Depositing money in the stock exchange for sale

18-7-2011 | IslamWeb

Question:

Brokers here deposit an amount of 4,000 US$ in the stock exchange, whereby they can buy and sell over the phone. They contact the stock exchange and ask them to buy, for example, something for 20,000 Francs, and after a while they demand the stock exchange to sell what was bought and calculate the profit or loss. Is this transaction permissible under the Sharee‘ah on the grounds that the stock exchange is acting as an agent for the brokers? Please advise, and may Allaah reward you.

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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, is His Slave and Messenger.

This transaction will be permissible if the following conditions are met:

 

First, the amount that is deposited in the stock exchange covers the amount that is required to be purchased from another currency. This applies if it covers it by itself, and also in case it covers it by means of an interest-free loan made by the stock exchange, for which it does not receive any benefit, and no penalty clause is made for late payment.

 

Second, the amount to be purchased must be received and the compensation for it must be delivered immediately, according to the applicable procedures, whether in cash or by depositing each sum in the account of its due claimant.

 

Third, the purchased amount should be sold in the same way it was purchased in terms of receipt and delivery.

Allaah Knows best.