article 42 of the Markets in Financial Instruments Regulation (MiFIR), BaFin’s General Administrative Act on CFDs, and the Australian Securities and Investments Commission (ASIC) product intervention order.

The window is July 2019 to August 18, 2026; jurisdictional scope is the UK, European Union, Australia, Japan and the United States. Two caveats. CP26/23 is a consultation — nothing in it is law, and the draft Handbook text at Appendix 2 can change. And this piece deliberately does not treat the 2018–19 CFD leverage consultation as live; it closed seven years ago.

What CP26/23 actually proposes

The Consumer Duty sits in PRIN 2A of the FCA Handbook and has applied to open products since July 31, 2023, requiring firms to deliver good outcomes on products and services, price and value, consumer understanding and consumer support. CP26/23 does not touch those four outcomes. It changes who counts as a customer.

Chapter 2 proposes to “limit the Duty to retail market business where the retail customer is usually resident in the UK, based on the customer’s residential address or, where the customer is not an individual, the place of establishment”. Three consequences follow. The Duty will not apply to a firm conducting business wholly for customers outside the UK. Where a product is sold both inside and outside the UK, firms must comply only in relation to customers usually resident in the UK. And firms may still apply Duty processes more widely, but will not be required to “design products to take account of specific needs, characteristics and objectives of customers outside the UK, to test non-UK customers’ understanding of disclosure material, or to monitor outcomes for customers outside the UK”. The carve-out is not absolute: Crown servants posted overseas, pre-paid UK funeral plans and UK pension activities stay in scope. There is no CFD equivalent on that list.

The residence test is a distributor test, not a marketing test. Manufacturers must reflect an intended non-UK target market in their distribution strategies; distributors “should know the customer’s address” and should use it, “unless there is any reason to believe otherwise”. If a product not intended for UK retail customers reaches them anyway, the firm must review and potentially amend its distribution strategy, review the affected transactions under the cross-cutting rules, and mitigate identified harm. For a broker running one platform, one price feed and one onboarding funnel across dozens of countries, that converts a single compliance population into two, keyed on a client-record field previously used for tax reporting and sanctions screening rather than product governance.

Why the leverage caps are not the live question

UK retail leverage has not been under consultation since 2019. PS19/18 made the European Securities and Markets Authority’s temporary measures permanent in UK law: leverage of 30:1 to 2:1 depending on the volatility of the underlying, close-out at 50% of the margin needed to maintain open positions, negative balance protection, a ban on cash and other inducements, and a standardised risk warning stating the percentage of the firm’s retail accounts that lose money. Those rules took effect on August 1, 2019 and now sit in COBS 22.5. Nothing in the FCA’s 2026 programme reopens them, and the separate prohibition on retail cryptoasset derivatives in COBS 22.6 remains in force despite the October 2025 decision to admit retail investors to crypto exchange traded notes.

What has moved is the conduct layer above the product rules. Supervisory pressure on CFD firms since 2023 has come almost entirely through the Consumer Duty’s price and value outcome, not through COBS 22.5. That is the layer CP26/23 rescopes — which is why a consultation with no CFD chapter is the most consequential UK retail-derivatives proposal currently open. It belongs to the same deregulatory wave as the FCA’s decision to drop FX derivatives from UK transaction reporting by 2028 and its refusal to copy the EU’s crypto rulebook.

How five jurisdictions bind retail rules to client location

Jurisdiction / regulator	Effective date	Retail leverage cap	Territorial hook	Penalty / sanction
UK (FCA)	August 1, 2019 (CFDs); September 1, 2019 (CFD-like options)	30:1 to 2:1, COBS 22.5	COBS reaches cross-border business by UK firms; CP26/23 would limit PRIN 2A to customers usually resident in the UK from Q1 2027	Penalty under section 206 FSMA 2000 — £338,000 imposed on Dinosaur Merchant Bank Limited, March 24, 2026
EU (national authorities under Article 42 MiFIR, e.g. BaFin)	August 1, 2019 (BaFin General Administrative Act on CFDs)	30:1 to 2:1, mirroring the lapsed ESMA measures	Article 42(1) MiFIR bites on marketing, distribution or sale “in or from that Member State” — the seat of the firm, not the client’s residence	Fines of at least €5 million or up to 10% of total annual turnover under Article 70(6) of MiFID II
Australia (ASIC)	March 29, 2021; extended without amendment to May 23, 2027	30:1 to 2:1, plus standardised close-out and negative balance protection	Product intervention order under Part 7.9A of the Corporations Act 2001, covering issue and distribution to retail clients	Civil and criminal liability for contravening a product intervention order (ASIC media release 22-082MR)
Japan (JFSA / FFAJ)	2011 (reduced from 50:1)	25:1 — a 4% margin requirement on retail FX margin trading	Applies to registered Type I financial instruments business operators dealing with customers in Japan	Administrative action under the Financial Instruments and Exchange Act, including business improvement orders
US (CFTC / NFA)	October 2010	50:1 on major pairs (2% margin); 20:1 on others (5% margin), with NFA setting specific levels	Retail forex rules attach to counterparties dealing with US persons; off-exchange retail CFDs on securities are not permitted	CFTC civil monetary penalties and registration sanctions; NFA member disciplinary action

Sources: FCA PS19/18 and COBS 22.5; Article 42 MiFIR and BaFin’s General Administrative Act of August 1, 2019; ASIC media release 22-082MR; Financial Futures Association of Japan leverage rules; CFTC retail forex final rules (2010). Last updated: August 18, 2026.

The comparison exposes an unusual UK position. Article 42(1) of MiFIR lets a national competent authority restrict the marketing, distribution or sale of an instrument “in or from that Member State” — wording that deliberately catches an EU-seated firm selling outward to clients anywhere, and the basis for BaFin’s General Administrative Act on CFDs of August 1, 2019. Australia’s order attaches to issue and distribution to retail clients under Part 7.9A of the Corporations Act 2001, and ASIC extended it without amendment to May 23, 2027 after finding it was working. Japan and the United States both anchor their caps to the domestic customer relationship. The UK proposal moves the other way: COBS 22.5 keeps its reach, while PRIN 2A retreats to UK residents only. Firms familiar with the gap between real offshore licensing regimes and paper ones will recognise the shape of it: the same trade, on the same server, priced by the same dealer, carries a different duty depending on the postcode on file.

“The Consumer Duty is helping deliver good outcomes and build confidence for retail consumers, but it was never intended to become a Wholesale Duty imposing on deals between sophisticated parties.”

— Simon Walls, Executive Director of Markets, Financial Conduct Authority (FCA press release, June 29, 2026)

Where the money is: funding, hedged positions and margin interest

The multi-firm review published on November 13, 2025 covered around 25% of regulated CFD manufacturers and distributors, from the largest providers to the smallest by retail client numbers and client money held. Its findings were specific. Most firms’ fair value assessments “gave only limited consideration to costs paid by consumers, other than those for executing trades”, relying on bid/offer spread comparisons, execution speeds and system performance. The FCA saw “wide variations in the effective interest rates paid by retail clients on overnight funding charges by different firms” without adequate justification, and firms “not fully disclosing these charges and the impact they could have on a CFD’s overall performance”. At the extreme, “some firms charged retail clients for overnight short positions when other providers would have applied a credit to the client’s account on the same position”.

Two findings go directly to margin economics. On hedged books, every firm surveyed allowed clients to hold equal and opposite positions in the same underlying, and applying overnight funding to both legs “appears standard industry practice”, with several firms citing platform constraints or hedge-counterparty pricing. The FCA’s verdict was blunt: “The costs of holding these hedged positions could be substantial as CFD clients are charged fully for gross open positions while having no actual net market risk exposure.” On client money, “most firms had considered offering interest on CFD accounts but had decided not to”, producing an asymmetry — clients “typically pay substantial interest to fund a long CFD position — charged on its full underlying consideration — [but] they receive no interest on their monies placed with firms as margin”. The FCA pointed firms to its 2023 Dear CEO letter on retention of client interest and to the COBS 22.5.20R financial incentives rule.

None of that is a rule change; all of it is supervisory expectation delivered through PRIN 2A. Strip PRIN 2A from the non-UK book and the review’s remediation list — annualised funding-rate disclosure, netting on hedged positions, a reasoned decision on paying interest on margin — becomes mandatory for one client population and optional for the other. The FCA’s cost-benefit annex is candid that it did not weigh this. The contrast with Brussels is sharp, given the EU has spent the same period building value-for-money benchmarks into the Retail Investment Strategy.

The size of the exposed book is measurable from the listed providers’ own filings, with one caveat: segment reporting is by booking geography rather than client residence, so these are indicative of the split rather than a precise measure of it. Plus500 disclosed United Kingdom revenue of $33.8 million out of $462.9 million total in the six months to June 30, 2026 — 7.3% of the group, with the rest spread across the European Economic Area, Australia and a “Rest of the World” line of $229.0 million. CMC Markets reported UK net operating income of £133.4 million out of £392.6 million for the year to March 31, 2026, and IG Group booked £213.3 million of £642.8 million total revenue to its UK and Ireland segment in the six months to June 30, 2026. On those proportions, the Duty would continue to bite on roughly a third of the two UK-listed brokers’ revenue base and well under a tenth of Plus500’s.

The interest question is already moving without a rule. IG reported net interest income of £54.0 million in the six months to June 30, 2026, down from £133.1 million for the full year to May 31, 2025, on customer cash balances of £4.8 billion — a fall the company attributes partly to paying more of it away. That is the practice the FCA found largely absent across the CFD sample. On the same call, IG’s chief financial officer said that “around two-thirds of group revenue is now generated outside the UK” — which is close to the share of that book CP26/23 would place beyond the Duty’s reach.

“Net interest income was down 10% as higher customer cash balances were more than offset by lower rates and greater pass-through to customers.”

— Clifford Abrahams, Chief Financial Officer, IG Group (H1 2026 results presentation transcript, July 31, 2026)

Enforcement context: Dinosaur Merchant Bank

The most recent UK CFD enforcement action shows which obligations do not move with client residence. On March 24, 2026 the FCA issued a Final Notice to Dinosaur Merchant Bank Limited (firm reference number 436215), imposing a penalty of £338,000 under section 206 of the Financial Services and Markets Act 2000. The firm settled at stage 1 and took a 30% discount; the pre-discount figure was £482,900.

Between June 1, 2024 and May 6, 2025 the firm breached Article 16(2) of the UK Market Abuse Regulation, SYSC 6.1.1R and Principle 3 by failing to detect and report suspicious orders and transactions in its single-stock CFD business. The trigger was growth: it launched a direct market access order execution platform in June 2024, ran no additional risk assessment, and until October 2024 failed to ensure trading routed through it reached automated surveillance. The failings touched 2,194 trades worth $3.05 billion notional, generating 2,916 alerts on later review — 2,723 for insider dealing, 193 for market manipulation.

Steve Smart, joint executive director of enforcement and market oversight, said the failures “had the potential to undermine the integrity of the market”. The case matters for scoping because market-abuse surveillance obligations attach to the instrument and the venue, not to where the client lives. A broker reading CP26/23 as a general retreat from its offshore book will find surveillance, systems and controls, client money and financial-crime obligations sitting exactly where they did. The Duty is the only layer being rescoped — the same distinction that governs where the regulatory perimeter actually bites for prop firms.

What this means for brokers, exchanges and compliance teams

For CFD and rolling spot forex providers, the first task is data, not policy. The proposed test is residential address, or place of establishment for non-individuals, and distributors are expected to know it. Firms should confirm residence is captured, current and auditable as a product-governance field, and that it can drive differential treatment without leaking into pricing that would resemble the two-tier execution the FCA polices under best execution.

For legal and compliance teams, the output is a scoping memorandum, not a rewrite. Fair value assessments, target market statements, distribution strategies and outcomes monitoring each need a stated territorial basis with evidence for the population covered. Board reporting is the exposed flank: the November 2025 review already criticised annual Consumer Duty board reports that restated requirements rather than analysing whether the firm met them, and a report that silently narrows its population from all clients to UK residents will not survive a supervisory read.

For groups running multiple entities, the carve-out changes where non-UK retail business is booked. A UK entity that previously exported the Duty to offshore clients may now match a Cyprus, Dubai or Mauritius booking centre on compliance overhead while keeping an FCA authorisation for marketing purposes — a live calculation for firms weighing what an FX licence actually buys in each tier. Responses close September 18, 2026, and the FCA’s questions 2 and 3 expressly invite comment on the residence definition and on safeguards against products intended for sale abroad reaching UK residents.

“Most of the rest of the changes are in practice drafting changes (and sometimes convoluted drafting changes) rather than substantive revisions to the regime … the current proposals fall a good way short of achieving that.”

— Tim Lewis, Head of Financial Services & Markets, Travers Smith (Travers Smith, July 3, 2026)

What’s next — the forward view

Three timelines run together. CP26/23 closes on September 18, 2026, with final rules expected in Q1 2027. A parallel consultation, CP26/22, proposes matching territorial changes to the Insurance Conduct of Business Sourcebook and PROD 4. The FCA has also committed to a post-implementation review of the Duty as a whole.

On retail derivatives, the November 2025 review closed by saying the FCA would “engage directly with selected firms” and was “considering further work in some areas identified from the survey”. That further work is the variable to watch. Arriving as another multi-firm review or a portfolio letter before Q1 2027, it lands on a sector whose Duty population is about to shrink. Arriving as rule change, the natural vehicle is COBS 22.5 or the disclosure rules — both territorially unaffected by CP26/23.

Two contested points decide what the carve-out is worth. First, whether “usually resident” survives in its current single-address form or acquires a substance test catching clients with UK connections and a foreign correspondence address. Second, whether firms that spent three years building Duty processes conclude, as Travers Smith argues many will, that their implementation “was and remains consistent with FCA expectations which have not substantively changed” — and keep applying the Duty to everyone. On that reading the carve-out buys legal certainty rather than money. The FCA’s own break-even analysis nearly concedes it: the package needs only about £300 per firm per year in recurring benefit across roughly 36,000 firms to pay for itself.

FAQ

Is the FCA consulting on changing CFD leverage limits in 2026?

No. The UK leverage limits of 30:1 to 2:1, the 50% margin close-out rule and negative balance protection were made permanent by PS19/18 on July 1, 2019 and took effect on August 1, 2019 for CFDs and September 1, 2019 for CFD-like options. They sit in COBS 22.5 of the FCA Handbook and are not open for consultation. The live UK proposal affecting retail leveraged trading is CP26/23, which changes which customers the Consumer Duty covers rather than how much leverage a client may use.

What exactly would CP26/23 remove from the Consumer Duty’s scope?

Business with retail customers who are not usually resident in the UK, judged by residential address or, for non-individuals, place of establishment. Where a product is sold both inside and outside the UK, Duty obligations would apply only to UK-resident customers. Firms would no longer be required to design products around overseas customers’ needs, test their understanding of disclosures, or monitor their outcomes. Crown servants posted overseas, pre-paid UK funeral plans and UK pension activities remain in scope as exceptions.

Does the carve-out affect market abuse or client money obligations?

No. CP26/23 rescopes the Consumer Duty in PRIN 2A only. Obligations under the UK Market Abuse Regulation, SYSC systems and controls requirements, the Principles for Businesses and the client assets rules keep their existing territorial reach. The FCA’s March 24, 2026 Final Notice against Dinosaur Merchant Bank Limited — a £338,000 penalty for surveillance failures across 2,194 CFD trades worth $3.05 billion notional — was brought under Article 16(2) of UK MAR, SYSC 6.1.1R and Principle 3, none of which CP26/23 touches.

What did the FCA’s 2025 CFD price and value review find?

Published November 13, 2025 and covering around 25% of regulated CFD providers, it found fair value assessments that considered little beyond bid/offer spreads, wide and unjustified variation in effective overnight funding rates, funding charges applied to both legs of hedged positions with no offset, and most firms declining to pay interest on client margin while charging interest on the full consideration of long positions. The FCA asked firms to address the gaps and said it was considering further work.

How does the UK approach compare with the EU’s?

They diverge. Article 42(1) of MiFIR allows a national competent authority to restrict marketing, distribution or sale “in or from that Member State”, which reaches an EU-seated firm selling outward — the basis for BaFin’s General Administrative Act on CFDs of August 1, 2019. CP26/23 goes the other way for conduct obligations, anchoring the Consumer Duty to the customer’s UK residence. UK product rules in COBS 22.5 keep their existing reach; only the outcome-based Duty retreats.

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.