US Retail Traders Get Cheaper Leveraged Exposure to Individual Stocks
US retail traders are poised to benefit from cheaper leveraged exposure to individual stocks compared to European regulations. According to an analysis by FM Intelligence, the US margin floor is set at 15% of a position's value, whereas in the European Union and the United Kingdom, a single-stock contract for difference requires 20% initial margin.
The same exposure sold to retail clients in the EU or UK comes with leverage caps, margin close-out, negative balance protection, standardized risk warnings, and a ban on trading incentives. In contrast, US security futures do not have these restrictions. The products are economically similar, being cash settled, without expiry, and financed by periodic payments between the two parties.
The American margin floor was established in December 2020, when the SEC and CFTC reduced required margin for unhedged security futures positions from 20% to 15%. Meanwhile, Europe settled on a classification rule in February, which led to leverage falling from 10x to 2x for crypto perpetuals sold in the region.
Three exchanges, Coinbase Derivatives, Bitnomial, and North American Derivatives Exchange (trading as Crypto.com Derivatives North America), filed to list single-stock contracts within a two-week period. The SEC received Form 1-N filings from these exchanges on September 1, 4, and 14, respectively.