Jump to content

Forex

From Encyclopedia of Contemporary Jurisprudence
  • abstract

The Forex market (in persian: فارکس) is the exchange of different currencies where traders gain or lose through price fluctuations. The simple form of currency exchange has no jurisprudential challenge. Nowadays, due to the expansion of the field of Forex activity, it has gone beyond its simple form, then this expansion includes the number of tradable symbols in Forex since it initially focused only on currency exchange. However, today it supports other trading symbols such as metals, energy resources, commodities, shares of stock exchange companies, stock indices and digital currencies. On the other hand, Forex has also expanded in terms of trading methods such as leveraged transactions and reverse transactions and overnight swaps requiring jurisprudential research.

The Significance and Importance in Contemporary Jurisprudence

Forex is a market where different currencies are exchanged with each other[1][2] and because of its features compared to other markets, it has attracted the attention of economic activists. Among these features are a very large volume of transactions, high liquidation speed, speed of transactions, quick and easy access and no need for initial capital. So, it has doubled the importance of jurisprudential examination of the issue. Jurisprudential questions about Forex transactions have made it necessary to examine it in contemporary jurisprudence: What is basically the nature of Forex contracts? Are they derived from contracts or are they under the title of Sharia contracts? What is the Sharia ruling on Forex trading? Is the general rule about Forex trading correct, or do different types of Forex trades require independent examination? The simple form of currency exchange has no jurisprudential challenge, but today this area has gone beyond its simple form due to the expansion of the Forex activity field; On the one hand, this expansion is in the number of tradable symbols in Forex; Because at first it only focused on currency exchange, but today it supports other trading symbols such as metals, energy resources, commodities, shares of stock exchange companies, stock indices and digital currencies. Also, the expansion of Forex in terms of trading methods, such as leveraged or leveraged trades and reverse trades and overnight swaps, requires research. Researches have been conducted in this field, but since Forex is a new issue in jurisprudence, and on the other hand, the Forex market is always developing and has new facilities, the need for more and more detailed researches in this field is felt.

Research history

Template:Main Researches have been carried out in this field, among them the article on jurisprudential analysis of the international Forex market based on its prohibition in Iran's laws[3] and the article explaining the nature and what is the Forex market and its requirements in Iranian jurisprudence and law[4] and Thematics of the Forex market[5] pointed out.

Introduction to the Forex market

Forex is derived from Foreign Exchange Market, it is a market where different currencies are exchanged with each other[6][7] and traders make profits and losses through price fluctuations.[8] Forex is the largest financial market in the world and the most Financial circulation takes place in it.[9] This market is decentralized; That is, it does not have a specific physical location and operates only virtually and on the Internet.[10] Forex initially focused only on the exchange of currencies, which are called currency pairs. With the development of this market, what is known as Forex trading today, has moved away from the first concept and has become wider, which, in addition to currency pairs, includes other trading symbols such as metals, energy sources, commodities, shares of stock exchange companies, stock indices and digital currencies. supports.[11]

Types of Forex transactions and their methods

Understanding how Forex transactions are conducted will help to explain its jurisprudential nature, and will also clarify whether Forex transactions are new contracts or can be adapted to Sharia contracts. Transactions in the Forex market are not physical, and the purchased currency or goods cannot be delivered, and profit or loss can only be obtained from price fluctuations.[12] Forex is a two-way market; It means that you can make a profit from both the price increase and the price decrease of a symbol.[13] Even if the commodity is not available in their asset portfolio, traders can still sell it; In fact, he lends the goods to the Forex brokers and after the price goes down, he buys the goods and pays the loan to the broker and earns profit from the price difference.

Transactions in the Forex market are divided into five categories. To explain the nature of transactions in Forex, it is necessary to examine the way of trading different symbols separately.

  • Trading currency pairs: In the Forex market, each currency is marked with a special symbol, and the two currencies that are exchanged are called currency pairs. The first currency is called the base currency and the second currency is called the counter currency. The value of each currency is compared to another currency, which is called exchange rate. For example, the euro is known by the symbol (EUR) and the dollar is known by the symbol (USD), and the symbol of this currency pair is shown as (EUR/USD) and represents the parity rate of the euro to the dollar, where the euro is the base currency and the dollar is the counter currency. The purchase transaction of a currency pair means the purchase of the base currency (Euro) and the payment of the counter currency (Dollar), and the sale transaction means the sale of the base currency (Euro) and the receipt of the counter currency (Dollar). For example, the parity rate (EUR/USD) means the value of the euro against the dollar is 1.04. Simply put, for 1 euro, 1.04 dollars should be paid.[14] The logic of placing an order in Forex is that if the trader predicts that the value of the dollar will decrease compared to the euro, he will place a buy order (EUR/USD), and vice versa, if he predicts that the value of the dollar will increase compared to the euro, he will place a sell order ( EUR/USD). After registering and executing the transaction, if the direction of the market is according to the trader's prediction, he can make a profit by closing the transaction, and if it is contrary to the prediction, he will lose.[15]
  • Commodity transactions: In addition to trading currency pairs, Forex has provided a platform where commodities such as metals and energy sources can be bought and sold. The trading method in these cases does not have the complexity of currency pairs, and in fact, it is normal buying and selling that is done with dollars. For example, in the exchange of gold and dollars represented by the symbol XAU/USD, one ounce of gold can be bought by paying dollars.[16]
  • Digital currency transactions: Cryptocurrencies such as Bitcoin and Ethereum can also be traded in the Forex market.[17]
  • Trading of economic indicators and company shares: In Forex, economic indices such as the dollar index (U.S. DOLLAR CURRENCY INDEX) or the American stock index such as Dow Jones (DJI) and Nasdaq (NDQ) and S&P (SPX) or the German stock index (DAX) and some other countries can be traded.[18] Stock can also be bought and sold in Forex.[19]

Brokers

The expansion of the Forex market requires an intermediary between customers and the international Forex market which led to the emergence of brokers who are responsible for deposit and withdrawal services, order registration and communication between buyers and sellers. Forex brokers are of two types:[20]

  • Real brokers who have a real presence in the currency market and do real buying and selling with customers' money.[21]
  • On the other hand, the brokers who are called market makers do not have real buying and selling and have only created a virtual page on the internet and make virtual transactions.[22]

Paying attention to the types of brokers is important because some experts argue that Forex transactions are formal, due to the lack of differentiation of this issue.

Jurisprudence Review

There is a difference of opinion regarding the accuracy of Forex trading. Some jurists like Seyyed Ali Sistani have not expressed a jurisprudential opinion in this regard and have referred to other jurists.[23]

Illegitimacy and its Evidence

Most of the contemporary jurists and researchers do not consider Forex transactions as legitimate and have presented various arguments against its illegitimacy. These evidences are presented in two categories: first commandment and the second commandment.

Illegitimacy according to Primary Evidence

  • Buying and selling property value: Seyed Mosa Shobeyri Zanjani believes that Forex transactions are buying and selling property value, not the property itself thus that is why it is not correct since selling is the exchange of property with property.[24] This type of transaction is actually a type of contract for difference or CFD that the parties buy and sell without owning currency or shares or goods.
  • Unreality: according to Lotfollah Safi Golpayegani, Forex trading is not real buying and selling and is actually a kind of betting[25] because in Forex no currency is bought and sold, but the trader only guesses the exchange rate and bets that the conversion rate, increases or decreases. When the broker posts prices on his website or trading platform, he actually reads these rates from the spot market as a reference.[26]
  • Impossibility of delivering the goods: Nasser Makarem Shirazi considers Forex transactions invalid due to the fact that it is not possible to deliver the goods.[27]
  • Usury: Some researchers consider Forex transactions to include usury. According to them, the credit given by the broker to the trader on the basis of which buying and selling is done, is actually a loan from the broker, and since he collects his commission after the transaction is closed, then the loan is conditional on receiving the commission and it is usury.[28]

Illegitimacy according to Secondary Evidence

Some researchers disprove the impermissibility of Forex trading by citing secondary rules.[29]

  • Harmless rule: According to some, Forex transactions cause losses to the market's operators, and based on the harmless rule, Forex transactions are not legitimate.[30]
  • Arrogance (Maghrour) Rule: Some other researchers consider Forex trading as the reason for deceiving traders due to the presence of speculators and the presence of hidden information and sometimes market manipulation. According to the rule of arrogance (al-Maghrour), he must be the guarantor of the lost property, and there is no way back in Forex transactions.[31]
  • The rule of expediency in the Islamic system: Some believe that disturbing the Islamic system is forbidden. Activity in the Forex market causes damage to employment and the loss of national reserves and the outflow of currency, and for this reason, it is not permissible.[32]
  • System disruption rule: It has been said that the main cause of the global economic crisis is the prevalence of this type of transactions, and according to the system disruption rule, Forex trading is not correct.[33]

Its legitimacy and evidence

Some jurists, such as Seyyed Ali Khamenei, consider Forex transactions to be correct in themselves by observing Sharia and legal regulations. If the transactions are real, and currency is bought and sold, and the broker does not receive profit for giving credit; these transactions are correct.[34] Those who believe in the legitimacy of Forex transactions consider the evidence of illegitimacy to be incomplete, as a result of the applications and generalities of Ahalallah al-Ba'i[35] and Ofwa al-Aqoud[36] include Forex transactions and these transactions are condemned to be true. Ebrahim Brarpour considers Forex transactions to be in accordance with rational principles and considers the approach of Islam in rulings of transactions to be a signature, and according to the basic principle of correctness of transactions, he ruled on correctness of Forex transactions.[37]

Footnote

  1. ↑ Record, Neil, Currency Overlay (Wiley Finance Series).
  2. ↑ Yousefi Moqadam, General principles governing the international currency market, p. 25.
  3. ↑ Nouri and others, "Jurisprudential analysis of the international Forex market based on its prohibition in Iranian laws".
  4. ↑ Brarpour, "Explaining the nature and essence of the Forex market and its requirements in Iranian jurisprudence and law".
  5. ↑ Tabatabaeinejad, "Forex market thematics".
  6. ↑ Record, Neil, Currency Overlay (Wiley Finance Series).
  7. ↑ Yousefi Moghadam, general principles governing the international currency market, p. 25.
  8. ↑ Tabatabainejad, "Thematics of the Forex market", p. 79.
  9. ↑ Dalili, Introduction to Forex, p. 13.
  10. ↑ Record, Neil, Currency Overlay (Wiley Finance Series).
  11. ↑ "Symbols in Forex", a simple exchange training site.
  12. ↑ Tabatabaeinejad, Topology of Forex Market, p. 78.
  13. ↑ Brarpour, "Explaining the nature and essence of the Forex market and its requirements in Iranian jurisprudence and law", p. 23.
  14. ↑ Tabatabaeinejad, Thematics of the Forex market, p. 78.
  15. ↑ "Symbols in Forex", a simple exchange training site; Tabatabainejad, Thematics of Forex Market, p.80.
  16. ↑ "Symbols in Forex", a simple exchange training site; Tabatabaeinejad, Topology of Forex Market, p. 78.
  17. ↑ "Symbols in Forex", a simple exchange training site; Tabatabaeinejad, Topology of Forex Market, p. 78.
  18. ↑ "Symbols in Forex", a simple exchange training site; Tabatabaeinejad, Topology of Forex Market, p. 78.
  19. ↑ "Symbols in Forex", a simple exchange training site; Tabatabaeinejad, Topology of Forex Market, p. 78.
  20. ↑ Tabadkani,What is trading, types of Forex broker, market maker?
  21. ↑ Tabadkani,What is trading, types of Forex broker, market maker?
  22. ↑ Tabadkani, What is trading, types of Forex broker, market maker?
  23. ↑ Sistani, Internet referendum, referendum number: 1155878.
  24. ↑ Shobeyri Zanjani, online poll, poll number: 91305.
  25. ↑ Safi, a survey of the Islam Quest site.
  26. ↑ Tabatabaeinejad, Topology of Forex Market, p.83.
  27. ↑ Makarem Shirazi, internet poll, tracking code: 140002270128.
  28. ↑ Nouri etc., "Jurisprudential analysis of the international Forex market based on its prohibition in Iranian laws", p. 84.
  29. ↑ Nouri etc. Jurisprudential analysis of the international Forex market based on its prohibition in Iranian laws", p. 88.
  30. ↑ Nouri etc., "Jurisprudential analysis of the international Forex market based on its prohibition in Iranian laws", p. 88.
  31. ↑ Nouri etc., "Jurisprudential analysis of the international Forex market based on its prohibition in Iranian laws", p. 89.
  32. ↑ Nouri etc., "Jurisprudential analysis of the international Forex market based on its prohibition in Iranian laws", p. 92.
  33. ↑ Arabiyat and others, "Al-Dawabat al-Sharia for Electronic Commerce in Al-Mamaalat al-Dawliyyah", p. 173.
  34. ↑ Khamenei, Internet referendum, date 26/02/1400 and referendum number 6z669g2.
  35. ↑ Baqarah, 275.
  36. ↑ Maedeh, 1.
  37. ↑ Brarpour, "Explaining the nature and essence of the Forex market and its requirements in Iranian jurisprudence and law", p. 23.

References

  • Brarpour, Ebrahim, "Explaining the nature and essence of the Forex market and its requirements in Iranian jurisprudence and law", Adalat Private Law Research Journal, No. 10, Fall and Winter 2017.
  • Tabadkani, Seyyed Mohammad, -market-maker-and-ndd/ "Types of Forex brokers, what is market maker?", Iranian trader website.
  • Dalili, Saeed; Arab, Saeed, Familiarity with Forex, Tehran, Publisher: Nevisandegan, second edition, 2007.
  • Tabatabaeinejad, Seyyed Sadeq, "Thematics of the Forex market", Marafet Monthly, No. 281, May 2022
  • Arabiy,at Wael Mohammad Abdullah; Obeid Al-Aoun, Ahmad Abdullah, "The Islamic Laws of Electronic Commerce in International Currency", Jordanian Journal of Islamic Studies, vol.7, no.1, 1432 AH.
  • What is Forex?, Internet article, Chart Iran site.
  • Yousefi Moqadam, Abbas, "General principles governing the international currency market", Payam Noor School of Law and Theology, Tehran Center, 2013.
  • .betsy, waters (2008), increase foreign exchange retai
  • . ?carmin, crig (2008), How is a poor money trader traveling
  • .Chen, James (2009), Essentials of Foreign Exchange Trading, Retrieved 2016 15 November
  • .Hicks, Alan (2000), Managing Currency Risk Using Foreign Exchange Options, Retrieved 2016 15 November
  • .Johnson, G. G. (1985), Formulation of Exchange Rate Policies in Adjustment Programs, Retrieved 2016 15 November
  • .Record, Neil, Currency Overlay (Wiley Finance Series)
Retrieved from "https://ency.feqhemoaser.com/en/index.php?title=Forex&oldid=340"