Question:

I have been trading on margins by analysis of the stock market. If it suggests it will rise I invest and then sell to make a profit. Is this permissible? [Published as received]

The Fatwa

In the Name of Allah, the Most Gracious, the Most Merciful

The Answer

The Fiqh of the Answer

The U.S. Securities and Exchange Commission explain margin as borrowing money from your broker to buy a stock and using your investment as collateral. Margin trading involves buying shares using funds borrowed from a broker, with the purchased assets acting as collateral. Investors initiate this by opening a margin account, wherein they’re required to deposit a percentage of the total trade value, known as the initial margin. This method amplifies potential gains and losses, providing leverage. For instance, if share prices rise, returns are magnified based on the entire value of the shares, not just the investor’s deposit. However, if prices fall, losses can surpass the original amount invested. Furthermore, investors are charged interest on the borrowed sum, adding to the costs.

Margin trading is called “margin” trading because investors are required to deposit a portion of the total value of the trade, known as a “margin”, into their brokerage account. This margin serves as collateral for the loan provided by the broker to purchase the securities.

In essence, the term “margin” refers to the difference between the total value of the securities and the amount borrowed from the broker. It acts as a buffer for the broker, ensuring they have some level of protection if the value of the purchased securities falls. This “margin” requirement is what allows the investor to leverage their investment, potentially amplifying both gains and losses. The name “margin trading” underscores the critical role this deposited amount plays in the trading process.

The leverage qualifying as a valid Qarḍ is also an area of contention. A trader is not permitted to use the leverage except on the platform and in the manner approved. However, for a Qarḍ to be valid, there must be Tamlīk and Yadd – control and the right of disposal in the manner one sees fit. This is non-existent in such liquidity facilities.

In regard to placing shares as security, the Imams of the Madhhab did not permit Rahn in a share of an asset (Mushāʿ). Imam al-Sughdī (d.461 AH) states that the only acceptable Rahn asset is that which is known, in one’s control, free from any encumbrances, clearly divided and separated, regardless of whether it can be divided or not. Imam al-Quduri (d.428 AH) states that the security must be such a thing that is not shared between people and is under the sole ownership of one person.

Imam al-Sarakhsī (d.483 AH) states that among the reasons that Rahn in Mushāʿ is not permitted is that the purpose of Rahn is having the ability to settle the outstanding debt if required, and with a Mushāʿ, Istīfā’ cannot take place. Typically, in jointly owned assets, one cannot settle or liquidate independently. The entire asset needs to be liquidated or impacted to be able to exercise one’s right over the security. When multiple individuals co-own an item, each possesses a vested interest in it and seeks to derive benefits from its use. Consequently, as each person naturally asserts their claim to the item, it can create conflicts that hinder its availability for use as a replacement or result in its absence from the lender, negating it being withheld as leverage.

The second reason why the Hanafi Fuqahā’ did not permit the Rahn of a Mushā’ is that the Rahn should remain in the possession of the mortgagee perpetually, as discussed by Imam al-Marghīnānī (d.593 AH). This cannot happen in a Mushāʿ, as multiple parties own the asset and they would want access via Muhāya’ah.

However, shares that are traded on the markets, even though they are ‘shares’ of a company, are treated as independent assets and rights, in and of themselves. They are almost given the ruling of individual assets, and deemed as an individual’s exclusive property, even though they are a part of a larger whole. In this scenario, the stock remains readily accessible to the broker, to the extent that they can even sell it off during a margin call, fulfilling the primary requirement of a Rahn arrangement.

Mufti Radha al-Haq Sahib Hafizhahullah permits the gifting of a share, which follows the same basis, due to the existence of convention today that recognises, and permits gifting shares. Mufti Taqi Sahib Hafizhahullah writes on the matter of the Rahn of shares, and comments that it is now possible to deal with one part of a commodity without affecting the rest. He then mentions that it is on this basis that the AAOIFI Standards have accepted and approved the Rahn of listed equity and shares.

Nevertheless, margin trading on conventional markets and the use of collateral in interest-based transactions is not permitted. Both are not Sharīʿah compliant.

And Almighty Allah Alone Knows Best

Maulana Mohammed Aneesur Rahman
Trainee Mufti 

Reviewed and approved by
Mufti Faraz Adam
Darul Iftaa Muadh ibn Jabal
www.darulfiqh.com 

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ومنها أن يكون مما له مثل ويجوز القرض في الفلوس (بدائع للكاساني)

الرهن: ينعقد بالإيجاب والقبول ويتم القبض فإذا قبض المرتهن الرهن محوزا مفرغا مميزا ثم العقد (مختصر القدوري)

وَأَمَّا حُكْمُ الْقَرْضِ فَهُوَ ثُبُوتُ الْمِلْكِ لِلْمُسْتَقْرِضِ فِي الْمُقْرَضِ لِلْحَالِ، وَثُبُوتُ مِثْلِهِ فِي ذِمَّةِ الْمُسْتَقْرِضِ لِلْمُقْرِضِ لِلْحَالِّ، وَهَذَا جَوَابُ ظَاهِرِ الرِّوَايَةِ.
وَرُوِيَ عَنْ أَبِي يُوسُفَ فِي النَّوَادِرِ لَا يُمْلَكُ الْقَرْضُ بِالْقَبْضِ مَا لَمْ يُسْتَهْلَك (بدائع للكاساني) .

لیکن آج کل یہ مسئلہ قابل غور ہے کہ ہبہ مشاع کا عام رواج ہو چکا ہے اور اسلامی قانون کے علاوہ دوسرے قوانین میں یہ ہبہ درست اور تام سمجھا جاتا ہے، بنا بریں فقہاء نے یہ تحریر فرمایا ہے کہ عرف عام جب نص فقہاء کے خلاف ہو تو عرف عام و عرف خاص کو ترجیح ہوگی تو بندہ کے خیال میں یہ ہبہ نافذ ہونا چاہئے. (فتاوي دار العلوم زكريا – جلد پانچ – مفتي رضاء الحق صاحب)

والذي يُقصد بالرَّهن أن يبقى المرهونُ في مُمكنة المرتهن بأن يحق له أن يستوفي الدين منه، وهذا المقصود لا يضره الشيوع، لأنَّه يُمكنُ للمرتهن أن يبيع الحِصَّةَ المشاعةَ . مع بقاء الشيوع. وليس هناك نص يمنع رهن المشاع. (توثيق الديون لمفتي تقي العثماني صاحب)

قال: «الربا محرم في كل مكيل أو موزون إذا بيع بجنسه متفاضلا» فالعلة عندنا الكيل

مع الجنس والوزن مع الجنس. قال ﵁: ويقال القدر مع الجنس وهو أشمل. (الهداية في شرح بداية المبتدي)

وفي الآية نهيٌ عن أكل الرِّبا (٣) أضعافًا مضاعفةً، فكان تحريمًا لذلك، وثبت تحريم القليل بقوله تعالى: ﴿وَحَرَّمَ الرِّبَا﴾ [البقرة: ٢٧٥] (التيسير في التفسير لابي حفص النسفي)

اعْلَم ان الرَّهْن لايجوز الا مَعْلُوما ومحوزا ومفروغا ومقسوما فِيمَا يحْتَمل الْقِسْمَة أَولا يحْتَمل ومقبوضا فى قَول ابي حنيفَة واصحابه وابي عبد الله(النتف)

وَلَنَا أَنَّ مُوجِبَهُ ثُبُوتُ يَدِ الِاسْتِيفَاءِ وَاسْتِحْقَاقُ الْحَبْسِ الدَّائِمِ وَلَا يُتَصَوَّرُ الْحَبْسُ الدَّائِمُ فِي الْمُشَاعِ؛ لِأَنَّهُ يَبْطُلُ بِالْمُهَايَأَةِ قَبَضَهُ كَأَنَّهُ رَهَنَهُ يَوْمًا وَيَوْمًا لَا وَلِهَذَا يَسْتَوِي فِيهِ مَا يَقْبَلُ الْقِسْمَةَ وَمَا لَا يَقْبَلُهَا بِخِلَافِ الْهِبَةِ حَيْثُ تَجُوزُ فِيمَا لَا يَحْتَمِلُ الْقِسْمَةَ؛ لِأَنَّ مُوجِبَهَا الْمِلْكُ وَلَا يَمْتَنِعُ بِالشُّيُوعِ وَلَا يَجُوزُ مِنْ شَرِيكِهِ أَيْضًا؛ لِأَنَّ ثُبُوتَ الْيَدِ فِي الْمُشَاعِ لَا يُتَصَوَّرُ وَلِأَنَّهُ لَوْ جَازَ لَأَمْسَكَهُ يَوْمًا بِحُكْمِ الرَّهْنِ وَيَوْمًا بِحُكْمِ الْمِلْكِ (البحر الرائق)

وَكَذَلِكَ رَهْنُ الْمُشَاعِ فَقَدْ قَامَتْ الدَّلَالَةُ لَنَا عَلَى أَنَّ يَدَ الِاسْتِيفَاءِ الَّتِي هِيَ مُوجَبُ الرَّهْنِ لَا تَثْبُتُ فِي الْجُزْءِ الشَّائِعِ (المبسوط)