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- Title
A STUDY ON HOW STOCK INDEX FUTURES CONTRACTS CAN BE LEGITIMIZED IN IRAN'S CAPITAL MARKET: A COMPARISON WITH SINGLE STOCK FUTURES CONTRACTS.
- Authors
Soltani, Mohammad; Shooshinasab, Nafise
- Abstract
Following the 1979 Islamic Revolution in Iran, many Islamic experts believed that capital market transactions should be forbidden because they were similar to gambling practices prohibited by Islam. They argued that gharar (uncertainty) and gaming based on chance, as the constituent elements of gambling, are an integral part of capital market transactions, and such transactions are not allowed in Islam. However, a study of the history of the Sharia board members' views in Iran's capital market shows that, contrary to the dominant Islamic belief, a variety of transactions--including some types of futures contracts--became prevalent in Iran's capital market. Futures contracts are commitments of parties to buy or sell an underlying asset at a predetermined price on a specific future date. The article reviews the evolution of Islamic jurisprudence towards the legitimacy of "single stock futures contracts" (SSFs) as an example of transactions that were once considered gambling, and compare SSFs with "stock index futures contracts" (SIFs)--a transaction with a similar definition and function that is still prohibited. We argue that the differences between these contracts, including the differences in their underlying assets and settlement procedure, are not fundamental enough to justify Sharia board members' distinctive approach to gambling and legitimization issues. We propose that SIFs should be legitimized in Iran's capital market, as the same justifications that were used to legitimize SSFs can partly be applied to SIFs as well. Finally, the paper proposes some additional justifications for SIFs in an effort to cover the distinctive challenges that they create.
- Subjects
CAPITAL market; FINANCIAL institution management; ECONOMIC conditions in Iran, 1997-; CONTRACTS; IRANIAN Revolution, 1979
- Publication
University of New Brunswick Law Journal, 2020, Vol 71, p132
- ISSN
0077-8141
- Publication type
Article