Simple Trading Method with trader101

I introduce this system in the other forum and quickly it become a phenomenal ground breaking methodology and created a buzz in the Forex world, and feel compiled to introduce this also here in this Forum.

Ive been been playing this method for about 3 months now after a 2 years collecting data and observing ccy pairs behavior and started trading this live and the return is quite good. This is a very simple method and it is all base on price action, indicator free trading and it is done manually. 

First you have to open a demo account (Indicator Account –IA) and make sure that the broker you choose have the ff. pairs (must have) in their platform:

Most brokers have the following Pairs.
1. GBPUSD 8. CADJPY
2. EURGBP 9. AUDUSD
3. GBPCHF 10. USDJPY
4. CHFJPY 11. EURUSD
5. AUDJPY 12. EURCHF
6. EURJPY 13. GBPJPY
7. USDCHF 14 USDCAD

If you are using the IBFX Platform below are your pairs to Hedge:
1. GBPUSD 8. EURUSD
2. EURGBP 9. USDJPY
3. GBPJPY 10. AUDUSD
4. USDCHF 11. NZDJPY
5. NZDUSD 12. GBPCHF
6. AUDJPY 13. CHFJPY
7. EURJPY 14 EURCHF

The first seven pairs is set 1 and the second is set 2. These pairs will hedge each other. Fresh start this method at the very beginning of the week, this will give you a good look at the pairs as weeks goes on. Set 1 trade them SHORT and set 2 trade them LONG. No SL and no TP. As much as possible run a script (attached) so as to maintain correct timing in opening them. Click twice the profit column of your terminal so as to make the positive profit pairs stay at the top and the negatives stay at the bottom or vice versa. Initially the order of this pairs is a mess, let it run for a day or two and you will notice the pairs will start to make a proper order. All the buys will stay at the bottom and all the sells will occupy the top or vice versa. It like putting to rest the dirty bottled water and it will start to settle down after a certain period and all the dirt to the bottom and the clearer water at the top.

About a day or two, all the buys (if negatives) will stay below and the sell (if positives) will be at the top. Now the indication that you should watch is, ideally the bottom 7 slots should be occupied by the negatives, the first pair in the negative that crosses the boundary of positive and negatives is the pairs we are concern. If one of the negative jump to slot 8 (counting from bottom) there is also a corresponding positive that will jump to slot 7. This is one of our signals. We can trade those two pairs that jump out of boundary. There are ways of watching and trading this pair as they start jumping slots. I called this method the Jumping Pairs Technique. There are also numerous variations associated with jumping pairs that I will discuss later in the thread. Another profitable method of trading is the trading of 14 pairs straight Buy or Sell, criteria of which I will also discuss in the later part of the thread.

You should have another account where you real trading will be executed. You can trade the two pairs that jump out. If the pair that jumps up is LONG then trade the two breakaway pairs LONG or vice versa. I also trade the next two pairs that jump of the boundary. I limit myself to just 4 pair’s max 5 pairs being traded at one time. The profit is up to you, what I do is when the pair I’m trading retreats a slot or 2 slots then I close it. Or sometimes I just leave and the Profit Protection EA does the watching of the trade. 

Remember do not touch your demo account as this will serve as your indicator and keep it running all the time and just check it once in while for any jumper pair and then trade them. 

On the attached terminal copy, you can see the breakaway pair USDCAD and was traded and make some pips on it. Consequently the other pair GBPUSD also jump 1 slot down and can also be traded Long as well. 

There will be many more setup as we go along.

I hope i explain it well. Good Luck trading,
Trader101

Note:
1) this method is manual.. Again manual... Indicator is fine.
2) I am trying to avoid any EA being made out of this system, indicators are welcome.
3) To those who will benefit from this method, my only request is to GIVE CREDIT TO WHERE CREDIT IS DUE this is given unselfishly free. Pipscorer/Trader101
PS: For advance reading go here:
Simple Trading Method with trader101

Linuxtroll Simple Scalping

-Identify the time (example: EST 3:00-3:30)
-Monitor the market using <=1min time frame (use the attached setup)
-Identify the direction of the move
-Jump in and out with higher lots
-You are done for the day within 30-60min (check the charts below)
-Go out and golf

NB! Spend a few months screen time with this setup... If you detect that the price is moving against you -- jump out immediately -- you will always get better trades later... You can add Rainbow to support and capture big moves (here you can pick the time frame based on your risk capital)... Only use this scalping style with ECN and jump in when you get the spread <=zero... Keep it Simple and Smart... Make Money and Enjoy...

NB! For more details about the Cyrox Method and Tools:
http://www.cyrox.com/
http://www.cyrox.com/forum

Leverage - satu lagi isu hukum berkaitan Forex

Pertama-tama sekali, TERIMA KASIH kepada sahabat2 yg sentiasa memberi peringatan dan pandangan yang telah dihantar ka email 'eringgit.net@gmail.com'. Sesungguhnya, sebagai umat islam, seharusnya kita saling ingat mengingati sesama kita lebih-lebih lagi dalam perjalanan kita menempuh dunia penuh cabaran sambil mecari rezeki di muka bumi Allah ini.. Semua pandangan anda amat saya hargai dan diruangan blog ini dapatlah kita berkongsi informasi terutama berkaitan hukum urusniaga forex yg sering dibincangkan.

Sebagaimana video klip youtube berkaitan hukum forex, anda disarankan untuk menonton 'kesemua' klip-klip video berkaitan hukum forex yang ada, contah 'forex yang haram', 'forex yang halal','hukum  forex' dan lain2nya untuk mendapatkan gambaran keseluruhannya.

Sepertimana yang dinasihatkan oleh salah seorang sahabat saya, janganlah kita hanya melihat kepada satu bahagian klip video youtube sahaja (yang berkenan dan sesuai dengan isi hati kita shj) sebelum membuat kesimpulan tetapi tontonlah kesemuanya video klip berkaitan yang disediakan demi untuk mendapatkan gambaran keseluruhan dan membuat penilaian yang lebih terbuka dan adil.

Berikut pula adalah petikan dari email yang Pak Lang terima juga dari salah seorang SAHABAT, diletakkan disini untuk rujukan kepada mereka yang mencari2 jawapan.

"Konsep leveraj yang disediakan oleh broker forex sebenarnya wujud dalam Islam. Islam
tidak pernah mengharamkan sesuatu perkhidmatan yang tiada unsur penindasan (gharar)
meskipun ianya disediakan oleh orang bukan Islam.
Leveraj forex merupakan jaminan (pertolongan)sementara yang diberikan oleh broker
forex. Ianya boleh dikatakan juga kontrak sementara antara pemain forex dan broker
selagi pemain tersebut masih mempunyai ekuiti dalam akaun mereka. Pemain hanya
boleh memegang kontrak berdasarkan ekuiti mereka sahaja dan mengikut yang mereka
persetujui dengan broker mereka. Bagi akaun Islamik, broker forex tidak mengenakan
atau memberikan apa-apa faedah atas jaminan mereka. Dengan jaminan mereka kita
dapat memasuki pasaran matawang mengikut kemampuan kita.

Broker forex adalah orang tengah antara bank-bank antarabangsa (institusi) dan pedagang
kecil (retailer). Mereka membeli (qoute) dari institusi dan menjual balik (reqoute) kepada
pedagang kecil. Biasanya jualan balik adalah munasabah antara 3-10 mata sahaja. Di sini
lah mereka membuat keuntungan. Proses ini adalah dibenarkan oleh Islam. Ianya bukan
riba. (Ada yang terkeliru menyatakan jual beli adalah juga sama riba. Bersambung...
Pandangan Professor Kewangan Islam

Saudara/i,
Kalau kita mengkaji banyak pandangan dari pakar-pakar kewangan islam yang terlibat
langsung dengan kewangan islam dan pernah membentang kertas kerja di forum
kewangan islam. Majoriti bersetuju menyatakan leverage adalah harus (permissible).
Seperti kata Professor Humayon Dar, Managing Director of Dar Al Istithmar in London

(Examines the Shari'ah aspects of the emerging Islamic hedge funds)...
"...Shari'ah does not have problems with leverage as long as it is achieved through
Islamic debt. Leverage is not a Shari'ah concern, rather it is an economic issue..."
Rujuk: http://islamicfinanceandbanking.blog...mic-hedge.html

Kalau mengambil kata-kata beliau, saya mengambil contoh leverage dalam akaun islamik
northfinance; leverage yang dikenakan tidak dikenakan sebarang interest (interest-free).
Juga kalau kita overnight pun tidak ada apa-apa interest (berbanding conventional
dikenakan interest kalau overnight).

Saya rasa perlunya kita merujuk banyak pihak yg mahir dan terlibat secara langsung
dalam kewangan islam. Bukan sekadar merujuk graduan bachelor yg baru balik dari
universiti di Jordan dan kerja 2-3 tahun di institusi kewangan islam dan tukar jadi
pensyarah di uiam. Kemudian buat hukum tanpa perbincangan.

How to Use Leverage for Great Results with Forex
When you execute a Forex trade, you are purchasing an amount of currency, termed a lot.
The amount of currency in one lot depends upon the type of account you have. In a
standard account, one lot is usually equal to U.S. $100,000; in a mini account, one lot is
$10,000.

But Forex trading accounts are leveraged, which means you don''t have to own that
expensive lot of currency; you just have to control it, and if you do, any profit it earns is
yours. To obtain the right to control a lot of currency, you put up a much smaller
amount of money in a sort of rental agreement called a margin deposit. In a standard
account, to control that U.S. $100,000, you must put up $1,000 of your own money; in a
mini account, to control $10,000, you need to put up $100.
The leverage influences the amount of profit you earn, as well. In a standard account, one
pip of a currency pair that has the U.S. dollar as the base is equal to U.S. $10; in a mini
account, one pip equals to $1. This means that, should you correctly forecast the
movement of the market and execute a trade that earns you two hundred pips (not an
unrealistic goal), if you have a standard account, your profit will be $2,000; if you have a
mini account, it''s $200.

To maximize your profits in Forex trading, you don''t have to trade a standard account;
not every beginning trader can afford to. Instead, if you believe you have a good forecast
on the market, you can trade more than one lot. To continue the above example, if your
successful trade earned you two hundred pips and you had purchased five lots of that
currency, in a mini account you would have put up $500 of your own money?but earned
a profit of $1,000 (two hundred pips times five lots). In a standard account, you would
have put up $5,000?and earned $10,000.

The number of lots you can trade depends upon the margin in your account. That''s not
the amount you deposited; that also includes any open trades you have running, taking
into account any profits or losses you may incur...

Siri 2: hadith dhaif sebagai hujah pengharaman
Maaf kerana saya senggang terlalu lama. Buat waktu ini, saya hanya berkempatan untuk
mengongsi pengetahuan tentang satu lagi hadith yang terputus sanad (dhaif)yg dijadikan
hujah pengharaman, iaitu:
"Janganlah kamu menjual sesuatu yang tidak di dalam milikmu." (Riwayat Abu Daud,
No 3504 3/283)
Rujuk Konsep Leveraj Haram; Metro Ahad 3 Februari 2008.
Adalah terjemahan langsung satu hadith yang masyhur
"la tabi' ma laysa 'indak"
كدنع سيل ام عبت ال
Beberapa isu telah dibangkit berkenaan hadith ini. Salah satunya tentang percanggahan
rantaian sanadnya. Al Bukhari dan Muslim tidak pernah merekodkan dalam koleksi
mereka walaupun yang lain antaranya Abū Dawūd and al Tirmidhi, ada merekodkannya.

Percanggahannya adalah seperi berikut:

1. Abū Dawūd, Ahmad ibn Hanbal, and Ibn Hibban menyatakan ianya diriwayatkan oleh
Ja'far ibn Abi Wahshiyah, dari Yūsuf ibn Mahak, dari Hakim ibn Hizam, manakala yang
keempatnya, ianya [Abd Allah ibn 'Ismah, manakala koleksi yang lain menyatakan antara
Yūsuf and Hakim. Dalam al Mizan, al Dhahabi menyatakan nama pertengahan langsung
tidak diketahui (la yu'araf).

2. Berkenaan periwayat utama Hadith ini, Hakim ibn Hizam, dikatakan “obscure”
(majhuūl al hal). Hanya Ibn Hibban memasukkan beliau antara periwayat yang boleh
dipercayai (reliable / al thiqqat). Sementara al Nasa’’i telah merakamkan cuma satu
Hadith yang diriwayatkan oleh beliau, Yang lain menyatakan beliau adalah “obscure”.
Rujukan:
Commodity futures: An Islamic legal analysis
Mohammad Hashim Kamali
http://en.wikipedia.org/wiki/Mohammad_Hashim_Kamali
--------------------------------------------------------(*
Perkataan: Majhul al-Hal (dinamakan juga al-Mastur)
Definisi: Perawi yang diriwayatkan daripadanya oleh dua orang atau lebih tetapi tidak
ditawsiqkan.

Hukum periwayatannya: tidak diterima mengikut pendapat yang sahih di sisi majoriti
ulama.

Adakah hadisnya itu mempunyai nama khusus?
Hadisnya itu tidak mempunyai nama khusus tetapi diletakkan di bawah hadis dha`if.
Rujukan:
http://www.darulkautsar.com/penghadi...bahasan_Kedua:
---------------------------------------------------------------(*
Nota: Saya tidak pernah memandang rendah pada hadith dhaif. Cuma menyatakan
bahawa hadith dhaif tidak boleh dijadikan hukum dalam soal halal dan haram.
The effects of using weak Hadeeth:
http://www.islamweb.net/ver2/archive...ng=E&id=139248
Wallahu 'alam.

Pandangan:

1) Margin trading or buying
Margin trading adalah membeli saham dengan menggunakan wang yang dipinjam dari
broker. Kebiasaannya faedah akan dikenakan atas pinjaman ini. Jika ini berlaku,
hukum menggunakan kaedah ini adalah haram disebabkan pinjaman Riba tadi. Selain itu
ia juga amat berisiko buat pelabur kerana jika saham yang dibelinya rugi, ia akan
menanggung kerugian berganda.
Sumber:
http://www.zaharuddin.net/index.php?...66&Item id=72

2) Hukum Leverage :
...Jika benarlah apa yang saya gambarkan ini, transaksi forex menggunakan Leverage ini
adalah HARAM kerana ia dikira menjual matawang yang tidak di dalam milik anda.
Milik sebenar anda hanyalah USD 100 tetapi yang dijual adalah 10,000. Ia berdasarkan
apa yang disebut oleh Nabi s.a.w.
Ertinya : Janganlah kamu menjual sesuatu yang tidak di dalam milikmu" ( Riwayat Abu
Daud, no 3504, 3/283)...
Sumber: http://www.zaharuddin.net/index.php?...49&Item id=72

3) Common stocks are a legitimate form of investment in Islam, but many of the practices
associated with stock trading are not halal (permitted). Short selling and margin trading,
for instance, are severely restricted. The prohibition of borrowing to invest (margin
trading) is based on the prohibition of riba, whilst short selling involves huge risk with
almost no upper limit. Moreover, from the Shari’ah point of view: “you cannot sell what
you do not posses”.
Source: http://www.failaka.com/downloads/For...SocialResp.pdf

Pandangan saya:
Bukankah leveraj dan margin trading saling berkait. Ibarat kuku dengan isi. Kalau ikut
pemahaman saya, pandangan #1 & #3 mengatakan: margin trading saham gunapakai
pinjaman ada riba sahaja HARAM. Kalau tiada riba, jadi HALAL. Secara amnya margin
trading (leverage) HALAL tanpa ada riba. Sebenarnya dalam akaun Islamik forex,
margin tradingnya LANGSUNG tidak kena / guna riba.

Fakta #1: In forex, margin is the minimum required balance to place a trade. When you
open a forex trading account, the money you deposit acts as collateral for your trades.
This deposit, called margin, is typically 1% of the value of the position.
* For example, if you want to purchase $100,000 of USD/JPY at 100:1 leverage, the
money required is 1%, or $1000. The other $99,000 is collateralized with your remaining
account balance. ***You pay no interest.***
Malah broker forex telah dulu merealisasikan prinsip-prinsip Qard Al Hassan (beautiful
loan) berbanding bank yang berjenama perbankan Islam tidak kira di Malaysia atau luar
negara. Kalau ada pun, ianya agak terbatas ruang lingkupnya seperti:

Fakta #2 "The aid is also aimed at promoting a healthy Islamic social structure by
facilitating social needs like marriage, education and situations beyond the control of the
applicant like prolonged delay in salaries or wages. Rujuk:
http://www.dib.ae/en/communityservice_qurad.htm

Insya Allah. Saya akan huraikan tentang Qard Al Hassan pada kesempatan lain.
Berkenaan risiko pula, andai pasaran tidak menyebelahi kita, kita masih ada stop loss
sebagai penyelamat. Andai kita tidak menggunakan stop loss pun, Broker forex
mengamalkan Fakta #3: ***No Debit Balances*** Your risk is only limited to funds on
deposit. Because there are no margin calls in forex trading, for your protection the broker
will automatically close out all of your open positions if your account equity falls below
the required margin level. Think of this as a final, automatic stop.
In fact, you'll never lose more money than you have in your account!
Info: On a daily basis, the volatility of the major currencies is ***less than 1%***. This
is much ***lower than*** an active ***stock***, which can easily have a 5-10% move
in a single day. (Konklusi: perdagangan saham lebih berisiko berbanding perdagangan
matawang!)

Jelas di sini, bahawa yang dikatakan "kerugian berganda" / "huge risk with almost no
upper limit" sebenarnya hampir tidak wujud dalam perdagangan matawang.
Pedagang perlu memahami peri pentingnya stop loss dan belajar Forex Money
Management. Bukan berdagang secara khinzir buta. Ini bertepatan dengan firman Allah
mafhumnya "jangan engkau campakkan dirimu ke dalam jurang kebinasaan".
Forex Money Management:
http://www.forex-money-management.com/stop_loss/02/

Berkenaan hadith “you cannot sell what you do not posses”, saya berpendirian seperti
yang dikomentarkan Professor Dr Mohammad Hashim Kamali. Pada pandangan awal
saya dengan adanya deposit (collateral - rujuk Fakta #1) itu sudah merupakan sebahagian
dari pemilikan wang tersebut walaupun belum dilaksanakan Qard Al Hassan lagi. Jadi
pedagang sebenarnya menjual apa yang dia miliki. Selain itu, saya akan cuba bawakan
iktilaf ulama dalam menafsir hadith ini. Ini membenarkan hadith shahih yang lain,
"perbezaan di kalangan umatku adalah rahmat'".
Fatwa tentang forex:
http://www.islamweb.net/ver2/Fatwa/S...Option=FatwaId
 Bersambung...

We will attempt to uncover all the questions you may have about islamic forex trading.
Islamic forex trading accounts are known as swap free forex trading accounts. Most
brokers offer their clients the possibility of maintaining an Islamic Forex Trading
Account, or a swap free account, which means that no swaps will be accounted to
positions overnight.

Some forex brokers provide Islamic Forex trading accounts as a way to cater for those
customers of theirs who have the belief that swaps are against their religious convictions.
It is often the case that brokers charge a flat fee rate for providing the service of Islamic
Forex Trading Accounts. Although they usually reserve the right to stop an Islamic forex
trading account (or swap free forex trading account) if the customer is abusing such
service.

These are the most interesting links we could find about this topic
Dr Mohammed Obaidullah
Dr Mohammed Obaidullah discusses issues around islamic forex trading and religious
beliefs
http://vlib.unitarklj1.edu.my/htm/islamforex.htm
GCI Trading
GCI Trading mentions islamic forex trading issues
http://www.gcitrading.com/shariah.htm
List of Swap Free (Muslim friendly) Forex Brokers
http://www.earnforex.com/muslim_forex_brokers.php
Wallahu'alam.

kengkawan semua,

janganlah susah-susahkan hati pasal forex ini halal ke haram. ianya harus. yg uzar

komenkan adalah pasal leverage. leverage dlm forex menepati hukum syarak. xde riba.

kena yakinkan diri yg ianya menepati hukum syarak. tanpa keyakinan boleh jatuh

syubhah pula. yg penting pakai islamic account [swap free account]. kan byk broker yg

tawarkan islamic account. was-was itu adalah bisikan syaitan. sedangkan hukum dagang

forex dan penggunaan leveraj adalah harus [halal]. yakinkan diri baru hati jadi

tenang...kerja jadi senang. saya mungkin newbies di sini. Tapi saya telah mengkaji pasal

hukum forex ini sejak 2005. banyak ebook forex yg saya baca dan kumpul juga dlm

tempoh 3 tahun menyertai forum spt forex-tsd, forexfactory dsb, semata-mata untuk

mengetahui apa sebenar forex dan dari sudut hukum dan cara perlaksanaannya agar ianya

bertepatan dgn muamalah dan jadi ibadat. wallahu 'alam.

Waalaikumussalam
Thu, 01/31/2008 - 03:50 — ibnu_mohamed

Waalaikumussalam w.b.t..
Terima kasih diucapkan kepada Saudara Seeraj atas pertanyaan yang diajukan
dan sokongan kepada ruangan forum ini. Memang semalam ada persoalan tentang
leverage. Oleh kerana soalan tersebut telah menyebut nama seseorang, pihak
pengurusan telah membuang soalan tersebut supaya perbincangan kita lebih telus
dan tidak menyentuh mana-mana pihak. Akhlak dan kesatuan adalah penting
dalam Islam dan bukan perpecahan serta pergaduhan yang dianjurkan. Terima
kasih atas keperihatinan saudara itu.

Diruangan yang terhad ini saya tidak bercadang untuk menterjemahkan definisi
LEVERAGE mengikut istilah perniagaan yang memeningkan kepala kerana ianya
berbeza mengikut penggunaan di dalam sesuatu urusniaga. LEVERAGE yang
berlaku dalam perdagangan FOREX adalah "how to earn more with less"
sebagaimana berikut :-

Sebagai contoh : kita mengambil urusniaga matawang asing yang melibatkan
matawang GBP/USD. Sekiranya kita membuka akaun USD1,000 dan kita ingin
membeli/menjual 1 lot GBP/USD, sepatutnya pihak platform akan memotong
USD100 dari akaun kita sebagai modal pusingan. Tetapi sekiranya leverage,
platform hanya akan memotong USD50 untuk modal pusingan 1 lot tersebut. Ini
merupakan kemudahan dan diskaun yang diberikan oleh pihak platform untuk
meringankan modal pusingan kepada pedagang yang mempunyai akaun mini
sahaja. Inilah yang dikatakan leverage dan keistimewaan ini hanya diberikan
kepada pedagang yang mempunyai akaun mini sahaja. Akaun mini ialah jumlah
akaun yang kurang dari USD50,000. Tetapi sekiranya akaun tersebut melebihi
USD50,000 ke atas, keistimewaan ini tidak diberikan kepada pedagang (trader).
Yang paling penting didalam perdagangan forex ini ialah setiap urusniaga yang
dibenarkan serta kerugian maksimum yang akan ditanggung oleh pedagang tidak
akan melebihi dari jumlah modal pusingan yang terdapat di dalam akaun mereka.
Sebagai contoh, sekiranya anda membuka akaun yang bernilai USD1,000 anda
tidak akan menanggung sebarang kerugian melebihi modal tersebut iaitu USD1,000
walau apapun leverage yang anda perolehi dari pihak platform dan kerugian anda
sama sekali tidak akan berganda dari keseluruhan modal yang anda laburkan.
Dengan ini leverage tidak menjadi halangan mengikut hukum syara' dalam
perlaksanaannya kerana ianya merupakan diskaun atau keistimewaan yang
diberikan kepada pedagang. Ini hanyalah kemudahan yang diberikan oleh pihak
platform dengan harga yan lebih rendah kepada pedagang yang mempunyai modal
yang kecil (mini akaun) iaitu akaun yang yang modalnya kurang dari USD50,000.
Saya berharap penerangan saya yang ringkas ini dapat merungkaikan segala
kekeliruan dan pemahaman yang silap tentang leverage yang timbul dewasa ini dan
juga menjawab kepada persoalan hukum tentang leverage itu sendiri. Di dalam
Islam "La ibrata bil musammayaat walakinna ibrata bil ma'aani" (Pengajaran
(hukum) bukan diambil dari segi istilah sesuatu perkara bahkan pengajaran
(hukum) diambil dari cara perlaksanaannya).
Sekian. Wassalam.

Haji Habin Faisal bin Haji Mohamed
Penasihat Syar'ie/Shar'ie Advisor
KODANA Berhad.

Expert warns of danger of non-state actors

Prof. Stephen Van Evera By Kang Hyun-kyung The release of a South Korean fishing boat Wednesday (KST), which was hijacked by Somali pirates near the waters of Kenya’s Lamu Island last October, ironically coincided with a rocket attack on a Korean provincial reconstruction team’s (PRT) base in Charikar, Afghanistan. Such criminal attacks overseas have raised concerns over the role of non-state actors, including insurgents and pirates, and how they could pose a threat to Korean civilians and troops dispatched abroad. Stephen Van Evera, professor of political science at the Massachusetts Institute of Technology (MIT), stressed that the threat of non-state actors spans the world. “I think that the danger of terrorism with weapons of mass destruction (WMD) is the main threat that emanates from non-state actors,” he said in an email interview with The Korea Times. “The threat is very serious and commonly threatens the whole world.” Van Evera warned of the possible catastrophic consequences if the international community continues to remain silent over the threat from such “players.” “Much of the world now views efforts to prevent WMD terror as a spectator sport in which they are not involved. In fact, all will be badly hurt if anyone suffers a WMD attack,” Van Evera said. “This surely includes South Korea, whose prosperity depends on global prosperity.” His remarks came a day after the nation faced mixed consequences of non-state actors’ criminal activities. The PRT base in Charikar came under rocket attack early Wednesday. Five rockets were fired — two were found outside while the remaining three inside, and luckily no casualties were reported. The Wednesday attack was the third of its kind in the war-torn nation after Korean troops were stationed there. On the same day, 43 sailors of the Keummi 305, a South Korean trawler, were freed near the coast off the Horn of Africa after four months of captivity by Somali pirates. A foreign ministry official told reporters on condition of anonymity that no ransom was given in return for the release of the ship and its sailors. The 241-ton fishing ship was one of eight South Korean vessels that have been seized by Somali pirates near the Gulf of Aden or in the Indian Ocean since April 2006. Koreans also have fallen victim to non-state actors’ attacks on land since 2004. In June 2004, an Islamist extremist group in Iraq kidnapped and beheaded Kim Sun-il, a translator and Christian missionary, in retaliation for Korea’s troop deployment in the Middle Eastern country. Three years later, Taliban insurgents kidnapped 23 Korean church workers. Two of them were killed, before the remaining 21 were returned to Korea after weeks of captivity. Koreans were also the victims of premeditated attacks by the terrorist group al-Qaida. In March 2009, a teenage suicide bomber, an al-Qaida operative, killed four South Korean tourists in Sana’a, Yemen. Three days later, a high-ranking Korean official, who went there to investigate the killings, escaped unhurt after an al-Qaida suicide bomber attacked a car carrying him and two other Koreans on a highway to the airport. Professor Van Evera warned of the grave threat al-Qaida and other non-state actors pose to the global economy. “WMD use anywhere on the planet will probably do grave harm to the world economy. If a WMD is ever used on the United States, there will be misguided calls to greatly restrict all movement of goods in to the United States,” he said. “This will be a huge blow to global prosperity.” Non-state actors: 한국인상대 해외무장세력위협 증가 소말리아 해적에 억류되었던 금미호가 4개월만에 풀려나던 날, 아프칸 우리군 PRT에는 로켓포 4발이 날아들었다. 한국인들이 공해와 군대가 파병된 외국영토에서 무장세력이나 해적과 같은 소위 non-state actors라고 불리는 비정부 행위자들에 의한 피해가 증가하고 있다는 것을 보여주는 사례들이다. 한국인들이 해외에서 알카에다와 같은 테러조직에 희생되는 경우도 있다. 예멘 현지언론에따르면 실제 2009년 예멘에서 자살폭탄에 희생된 한국인 관광객들과 정부 조사단을 대상으로 한 테러위협이 모두 알카에다 조직원에 의한 소행으로 밝혀지면서 한국인을 상대로한 무장세력의 위협이 증가하고 있다는 것을 보여준다. 2004년 이라크에서 현지 무장세력에 의해 납치 희생된 고김선일씨 사건이후 한국인이나 군을 상대로한 무장세력의 위협이 계속되고 있다. 현지 무장세력외에 2006년부터는 소말리아 해적들에 의해 총 8척의 한국선박이 피랍되었다가 풀려난 바 있다. 스테판 벤 이베라 MIT 대학 정치학과 교수는 코리아 타임스와의 인터뷰를 통해, 이들 비정부 행위자들이 대량살상무기를 획득하게 되는 경우 문제의 심각성은 특정 국가가 아닌 국제사회가 직면한 문제로 확대될 것이며 상황이 걷잡을 수 없게 될 것이라고 경고한다.

hkang@koreatimes.co.kr

The truth about Wikileaks' top secret UFO data

The Wikileaks organization has suggested that top secret UFO data is amongst its controversial leak of U.S. diplomatic cables. Wikileaks founder Julian Assange drew attention last December, told U.K. daily The Guardian, “It is worth noting that in yet-to-be-published parts of the cablegate archive there are indeed references to UFOs.” Assange then kept silent on the matter for two months before stating Feb. 6 that most of the data obtained concerned neither aliens nor UFOs but instead UFO religions. He said it was true that top secret UFO information had been obtained; however, for the most part, it was about the activities of UFO religions such as the Raelian movement. The Raelism is an atheist religious movement which was founded by Claude Vorilhon, now known as Rael. Raelians claim that between 1973 and 1975, Rael encountered aliens called the Elohim. They adhere to the concept of intelligent design, claiming that all Earth's lifeforms are the handiwork of genetic synthesis by the Elohim. In July 2007 it was estimated that there were some 60,000 Raelians in 182 countries around the world. The notion that the U.S. government considered UFO religions a nuisance enough to carefully track their movements was enough to rouse general interest, but UFO researchers were disappointed after the lofty expectations Assange had raised last year. “It appears the Wikileaks material deals primarily with a cult and not with classified information about the existence of UFOs,” said Craig Fergus, a ufologist based in California. 위키리크스 ‘UFO극비자료’ 뚜껑 열어보니… 미국 국무부 외교문서를 공개해 파장을 일으키고 있는 기밀폭로 웹사이트 위키리크스가 최근 미확인비행물체(UFO) 관련 극비자료 내용을 언급했다. 위키리크스 설립자 줄리언 어산지는 지난해 12월 영국 일간 가디언과 한 온라인 인터뷰에서 “미국 정부가 극비문건으로 분류해 놓은 UFO관련 자료를 입수했으며 곧 사이트에 공개하겠다.”고 밝혀 호기심을 자아냈다. 2달 동안이나 이 문서에 대해 침묵하던 어산지는 지난 6일(현지시간) 입수한 자료 대부분은 외계인이나 UFO에 대한 정보가 아닌 UFO신봉 종교에 관련돼 있다고 대답했다. 그는 “UFO관련 극비문서를 입수한 건 사실이다. 하지만 대부분은 UFO를 신봉하는 라엘리안 무브먼트(Ra?lism)과 같은 종교집단이 어떻게 활동하고 사람들을 모으는지에 대한 기록”이라고 선을 그었다. 라엘리안 무브먼트는 1973년과 1975년에 외계인 엘로힘과 접촉했다고 주장하는 클로드 보리옹 라엘이 창설한 무신론 종교단체로, 인간을 비롯한 지구상 모든 생명체가 엘로힘의 DNA합성을 통해 창조됐다는 이른바 지적설계론을 주장한다. 2007년 7월까지 전 세계 182개국에 6만여 명의 회원을 모은 것으로 알려졌다. 미국 정부가 UFO 신봉단체를 골칫덩이로 여기고 이들의 활동 동향을 자세하게 파악하고 있다는 점은 흥미를 유발하기에 충분했지만, 지난해 어산지의 UFO기밀 폭로 발언을 두고 촉각을 곤두세웠던 UFO 연구 커뮤니티에게는 적잖은 실망감을 안겨준 소식이었다. UFO연구가 크레이그 퍼거스는 “어산지가 입수한 자료는 UFO컬트나 법적 분쟁 등 UFO와 관련된 극히 일부분의 정보일 것”이라고 추정했다.

N. Korea refuses more military talks with South

Seoul to stick with `responsible measures’ stance By Lee Tae-hoon North Korea said Thursday that it will stop seeking military talks with South Korea, condemning Seoul for lacking the willingness to improve relations and ease tension through dialogue. “The army and people of the (North) do not feel any need to deal with the group of traitors any longer now that they do not wish to see inter-Korean relations improved but totally reject the dialogue itself,” the North Korean delegation said in a statement carried by the Korean Central News Agency. The North claimed that the South repeatedly sought “unreasonable” preconditions for higher-level dialogue. A day earlier, the two Koreas wrapped up their two days of preliminary military talks with little progress as they failed to narrow their differences over the agenda for a ministerial meeting. Seoul has insisted Pyongyang first take responsibility for two military attacks last year and promise not to stage any further provocations before moving the talks forward. The North’s statement claimed that the working-level talks broke down as Seoul revealed its “ill-intention to use the preliminary military talks as a means of easing the public’s anger against its hostile policy.” It also argued that the South wants to escalate inter-Korean tensions to hamper the resumption of the six-party denuclearization talks that would provide financial aid in exchange for an end to Pyongyang’s nuclear program. The North has flatly denied any involvement in the torpedo attack on the frigate Cheonan in March and insisted that its deadly artillery bombardment of Yeonpyeong Island in November was provoked by the South’s live-fire drill with some shells allegedly falling in the former’s territorial waters. Seoul, however, remained firm saying any future military discussions with Pyongyang will only be possible on the condition that the communist regime accepts the South’s prerequisites for “responsible measures” over the two deadly provocations. “Our stance is that the door for a high-level military meeting is still open, but such dialogue will only be possible if North Korea takes responsible measures for the two military attacks last year,” said Col. Moon Sang-gyun, the South’s chief delegate to the talks. Moon said the North unilaterally walked away from the negotiating table. A Cheong Wa Dae official expressed skepticism over an early resumption of inter-Korean military dialogue. “The North appears to have tested how determined the South is in sticking to principles over the Cheonan and Yeonpyeong issues,” the official said asking for anonymity. “It will likely take some time for the military dialogue to resume.” As for inter-Korean Red Cross talks, he said the government won’t be in a hurry to meet with the North. “Though Red Cross talks are separate matters, they will be influenced by inter-Korean relations.” Earlier, the South agreed “in principle” to hold a Red Cross meeting with the North to discuss humanitarian issues.

leeth@koreatimes.co.kr

38 sebab kenapa pilih forex, bukan bisnes lain

• Modal kecil, lebih kecil dari bela cacing, keli, lintah, kambing, lembu, ayam, kelapa sawit, jathropa, serai, pisang, buka kedai runcit, jadi kontraktor, atau buka mana-mana bisnes brick n mortar
• Pasaran kewangan terbesar dalam dunia lebih $3.5 trillion sehari
• Pasaran tunai
• Keuntungan melebihi 1% sehari atas jumlah modal
• Untung boleh dibayar segera melalui internet
• Lebih suci dari saham
• 24 jam sehari, memaksimakan masa bekerja
• 5 hari seminggu
• Bisnes global
• 40++ matawang yang boleh di trade, menjamin peluang membuat untung setiap masa
• Belajar dalam 1-2 bulan, tempoh belajar yang cepat
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• Boleh habiskan masa kualiti dengan keluarga
• Dapat mengisi masa anak dengan lebih berfaedah dengan mencari duit poket dari melayar web secara kosong
• Hanya perlu internet
• Boleh trading dimana-mana asal ada internet, menawar gaya hidup baru
• Tak ada bos
• Tak ada dateline
• Tak ada VSS, restructring, downsizing, termination, layoff
• Tak perlu berhenti kerja
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• Bukan kedai cyber
• Bukan MLM
• Tak perlu ada website
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• Tak perlu jumpa pelanggan
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• Tak perlu mengharap kepada orang lain
• Tak perlu office, boleh trade dimana-mana
• Tak perlu orang atas upline
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• Kemahiran penting untuk persediaan masa pencen nanti bila dapat duit EPF yang boleh diniagakan tanpa perlu cari bisnes lain
• Kemahiran seumur hidup
• Ultra-Recession proof

Forex dari Perspektif Islam

Sebagian umat Islam ada yang meragukan kehalalan praktik perdagangan berjangka. Bagaimana menurut padangan para pakar Islam? Apa pendapat para ulama mengenai trading forex, trading saham, trading index, saham, dan komoditi? Apakah Hukum Forex Trading Valas Halal Menurut Hukum Islam? Mari kita ikuti selengkapnya.

Jangan engkau menjual sesuatu yang tidak ada padamu,” sabda Nabi Muhammad SAW, dalam sebuah hadits riwayat Abu Hurairah.

Oleh sementara fuqaha (ahli fiqih Islam), hadits tersebut ditafsirkan secara saklek. Pokoknya, setiap praktik jual beli yang tidak ada barangnya pada waktu akad, haram. Penafsiran secara demikian itu, tak pelak lagi, membuat fiqih Islam sulit untuk memenuhi tuntutan jaman yang terus berkembang dengan perubahan-perubahannya.

Karena itu, sejumlah ulama klasik yang terkenal dengan pemikiran cemerlangnya, menentang cara penafsiran yang terkesan sempit tersebut. Misalnya, Ibn al-Qayyim. Ulama bermazhab Hambali ini berpendapat, bahwa tidak benar jual-beli barang yang tidak ada dilarang. Baik dalam Al Qur’an,sunnah maupun fatwa para sahabat, larangan itu tidak ada.

Dalam Sunnah Nabi, hanya terdapat larangan menjual barang yang belum ada, sebagaimana larangan beberapa barang yang sudah ada pada waktu akad. “Causa legis atau ilat larangan tersebut bukan ada atau tidak adanya barang, melainkan garar,” ujar Dr. Syamsul Anwar, MA dari IAIN SUKA Yogyakarta menjelaskan pendapat Ibn al-Qayyim. Garar adalah ketidakpastian tentang apakah barang yang diperjual-belikan itu dapat diserahkan atau tidak. Misalnya, seseorang menjual unta yang hilang. Atau menjual barang milik orang lain, padahal tidak diberi kewenangan oleh yang bersangkutan.

Jadi, meskipun pada waktu akad barangnya tidak ada, namun ada kepastian diadakan pada waktu diperlukan sehingga bisa diserahkan kepada pembeli, maka jual beli tersebut sah. Sebaliknya, kendati barangnya sudah ada tapi – karena satu dan lain hal — tidak mungkin diserahkan kepada pembeli, maka jual beli itu tidak sah.

Perdagangan berjangka, jelas, bukan garar. Sebab, dalam kontrak berjangkanya, jenis komoditi yang dijual-belikan sudah ditentukan. Begitu juga dengan jumlah, mutu, tempat dan waktu penyerahannya. Semuanya berjalan di atas rel aturan resmi yang ketat, sebagai antisipasi terjadinya praktek penyimpangan berupa penipuan — satu hal yang sebetulnya bisa juga terjadi pada praktik jua-beli konvensional.

Dalam perspektif hukum Islam, Perdagangan Berjangka Komoditi (PBK) (forex adalah bagian dari PBK) dapat dimasukkan ke dalam kategori almasa’il almu’ashirah atau masalah-masalah hukum Islam kontemporer. Karena itu, status hukumnya dapat dikategorikan kepada masalah ijtihadiyyah. Klasifikasi ijtihadiyyah masuk ke dalam wilayah fi ma la nasha fih, yakni masalah hukum yang tidak mempunyai referensi nash hukum yang pasti.

Dalam kategori masalah hukum al-Sahrastani, ia termasuk ke dalam paradigma al-nushush qad intahat wa al-waqa’I la tatanahi. Artinya, nash hukum dalam bentuk Al-Quran dan Sunnah sudah selesai; tidak lagi ada tambahan. Dengan demikian, kasus-kasus hukum yang baru muncul mesti diberikan kepastian hukumnya melalui ijtihad.

Dalam kasus hukum PBK, ijtihad dapat merujuk kepada teori perubahan hukum yang diperkenalkan oleh Ibn Qoyyim al-Jauziyyah. Ia menjelaskan, fatwa hukum dapat berubah karena beberapa variabel perubahnya, yakni: waktu, tempat, niat, tujuan dan manfaat. Teori perubahan hukum ini diturunkan dari paradigma ilmu hukum dari gurunya Ibn Taimiyyah, yang menyatakan bahwa a-haqiqah fi al-a’yan la fi al-adzhan. Artinya, kebenaran hukum itu dijumpai dalam kenyataan empirik; bukan dalam alam pemikiran atau alam idea.
Paradigma ini diturunkan dari prinsip hukum Islam tentang keadilan yang dalam Al Quran digunakan istilah al-mizan, a-qisth, al-wasth, dan al-adl.

Dalam penerapannya, secara khusus masalah PBK dapat dimasukkan ke dalam bidang kajian fiqh al-siyasah maliyyah, yakni politik hukum kebendaan. Dengan kata lain, PBK termasuk kajian hukum Islam dalam pengertian bagaimana hukum Islam diterapkan dalam masalah kepemilikan atas harta benda, melalui perdagangan berjangka komoditi dalam era globalisasi dan perdagangan bebas.

Realisasi yang paling mungkin dalam rangka melindungi pelaku dan pihak-pihak yang terlibat dalam perdagangan berjangka komoditi dalam ruang dan waktu serta pertimbangan tujuan dan manfaatnya dewasa ini, sejalan dengan semangat dan bunyi UU No. 32/1977 tentang PBK.
Karena teori perubahan hukum seperti dijelaskan di atas, dapat menunjukkan elastisitas hukum Islam dalam kelembagaan dan praktek perekonomian, maka PBK dalam sistem hukum Islam dapat dianalogikan dengan bay’ al-salam’ajl bi’ajil.

Bay’ al-salam dapat diartikan sebagai berikut. Al-salam atau al-salaf adalah bay’ ajl bi’ajil, yakni memperjualbelikan sesuatu yang dengan ketentuan sifat-sifatnya yang terjamin kebenarannya. Di dalam transaksi demikian, penyerahan ra’s al-mal dalam bentuk uang sebagai nilai tukar didahulukan daripada penyerahan komoditi yang dimaksud dalam transaksi itu. Ulama Syafi’iyah dan Hanabilah mendefinisikannya dengan: “Akad atas komoditas jual beli yang diberi sifat terjamin yang ditangguhkan (berjangka) dengan harga jual yang ditetapkan di dalam bursa akad”.

Keabsahan transaksi jual beli berjangka, ditentukan oleh terpenuhinya rukun dan syarat sebagai berikut:
a) Rukun sebagai unsur-unsur utama yang harus ada dalam suatu peristiwa transaksi Unsur-unsur utama di dalam bay’ al-salam adalah:

• Pihak-pihak pelaku transaksi (‘aqid) yang disebut dengan istilah muslim atau muslim ilaih.
• Objek transaksi (ma’qud alaih), yaitu barang-barang komoditi berjangka dan harga tukar (ra’s al-mal al-salam dan al-muslim fih).
• Kalimat transaksi (Sighat ‘aqad), yaitu ijab dan kabul. Yang perlu diperhatikan dari unsur-unsur tersebut, adalah bahwa ijab dan qabul dinyatakan dalam bahasa dan kalimat yang jelas menunjukkan transaksi berjangka. Karena itu, ulama Syafi’iyah menekankan penggunaan istilah al-salam atau al-salaf di dalam kalimat-kalimat transaksi itu, dengan alasan bahwa ‘aqd al-salam adalah bay’ al-ma’dum dengan sifat dan cara berbeda dari akad jual dan beli (buy).

b) Syarat-syarat

• Persyaratan menyangkut objek transaksi, adalah: bahwa objek transaksi harus memenuhi kejelasan mengenai: jenisnya (an yakun fi jinsin ma’lumin), sifatnya, ukuran (kadar), jangka penyerahan, harga tukar, tempat penyerahan.
• Persyaratan yang harus dipenuhi oleh harga tukar (al-tsaman), adalah, Pertama, kejelasan jenis alat tukar, yaitu dirham, dinar, rupiah atau dolar dsb atau barang-barang yang dapat ditimbang, disukat, dsb. Kedua, kejelasan jenis alat tukar apakah rupiah, dolar Amerika, dolar Singapura, dst. Apakah timbangan yang disepakati dalam bentuk kilogram, pond, dst.
• Kejelasan tentang kualitas objek transaksi, apakah kualitas istimewa, baik sedang atau buruk. Syarat-syarat di atas ditetapkan dengan maksud menghilangkan jahalah fi al-’aqd atau alasan ketidaktahuan kondisi-kondisi barang pada saat transaksi. Sebab hal ini akan mengakibatkan terjadinya perselisihan di antara pelaku transaksi, yang akan merusak nilai transaksi.
• Kejelasan jumlah harga tukar. Penjelasan singkat di atas nampaknya telah dapat memberikan kejelasan kebolehan PBK. Kalaupun dalam pelaksanaannya masih ada pihak-pihak yang merasa dirugikan dengan peraturan perundang-undangan yang ada, maka dapatlah digunakan kaidah hukum atau legal maxim yang berbunyi: ma la yudrak kulluh la yutrak kulluh. Apa yang tidak dapat dilaksanakan semuanya, maka tidak perlu ditinggalkan keseluruhannya.

Dengan demikian, hukum dan pelaksanaan PBK sampai batas-batas tertentu boleh dinyatakan dapat diterima atau setidak-tidaknya sesuai dengan semangat dan jiwa norma hukum Islam, dengan menganalogikan kepada bay’ al-salam.

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ISLAMIC FOREX TRADING By Dr Mohammed Obaidullah

1. The Basic Exchange Contracts

There is a general consensus among Islamic jurists on the view that currencies of different countries can be exchanged on a spot basis at a rate different from unity, since currencies of different countries are distinct entities with different values or intrinsic worth, and purchasing power. There also seems to be a general agreement among a majority of scholars on the view that currency exchange on a forward basis is not permissible, that is, when the rights and obligations of both parties relate to a future date. However, there is considerable difference of opinion among jurists when the rights of either one of the parties, which is same as obligation of the counterparty, is deferred to a future date.
To elaborate, let us consider the example of two individuals A and B who belong to two different countries, India and US respectively. A intends to sell Indian rupees and buy U.S dollars. The converse is true for B. The rupee-dollar exchange rate agreed upon is 1:20 and the transaction involves buying and selling of $50. The first situation is that A makes a spot payment of Rs1000 to B and accepts payment of $50 from B. The transaction is settled on a spot basis from both ends. Such transactions are valid and Islamically permissible. There are no two opinions about the same. The second possibility is that settlement of the transaction from both ends is deferred to a future date, say after six months from now. This implies that both A and B would make and accept payment of Rs1000 or $50, as the case may be, after six months. The predominant view is that such a contract is not Islamically permissible. A minority view considers it permissible. The third scenario is that the transaction is partly settled from one end only. For example, A makes a payment of Rs1000 now to B in lieu of a promise by B to pay $50 to him after six months. Alternatively, A accepts $50 now from B and promises to pay Rs1000 to him after six months. There are diametrically opposite views on the permissibility of such contracts which amount to bai-salam in currencies. The purpose of this paper is to present a comprehensive analysis of various arguments in support and against the permissibility of these basic contracts involving currencies. The first form of contracting involving exchange of countervalues on a spot basis is beyond any kind of controversy. Permissibility or otherwise of the second type of contract in which delivery of one of the countervalues is deferred to a future date, is generally discussed in the framework of riba prohibition. Accordingly we discuss this contract in detail in section 2 dealing with the issue of prohibition of riba. Permissibility of the third form of contract in which delivery of both the countervalues is deferred, is generally discussed within the framework of reducing risk and uncertainty or gharar involved in such contracts. This, therefore, is the central theme of section 3 which deals with the issue of gharar. Section 4 attempts a holistic view of the Sharia relates issues as also the economic significance of the basic forms of contracting in the currency market.

2. The Issue of Riba Prohibition

The divergence of views1 on the permissibility or otherwise of exchange contracts in currencies can be traced primarily to the issue of riba prohibition.
The need to eliminate riba in all forms of exchange contracts is of utmost importance. Riba in its Sharia context is generally defined2 as an unlawful gain derived from the quantitative inequality of the countervalues in any transaction purporting to effect the exchange of two or more species (anwa), which belong to the same genus (jins) and are governed by the same efficient cause (illa). Riba is generally classified into riba al-fadl (excess) and riba al-nasia (deferment) which denote an unlawful advantage by way of excess or deferment respectively. Prohibition of the former is achieved by a stipulation that the rate of exchange between the objects is unity and no gain is permissible to either party. The latter kind of riba is prohibited by disallowing deferred settlement and ensuring that the transaction is settled on the spot by both the parties. Another form of riba is called riba al-jahiliyya or pre-Islamic riba which surfaces when the lender asks the borrower on the maturity date if the latter would settle the debt or increase the same. Increase is accompanied by charging interest on the amount initially borrowed.
The prohibition of riba in the exchange of currencies belonging to different countries requires a process of analogy (qiyas). And in any such exercise involving analogy (qiyas), efficient cause (illa) plays an extremely important role. It is a common efficient cause (illa), which connects the object of the analogy with its subject, in the exercise of analogical reasoning. The appropriate efficient cause (illa) in case of exchange contracts has been variously defined by the major schools of Fiqh. This difference is reflected in the analogous reasoning for paper currencies belonging to different countries.
A question of considerable significance in the process of analogous reasoning relates to the comparison between paper currencies with gold and silver. In the early days of Islam, gold and silver performed all the functions of money (thaman). Currencies were made of gold and silver with a known intrinsic value (quantum of gold or silver contained in them). Such currencies are described as thaman haqiqi, or naqdain in Fiqh literature. These were universally acceptable as principal means of exchange, accounting for a large chunk of transactions. Many other commodities, such as, various inferior metals also served as means of exchange, but with limited acceptability. These are described as fals in Fiqh literature. These are also known as thaman istalahi because of the fact that their acceptability stems not from their intrinsic worth, but due to the status accorded by the society during a particular period of time. The above two forms of currencies have been treated very differently by early Islamic jurists from the standpoint of permissibility of contracts involving them. The issue that needs to be resolved is whether the present age paper currencies fall under the former category or the latter. One view is that these should be treated at par with thaman haqiqi or gold and silver, since these serve as the principal means of exchange and unit of account like the latter. Hence, by analogous reasoning, all the Sharia-related norms and injunctions applicable to thaman haqiqi should also be applicable to paper currency. Exchange of thaman haqiqi is known as bai-sarf, and hence, the transactions in paper currencies should be governed by the Sharia rules relevant for bai-sarf. The contrary view asserts that paper currencies should be treated in a manner similar to fals or thaman istalahi because of the fact that their face value is different from their intrinsic worth. Their acceptability stems from their legal status within the domestic country or global economic importance (as in case of US dollars, for instance).
2.1. A Synthesis of Alternative Views
2.1.1. Analogical Reasoning (Qiyas) for Riba Prohibition
The prohibition of riba is based on the tradition that the holy prophet (peace be upon him) said, “Sell gold for gold, silver for silver, wheat for wheat, barley for barley, date for date, salt for salt, in same quantities on the spot; and when the commodities are different, sell as it suits you, but on the spot.” Thus, the prohibition of riba applies primarily to the two precious metals (gold and silver) and four other commodities (wheat, barley, dates and salt). It also applies, by analogy (qiyas) to all species which are governed by the same efficient cause (illa) or which belong to any one of the genera of the six objects cited in the tradition. However, there is no general agreement among the various schools of Fiqh and even scholars belonging to the same school on the definition and identification of efficient cause (illa) of riba.
For the Hanafis, efficient cause (illa) of riba has two dimensions: the exchanged articles belong to the same genus (jins); these possess weight (wazan) or measurability (kiliyya). If in a given exchange, both the elements of efficient cause (illa) are present, that is, the exchanged countervalues belong to the same genus (jins) and are all weighable or all measurable, then no gain is permissible (the exchange rate must be equal to unity) and the exchange must be on a spot basis. In case of gold and silver, the two elements of efficient cause (illa) are: unity of genus (jins) and weighability. This is also the Hanbali view according to one version3. (A different version is similar to the Shafii and Maliki view, as discussed below.) Thus, when gold is exchanged for gold, or silver is exchanged for silver, only spot transactions without any gain are permissible. It is also possible that in a given exchange, one of the two elements of efficient cause (illa) is present and the other is absent. For example, if the exchanged articles are all weighable or measurable but belong to different genus (jins) or, if the exchanged articles belong to same genus (jins) but neither is weighable nor measurable, then exchange with gain (at a rate different from unity) is permissible, but the exchange must be on a spot basis. Thus, when gold is exchanged for silver, the rate can be different from unity but no deferred settlement is permissible. If none of the two elements of efficient cause (illa) of riba are present in a given exchange, then none of the injunctions for riba prohibition apply. Exchange can take place with or without gain and both on a spot or deferred basis.
Considering the case of exchange involving paper currencies belonging to different countries, riba prohibition would require a search for efficient cause (illa). Currencies belonging to different countries are clearly distinct entities; these are legal tender within specific geographical boundaries with different intrinsic worth or purchasing power. Hence, a large majority of scholars perhaps rightly assert that there is no unity of genus (jins). Additionally, these are neither weighable nor measurable. This leads to a direct conclusion that none of the two elements of efficient cause (illa) of riba exist in such exchange. Hence, the exchange can take place free from any injunction regarding the rate of exchange and the manner of settlement. The logic underlying this position is not difficult to comprehend. The intrinsic worth of paper currencies belonging to different countries differ as these have different purchasing power. Additionally, the intrinsic value or worth of paper currencies cannot be identified or assessed unlike gold and silver which can be weighed. Hence, neither the presence of riba al-fadl (by excess), nor riba al-nasia (by deferment) can be established.
The Shafii school of Fiqh considers the efficient cause (illa) in case of gold and silver to be their property of being currency (thamaniyya) or the medium of exchange, unit of account and store of value . This is also the Maliki view. According to one version of this view, even if paper or leather is made the medium of exchange and is given the status of currency, then all the rules pertaining to naqdain, or gold and silver apply to them. Thus, according to this version, exchange involving currencies of different countries at a rate different from unity is permissible, but must be settled on a spot basis. Another version of the above two schools of thought is that the above cited efficient cause (illa) of being currency (thamaniyya) is specific to gold and silver, and cannot be generalized. That is, any other object, if used as a medium of exchange, cannot be included in their category. Hence, according to this version, the Sharia injunctions for riba prohibition are not applicable to paper currencies. Currencies belonging to different countries can be exchanged with or without gain and both on a spot or deferred basis.
Proponents of the earlier version cite the case of exchange of paper currencies belonging to the same country in defense of their version. The consensus opinion of jurists in this case is that such exchange must be without any gain or at a rate equal to unity and must be settled on a spot basis. What is the rationale underlying the above decision? If one considers the Hanafi and the first version of Hanbali position then, in this case, only one dimension of the efficient cause (illa) is present, that is, they belong to the same genus (jins). But paper currencies are neither weighable nor measurable. Hence, Hanafi law would apparently permit exchange of different quantities of the same currency on a spot basis. Similarly if the efficient cause of being currency (thamaniyya) is specific only to gold and silver, then Shafii and Maliki law would also permit the same. Needless to say, this amounts to permitting riba-based borrowing and lending. This shows that, it is the first version of the Shafii and Maliki thought which underlies the consensus decision of prohibition of gain and deferred settlement in case of exchange of currencies belonging to the same country. According to the proponents, extending this logic to exchange of currencies of different countries would imply that exchange with gain or at a rate different from unity is permissible (since there no unity of jins), but settlement must be on a spot basis.
2.1.2 Comparison between Currency Exchange and Bai-Sarf
Bai-sarf is defined in Fiqh literature as an exchange involving thaman haqiqi, defined as gold and silver, which served as the principal medium of exchange for almost all major transactions.
Proponents of the view that any exchange of currencies of different countries is same as bai-sarf argue that in the present age paper currencies have effectively and completely replaced gold and silver as the medium of exchange. Hence, by analogy, exchange involving such currencies should be governed by the same Sharia rules and injunctions as bai-sarf. It is also argued that if deferred settlement by either parties to the contract is permitted, this would open the possibilities of riba-al nasia.
Opponents of categorization of currency exchange with bai-sarf however point out that the exchange of all forms of currency (thaman) cannot be termed as bai-sarf. According to this view bai-sarf implies exchange of currencies made of gold and silver (thaman haqiqi or naqdain) alone and not of money pronounced as such by the state authorities (thaman istalahi). The present age currencies are examples of the latter kind. These scholars find support in those writings which assert that if the commodities of exchange are not gold or silver, (even if one of these is gold or silver) then, the exchange cannot be termed as bai-sarf. Nor would the stipulations regarding bai-sarf be applicable to such exchanges. According to Imam Sarakhsi4 “when an individual purchases fals or coins made out of inferior metals, such as, copper (thaman istalahi) for dirhams (thaman haqiqi) and makes a spot payment of the latter, but the seller does not have fals at that moment, then such exchange is permissible…….. taking possession of commodities exchanged by both parties is not a precondition” (while in case of bai-sarf, it is.) A number of similar references exist which indicate that jurists do not classify an exchange of fals (thaman istalahi) for another fals (thaman istalahi) or gold or silver (thaman haqiqi), as bai-sarf.
Hence, the exchanges of currencies of two different countries which can only qualify as thaman istalahi can not be categorized as bai-sarf. Nor can the constraint regarding spot settlement be imposed on such transactions. It should be noted here that the definition of bai-sarf is provided Fiqh literature and there is no mention of the same in the holy traditions. The traditions mention about riba, and the sale and purchase of gold and silver (naqdain) which may be a major source of riba, is described as bai-sarf by the Islamic jurists. It should also be noted that in Fiqh literature, bai-sarf implies exchange of gold or silver only; whether these are currently being used as medium of exchange or not. Exchange involving dinars and gold ornaments, both quality as bai-sarf. Various jurists have sought to clarify this point and have defined sarf as that exchange in which both the commodities exchanged are in the nature of thaman, not necessarily thaman themselves. Hence, even when one of the commodities is processed gold (say, ornaments), such exchange is called bai-sarf.
Proponents of the view that currency exchange should be treated in a manner similar to bai-sarf also derive support from writings of eminent Islamic jurists. According to Imam Ibn Taimiya “anything that performs the functions of medium of exchange, unit of account, and store of value is called thaman, (not necessarily limited to gold & silver). Similar references are available in the writings of Imam Ghazzali5 As far as the views of Imam Sarakhshi is concerned regarding exchange involving fals, according to them, some additional points need to be taken note of. In the early days of Islam, dinars and dirhams made of gold and silver were mostly used as medium of exchange in all major transactions. Only the minor ones were settled with fals. In other words, fals did not possess the characteristics of money or thamaniyya in full and was hardly used as store of value or unit of account and was more in the nature of commodity. Hence there was no restriction on purchase of the same for gold and silver on a deferred basis. The present day currencies have all the features of thaman and are meant to be thaman only. The exchange involving currencies of different countries is same as bai-sarf with difference of jins and hence, deferred settlement would lead to riba al-nasia.
Dr Mohamed Nejatullah Siddiqui illustrates this possibility with an example6. He writes “In a given moment in time when the market rate of exchange between dollar and rupee is 1:20, if an individual purchases $50 at the rate of 1:22 (settlement of his obligation in rupees deferred to a future date), then it is highly probable that he is , in fact, borrowing Rs. 1000 now in lieu of a promise to repay Rs. 1100 on a specified later date. (Since, he can obtain Rs 1000 now, exchanging the $50 purchased on credit at spot rate)” Thus, sarf can be converted into interest-based borrowing & lending.
2.1.3 Defining Thamaniyya is the Key ?
It appears from the above synthesis of alternative views that the key issue seems to be a correct definition of thamaniyya. For instance, a fundamental question that leads to divergent positions on permissibility relates to whether thamaniyya is specific to gold and silver, or can be associated with anything that performs the functions of money. We raise some issues below which may be taken into account in any exercise in reconsideration of alternative positions.
It should be appreciated that thamaniyya may not be absolute and may vary in degrees. It is true that paper currencies have completely replaced gold and silver as medium of exchange, unit of account and store of value. In this sense, paper currencies can be said to possess thamaniyya. However, this is true for domestic currencies only and may not be true for foreign currencies. In other words, Indian rupees possess thamaniyya within the geographical boundaries of India only, and do not have any acceptability in US. These cannot be said to possess thamaniyya in US unless a US citizen can use Indian rupees as a medium of exchange, or unit of account, or store of value. In most cases such a possibility is remote. This possibility is also a function of the exchange rate mechanism in place, such as, convertibility of Indian rupees into US dollars, and whether a fixed or floating exchange rate system is in place. For example, assuming free convertibility of Indian rupees into US dollars and vice versa, and a fixed exchange rate system in which the rupee-dollar exchange rate is not expected to increase or decrease in the foreseeable future, thamaniyya of rupee in US is considerably improved. The example cited by Dr Nejatullah Siddiqui also appears quite robust under the circumstances. Permission to exchange rupees for dollars on a deferred basis (from one end, of course) at a rate different from the spot rate (official rate which is likely to remain fixed till the date of settlement) would be a clear case of interest-based borrowing and lending. However, if the assumption of fixed exchange rate is relaxed and the present system of fluctuating and volatile exchange rates is assumed to be the case, then it can be shown that the case of riba al-nasia breaks down. We rewrite his example: “In a given moment in time when the market rate of exchange between dollar and rupee is 1:20, if an individual purchases $50 at the rate of 1:22 (settlement of his obligation in rupees deferred to a future date), then it is highly probable that he is , in fact, borrowing Rs. 1000 now in lieu of a promise to repay Rs. 1100 on a specified later date. (Since, he can obtain Rs 1000 now, exchanging the $50 purchased on credit at spot rate)” This would be so, only if the currency risk is non-existent (exchange rate remains at 1:20), or is borne by the seller of dollars (buyer repays in rupees and not in dollars). If the former is true, then the seller of the dollars (lender) receives a predetermined return of ten percent when he converts Rs1100 received on the maturity date into $55 (at an exchange rate of 1:20). However, if the latter is true, then the return to the seller (or the lender) is not predetermined. It need not even be positive. For example, if the rupee-dollar exchange rate increases to 1:25, then the seller of dollar would receive only $44 (Rs 1100 converted into dollars) for his investment of $50.
Here two points are worth noting. First, when one assumes a fixed exchange rate regime, the distinction between currencies of different countries gets diluted. The situation becomes similar to exchanging pounds with sterlings (currencies belonging to the same country) at a fixed rate. Second, when one assumes a volatile exchange rate system, then just as one can visualize lending through the foreign currency market (mechanism suggested in the above example), one can also visualize lending through any other organized market (such as, for commodities or stocks.) If one replaces dollars for stocks in the above example, it would read as: “In a given moment in time when the market price of stock X is Rs 20, if an individual purchases 50 stocks at the rate of Rs 22 (settlement of his obligation in rupees deferred to a future date), then it is highly probable that he is , in fact, borrowing Rs. 1000 now in lieu of a promise to repay Rs. 1100 on a specified later date. (Since, he can obtain Rs 1000 now, exchanging the 50 stocks purchased on credit at current price)” In this case too as in the earlier example, returns to the seller of stocks may be negative if stock price rises to Rs 25 on the settlement date. Hence, just as returns in the stock market or commodity market are Islamically acceptable because of the price risk, so are returns in the currency market because of fluctuations in the prices of currencies.
A unique feature of thaman haqiqi or gold and silver is that the intrinsic worth of the currency is equal to its face value. Thus, the question of different geographical boundaries within which a given currency, such as, dinar or dirham circulates, is completely irrelevant. Gold is gold whether in country A or country B. Thus, when currency of country A made of gold is exchanged for currency of country B, also made of gold, then any deviation of the exchange rate from unity or deferment of settlement by either party cannot be permitted as it would clearly involve riba al-fadl and also riba al-nasia. However, when paper currencies of country A is exchanged for paper currency of country B, the case may be entirely different. The price risk (exchange rate risk), if positive, would eliminate any possibility of riba al-nasia in the exchange with deferred settlement. However, if price risk (exchange rate risk) is zero, then such exchange could be a source of riba al-nasia if deferred settlement is permitted7.
Another point that merits serious consideration is the possibility that certain currencies may possess thamaniyya, that is, used as a medium of exchange, unit of account, or store of value globally, within the domestic as well as foreign countries. For instance, US dollar is legal tender within US; it is also acceptable as a medium of exchange or unit of account for a large volume of transactions across the globe. Thus, this specific currency may be said to possesses thamaniyya globally, in which case, jurists may impose the relevant injunctions on exchanges involving this specific currency to prevent riba al-nasia. The fact is that when a currency possesses thamaniyya globally, then economic units using this global currency as the medium of exchange, unit of account or store of value may not be concerned about risk arising from volatility of inter-country exchange rates. At the same time, it should be recognized that a large majority of currencies do not perform the functions of money except within their national boundaries where these are legal tender.
Riba and risk cannot coexist in the same contract. The former connotes a possibility of returns with zero risk and cannot be earned through a market with positive price risk. As has been discussed above, the possibility of riba al-fadl or riba al-nasia may arise in exchange when gold or silver function as thaman; or when the exchange involves paper currencies belonging to the same country; or when the exchange involves currencies of different countries following a fixed exchange rate system. The last possibility is perhaps unIslamic8 since price or exchange rate of currencies should be allowed to fluctuate freely in line with changes in demand and supply and also because prices should reflect the intrinsic worth or purchasing power of currencies. The foreign currency markets of today are characterised by volatile exchange rates. The gains or losses made on any transaction in currencies of different countries, are justified by the risk borne by the parties to the contract.
2.1.4. Possibility of Riba with Futures and Forwards
So far, we have discussed views on the permissibility of bai salam in currencies, that is, when the obligation of only one of the parties to the exchange is deferred. What are the views of scholars on deferment of obligations of both parties ? Typical example of such contracts are forwards and futures9. According to a large majority of scholars, this is not permissible on various grounds, the most important being the element of risk and uncertainty (gharar) and the possibility of speculation of a kind which is not permissible. This is discussed in section 3. However, another ground for rejecting such contracts may be riba prohibition. In the preceding paragraph we have discussed that bai salam in currencies with fluctuating exchange rates can not be used to earn riba because of the presence of currency risk. It is possible to demonstrate that currency risk can be hedged or reduced to zero with another forward contract transacted simultaneously. And once risk is eliminated, the gain clearly would be riba.
We modify and rewrite the same example: “In a given moment in time when the market rate of exchange between dollar and rupee is 1:20, an individual purchases $50 at the rate of 1:22 (settlement of his obligation in rupees deferred to a future date), and the seller of dollars also hedges his position by entering into a forward contract to sell Rs1100 to be received on the future date at a rate of 1:20, then it is highly probable that he is , in fact, borrowing Rs. 1000 now in lieu of a promise to repay Rs. 1100 on a specified later date. (Since, he can obtain Rs 1000 now, exchanging the 50 dollars purchased on credit at spot rate)” The seller of the dollars (lender) receives a predetermined return of ten percent when he converts Rs1100 received on the maturity date into 55 dollars (at an exchange rate of 1:20) for his investment of 50 dollars irrespective of the market rate of exchange prevailing on the date of maturity.
Another simple possible way to earn riba may even involve a spot transaction and a simultaneous forward transaction. For example, the individual in the above example purchases $50 on a spot basis at the rate of 1:20 and simultaneously enters into a forward contract with the same party to sell $50 at the rate of 1:21 after one month. In effect this implies that he is lending Rs1000 now to the seller of dollars for one month and earns an interest of Rs50 (he receives Rs1050 after one month. This is a typical buy-back or repo (repurchase) transaction so common in conventional banking.10

3. The Issue of Freedom from Gharar

3.1 Defining Gharar
Gharar, unlike riba, does not have a consensus definition. In broad terms, it connotes risk and uncertainty. It is useful to view gharar as a continuum of risk and uncertainty wherein the extreme point of zero risk is the only point that is well-defined. Beyond this point, gharar becomes a variable and the gharar involved in a real life contract would lie somewhere on this continuum. Beyond a point on this continuum, risk and uncertainty or gharar becomes unacceptable11. Jurists have attempted to identify such situations involving forbidden gharar. A major factor that contributes to gharar is inadequate information (jahl) which increases uncertainty. This is when the terms of exchange, such as, price, objects of exchange, time of settlement etc. are not well-defined. Gharar is also defined in terms of settlement risk or the uncertainty surrounding delivery of the exchanged articles.
Islamic scholars have identified the conditions which make a contract uncertain to the extent that it is forbidden. Each party to the contract must be clear as to the quantity, specification, price, time, and place of delivery of the contract. A contract, say, to sell fish in the river involves uncertainty about the subject of exchange, about its delivery, and hence, not Islamically permissible. The need to eliminate any element of uncertainty inherent in a contract is underscored by a number of traditions.12
An outcome of excessive gharar or uncertainty is that it leads to the possibility of speculation of a variety which is forbidden. Speculation in its worst form, is gambling. The holy Quran and the traditions of the holy prophet explicitly prohibit gains made from games of chance which involve unearned income. The term used for gambling is maisir which literally means getting something too easily, getting a profit without working for it. Apart from pure games of chance, the holy prophet also forbade actions which generated unearned incomes without much productive efforts.13
Here it may be noted that the term speculation has different connotations. It always involves an attempt to predict the future outcome of an event. But the process may or may not be backed by collection, analysis and interpretation of relevant information. The former case is very much in conformity with Islamic rationality. An Islamic economic unit is required to assume risk after making a proper assessment of risk with the help of information. All business decisions involve speculation in this sense. It is only in the absence of information or under conditions of excessive gharar or uncertainty that speculation is akin to a game of chance and is reprehensible.
3.2 Gharar & Speculation with of Futures & Forwards
Considering the case of the basic exchange contracts highlighted in section 1, it may be noted that the third type of contract where settlement by both the parties is deferred to a future date is forbidden, according to a large majority of jurists on grounds of excessive gharar. Futures and forwards in currencies are examples of such contracts under which two parties become obliged to exchange currencies of two different countries at a known rate at the end of a known time period. For example, individuals A and B commit to exchange US dollars and Indian rupees at the rate of 1: 22 after one month. If the amount involved is $50 and A is the buyer of dollars then, the obligations of A and B are to make a payments of Rs1100 and $50 respectively at the end of one month. The contract is settled when both the parties honour their obligations on the future date.
Traditionally, an overwhelming majority of Sharia scholars have disapproved such contracts on several grounds. The prohibition applies to all such contracts where the obligations of both parties are deferred to a future date, including contracts involving exchange of currencies. An important objection is that such a contract involves sale of a non-existent object or of an object not in the possession of the seller. This objection is based on several traditions of the holy prophet.14 There is difference of opinion on whether the prohibition in the said traditions apply to foodstuffs, or perishable commodities or to all objects of sale. There is, however, a general agreement on the view that the efficient cause (illa) of the prohibition of sale of an object which the seller does not own or of sale prior to taking possession is gharar, or the possible failure to deliver the goods purchased.
Is this efficient cause (illa) present in an exchange involving future contracts in currencies of different countries ? In a market with full and free convertibility or no constraints on the supply of currencies, the probability of failure to deliver the same on the maturity date should be no cause for concern. Further, the standardized nature of futures contracts and transparent operating procedures on the organized futures markets15 is believed to minimize this probability. Some recent scholars have opined in the light of the above that futures, in general, should be permissible. According to them, the efficient cause (illa), that is, the probability of failure to deliver was quite relevant in a simple, primitive and unorganized market. It is no longer relevant in the organized futures markets of today16. Such contention, however, continues to be rejected by the majority of scholars. They underscore the fact that futures contracts almost never involve delivery by both parties. On the contrary, parties to the contract reverse the transaction and the contract is settled in price difference only. For example, in the above example, if the currency exchange rate changes to 1: 23 on the maturity date, the reverse transaction for individual A would mean selling $50 at the rate of 1:23 to individual B. This would imply A making a gain of Rs50 (the difference between Rs1150 and Rs1100). This is exactly what B would lose. It may so happen that the exchange rate would change to 1:21 in which case A would lose Rs50 which is what B would gain. This obviously is a zero-sum game in which the gain of one party is exactly equal to the loss of the other. This possibility of gains or losses (which theoretically can touch infinity) encourages economic units to speculate on the future direction of exchange rates. Since exchange rates fluctuate randomly, gains and losses are random too and the game is reduced to a game of chance. There is a vast body of literature on the forecastability of exchange rates and a large majority of empirical studies have provided supporting evidence on the futility of any attempt to make short-run predictions. Exchange rates are volatile and remain unpredictable at least for the large majority of market participants. Needless to say, any attempt to speculate in the hope of the theoretically infinite gains is, in all likelihood, a game of chance for such participants. While the gains, if they materialize, are in the nature of maisir or unearned gains, the possibility of equally massive losses do indicate a possibility of default by the loser and hence, gharar.
3.3. Risk Management in Volatile Markets
Hedging or risk reduction adds to planning and managerial efficiency. The economic justification of futures and forwards is in term of their role as a device for hedging. In the context of currency markets which are characterized by volatile rates, such contracts are believed to enable the parties to transfer and eliminate risk arising out of such fluctuations. For example, modifying the earlier example, assume that individual A is an exporter from India to US who has already sold some commodities to B, the US importer and anticipates a cashflow of $50 (which at the current market rate of 1:22 mean Rs 1100 to him) after one month. There is a possibility that US dollar may depreciate against Indian rupee during these one month, in which case A would realize less amount of rupees for his $50 ( if the new rate is 1:21, A would realize only Rs1050 ). Hence, A may enter into a forward or future contract to sell $50 at the rate of 1:21.5 at the end of one month (and thereby, realize Rs1075) with any counterparty which, in all probability, would have diametrically opposite expectations regarding future direction of exchange rates. In this case, A is able to hedge his position and at the same time, forgoes the opportunity of making a gain if his expectations do not materialize and US dollar appreciates against Indian rupee (say, to 1:23 which implies that he would have realized Rs1150, and not Rs1075 which he would realize now.) While hedging tools always improve planning and hence, performance, it should be noted that the intention of the contracting party – whether to hedge or to speculate, can never be ascertained.
It may be noted that hedging can also be accomplished with bai salam in currencies. As in the above example, exporter A anticipating a cash inflow of $50 after one month and expecting a depreciation of dollar may go for a salam sale of $50 (with his obligation to pay $50 deferred by one month.) Since he is expecting a dollar depreciation, he may agree to sell $50 at the rate of 1: 21.5. There would be an immediate cash inflow in Rs 1075 for him. The question may be, why should the counterparty pay him rupees now in lieu of a promise to be repaid in dollars after one month. As in the case of futures, the counterparty would do so for profit, if its expectations are diametrically opposite, that is, it expects dollar to appreciate. For example, if dollar appreciates to 1: 23 during the one month period, then it would receive Rs1150 for Rs 1075 it invested in the purchase of $50. Thus, while A is able to hedge its position, the counterparty is able to earn a profit on trading of currencies. The difference from the earlier scenario is that the counterparty would be more restrained in trading because of the investment required, and such trading is unlikely to take the shape of rampant speculation.

4. Summary & Conclusion

Currency markets of today are characterized by volatile exchange rates. This fact should be taken note of in any analysis of the three basic types of contracts in which the basis of distinction is the possibility of deferment of obligations to future. We have attempted an assessment of these forms of contracting in terms of the overwhelming need to eliminate any possibility of riba, minimize gharar, jahl and the possibility of speculation of a kind akin to games of chance. In a volatile market, the participants are exposed to currency risk and Islamic rationality requires that such risk should be minimized in the interest of efficiency if not reduced to zero.
It is obvious that spot settlement of the obligations of both parties would completely prohibit riba, and gharar, and minimize the possibility of speculation. However, this would also imply the absence of any technique of risk management and may involve some practical problems for the participants.
At the other extreme, if the obligations of both the parties are deferred to a future date, then such contracting, in all likelihood, would open up the possibility of infinite unearned gains and losses from what may be rightly termed for the majority of participants as games of chance. Of course, these would also enable the participants to manage risk through complete risk transfer to others and reduce risk to zero. It is this possibility of risk reduction to zero which may enable a participant to earn riba. Future is not a new form of contract. Rather the justification for proscribing it is new. If in a simple primitive economy, it was prevention of gharar relating to delivery of the exchanged article, in todays’ complex financial system and organized exchanges, it is prevention of speculation of kind which is unIslamic and which is possible under excessive gharar involved in forecasting highly volatile exchange rates. Such speculation is not just a possibility, but a reality. The precise motive of an economic unit entering into a future contract – speculation or hedging may not ascertainable ( regulators may monitor end use, but such regulation may not be very practical, nor effective in a free market). Empirical evidence at a macro level, however, indicates the former to be the dominant motive.
The second type of contracting with deferment of obligations of one of the parties to a future date falls between the two extremes. While Sharia scholars have divergent views about its permissibility, our analysis reveals that there is no possibility of earning riba with this kind of contracting. The requirement of spot settlement of obligations of atleast one party imposes a natural curb on speculation, though the room for speculation is greater than under the first form of contracting. The requirement amounts to imposition of a hundred percent margin which, in all probability, would drive away the uninformed speculator from the market. This should force the speculator to be a little more sure of his expectations by being more informed. When speculation is based on information it is not only permissible, but desirable too. Bai salam would also enable the participants to manage risk. At the same time, the requirement of settlement from one end would dampen the tendency of many participants to seek a complete transfer of perceived risk and encourage them to make a realistic assessment of the actual risk. .

Notes & References

1. These diverse views are reflected in the papers presented at the Fourth Fiqh Seminar organized by the Islamic Fiqh Academy, India in 1991 which were subsequently published in Majalla Fiqh Islami, part 4 by the Academy. The discussion on riba prohibition draws on these views.
2. Nabil Saleh, Unlawful gain and Legitimate Profit in Islamic Law, Graham and Trotman, London, 1992, p.16
3. Ibn Qudama, al-Mughni, vol.4, pp.5-9
4. Shams al Din al Sarakhsi, al-Mabsut, vol 14, pp 24-25
5. Paper presented by Abdul Azim Islahi at the Fourth Fiqh Seminar organized by Islamic Fiqh Academy, India in 1991.
6. Paper by Dr M N Siddiqui highlighting the issue was circulated among all leading Fiqh scholars by the Islamic Fiqh Academy, India for their views and was the main theme of deliberations during the session on Currency Exchange at the Fourth Fiqh Seminar held in 1991.
7. It is contended by some that the above example may be modified to show the possibility of riba with spot settlement too. “In a given moment in time when the market rate of exchange between dollar and rupee is 1:20, if an individual purchases $50 at the rate of 1:22 (settlement of his obligation also on a spot basis), then it amounts to the seller of dollars exchanging $50 with $55 on a spot basis (Since, he can obtain Rs 1100 now, exchange them for $55 at spot rate of 1:20)” Thus, spot settlement can also be a clear source of riba. Does this imply that spot settlement should be proscribed too ? The fallacy in the above and earlier examples is that there is no single contract but multiple contracts of exchange occurring at different points in time (true even in the above case). Riba can be earned only when the spot rate of 1:20 is fixed during the time interval between the transactions. This assumption is, needless to say, unrealistic and if imposed artificially, perhaps unIslamic.
8. Islam envisages a free market where prices are determined by forces of demand and supply. There should be no interference in the price formation process even by the regulators. While price control and fixation is generally accepted as unIslamic, some scholars, such as, Ibn Taimiya do admit of its permissibility. However, such permissibility is subject to the condition that price fixation is intended to combat cases of market anomalies caused by impairing the conditions of free competition. If market conditions are normal, forces of demand and supply should be allowed a free play in determination of prices.
9. Some Islamic scholars use the term forward to connote a salam sale. However, we use this term in the conventional sense where the obligations of both parties are deferred to a future date and hence, are similar to futures in this sense. The latter however, are standardized contracts and are traded on an organized Futures Exchange while the former are specific to the requirements of the buyer and seller.
10. This is known as bai al inah which is considered forbidden by almost all scholars with the exception of Imam Shafii. Followers of the same school, such as Al Nawawi do not consider it Islamically permissible.
11. It should be noted that modern finance theories also distinguish between conditions of risk and uncertainty and assert that rational decision making is possible only under conditions of risk and not under conditions of uncertainty. Conditions of risk refer to a situation where it is possible with the help of available data to estimate all possible outcomes and their corresponding probabilities, or develop the ex-ante probability distribution. Under conditions of uncertainty, no such exercise is possible. The definition of gharar, Real-life situations, of course, fall somewhere in the continuum of risk and uncertainty.
12. The following traditions underscore the need to avoid contracts involving uncertainty.
Ibn Abbas reported that when Allah’s prophet (pbuh) came to Medina, they were paying one and two years advance for fruits, so he said: “Those who pay in advance for any thing must do so for a specified weight and for a definite time”.
It is reported on the authority of Ibn Umar that the Messenger of Allah (pbuh) forbade the transaction called habal al-habala whereby a man bought a she-camel which was to be the off-spring of a she-camel and which was still in its mother’s womb.
13. According to a tradition reported by Abu Huraira, Allah’s Messenger (pbuh) forbade a transaction determined by throwing stones, and the type which involves some uncertainty.
The form of gambling most popular to Arabs was gambling by casting lots by means of arrows, on the principle of lottery, for division of carcass of slaughtered animals. The carcass was divided into unequal parts and marked arrows were drawn from a bag. One received a large or small share depending on the mark on the arrow drawn. Obviously it was a pure game of chance.
14. The holy prophet is reported to have said ” Do not sell what is not with you”
Ibn Abbas reported that the prophet said: “He who buys foodstuff should not sell it until he has taken possession of it.” Ibn Abbas said: “I think it applies to all other things as well”.
15. The Futures Exchange performs an important function of providing a guarantee for delivery by all parties to the contract. It serves as the counterparty in the exchange for both, that is, as the buyer for the sale and as the seller for the purchase.
16. M Hashim Kamali “Islamic Commercial Law: An Analysis of Futures”, The American Journal of Islamic Social Sciences, vol.13, no.2, 1996
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