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.
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I have seen Malaysia’s shariah advisory council allowing single stock futures as long the underlying company is shariah compliant.
https://www.sc.com.my/api/documentms/download.ashx?id=5f0c31dc-daa9-43c1-80ac-e7ecf70c8e44
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.
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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.
@Mohammed_Alam
W.salam, yes i do follow it. For comparison sake, single stock futures has less volume compared to CFD in Malaysia. The original ruling is for Malaysia derivatives exchange only though.
What’s your opinion on CFDs? Or the opinion you follow on CFDs?
@Mohammed_Alam
Since CFD & SSF are similar, Malaysia Shariah Advisory Council (SAC) advised SSF are shariah compliant if the underlying shares are shariah compliant. The context is for Malaysia’s market. CFD in Malaysia is over the counter products while SSF are traded on the derivatives exchange. The question can we use the ruling from Malaysia & apply it to other markets worldwide? one could argue by making SSF shariah complaint, is to make muslim traders trade SSF instead of CFD. Since the derivative exchange can earn revenues if more SSF are traded compared to CFD which are over the counter.
@mft126
Since SSF and CFD are similar and the condition for SSF is for the underlying share to be halal, what I personally believe is this ruling can be used on CFD too. I haven’t seen where the shariah board says this only applies to Malaysia. SSF contracts in Malaysia and SSF contracts in the rest of the world are the same. Malaysia sharia board permitted SSF contracts as long as the instrument you are trading is shariah compliant. Also rulings in general can be applied on other matters as long as it’s within the same subject, based on what I’ve seen. If you can trade derivatives with SSF then you can with CFD too. Just gotta make sure interest isn’t involved and if there is any haram factor in profits you make for example from a stock or index fund, then make sure you purify the profits by donating the haram factor to charity, this is called profit purification which is allowed in Islamic finance.
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Salam aleykum …
I want to ask about WEBULL broker
It is a non CFD broker but it gives a 4:1 leverage
Can we day trade with this broker
BarakALLAH fik