Currency Trading

CategoriesTrade, Business & All Things Money [456]

Is Currency Trading & Margin Trading permissible?

. In the name of Allah, the most Beneficent, the most Merciful.

Answer

It is stated in Hidayah that Bai-sarf is that transaction where both the buyer and seller are making a transaction using either gold or silver. In such transactions excess on either side is not permissible and it is also essential to complete the transaction before separating. (Vol 3. P104)

Scholars’ state that paper currencies are not considered to represent gold and silver but rather a legal tender and is considered as fulus.

In view of the above, currency trading will be permissible as the genus (jins) of both currencies is different. It is stated in Hidayah that when exchanging items of varied nature, it is permitted to have excess on one side. (Vol 3, P105)

However for the transaction to be valid, it would be necessary that the transaction is either completed on a spot basis or at least one party takes possession of the currency at the time of the transaction. Separating with debt on both sides (deferred to a future date) is not permitted.
In regards to the margin trading described in your question, it will only be permissible if it is interest free and also the commission is not in regards to the loan but rather for placing the trade on behalf of the investor.

Only Allah knows best

Sayeedur Rahman

Darul Ifta, Birmingham

About the author