Purchasing shares when exact price is unknown

Investment Questions and Chats Stocks
#1

Assalamu Alaikum,

I learned in a lecture that one of the Shariah rules in buying and selling is that the price of the item be known.

I have encountered several scenarios where the exact price is not known at the time of submitting the offer, however, one would have an idea of how it will be computed. Are these permissible? Below are some specific scenarios I have run into:
1 - When purchasing a mutual fund, the price is computed after markets close based on the net asset value of the holdings so one will not know the exact price when submitting the request to purchase.
2 - My employer offers discounted company stock. A portion of each paycheque is set aside as contributions. At the end of each period (quarter), the program will use your contributions to purchase stocks on your behalf. The price of the stock that you will be charged will be 15% off of the weighted weighted average trading price of the shares on the final day of the quarter.
3 - At some online brokerages, if you purchase shares from a stock exchange in another currency and you don’t hold value in that currency, they will allow you to purchase the stock. At the end of the trading day, they will convert the currencies based on the exchange rate which was not exactly known when the stocks were bought.
4) A request to convert between currencies (without purchasing stock) at a brokerage is also not immediately processed with an exact conversion rate. Rather, it may be processed some time later in the day or the next day, based on the spot rate and spread.
5) Online brokerages typically let you specify a max or a min price at which you would be okay with your order getting processed. I am not sure exactly how that works, but you can end up purchasing shares at a better rate than your offer if the value of the stocks drops

Are such transactions okay even though I do not know the exact price at the time of offer?

JazakAllah khair

#2

Assalaamu alaykum,

In all these scenarios, the Jahalah (ignorance) of the price is very little. The actual price will not be drastically different. This is something you are made aware of and agree to in the terms. From a Shariah perspective, the uncertainty is not gross and major, therefore it is overlooked and acceptable as it doesn’t lead to dispute.

I’m sure that most of the the areas discussed will have specific rules with regard to the pricing. Even from a commercial, compliance and governance perspective, they would have to have policies about this to ensure consumer rights and consumer protection.

Allah knows best

#3

Assalamu Alaikum,

JazakAllah khair, yes that is correct.

The only one that confuses me a bit is number 3 - because over the course of the quarter (3 months) the stock price can change quite a bit. Now at the end of the quarter, we will have an idea of what the price of the stock is but it might be too late to withdraw from the program at that time if we wish to do so.

#4

From an ideal Shariah compliance point of view, there should be an option to cancel in such trade.

However, if you are happy with the price despite the change at the end of the day, that will override any Shariah concern.

Allah knows best