Fatwa ID: 09143
Answered by Mufti Abdurrahman Mohammad
Question:
CDR is in CAD$ So let’s say I wanted to invest a small $ every month, if I paid an FX Exchange fee that would take a good bite of my profits. So it was better to do in CAD$, invest until the USD/CAD exchange was good and then flip if I wanted to. Yes there is was a small 0.5% fee but I felt that was well under the costs of FX fees.
The CDR was the stock, so if I brought $1k I ‘owned’ about $1k of that stock. No voting rights however and CIBC was the true ‘owner’. If APPL went up 1.0% the CDR would go up 1.0 \* CAD/USD Change
I bought a ton of US Stocks many years ago when the Cad/USD was almost at par. If I sold those stocks and returned it to CAD today I lose a sizable bite.
In the name of Allah, the Most Gracious, the Most Merciful
Answer:
Stocks are allowed when you own actual shares, the company is halal, you take possession (qabd), and you bear real ownership risk. Based on what you explained, a CDR is not direct ownership of the underlying stock. Instead, a bank (ex. CIBC) holds the real shares, and you own a derivative certificate representing economic exposure (i.e. unexpected currency fluctuations). Additionally, the built-in currency hedging in CDR bears a portion of the risk instead of the investor.
Since you do not own any underlying assets and have nothing tangible in your possession to sell, you are essentially trading based solely on price movements rather than the asset itself. This resembles selling something you do not possess (bay’ qabl al-qabd) and includes elements of deception (gharar) and gambling (qimār).
According to your explanation, CDRs allow you to trade against the price fluctuations of financial assets without actually owning the underlying asset. This is akin to gambling and therefore Haram.
CDRs are similar to gambling as they involve exchanging money for a different amount of money with no intermediary exchange. It is similar to betting, where money is placed on a position, profiting when it rises and incurring a loss when it falls. Even if there are no interest, swap, or rollover fees, it is still impermissible since you do not actually own the financial asset. Allah (ﷻ) says in the Quran:
They ask you ˹O Prophet˺ about intoxicants and gambling. Say, “There is great evil in both, as well as some benefit for people—but the evil outweighs the benefit. (Al-Baqarah 2:219)
O believers! Intoxicants, gambling, idols, and drawing lots for decisions are all evil of Satan’s handiwork. So shun them so you may be successful. (Al-Maidah 5:90)
Only Allah ﷻ knows best.
Written by Mufti Abdurrahman Mohammad
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham
References:
(قَوْلُهُ لِأَنَّهُ يَصِيرُ قِمَارًا) لِأَنَّ الْقِمَارَ مِنْ الْقَمَرِ الَّذِي يَزْدَادُ تَارَةً وَيَنْقُصُ أُخْرَى، وَسُمِّيَ الْقِمَارُ قِمَارًا لِأَنَّ كُلَّ وَاحِدٍ مِنْ الْمُقَامِرَيْنِ مِمَّنْ يَجُوزُ أَنْ يَذْهَبَ مَالُهُ إلَى صَاحِبِهِ، وَيَجُوزُ أَنْ يَسْتَفِيدَ مَالَ صَاحِبِهِ وَهُوَ حَرَامٌ بِالنَّصِّ
(Radd Al-Muhtār, vol. 6, pg. 403, Darul Fikr Beirut)
وَإِذَا عَرَفْت الْمَبِيعَ وَالثَّمَنَ فَنَقُولُ مِنْ حُكْمِ الْمَبِيعِ إذَا كَانَ مَنْقُولًا أَنْ لَا يَجُوزَ بَيْعُهُ قَبْلَ الْقَبْضِ
(Al-Fatāwā Al-Hindiyyah, vol 3, pg. 13, Al-Maṭba’ah Al-Kubrā Al-Amīriyyah)
حَدَّثَنَا مُسَدَّدٌ، حَدَّثَنَا أَبُو عَوَانَةَ، عَنْ أَبِي بِشْرٍ، عَنْ يُوسُفَ بْنِ مَاهَكَ، عَنْ حَكِيمِ بْنِ حِزَامٍ، قَالَ يَا رَسُولَ اللَّهِ يَأْتِينِي الرَّجُلُ فَيُرِيدُ مِنِّي الْبَيْعَ لَيْسَ عِنْدِي أَفَأَبْتَاعُهُ لَهُ مِنَ السُّوقِ فَقَالَ “ لاَ تَبِعْ مَا لَيْسَ عِنْدَكَ ” .
(Sunan Abi Dawud 3503, Book 24, Hadith 88)