Are Contract for Differences #CFD / #Binary Options halal? Well, no. Why?
Many Muslims contacted me in the last years with one single repeating question: Are CFD and/or Binary Options halal meaning permissible in Islam? There are indeed forex brokers offering so called Islamic accounts avoiding outright interest. But still: A contract of difference does not involve the ownership of any underlying (currency, stocks etc.) hence money against money is exchanged in different amounts - this is the most simple test for the prohibited Riba. Any Muslim receiving such offers should therefore insist of receiving the Fatwa and if not provided leave out.
The intention on those trading activities everyone can ask himself; mostly it will be akin to gambling and this on top of the fact that the trading activity itself is a zero sum game; meaning what one wins another looses, which rules out again to participate in such business. It does not do any better that aside from luck the outcome is influenced by know how - the same is true for classical money games as Poker or Backgammon. Still nobody would classify Poker therefore as halal.
Fortunately it seems that Malaysia takes some action to protect Muslim retail investors: http://blogs.wsj.com/indonesiarealtime/2012/02/21/malaysian-fatwa-counci...
Economically I always wonder why a retail investor thinks he/she could eventually outdo the big investment banks of the world? It is like taking your family car and try to compete the Formula One. Weired idea? Pretty much the same...
Some in the web said if fiat money (USD, Euro, SAR etc) is permissible so is Forex trading; but here the a) intention is different b) fiat money is created by sovereign authority, which does not leave individual responsibility whether permissible or not.
In short: Muslims beware! Spend your time and efforts on blessed activities creating value and positive impact for society.
All the best,
Michael Gassner
www.islamicfinance.de
See also: International Islamic Fiqh Academy No. 63, 1/7 - https://uaelaws.files.wordpress.com/2012/05/resolutions-and-recommendati...
updated with Binary Options on 10th Nov 2016
Original blog: Thu, 2016-05-19 09:01
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