A brokerage licensed in a jurisdiction with light regulation, often offering very high leverage and accepting clients that mainstream regulators would not.
Offshore licences typically carry minimal capital requirements, no negative-balance-protection mandate, no compensation scheme and limited complaint machinery. The appeal is leverage of 500:1 or more and fast onboarding. The cost is that recovery options are close to nonexistent if something goes wrong.
Many large groups run both a regulated entity and an offshore one, moving clients to the latter for higher leverage. The terms of business name which entity you have contracted with; that name, not the group brand, is what matters.
Example: a client with an offshore entity loses more than deposited during a gap and receives a demand for the negative balance. The same group's EU entity would have written that balance off under esma-leverage-caps rules.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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