The Hoodie Comes Off: How Europe Turned Perps Into CFDs Overnight

How a perpetual became a CFD in Europe — definition, restriction, national classification, relocation, and the onshore alternative

1. 01 · Definition

   A perpetual that meets the CFD definition is a CFD

   On February 24, ESMA said the label doesn't decide the category. A perpetual future meeting the CFD definition is a CFD, regardless of what it's called.

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2. 02 · Restriction

   MiFID II rules follow the classification

   That single line pulls the product under MiFID II: 2:1 retail leverage cap, negative balance protection, margin close-out, no bonuses.

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3. 03 · Classification

   CySEC names retail perps outright

   On June 10, CySEC told every firm it licenses — the largest concentration of CFD brokers in the EU, passporting into all 27 member states — that perpetual futures sold to retail clients are CFDs. The UK had already banned crypto derivatives for retail.

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4. 04 · Relocation

   The leverage leaves, sometimes behind the same badge

   The record's observation: firms didn't comply, they left. A 2:1 perp can't compete with a 100x perp, so higher-leverage activity moved to lighter jurisdictions — and dual-entity structures route a client who trusts the European badge to a group entity where the compensation fund doesn't exist.

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5. 05 · Onshore alternative

   A defined-risk venue now exists inside the rules

   An authorised, MiFID II-compliant venue runs perpetual-style products with defined risk, mandatory stops and no liquidation cascades, and CySEC expanded its own permissions in March to execute client orders directly. The demand doesn't disappear; the question is what the trader is standing on when the position turns.

Stated in the record — ESMA statement February 24; CySEC classification June 10; 2:1 retail leverage cap under MiFID II; perps cleared $86 trillion in volume last year.

The mechanism, in five stages. First, definition: on February 24, ESMA said a perpetual future that meets the CFD definition is a CFD, regardless of what it is called. Second, restriction: that classification drags the product under MiFID II, bringing a 2:1 retail leverage cap, negative balance protection, margin close-out and no bonuses. Third, national classification: on June 10, CySEC told every firm it licenses — the largest concentration of CFD brokers in the EU, passporting into all 27 member states — that perpetual futures sold to retail clients are CFDs, naming the product outright for the first time. The UK had already banned crypto derivatives for retail. Fourth, relocation: the record's observation is that firms did not comply, they left. A 2:1 perp cannot compete with a 100x perp, so higher-leverage activity moved to lighter jurisdictions, and the cleverest operators run two flags at once — the client sees the European badge and is routed to a group entity elsewhere, where the leverage is high and the compensation fund doesn't exist. Perps cleared $86 trillion in volume last year, so fines are a rounding error against that book. Fifth, the onshore alternative: an authorised, MiFID II-compliant venue now runs perpetual-style products with defined risk, mandatory stops and no liquidation cascades, and CySEC expanded its own permissions in March to execute client orders directly. The record's closing point is about what the trader is standing on when the position turns — a 2:1 floor and a compensation fund, or a flag nobody can find.