Permissibility Status Of Earnings By Trading Indices On Funded Account
I would like to clarify that online prop firms do not involve real investment in indices. Their trading model is based on CFDs (Contracts for Difference), which function differently from actual index investment.For clarity, the CFD structure used by prop firms is as follows:No real money enters the marketNeither the trader’s money nor the firm’s money is invested in the actual index, exchange, or underlying companies.No ownership of index or sharesThe trader does not buy, sell, or own any part of the index or its constituent companies.Trading is purely on price movementProfit or loss is determined only by predicting whether the price moves up or down. Settlement is based on price difference only.Internal settlement with the firmThe contract is between the trader and the prop firm (or broker). The firm may hedge externally or may not, but the trader’s trade itself never reaches the real market.Nature similar to futures-style contractsCFDs resemble futures in the sense that there is no delivery of assets, only cash settlement based on price difference.Given this structure, my questions are:If no real investment is made in indices or companies, and no ownership exists, does the ruling related to “investment in haram companies” still apply? From a Shariah perspective, are CFDs permissible or impermissible. Jazakallah
Possession then was a means to ensure that the trade was not a fraud. Now, when other assurances are there, it is not necessary to insist on physical possession.