CFD vs Futures: How Clearing, Leverage and Costs Differ

A CFD and a futures contract can track the same underlying market, move the same number of points on the same day, and still leave you holding two different things. The difference is not the chart. It is who is on the other side of the contract, and what happens to your position if that party fails.

Most comparisons of the two rank them on leverage, cost and convenience. Those are outputs. This page starts from the structure that produces them, because once the structure is clear the rest of the comparison follows from it.

The One Structural Difference: Who Stands Between the Two Sides

A futures trade is executed on an exchange and then cleared. The CFTC glossary has an entry for the body that does the clearing: it settles the trades, oversees delivery, and the same entry records central counterparty as another name for it. Once a trade clears, the buyer and the seller no longer face each other. Each faces that body instead.

That has a consequence the leverage tables never reach. If the party who took the other side of your futures trade defaults, your position is unaffected, because your contract is with the clearing organisation and its financial resources stand behind it.

A CFD has no such layer. The contract is between you and the provider, and it stays that way for its whole life. The price may be derived from an exchange, but the obligation to pay you runs to one firm, so the credit standing of that firm is part of the position rather than background to it. A spread bet is the same bilateral contract sized in a different unit, so it inherits the same point.

The clearest evidence of how differently the two are treated is where a CFD does not appear. The CFTC glossary defines the futures contract, the clearing organisation, the clearing member, contract size and the minimum tick, and it has no entry for a contract for difference, because these products are not offered to retail clients in the United States.

Where your money sits under each arrangement, for the narrower case of spot forex against exchange-traded currency futures, is worked through on our page comparing exchange-traded currency futures with the spot market.

What Each Contract Obliges You To Do

The CFTC definition of a futures contract has four parts, and the second is the one that matters here: it obligates each party to fulfil the contract at the specified price. Delivery in the future is the default, and the obligation is discharged either by delivery or by offset, which means closing it with an equal and opposite contract before the date arrives.

A CFD carries no delivery obligation of any kind. It settles in cash against the price difference, and there is no date on which anything has to be tendered or received. The full mechanics of that settlement, and of margin against notional, are set out under what a CFD is rather than repeated here.

Standardisation follows the same split. A futures contract has a fixed contract size, defined by the CFTC as the actual amount of the commodity the contract represents, and a fixed minimum tick, so every participant trades the identical instrument. A CFD has neither: the size is whatever the provider allows you to open, which is why two providers can quote the same market and not offer the same position.

Leverage Is Set by Your Jurisdiction, Not by the Product

The usual framing is that CFDs offer higher leverage than futures. That is a statement about a particular account, not about the instrument, and the thing setting the number is the rulebook the account is opened under.

ESMA set the ladder for retail clients across the European Union under Article 40 of MiFIR. What decides each rung is how volatile the underlying is, so the tightest cap belongs to the most volatile market and the loosest to the least. Read from the bottom up, the ladder is the opposite of the one CFD marketing quotes.

Two further rules travel with the ladder. A position is closed out once the account falls to half the margin it needs to stay open, and negative balance protection applies account by account, so the leverage cap arrives together with a floor under the loss.

The FCA finalised matching rules for the United Kingdom in PS19/18, published in July 2019: the same ladder from 30:1 to 2:1 by volatility, the same close-out at half the maintaining margin, and a guarantee that a loss cannot run past the money held in the account.

None of that is a property of the CFD. Move the same account to a jurisdiction with no such rules and the ladder disappears; keep it where the rules apply and the cap binds whatever the provider advertises. How a broker applies the ladder as a position grows is covered under tiered leverage.

Futures margin works on a different principle again. The exchange sets initial and maintenance margin per contract and the clearing member may require more, so the effective leverage is an outcome of the margin requirement rather than a ratio anyone advertises.

The Two Products Charge in Different Units

Every comparison promises a verdict on cost and then compares two things measured in different units. The charges do not line up, and the reason they do not is structural.

The overnight row is the one that decides most comparisons. A futures price for a distant month already contains the cost of financing and storing the underlying until that date, so holding the contract costs nothing extra day by day. Why that pushes a curve into contango or backwardation is set out under the futures curve.

A CFD charges that carry as it goes, in daily instalments, on the full notional rather than on the margin posted. Two positions of the same size in the same market can therefore have very different total costs depending only on how long each was held, and no single-figure cost comparison between the two products survives that.

The notional basis is what makes the charge larger than it looks. Margin is a fraction of the notional, so the financing rate measured against the capital actually committed is the quoted rate divided by that fraction. At the 30:1 cap the margin is one thirtieth of the notional, which makes the cost per unit of committed capital thirty times the headline rate. Nothing about the rate changes; the denominator does.

Expiry, Rollover and What Happens If You Do Nothing

Doing nothing has a different meaning in each product, and that is the practical difference a trader meets first.

A futures contract ends on its stated date. If the position is still open, it is settled, in cash or by delivery according to the contract, and whether that suits you is not part of the arrangement. Continuing the exposure means opening the next month deliberately, at that month price rather than the one just settled.

A CFD on a cash market has no expiry at all. Left alone it stays open, accruing financing, until it is closed or the account runs out of margin. Some CFDs are written on a dated futures contract instead, and those do expire or roll, with a cash adjustment applied to keep the position value unchanged across the roll. That adjustment, and what it does to a stop or a limit, is worked through under CFD expiry and rollover.

The offset route is the one most futures traders use, and the CFTC definition names it: the obligation is satisfied by delivery or by offset, which means buying back an equal and opposite contract in the same delivery month. That has to be done before the contract reaches its own deadline, so the calendar is part of the position from the moment it is opened.

So the risk of inattention runs opposite ways. Forget a futures position and it closes itself on a date you did not choose. Forget a CFD and it stays open, charging you daily for the privilege.

Which One Fits Which Account

The choice follows from the three structural facts above rather than from any ranking. If the credit of a single firm is the exposure you are least willing to carry, only the cleared product removes it. If your positions are held for days at a time in a market with a meaningful cost of carry, the daily financing charge is the number to price, not the spread.

If the account is small, the fixed contract size settles it: a standardised contract has a minimum position that a CFD does not, and no leverage ratio changes that quantity.

And if the account sits under ESMA or FCA rules, the leverage question is already answered by the rulebook, so the remaining decision is between a cleared contract of fixed size and a bilateral one of flexible size. That is the comparison worth making.