The Shariah Advisory Council of the Securities Commission Malaysia (the SAC) had, at its 169th meeting held on 26 February 2015, deliberated on an industry proposal on Islamic Securities Selling and Buying-Negotiated Transaction (iSSB-NT) Model. iSSB-NT Model is a Shariah- compliant alternative to the conventional Securities Borrowing and Lending-Negotiated Transaction (SBL-NT) Model1. The iSSB-NT Model is developed to address the needs to further grow the Shariah-compliant securities market in particular the Islamic exchange traded fund.
The issue in deliberation was on the permissibility of the proposed iSSB-NT Model which is structured based on two (2) outright bai` (sale) transactions that includes the feature of wa`dan (two (2) unilateral promises/ undertakings), khiyar al-shart (conditional option)2 and the provision of collateral as security for the indebtedness.
The SAC had resolved that the proposed Islamic Securities Selling and Buying – Negotiated Transaction (iSSB-NT) Model is permissible.
1 SBL is the term used to describe a transaction where securities are transferred from the owner (the lender) to another party (the borrower). The borrower is obliged to return the securities to the lender either on demand or at the end of the loan term. As a fully collateralised transaction, securities lending is considered a low-risk activity and it is usually operating within a stringent legal and regulated framework.
2 Khiyar al-shart (conditional option) – an option to cancel a previous agreed sale within a specific number of days.