trading of options is not found incompatible with shariah principles. however, further work is still necessary to assess the implication for islamic finance in terms of social welfare, speculation and risk - sharing, and more specifically risk management. errico luca & farrahbaksh mitra, “ islamic banking : issues in prudential regulation and supervision, ” imf working paper 98 / 30, march 1998 ; http : / / www. imf. org / external / pubs / ft / wp / wp9830. pdf ; also see, el hawary dahlia, grais wafik, iqbal zamir, “ regulating islamic financial institutions : the nature of the regulated, ” world bank working paper 3227. hong kong monetary authority, quarterly bulletin, december 2008. e. g. muhammad al - bashir muhammad al - amine of the international islamic university of malaysia and manager of the shariah compliance department at unicorn investment bank ( 2008 ), andreas jobst ( imf, 2008 ), obiyathullah ismath bacha ( international journal of islamic financial services, 2001 ). islamic finance in luxembourg : opportunities and challenges 34 - explanation of the business environment - challenges for further development explanation of the business environment the development of luxembourg ’ s international banking activities started in the late 60 ’ s with the expansion of the euro bond market. the financial centre extended further in the 80 ’ s with private banking services. the other core activity of the luxembourg financial centre is the investment fund industry. our practitioners developed acute expertise in the domiciliation, administration and distribution of investment funds with the result that the luxembourg financial sector is positioned among the world ’ s leading investment centres together with the us and france. islamic finance started to operate in luxembourg as early as in 1983 with the establishment of the first shariah compliant insurance company in europe ( takafol s. a. ). year by year, other islamic financial products developed and there are currently 31 shariah compliant investment funds ( september 2008 ) domiciled and managed in luxembourg. our stock exchange, started listing islamic funds in 2002 and is thus the first stock exchange in europe to host sukuk. its current listing of 14 sukuk with a combined value of $ 5. 5 billion put it in a competitive position with london. several of these sukuk have issuers originating from the gulf countries, malaysia or pakistan. furthermore, local financial institutions lobby the

treasury to issue luxembourg sukuk, but the volume would be symbolic in international comparison. on the operational side, clearstream banking, the luxembourg international central securities depository ( icsd ) holds under custody and offers the clearing and settlement of a range of islamic securities. it has slightly adapted its technical processes to sukuk ’ s requirements as regards the distribution of payments. earlier this year, deutsche bank announced the launch of a new platform " al mi'yar " whose aim is to facilitate the issuance of shariah compliant securities. this platform is domiciled in luxembourg. it is also worth mentioning that several local market practitioners and support entities ( mainly law firms and investment funds service providers ) are expanding to the gulf region. competition for the global lead in the investment fund industry has attracted expertise in domiciliation, administration and distribution of investment funds to luxembourg, including shariah compliant investment funds. working groups encompassing authorities and market players were set up to find out how to remove barriers to the development of islamic finance products. our national agency for the development of the financial centre “ luxembourg for finance ” has issued a leaflet which is used during promotional trips to explain the islamic finance opportunities in luxembourg. a 2 - day conference is planned for early may to disseminate awareness and knowledge within the banking and funds industry 35. the bcl participates together with other public authorities in a working group, chaired by the ministry of finance, on the promotion of islamic finance in luxembourg. the luxembourg school of finance and the university of luxembourg offer modules of islamic finance in their master programmes. see, bataineh sufian & carole, la finance islamique : opportunites et challenges pour le grand - duche de luxembourg, to be published in a forthcoming bulletin of the association luxembourgeoise des juristes de droit bancaire. see, islamic finance awareness days, agenda 2009, http : / / www. alfi. lu /. in reality, practitioners in luxembourg consider that our current legal framework is compatible with islamic insurance products and islamic finance products. it already allows the issuance of such products – differences between conventional investment funds and islamic funds are considered minimal. however, full islamic banking would request adjustments 36. the most appropriate structural category for islamic funds is the “ specialized investment fund ” ( fonds d ’ investissement specialise – sif ) which is targeted at well - informed investors. in addition, this structure is legally easier to establish and it