Vantage FX Retail Forex Trading: Shariah Compliant?
Question:
Asalaam u alay kum, Hope you are well. Can you please advise if the Islamic FOREX account offered by Vantage FX (link below) is OK to use. It has a sharia certificate and a breakdown of amendments made from the conventional FOREX account to show that it's in line with Islamic values. Thank you for your time. https://www.vantagefx.com.ky/trading/trading-accounts/islamic/
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
We sincerely apologize for our belated response.
Your question refers.
The issue of conventional retail forex trading is premised on a contractual arrangement between the retail trader/investor who places a forex order in the market either through A or B Booking with/without leverage. For example, Person A executes a USD/ZAR currency pair trade via the forex broker through A booking (STP/ECN) with a liquidity provider (LP). The retail forex investor executes the trade for 100 USD with a stop loss of 16 ZAR to the USD. The investor trades “long” on the USD expecting the USD to ZAR currency exchange rate to rise higher. The investor also purchases and executes a stop loss to protect from potential downside risk. The broker refers the trade to a liquidity pool via liquidity providers (LP’s) such as banks or forex traders generally referred to as “market makers”. The broker and investor could also engage in a B booking trade which does not entail any physical currency transaction with zero liquidity but rather a fictitious exposure to market pricing only. In both the above cases, such transactions are impermissible due to the issue of interest charges, conventional leverage, non-conformant and non-compliant shariah currency counter transactions, overnight swaps, etc.
However, in general, a Shariah compliant transaction or construct should be reviewed in depth to ensure the concept, terms and conditions and the shariah governance procedures are in light with the pristine laws of Shariah business, finance and economics. The mere outward appearance of a shariah construct does not constitute a shariah compliant contract. The contractual terms and conditions should reflect a shariah compliant agreement. The back office including the treasury function should be shariah compliant. In other words, the function regulating the actual cash flow process of trading should be reviewed to ensure that the contractual terms reflect a proper shariah transaction at the back office level also.
In particular reference to online forex trading, if the underlying construct is coherent with the laws of shariah finance and economics through actual instantaneous currency trading via actual liquidity providers through A Booking as per the laws of Bay al-Sarf (currency trading) and the underlying fundamental terms and conditions of such an agreement and transaction reflect that of a shariah compliant construct, then such a transaction could be reviewed for shariah compliance.
We do advice general caution in this matter due to the complex nature of these transactions and you could seek further advice from us in reviewing the specifics for shariah compliance.
With regards to the Islamic account offered by Vantage FX, kindly contact the management to refer the matter to us for direct shariah review. We will then communicate with them directly to review and issue a verdict (Fatwa).
And Allah Ta’āla Knows Best
(Mufti) Ismail Desai
Chairman of Shariah Board and Fatwa Committee,
Darul Iftaa, Durban, South Africa
DISCLAIMER: The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
(Announcement: The Darul Iftaa under the auspices of the Mufti Ebrahim Desai Foundation is managed by Mufti Ismail Desai Saheb, son of Hazrat Mufti Ebrahim Desai Saheb RA. Mufti Ismail Desai will continue his academic career by conducting an intensive one year specialist programme in Islamic Finance, Banking and economics (MA) and Iftaa training programme for Ulema and Shariah graduates. Mufti Ismail Desai Saheb will also be conducting various programmes for the public on Islamic Finance, Ishaahi Majlis and general Islamic Q&A. Alhamdulillah the Darul Iftaa currently has over 50 students from over 32 countries globally. The Darul Iftaa will be conducting programmes on Islamic Finance, Business and Economics in various cities/countries. The programme is conducted free of charge and you can request an event by contacting us directly at www.shariahbusiness.com. You can contact the Mufti Ebrahim Desai Foundation for any details on Hazrat Mufti Ebrahim Desai RA at www.muftiebrahimdesai.com. We will keep you updated on our programmes and events via our email data base and other media channels)
and Allah Ta'ala Knows Best
Mufti Ismail Desai
Darul Iftaa
Durban, South Africa
Disclaimer The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
Browse next Fataawa