SC Shariah advisory council accepts single stock futures as Shariah-compliant instrument – Increases range of Islamic instruments for investors

The Securities Commission (SC) Shariah Advisory Council (SAC) has approved single stock futures (SSF) as a Shariah-compliant instrument, provided that the underlying stocks of the SSF are Shariah-compliant. This latest development provides investors with another Islamic investment alternative, as well as a Shariah-compliant tool to manage risks in relation to Shariah-compliant stocks.

SSFs were introduced by Bursa Malaysia Securities Berhad (Bursa Malaysia) in April 2006 as a tool for managing share price risk and as a more cost-effective way to gain exposure to the equity market.

Based on the SAC’s list of Shariah compliant securities as at April 2006, five of the ten SSFs currently trading on Bursa Malaysia Derivatives Berhad are Shariah-compliant namely AirAsia, IOI Corporation, Maxis Communications, Scomi Group and Telekom Malaysia.

The SAC’s resolution meets the aspirations of the 9th Malaysia Plan to promote a vibrant financial services sector through the introduction of new products in the derivatives market as well as positioning Malaysia as a global hub for Islamic capital market products. The approval of SSF as Shariah-compliant is also in line with the recommendations of the SC’s Capital Market Masterplan to introduce more competitive and innovative Islamic financial products and services.

SSFs were approved by the SAC on the basis that the instruments are free of elements pertaining to muqamarah (gambling), bai’ ma’dum (buying and selling something which does not exist), jahalah (ignorance) and gharar (uncertainty). The instrument is traded in clear quantities and pricing is based on market demand and supply.

In addition to approving Islamic capital market instruments, the SAC also issues a list of Shariah-compliant securities listed on Bursa Malaysia, twice a year in April and October.