Question
Assalamo Aleykom Wa Rahmatullahi Wa Barakatho
Hope this message reaches all of you in the best of iman and health…. The whole history and question is below with attached pictures. Please read from bottom (18 January) so the whole story will be clear. And if the answer to main question is that it is permissible, then i would be grateful if you could answer to this follow up question (given that the answer to main question is permissible): If buying and selling at same day is permissible, will it be necessary to give anything as Sadaqah (regarding the loan etc the company has on it – company that has main business as halal but loan under 33% on itself) from the profit from that buying and selling on the same day? As i have understood, this is given when we recieve dividents and not from Short term capital gains like intraday trading from the fatwa below.
I came across the fatwa from Mufti Mohammed Tosir Miah (Darul Ifta Birmingham). Link to fatwa: https://islamqa.org/hanafi/daruliftaa-birmingham/136159 Here it is said that it is not necessary to give. JazakAllah khair
Assalamo Aleykom Was told by Mufti Saab that his students was looking into the case and wanted to send some more additional information that might be relevant and more clear in what i’m asking. I came across a video adressing the exact issue that i was asking about. This is from a Mufti Akbar Hashmi from India, but i don’t know anything about his background. He is talking about the possession of the share related to intraday trading. I might have explained my question little bit confusing, and wanted to send this video where the issue was asked more clearly than i e-mailed you. If you want to take a look at it if you have time. (11min50sec video). ?
————————————————————————————
https://islamqa.org/hanafi/muftionline/113867 Answer from the link above ?? If you gain control and ownership of the shares and it is just a matter registering it on your name then you may sell it before the third day. And Allah Ta’ala (الله تعالى) knows best. Answered by: Mufti Ebrahim Salejee (Isipingo Beach) Maybe this is also relevant to the question i’m asking? JazakAllah khair Sendt fra min Galaxy ——– Opprinnelig melding ——–
Assalamo Aleykom Mufti Saab I had some additional information that may be important to take into consideration when giving an answer. The main reason i’m asking all of this is because i want to buy and sell shares on the same day (daytrading/intraday trading). I have read some fatwas and there is especially one thing that i’m very unsure about. And that is when it comes to take possession over the share before selling it. As you can see the conversation between me and the representative for the company in the attached file, he says that i get ownership over the share as soon as i buy the share. Will this be enough to cover the criteria that says that a stock/share has to be in my possession before selling?
So my question is actually, will it be permissible for me to buy and sell shares on the same day when using a Equity account?
Answer
A research fellow contacted Colmex Pro and was told that they do not offer an equity account. Please also refer to the following critical website that argues that Colmex Pro is a pure CFD broker: https://www.tradingschools.org/colmex-pro-and-trade-dumpster-fire/
The second point is regarding intraday trading. The controversy surrounding this is based on whether or not ownership and possession of shares take place before they are sold. This is important because having ownership and possession of an item is a prerequisite to selling it. Hence, if these two conditions are not met then the sale of those shares will be impermissible, and if they are met the sale will be permissible.
The likes of Mufti Taqi Usmani have argued in considerable detail that possession does not take place and therefore selling prior to settlement will not be permissible. One of the arguments presented is that if the seller refuses to settle after the sale has taken place, the buyer will go through a buy-in process, where they re-purchase those same shares elsewhere. The seller will then be forced to pay the difference if any. If the ownership and possession of shares had transferred at the trade date then the buyer would not be able to change their mind and abstain from handing over those shares.
Also, even though the shares maybe recorded on the buyers name, they are not documented officially as being the owner of the shares, hence, they will not be entitled to participate in general meetings or be entitled to receive dividends directly.
Based on these factors we understand that complete possession of shares is not transferred over to the buyer before settlement and therefore they cannot sell the shares before settlement. This would render such day-trading as impermissible.
Some scholars have adopted the position that provided the formalities of sale have taken place and liability is transferred the shares can be sold. The question is whether or not liability actually takes place prior to settlement. If the company was to go bankrupt after sale of shares but prior to settlement, it will be the shareholders registered in the company’s records who will bear the loss. As the buyer will not be registered until settlement they will not bear any loss, again indicating that liability has not yet transferred. Hence, it would not be permissible to trade before settlement.
In regards to purification, scholars have generally adopted the position that purification is only necessary when receiving dividends and not upon capital gains. However, purifying in both cases would be more cautious. You may want to read An Introduction to Islamic Finance: Pages 145-146 for more detail on this issue.
(1) Fiqh al-Buyū’ volume 1, pages 384-388
(2) AAOIFI standard (21) 3/7: It is permissible to the buyer of a share to undertake transactions in it by way of sale to another and the like after the completion of the formalities of the sale and the transfer of liability to him even though the final settlement in his favour has not been made.
Also see page 574: The basis for the permissibility of undertaking transactions in shares even though the final registration formalities have not been completed is the transfer of liability for loss (Daman) to the buyer. This is attained through constructive possession that is granted through the transacting in what he has purchased.
Answered by:
Ifta Research Fellow
Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel