Permissibility of using some brokers

As-salamu alaykum,

I opened an account with DEGIRO to buy shares but I found that DEGIRO puts all the money they get into Money Market Funds. “DEGIRO is not a bank but an investment firm. In the Netherlands, investment firms are not allowed to hold the money of clients. Therefore, when you become a client of DEGIRO, you give a standing order to invest money into a Money Market Fund. As such, at DEGIRO you do not hold money. For every currency available in the trading platform, a separate Money Market Fund is also available. The objective of a Money Market Fund is to realise a return that is equal to the market interest rate with as low risk as possible.”
Source: https://www.degiro.co.uk/about-degiro/cashfunds.html

I’m in the process of closing that account and looking for a different broker. I looked into other brokers such as Interactive Brokers and found that they spend a portion of client funds to buy securities.
"How We Handle Client Assets

Client money is segregated in special bank or custody accounts, which are designated for the exclusive benefit of clients of IBKR. This protection (the SEC term is “reserve” and the CFTC term is “segregation”) is a core principle of securities and commodities brokerage. By properly segregating the client’s assets, if no money or stock is borrowed and no futures positions are held by the client, then the client’s assets are available to be returned to the client in the event of a default by or bankruptcy of the broker.

A portion of client funds are typically invested in U.S. Treasury securities. Although permitted by CFTC regulations, given the credit concerns over foreign sovereign debt IBKR does not currently invest any client money in money market funds.

As a practice, IBKR holds an excess amount of its own money in these reserve and segregated accounts to ensure that there is more than enough cash to protect all clients."
Source: https://www.interactivebrokers.com/en/index.php?f=2334

Is it permissible to use these brokers if this is a common thing? And that leads me to question the permissibility of using non-Islamic banks because they use client money to give out loans and charge interest.

Jazakum Allahu Khayran

Assalaamu alaykum,

It is not permissible to use brokers which invest your funds in money markets. You should select a broker which does not do this.

IBKR seem better, but you would have to monitor them regularly to see what they are doing with your funds.

Ideally, find another broker.

I asked about it to Degiro recently, how I can stay away from investing my left money into Money Market Fund. They adviced me to buy my stocks and ask for refund of the money left right after buying the shares. As long as the withdraw is before 4 PM CET, it’s not invested in the fund they said.

An example: so let’s say Apple share is 116 USD, and I deposited 100 EUR in the Netherlands. It converted into 116,25 USD and I bought the Apple share for 116 USD. There might be a few cents difference due to changes in stock price in seconds. So I can still take 20-25 cents back in order to leave zero balance in my account.

Do you think we can stay away from haram investing by doing this? This is what Degiro Customer Services recommended to me on what I can do. I know it’s a little tricky and complex but I still try to find a solution to invest in halal way.

@Ibrahim
Selam brother,

did you find a good broker yet ?

Greetings,
Omar