Why Choose DFSA Regulated CFD Broker in UAE?
The Dubai Financial Services Authority (DFSA) is the regulatory body responsible for monitoring all financial activities within its jurisdiction, which includes overseeing CFD (Contracts for Difference) trading. The DFSA ensures adherence to financial regulations and verifies that Islamic swap-free accounts, which comply with Sharia laws, are genuinely provided.
The DFSA has set specific regulatory requirements for CFD brokers:
Limited Leverage: Retail traders are restricted to a maximum leverage of 30:1, while professional traders can use up to 500:1 leverage. A 30:1 leverage ratio means that for every $1 in the trader’s account, they can hold a position worth up to $30. In other words, with leverage, a trader can control a larger position in the market than what they could with their own capital alone. For example, if a trader has $1,000 in their account, with 30:1 leverage, they could potentially take a position in the market worth $30,000. Leverage amplifies both potential profits and potential losses, making it a powerful but risky tool in trading.
Margin Close-Out Rule: Brokers are required to close all of a trader’s positions if the capital in the account drops below 50% of the margin needed to maintain those positions.
Negative Balance Protection: Negative balance protection in the UAE, as enforced by the Dubai Financial Services Authority (DFSA) for CFD trading, is a safeguard for traders that prevents them from losing more money than they have deposited in their trading accounts. This means that if the market moves against a trader’s position and their losses exceed the money they have in their account, they will not be indebted to the broker for the excess amount. The trader’s account balance cannot go below zero, ensuring they are not at risk of owing money due to trading losses. This protection is particularly important in highly leveraged trades, where market volatility can lead to rapid losses.
Marketing Restrictions: Brokers must be transparent about the percentage of their clients who lose money and are prohibited from marketing CFDs as a quick way to wealth. This rule helps manage risk by ensuring that traders do not lose more than the funds available in their accounts and that they maintain sufficient capital to cover the margin requirements of their open positions.
Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].