Though forex trading has been in the industry since a long time, the binary options trading industry is also growing by Forex From Islamic Perspective leaps & bounds. In the recent years, the binary options trading industry has observed a great impetus in its popularity.5/10() /8/31 · The question as to whether Forex trading is permissible according to Islamic law is a difficult question to conclusively answer. Although Islamic authorities certainly agree that currency exchange under certain conditions is halal (i.e., permissible according to Islamic law), there is some dispute regarding under exactly what blogger.com: Adam Lemon /2/7 · In fact, Islam allows the search for the improvement of your situation, especially financial, but doubts persist about the stock market in Islam. By definition, Forex trading can be considered halal and not contrary to the fundamental principles of Islamic finance
What Is an Islamic Forex Account and How Can I Open One? - Admirals
I have been meaning to explore further the retail foreign exchange or forex market following my initial thoughts on the topic here and here. However, I believe it is not as clear-cut as I previously thought, and there are some quite complicated concepts to tussle with along the way. I am going to assume you know the basics of modern retail foreign exchange e, forex from islamic perspective.
The first insightful thing to note in retail forex is that pretty much all the big brokers in this space will act as your direct counterparty. Most brokers will have similar terms, which say that they will act as principal i. they will represent just themselves, and not some other client and market-maker i. the y are the market you will be directly trading into. However, brokers will monitor how you do, and if you start improving and making a large percentage of successful trades, then they will still be your counterparty, forex from islamic perspective, but they will hedge their positions into the institutional market so that economically they are not exposed to any risk — whatever happens to the trade you placed.
The result is obviously neutral. When you close, they will close, forex from islamic perspective. Now the only profit they are making is the brokerage commission they charge for each trade, forex from islamic perspective. The second insight I found useful was looking at what equivalent economic activity would be required to replicate the effect of the currency pair.
You have simply held an exposure to an amount over a few days, before selling. This means that for those days you will have got paid rollover interest as well.
Upon closing the trade you get paid the profit back into whatever currency your account is denominated in with your broker. Economically, what you have done is you have borrowed JPY from the interbank market and then sold JPY for USD via the brokerand then lent USD back to the interbank market. This means that each day you need to pay the interest on the JPY you borrowed, and each day you get paid interest on the USD you lent out.
Eventually you get the USD back and convert it back into JPY, forex from islamic perspective, and then give it back to the interbank market where you borrowed it in the first place. Step forex from islamic perspective step this looks like:. The two haram transactions in the above economic transaction-pattern are the two interest-bearing loan agreements. Under such an account, you are gaining exposure directly to holding the money not to the interest of holding the currencies.
Therefore you are in effect achieving the above economic transaction pattern but without the interest elements. One could therefore argue that such accounts are Sharia compliant.
However the problem with this analysis is that the broker is the one who is extending that liquidity and also brokering the exchange.
Islamically, you are not allowed such a contract where what is actually happening is you have two contracts in one. Ask yourself this: would the broker give you the interest-free loan if you were not going to use that broker for your trade? But that is trying have your cake and eating it. Either a we say a currency pair is a synthetic product not analogous to any real-life economic activity, or b it is analogous to real-life economic activity.
If it is a synthetic product not related to real-life economic activity then it is best characterised as just like any other zero-sum derivative e.
a CFD and is ipso facto impermissible. The second approach to finding a solution is to take a purposive approach.
That is, to provide instant access to the currency market in a cheap and efficient way. Under this analysis, if forex is just a modern, forex from islamic perspective, way of going to Travelex, then we should overlook any modern developments as wrinkles, rather than anything that fundamentally changes the nature of the activity.
Thus the fact that the broker is often the counterparty to the trade and that the trade is on margin, should be overlooked. However, this could arguably be a quirk of the international financial plumbing we have in place today as well as an increasingly globalised world. The institutional forex market is made up of large financial institutions, where trades are between such financial institutions as opposed to the broker and youwhere forex from islamic perspective is not used most of the timeand where the primary driver of these trades is necessity rather than speculation.
For example, companies will need to transfer £m into dollars or yen in order to complete a transaction, and in order to forex from islamic perspective that, they go through the institutional forex market.
Yet other companies will need to hedge their currency risk though these are separate topics in themselves. Under this characterisation of the industry, institutional forex trading looks Sharia compliant to me for three primary reasons:. In Islamic law, currency trading should be hand-to-hand, and on-spot, and therefore should not be delayed for 1 or 2 days as is standard in the industry.
Banks have established debtor-creditor agreements between themselves, rather like margin accounts that retail traders will have with their broker, forex from islamic perspective, so one could argue that this is a form of margin.
However, this need not concern the institutional participant for two reasons. But the forex from islamic perspective that actual currency goes from one person to another supports the idea that institutions are trading in currency because of a genuine need, as opposed to pure speculation. But pure speculation is not in my view wrong either. But that takes me back to retail forex.
But if you do want to speculate, then the only way you forex from islamic perspective do so efficiently is by participating in the retail forex market. The alternative of using Travelex is not viable, as there would be no margin involved and currency movements are tiny from day-to-day.
The argument would therefore be, that as a retail trader you can only speculate using retail forex, forex from islamic perspective, with a margin account, and as fundamentally currency speculation is halal, trading on a margin account is halal as that is the only way available. However this is a flawed argument too. Running such a business is halal. So the only thing stopping me from doing the halal business is money. Therefore I forex from islamic perspective borrow that forex from islamic perspective. There is also no need for you to speculatively trade forex, which might have otherwise justified things, forex from islamic perspective.
If however, one could have a forex set-up where a retail punter was given an interest-free loan of £x on an interest free basis from an entity legally distinct from the broker and properly distinct from it, i.
not in the same groupand could use that for trading, then that would be Sharia-compliant. The only way that I could see would be a government profit-free trust set up to lend to Muslim retail forex traders for the purpose of allowing them to trade forex. But that seems like a rather frivolous use of government currency, and one that no government would ever seriously consider.
Please also remember to subscribe to our website if you would like to keep in the loop with more articles like these. Two excellent resources I stumbled across:. Thank you for this very in-depth analysis, probably one of the very few islamically contextualised pieces on trading. I can see that there are multiple areas in the market which make trading forex haram. Some of the ones you have picked up on are: interest-baring accounts; trading on margin and the idea of speculation.
Secondly, the concept of margin. For instance, we see this in the Islamic mortgage industry — banks will lend you hundreds of thousands, so long that it is used to purchase a house often with further conditions on what kind of house.
Similarly, banks offer professional development loans which are only to be used for educational purposes which they need to verify first to be legitimate cause. These are tactics used to increase sales. With margin, why would there be a need for someone to apply for margin from an organisation which would then supply leverage via the prefered broker, vs the broker themselves offering the margin on their own platform.
Much like the car dealer offering additional services to facilitate selling a vehicle on its forecourt, the broker is facilitating trading by offering margin as part of its trading facilities. For CFDs an issue of ownership also arises not sure if you have covered this already in another article — still getting through them. interest-free accounts — yes excluding interest this way is fine for the simple interest. Not the more complicated forms of interest i. the interest arising where there are 2 transactions in 1.
margin — the crucial thing here is that there are two separate transactions. an Islamic bank is entering into a sales agreement with you on a murabaha model with a deferred payment. it is 1 contract. same with interest-free car sales.
here the broker is selling you a cfd and also lending you money with which to buy it. CFDs — equitable ownership by another party is fine as opposed to legal ownershipbut in CFDs no one owns the legal ownership.
Assalaamu alaykum. am I being too simplistic when I say the loan is from the interbank forex from islamic perspective and not from the broker. and what about sharia supervisory board they regulate some brokers in fx market is that ok for Muslim trader to use these brokers bcz they have a forex from islamic perspective of SSB??
If so could you kindly shed some light on whether it would be permissable to invest with them? They seem to be a forex education platform? Jazakallaahu Khairan Hifdi. Brother Ibrahim and Mohsin, earnestly request you to review vantagefx, and share your views whether in fits within the boundaries of Islamic Shariah. I would like you to cover islamic loan system.
I am not expert but it seems to me extremely fishy, because, suppose i want to buy a car that cost 30k they will say if you want to buy a year you will buy 33k and forex from islamic perspective you agree they go the car owner buy them selves and than sell you 33k.
In my mind, the first reason islam prohabited interest is not to burden the loan taker and here forex from islamic perspective what happening. I have one question regarding the swap free accounts. How can they call it as such when the rollover Swap is embedded in to the algorithm used to calculate the interest rate defferential between the two currencies? Are the brokers figuring the interest rate differentials out ahead of time and calling it a commision or a fee? Or is there a diffrent method of calculation specifically designed for muslim traders?
Hi, what if I open a Leverage account and obviously I will opt for a swaps free account. I will only trade with forex from islamic perspective own money. I am not aware of any truly leverage account on the internet. Even then, you will be using derivatives so best to avoid. I have a question. Jazak a Allah. I would still avoid.
JP MORGAN - Islamic Finance
, time: 5:44Is Forex Trading allowed in Islam?| IslamicFinder
Islamic Forex. Foreign exchange (FX) is an important activity in modern economy. A foreign exchange transaction is essentially an agreement to exchange one currency for another at an agreed exchange rate on an agreed date, it provides protection against unfavorable currency exchange rates and helps businesses associated with activities in a foreign The simple concept of online forex trading is about selling and buying foreign exchange. In economics Islam, this activity can be specified with Al-Sharf as the form of selling and buying in Fiqh Muamala. The practice of online forex trading in Islam is permissible and lawful to do as long as it based on the Islamic Thus, as with everything else, you Forex From Islamic Perspective should spread your risk over a number of Binary Option Robots, to maximise potential profit and prevent loss. Each one of the Binary Option Robot suggested in this article, has been rigorously tested, regulated, licenced and Forex From Islamic Perspective approved for the territories listed in/10()
No comments:
Post a Comment