1. What is leverage in trading?
2. Do any brokerage take commission on leverage if they do take commission, is it halal or Haram.
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
1. Leverage in trading refers to the brokerage providing you the increased exposure to underlying asset based on your deposit. So for example, if you put $20 down, the brokerage will give you a chance to invest $80 from themselves towards your investment.
You enter into this form of investment based on your speculative prediction of the chance to make a profit from the investment. Such leverage in trading can be done in different markets of trading.
Islamically, this leverage offered from the brokerage is a loan, which based on your speculation is wagered into the trade in hopes of making large profits. The broker will also charge interest on this loan as well which in some cases is waived by particular brokers. Finally, this loan comes with the caveat of investing it through the broker for the trade. All these three issues are against shar’i dictates. As such, this concept is not Shariah Compliant.
2. With the above clarification, even if the broker takes commission, that commission will not be Shar’an permissible.
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi