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Search Fatawaa

Subject : Ruling on Margin Trading

Fatwa Number : 645

Date : 22-04-2010

Classified : Current Financial Issues

Fatwa Type : Search Fatawaa

Question :

What is the ruling of Sharia on giving money to someone to trade in via the internet (electronic stock exchange) in return for an agreed percentage of the profit?

The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

Electronic stock exchange or margin trading is forbidden for several reasons. Most importantly, there is no actual or constructive holding of the stocks. Also, the broker benefits from the money it lends to the client to trade in over  the deposited amount. However, according to scholarly consensus, any loan which provides benefit to the lender is considered usury. 

The Islamic Fiqh Academy of the Islamic World League issued Resolution No. (18/1), which prohibits this kind of transaction along with explaining all the violations of Sharia therein. And Allah the Almighty knows best. 



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