Quant opinion: Islamic finance

(Last Updated On: May 31, 2011)

Quant opinion: Islamic finance

Hi all,

I found this on a broker website about Islamic forex account:
“Islamic forex accounts are a specific category of forex trading accounts also known as interest free or swap free forex accounts.
Islamic forex trading accounts permit clients of Islamic religion to trade on interest free accounts (SWAP free or Roll Over fee) with no extra charge or penalty for the ability to trade in adherence with Islamic religious principles.
No Riba Policy:
Clients benefiting from the No Riba policy may hold positions for an undetermined time at the original opening price until they are closed and no charges will occur. Tadawul FX may revoke the ‘No Riba’ policy in case of abuse with a 48 hour notice by email.”

My questions are:
-How do they manage the no riba policy?
-Is it interesting if you are a swing trader to open 2 accounts to never pay the swap?
-When do they consider that you are abusing the system with carry trade? If you do carry trade without the most famour carry trade currencies will they allow it? If yes could this be the Holy Grail if you open a normal account and an Islamic account??
I had a chat with a broker:
Please wait for a site operator to respond.
You are now chatting with ‘TADAWULFX#2’
TADAWULFX#2: Thank you for contacting LivePerson Support. My name is Christopher. How may I help you today?
guillaume: Hi, for Islamic Forex Accounts, what are the fees?
TADAWULFX#2: there are no additional costs
guillaume: just the spread?
TADAWULFX#2: exactly
guillaume: ok and what do you mean about “Tadawul FX may revoke the ‘No Riba’ policy in case of abuse with a 48 hour notice by email.”
guillaume: what is a case of abuse?
TADAWULFX#2: the Islamic option is purely for our Muslim clients
TADAWULFX#2: we offer day trading
TADAWULFX#2: if someone is abusing this then the account type will be changed
guillaume: I thought that an abuse was utilisation of carry trade with islamic account?
TADAWULFX#2: carry trading on an Islamic account may be classed as abuse
guillaume: ok thanks have a nice day

Best regards

Some brokers i heard require some form of prrof to identify them as Muslims.. Some only allows clients from certain Muslim countries.. The rest usually do not have much methods to manage the no riba policy.
– About having to accounts to never pay a swap is exactly one of the kinds of abuse those brokers would be looking out for. They will look out for these rather suspicious activities
– basically, brokers with Islamic accounts run the risk of these abuses so some will charge a commission instead for these islamic accounts..

Hope the above answers some of your questions. 🙂


Please note that I am not a Muslim, and my knowledge of Arabic is limited. I do, however, have experience in dealing with businesses (both large and small) and banks in the Middle East.

I have done business in the Gulf for a number of years. The no-riba policy is subject to interpretation. To some Muslims, “Al-riba” refers to charged interest of any kind. It is forbidden under Islamic Law. To others, Al-riba refers to usury, or the charging of excessive interest. What is “excessive” is not defined. It is thought by some to mean any level of interest over the current level of inflation. Thus, a lender is fairly compensated for his services, but does not profit by exploitation of the borrower.

You will find the second interpretation more common in the UAE, while the first is widely accepted in Saudi Arabia and Kuwait. There are, however, exceptions both ways. It really comes down to the personal beliefs and interpretation of Sharia law on the part of the individual policymaker in any given organization.

I know that this may sound confusing, but life in the Gulf is a mass of contradictions.

Cheers and trade well.



NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

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