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Margin Trading Of Equities And Derivatives Trading
Dear Sir. As trading in equities is allowed, I have previously seen in your talk that dealing in derivatives such as options, CFDs etc is considered allowed too as there is no injustice or immorality. In reading other scholars, there is prohibition of this activity as there is leverage involved and there is no underlying ownership. Please shed some light if the activity is strictly prohibited or somewhat allowed provided the company whose share is being traded meets shariah guidelines such as gambling, alcohol are not involved. Similarly please advise on trading of instruments such as FX, Indices and also on Short sales. Kind regards
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Margin Trading Of Equities And Derivatives Trading
updated 1 week, 4 days ago
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There are many different kinds of trading, and different brokerages offer different terms to different clients according to their needs, level of experience, capital invested, etc. With that in mind, it’s not possible to provide an overarching generic response. The key thing to keep in mind is that all kinds of trades are permissible as long as there are no aspects of injustice or immorality involved. If you have a question regarding a certain aspect of trading please feel free to post a precise question so that an objective response can be provided.
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Assalamualaikum!
You stated Here that initially all types of trades are halal as long as the elements of injustice and immorality are avoided, would you please clarify why wouldn’t CFDs Be considered as the action of “Akal-Al-Maal” (unjust acquiring of wealth)? Where my profit is a direct loss of others wealth!.
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Batil is a defined term, not a residual category
It does not mean “wealth that reached me because someone else lost.” Ghamidi Sahab defines it narrowly, and by enumeration:
“…those things which the human conscience has considered wrong, about which there is no scope for any debate or discussion, whose flaws have always been clear in knowledge and intellect… stealing someone’s property, embezzling money, cheating someone, deceiving someone — there is no scope for debate on these things.”
Notice what unites every item: the loser was wronged — his consent was absent, or vitiated by deception, or his right was simply overridden. Not one entry on the list is “the counterparty made a bad trade.”
And the Quran supplies its own contrast term:
لَا تَأْكُلُوا أَمْوَالَكُم بَيْنَكُم بِالْبَاطِلِ إِلَّا أَن تَكُونَ تِجَارَةً عَن تَرَاضٍ مِّنكُمْ
— al-Nisa 4:29
The opposite of baṭil is trade by mutual consent. So the question to ask is not “did money move from him to me?” but “was this tijarah?”
(One clarification — consent is not a defence in all scenarios: it is necessary, not sufficient. In gambling the consent is there, but tijarah limb is missing, so consent has nothing to attach to; consent to a transfer is not consent to a trade. That is why 4:29 requires both.)
And amwal — whose wealth was it?
This is the decisive point. Akl al-amwal means consuming others’ wealth. So ask: at the moment your profit accrued, whose mal was it?
In theft, the money was his — he held title, and you took it without consent.
In fraud, the money was his — he transferred title, but on a false basis.
In a market transaction, the price movement was never anyone’s wealth. Nobody held title to the DAX rising. Your counterparty had title to the position he held and to the price he agreed — and he received exactly the price he agreed. What he “lost” was a hoped-for gain.
An expectation is not mal. A counterfactual is not property. You cannot unjustly consume what was never anyone’s wealth.
If “my gain corresponds to another’s loss” were the test for batil, then every sale of an appreciating asset, every currency exchange, insurance, and all competitive commerce would be batil. If I open a better shop and my neighbour’s customers come to me, his loss is real and I caused it. Nobody calls that akl al-amwal bil-batil — and Ghamidi Sahab draws the line exactly where it belongs:
“You do business, you earn profit, but if you include the fact that I have to destroy someone else’s shop, then it is a crime.“
Design and intent — not the ledger.
So, in summary: what makes acquisition batil is a wronged counterparty, not a debited counterparty. Your CFD counterparty received the price he contracted for and was not deceived. He is debited; he is not wronged.
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JazakAllah & appreciation for your detailed response!
“The Last question for my notebook”
So using this understanding and methadology, Assuming you understand order handling models of different types used by brokers,
we can conclude that even if a broker with a B-book trading model where Broker is the direct counter party to my trades to provide fast execution and liquidity for orders, can also be considered Halal !? Talking About B-Book Brokers specifically!
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I understood what you said about CFDs, but I have a comment on binary options. You don’t own anything; you’re simply gambling on whether the price will be higher or lower than your purchase price at a specific time. If you win, you keep your initial investment; if you lose, you lose it all. Most platforms operate 24/7, even outside of trading hours. I believe that winning or losing everything is essentially gambling, and that’s the difference between binary options and CFDs. With CFDs, you can close and open whenever you want, so how can binary options be considered permissible (halal)?
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Also if the given criterion is applied How would we distinguish between Cfd and A Sport Bet? Where Both the Cfd and Sport bet are based on Mutual agreement, Analysis and the Outcome is not totally random?..
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