Our broker claim he follows shariah rules for CFD swap free trading. Is he right?
Salaam and welcome, @Faisal! I’m no expert on the topic but the most common scholarly advice I’ve come across is that it should be avoided.
I have seen Malaysia’s shariah advisory council allowing single stock futures as long the underlying company is shariah compliant.
Thanks, @mft126. Can you share any references?
Pdf page 35-36
CFD based on my analysis are not halal as you not taking ownership of an asset, nor are you investing in asset rather the outcome of an event. In addition, take into consideration related to derivaties, and short-term trading from a halal lens and you are getting into a complicated product, and when a product gets complicated it often lends itself to haram.
- A contract for differences (CFD) is a financial contract that pays the differences in the settlement price between the open and closing trades.
- CFDs essentially allow investors to trade the direction of securities over the very short-term and are especially popular in FX and commodities products.
This is different …although I think it is also not correct.better consult AAOIFI shari’ah standard no 21
It is an ijitihad, nothing wrong with it, cfd & single stock futures are similar, allows investor to profit from up & down markets
CFD are similar to single stock futures, the malaysian shariah advisory allows single stock futures which are shariah compliant to be traded
there is no details as to how they came to this decision, just a decision.
it would be good to understand how they came to this ruling given:
Being futures contracts they are traded on margin, thus offering leverage, and they are not subject to the short selling limitations that stocks are subjected to.
I think the malaysian shariah council sees futures contract as a risk management tool, adds liquidity, they also allowed regulated short selling perhaps to boost revenue & to keep the market in check from going beyond the fundamentals too much esp if price goes up too much beyond its true value.