Is buying or selling forex, commodities and stock indices halal in Islam?

Question

Websites like eToro offer services where you can buy and sell currencies, commodities(gold, silver, oil, etc.) and indices(SPX500, NSDQ100, DJ30, UK100, FRA40, GER30, etc).

It's basically an online trading platform. The way it works is that, for example, you buy gold or euro at a price from the current market and later sell it for a higher price(if the price goes up). Now, you predict the market and think that euro may rise against dollar or vice versa, which may or may not happen.

I don't know much about Interest or Riba and I wonder if the above trading is Halal in Islam? Detailed answers with authentic references are appreciated.

EDIT

The comments to this question convinced me that it was Halal, until I read the following on eToro.

Both FX and commodities are traded in the spot market for 24 hours. At 5:00 pm New York time, all open positions are rolled over for the next 24 hours and the daily interest is added to the company’s accounts every 24 hours. The company can then either pay the interest or charge the client’s account to cover the fees.

With an Islamic account we make sure that there is no Riba in any form throughout the duration of the contract. In the FX market, if you don't close the trade before 5:00 pm New York time, all open trades will be automatically rolled over, which normally poses a problem for those following Islamic law, due to the possibly usurious interest charged for the rollover. However with an eToro Islamic account, all your positions will be closed at 5:00 pm (10:00 pm UST) and you can then reopen them immediately in order to avoid all interest problems and trade according to Islamic Sharia law. If the client chooses to reopen a trade immediately, the client will not pay any usurious interest.

There's no doubt that currency trading is one of the most difficult dilemmas in Islamic jurisprudence (Faqih). On the one hand, it requires the simultaneous exchange of currencies, which makes it a kind of hand to hand exchange. On the other hand, contemporary scholars consider the record of money transferred to or from a bank account as delivery. To resolve the issue, several decisions and fatwas have been issued. According to these decrees, the conditions for trading currency are:

1. Immediate buying and selling without delay

2. The currencies needs to be transferred from the account of the seller to that of the buyer and vice versa

3. The cost of the trade should be paid without delay

4. No interest on trades. In the case that there is any usurious interest, the contract will be invalid, void and Haram.

Answer 1

As you know already interest is haraam, I probably don't need to provide any hadith or quranic verse to prove that. If I do need to prove this first, please let me know as it won't take long.

Based on your research, I can clearly see that you think the stock market is very difficult for muslims, and you're right, it is!

Based on my own research, here are the problems:

1. The company must not have a product which is forbidden in islam, alcohol, interest based loans etc etc

2. The company must not be in debt, i.e. it must not be paying interest on a loan

3. The company must not be using money from shareholders and sticking that money into an interest based account and earning interest on it

These 3 points rule out most of the stock market...

However, you can still find companies through which you can still get into the stock market in a halaal manner. For example, HSBC Amanah Freedom Plus accounts, let you do just that. For example, they have scholars who monitor the funds and make sure they are halaal. As soon as they are found to be haraam, a particular stock from a fund is removed. Plus anything related to interest is automatically removed from the funds and given to charity.

For more info, check out this link: http://www.expat.hsbc.com/1/2/jerseyfundinvestments/hsbc-amanah

I don't know how many of these types of companies there are around the world, this is the only one I have found with a little research.

Answer 2

Assuming the definition of riba is not derived from ra-ba-wa (to grow) as hinted by Allah SWT at 30:39, where by there is no notion of growing in riba, but rather riba would have something to do with ra-ya-ba or uncertainties such as futures, hedging, etc. The abuse of ra-ya-ba to the point of harming others is what i define as riba.

So in the case of futures, as long as it's for the good of others it's ok. Cases like anticipating a hardship season to come, would be an example of a good for others. Cases like insider trading would be bad for others and be categorized as riba.

wallahua3lam