Ruling on online Forex margin trading
Fatwa No: 262402

Question

Assalaamu 'alaykum Is online forex margin trading halal or haram? My question might be cleared by the following example: I trade currency via an online trading platform. If I want to buy 100,000 USD (1 lot), I only need 1,000 dollars as margin to make the trade. It is called 'leverage'. I will get profits or losses regarding to my transaction; if I buy then the price goes down, I will loss, vice versa. If I get profits, the broker will credit it into my trading account as the transaction closed with no delay. Conversely, if I loss, they will cut it from my trading account. Is this kind of transaction permissible in sharia law? Because I have read split opinions about this leverage. PS: NO interest (riba) involved, because the broker provides no-interest accounts for Muslim traders. Thanks in advance. Assalaamu 'alaykum

Answer

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and messenger.

The view we adopt in Islamweb is that it is not permissible to deal with the money leverage system. This is because it is a loan that brings benefit for the broker as he gets profits as a result of being a mediator through whom the debtor gets loans. Thus, the deal involves Riba and we have already underlined in previous Fataawa that trading in Forex involves some Islamic prohibitions, the most important of which is what is called Forex margin system, which is in reality a loan that brings about profit.

Among other Islamic prohibitions is what is known as overnight index swap, and non-fulfillment of the reciprocal taking possession of commodity and its monetary equivalent by the buyer and seller respectively in transactions that requires that such as those of gold and silver, metals and so on.

For more information, please refer to Fataawa 15672 and 88034.

Allaah Knows best.

Related Fatwa