Major Fiqhi Discussion on Stock Market Futures Contracts

Dars-e Khārij of Fiqh of the Stock Exchange taught by Ayatollah ʿAndalībi will focus on exchange-traded futures contracts. Esteemed students and scholars may attend this important discussion daily from 7:00 to 8:00 a.m., in Classroom 112 at the late Ayatollah Tabrizi Seminary (may God have mercy on him).

“Regulations Governing Futures Trading on the Tehran Stock Exchange” can be accessed [here], and this regulatory instrument will be subjected to in-depth fiqhi scrutiny in the Fiqh of the Stock Exchange course.

Definition of a Futures Contract in the London Derivatives Market

“Futures Contract” means a contract conferring an obligation to trade the underlying asset at a price agreed on the trade day, for physical or cash settlement on a predefined date in the future. A futures contract is an agreement that creates a binding obligation to buy or sell an asset at a price agreed upon on the trade date, with settlement—either physical or cash—on a specified future date.

Resolution of the Iranian Securities Authority on Stock Futures Contracts

In 2009, the Supreme Council of the Stock Exchange and Securities adopted a single-article resolution concerning stock futures contracts, which merits careful consideration and complements earlier regulatory decisions.

• Title: Resolution on Stock Futures Trading
• Type: Resolutions of the Supreme Council of the Stock Exchange and Securities
• Date of Adoption: 3 May 2009
• Approving Authority: Supreme Council of the Stock Exchange and Securities

Single Article:
Pursuant to Clause (4) of Article (4) of the Securities Market Law, the Council approved stock futures contracts as a financial instrument under the structure of “commitment against commitment”. In implementation of Article (2) of the Executive By-Laws of the Securities Market Law, the regulations governing stock futures transactions are set out as follows:

A stock futures contract is an agreement whereby the seller undertakes to sell, at a specified maturity date, a determined number of specified shares at a price fixed at the time of concluding the futures contract, and the counterparty undertakes to purchase those shares with the same specifications at the maturity date. To prevent non-performance by either party, both parties agree—by way of a contractual condition—to deposit a margin with a brokerage firm or clearinghouse and to adjust that margin in proportion to changes in the futures price. The brokerage firm or clearinghouse is authorized, on their behalf, to transfer part of each party’s margin to the other in accordance with price changes, with the right of utilization, until settlement at maturity or upon transfer of the obligation. The seller and buyer may, in return for a specified amount, assign their contractual obligation to a third party, who shall replace them in fulfilling the obligation.