Question(s)

1) Are Contracts for Differences (CFD) permissible?
2) Is FTMO Trading permissible?

Answer(s)

الجواب حامدا ومصليا ومسلما

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

1) Contracts for Differences (CFDs) are not Shari’ah compliant, due to the fact that there is no immediate delivery from either side. Thus, they contain elements of Gharar (Gross Uncertainty) and Qimar (gambling), which are unlawful in Shari’ah. [1]

2) With regards to FTMO, from our research and correspondence with FTMO, we have understood that FTMO is a proprietary trading firm that allows traders to trade in forex using a funded account.

How it works
In essence, once the trader signs an agreement with FTMO, they are provided with a demo FTMO account which contains virtual funds. The trader is granted access to various trading resources. Although this demo account is not directly used to trade, crucially, it is connected to the another account belonging to the FTMO Proprietary Trading Firm; thereupon, the trades are copied based on an algorithm. Thus, in essence, the trades are made by the trader himself and copied by the FTMO algorithm from another account. Thereafter, 70% of the profits from these trades are given to the trader, whilst any losses are covered by the firm. For further details, you may refer to the correspondence in the notes/details below.

Shari’ Ruling
It is noteworthy that the trader may trade in all instruments and assets available in their trading platform such as Forex, Indices, Commodities, Stocks and Crypto, which all have inherent issues. You may refer to our earlier answers for more detail:
Online Forex Tradinghttps://deenspire.com/online-forex/
Cryptohttps://deenspire.com/trading-bitcoin/
Stockshttps://deenspire.com/investing-in-shares/

Nonetheless, FTMO themselves confirmed to us via correspondence that “all instruments that are available in your trading platform are CFD derivatives of the futures underlying assets.” [Direct Correspondence, 27th Feb 2021]

Accordingly, since Contracts for Differences (CFDs) are not Shari’ah compliant [1], it will not be permissible to undertake such a role with FTMO.

And Allah Ta’āla Knows Best.
Mubasshir Talha
4 March 2021 / 20 Rajab 1442

Concurred by: Mufti Faraz Adam

Approved by:
Mufti Tahir Wadee | Mufti Yusuf Ilolvi
[To see their profiles, click here]

Note: This fatwa is only to be viewed with the question asked. In the event of presenting this to a third party, please ensure it is coupled with the original question, as well as the references below for Islamic Scholars.


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Arguments and ideas propounded in this answer are based on the juristic interpretations and reasoning of the author. Given that many juristic issues and their interpretations are subjective in nature, another Mufti may reach different conclusions to the one expressed by the author. Whilst every effort has been taken to ensure total accuracy and soundness from a Shari’ah perspective, the author is open to any correction or juristic guidance. In the event of any juristic shortcomings, the author will retract any or all of the conclusions expressed within this answer.

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[Notes/Details]

Key Parts of Correspondence with FTMO (26th/27th Feb 2021)
FTMO: “Your FTMO Account will be connected to our Proprietary Trading Firm’s account, the trades will be copied algorithmically”
FTMO: “We do not provide trading recommendations, we are only looking for talented traders and provide them with capital”
FTMO: “If you successfully pass both the Challenge and the Verification, you will receive an FTMO Account, also with virtual funds, however, it will be connected to our Proprietary Trading Firm’s account and the trades are copied based on our own algorithm”
FTMO: “Your FTMO Account is connected to our Proprietary Trading Firm’s live trading account with real capital.
FTMO: “Therefore, you will receive 70% of the trades you make on your FTMO Account.”
DeenSpire: What does it mean by the following words in the terms and conditions: “no performance provided by FTMO Trading to the Customer under this Agreement, including all Services, may be considered as investment services or activities within the meaning of the legal regulations governing, in particular, investment services and capital markets; in particular, FTMO Trading does not receive or execute in any case, whether directly or indirectly, any trading instructions, does not trade on its own account, does not provide or conduct investment or other advice, research, recommendations or analyses, and does not give or forward to the Customer any trading instructions, does not receive any assets from, or manage any assets for, the Customer, and does not provide any related foreign exchange services; 3. 3.1.3 all trading that the Customer performs through the Services is simulated only and that the execution of a demo trade within the Services provided shall in no way constitute an instruction to trade in real financial markets or with real currency”
FTMO: “It just means that we are a funding company, not asset management or an investment company. FTMO allows successful traders to trade the company’s money and profit from it, but we do not accept money from third parties with the goal to invest them, nor do we provide any trading recommendations”
FTMO: “Your trading style is completely up to you. You can trade all the instruments and assets that are available in your trading platform (Forex, Indices, Commodities, Stocks, Crypto,…). You can also view the available symbols on this link: https://ftmo.com/en/symbols/
FTMO: “All instruments that are available in your trading platform are CFD derivatives of the futures underlying assets.”
Also refer to:


[References]

[1]
يا ايها الذين امنوا انما الخمر والميسر والانصاب والازلام رجس من عمل الشيطان فاجتنبوه لعلكم تفلحون
[Surah Al-Ma’idah, Ayah 90]

وكذا إذا تبايعا فلسا بعينه بفلس بعينه فالفلسان لا يتعينان، وإن عينا إلا أن القبض في المجلس شرط حتى يبطل بترك التقابض في المجلس لكونه افتراقا عن دين بدين۔ انتهى
[Al-Bada’i al-Sana’i, 5/236, DKI]

شرحنا فيما قبل أن العملات الورقية عند كثير من العلماء المعاصرين والمجامع الفقهية في حكم الذهب والفضة، فيشترط في مبادلتها التقابض في المجلس، وإن هذ الشرط مفقود في معظم عمليات هذه السوق، وأما على الموقف الثالث الذي شرحناه ورجحناه، فإنه يجب في تبادل العملات المختلفة الجنس أن يقع القبض على إحدى العملتين في مجلس العقد، وهذا الشرط مفقود أيضا في هذه السوق؛ فإنما يقع البيع والشراء عن طريق الكمبوتر أو الإنترنبت… ولا يقع التسليم والتسلم في كثير من عمليات السوق
[Fiqhul Buyoo’, 2/728, Dār al-Qalam]

عن أبي هريرة قال نهي رسول الله عن بيع الحصاة وعن بيع الغرر
[Sahih Muslim – 3170]

يع الغرر كله فاسد
[Muwatta Bi Riwayah Muhammad, 775]

لأن فيه تعليقا للتمليك بالخطر فيكون قمارا
[Tabyīn al-Haqa’iq, 4/48, DKI]

وهو حرام بالنص القمار
[Radd al-Muhtar ala ad-Durr al-Mukhtar, 6/403, Dar al-Fikr]

Also see: [Fatawa Mahmoodiyyah, 16/387-340; Takmilah Fath al-Mulhim, 1/320; Ahsan al-Fatawa, 7/24-5]
Also see: [Islam aur jaded ma`ashee masa`il, 3/307-19, Idarah Islamiyaat]