Sharia compliant trading platform

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Old Nov 30, 2010, 5:46pm   #1
 
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Sharia compliant trading platform

Hi, I ve been looking for a trading platform to trade in sharia compliant stocks.
I ve looked all over the web and the only one I ve found is called UMEX Trader. It offers approx 10,000 sharia compliant stocks, global market coverage including MTFs, real time price feeds, dividend purification, research, etc.
Before I sign up for it, I would like to do more research.

Can anyone else recommend any other similar platforms?
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Old Nov 30, 2010, 5:48pm   #2
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Re: Sharia compliant trading platform

Ask Arabianights, he's the expert on things like that 'round here.
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Old Nov 30, 2010, 5:59pm   #3
 
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Re: Sharia compliant trading platform

Riba in every other platform, son.

You're pissing into the wind.
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Old Nov 30, 2010, 6:49pm   #4
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Re: Sharia compliant trading platform

Quote:
Originally Posted by shahidkhan View Post
Hi, I ve been looking for a trading platform to trade in sharia compliant stocks.
I ve looked all over the web and the only one I ve found is called UMEX Trader. It offers approx 10,000 sharia compliant stocks, global market coverage including MTFs, real time price feeds, dividend purification, research, etc.
Before I sign up for it, I would like to do more research.

Can anyone else recommend any other similar platforms?
Hi shahidkhan,
Welcome to T2W.
I confess I've no idea what constitutes "sharia compliant stocks" but, if you're able to identify them, could you not load them into a watchlist (e.g. an Excel spreadsheet) so that you only trade those stocks? This would enable you to use the platform / broker / software of your choice and not be restricted to the company you mention? I realise fully that this is an obvious suggestion and one which, probably, you've thought of already. So, I apologise in advance if it's got some blindingly obvious flaw that I've somehow managed to overlook!

Tim.
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Old Nov 30, 2010, 7:47pm   #5
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Re: Sharia compliant trading platform

i. Day Trading
Day trading has little to do with actual investing. Usually day traders watch the market and buy and sell on short-term price fluctuation (normally within one day). For this reason, a number of Islamic scholars have termed this as closer to gambling and thus it is prohibited.

ii. Margin Trading:
Margin trading is buying stocks using money loaned from the broker. Interest is paid for this loan, and therefore it is prohibited. Moreover this is a very risky (and complicated) practice, as one can lose more than what he has borrowed.

iii. Derivatives - Options and Futures
Option is purchasing the right to buy or sell a stock or a commodity at a future date for a fixed price (regardless of the then prevailing price in the market). Exercising this option means buying at the price set in the past. Not exercising the option results in the investor paying the option fee. A great majority of scholars are of the opinion that Futures trading is not permitted in Islam.

iv. Short Selling:
Short selling is borrowing a stock from the brokerage firm and selling it in anticipation that the stock price will further go down. Once the prices are a bit stabilised the stock is purchased back to square up the sale transaction. Thus, the investor as a “shorter” keeps the difference. This transaction involves huge risk that almost has no upper limits. Moreover, from shariah point of view you cannot sell what you do not posses.
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Old Nov 30, 2010, 7:48pm   #6
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Re: Sharia compliant trading platform

i. Debt/Asset Ratio:
Has the company borrowed funds on interest? Ideally there should be no interest-based debt, but based on the Islamic legal principle "li al-akthar hukm al-kul" (to the majority goes the verdict of the whole) and subsequent scholarly opinions, a company is not a permissible investment if debt financing is more than 33% of its capital. This could be calculated as Total Debt divided by Trailing 12-Month Average Market Capitalization (where Total Debt = Short-Term Debt + Current Portion of Long-Term Debt + Long-Term Debt).

ii.Interest-related Income
Does the company generate any interest or interest-related income? This only includes those companies which do not make earning interest their business, but place their surplus funds in investments that yield interest income. As in the previous case, ideally no income should come from interest-related sources. However, looking at the current situation shariah scholars have permitted to invest in stocks of companies whose income from interest forms less than 5% of a company's total income. Some scholars have fixed that ceiling at 10% of a company’s total income.

iii. Monetary Assets
To invest in shariah compliant companies, one has to be very careful about company's monetary assets. Accounts receivables and liquid assets such as bank accounts and marketable securities have to be below the limits fixed by shariah scholars for the investment to be permissible. Some scholars have set this minimum at 51% whereas the majority of shariah scholars agree that "Accounts Receivables" should not be over 45% of company's total assets (where Accounts Receivables = Current Receivables + Long-Term Receivables).
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Old Nov 30, 2010, 7:49pm   #7
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Re: Sharia compliant trading platform

Sounds like fun.
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Old Nov 30, 2010, 7:52pm   #8
 
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Re: Sharia compliant trading platform

Any trading platform is sharia compliant if you find the right mullah
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Old Nov 30, 2010, 8:47pm   #9
 
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Re: Sharia compliant trading platform

Found it!

Click the image to open in full size.
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Thanks! The following members like this post: Mr. Charts
Old Nov 30, 2010, 10:14pm   #10
 
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Re: Sharia compliant trading platform

Bloody hell, Tony !
Did you write that from pre-existing personal knowledge, or was it a copy and paste job?
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