How To Choose A Reputable Islamic Forex Brokers?

Posted by Zandra Faye on September 15th, 2019

An Islamic Forex trading account varies from a regular forex trading account in several ways. Most significantly, Sharia law prevents the accrual of interest on funds deposited in the account and eliminates these accounts from acquiring rollover swap points on positions that remain open at the New York close of 5 p.m. EST.

Another significant feature of an Islamic Forex Trading Account is that transactions must be resolved right away. This means that currencies must be transferred between accounts right after the transaction and the cost of the transaction is paid at the same time.

Two of the fundamental elements of Islamic law that correlate to trading accounts.

Riba- means “interest”, it is a loan with the condition that the borrower will return to the lender more than and bigger than the amount borrowed.  Riba is restricted under Islamic law.

Gharar- is an Islamic finance term expressing a risky or dangerous sale, where aspects concerning the sale item are unknown or uncertain. Gharar is commonly outlawed under Islam, which explicitly prohibits trades that are considered to have extreme risk due to uncertainty.

How to Look for an Islamic Forex Brokers?

In choosing a broker, you should have oversight from a reputable forex regulator, such as the U.K.’s Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC), the U.S. Commodities Futures Trading Commission (CFTC), the National Futures Association (NFA) or the Australian Securities Investment Commission (ASIC).

Many brokers that allow customers swap-free Islamic accounts place time limitations on the no-swap period. Some brokers will enable you unlimited swap-free periods. For example, the swap-free account will be approved for five or 14 business days in many accounts. Also, forex brokers often ask potential clients seeking Islamic accounts to show why they need this type of account and ask for documentation of their religious affiliation.

Make sure you check with each broker about the certain terms and conditions of the Islamic account since considerable diversity can exist. Also, ask about a broker’s swap-free time frame and whether Islamic accounts need a higher deposit. Remember to ask how wide dealing spreads are in the Islamic account and the kind of maximum leverage ratio you can anticipate.