The concept of Settlement Cycle (T+2)

Investment Questions and Chats Stocks
#1

Salam alaikum was rahmatullahi was barakatuh,

The concept of Settlement Cycle (T+2). Please check this out: https://www.tadawul.com.sa/wps/portal/tadawul/knowledge-center/about/settlement-cycle?locale=en

Question 1. So, can I invest in tadawul (Saudi Stock Exchange, https://www.google.com/search?q=tadawul&oq=tadawul&aqs=chrome.0.69i59j35i39j0l2j69i60l4.1519j0j4&sourceid=chrome&ie=UTF-8), since I think tadawul uses this concept?

It says (i copied from the link which I have pasted above):

"GOALS OF ADOPTING A TWO BUSINESS DAY SETTLEMENT CYCLE

Increase the level of asset safety for investors, by providing enough time to verify transactions and deal with errors should they occur."

Question 2. Can I use tadawul for long-term investment?
Question 3. Can I use tadawul for short-term (like, within hours, minutes, seconds, days etc.) investment? Because I think you will own the asset (stock) after 2 days. So, I think I can’t sell after 2 days, right? Because I will be selling something that I own. I should not be selling that which I don’t own.

Please correct me if I am wrong anywhere.
Jazak Allah khair! :slight_smile:

May Allah reward us all the highest level of paradise.

#2

Assalaamu alaykum,

  1. You can invest as long as underlying investment is Shariah compliant and you fuflil Shariah principles in your trading.

  2. Yes, as per number 1.

  3. You should trade after T+2, this is the view of the majority of the scholars.

Allah knows best

#3

walaikum assalam rahmatullahi barakatuh

Do you mean AFTER or WITHIN 2 business days?
Jazak Allah khair for your answer.

#4

After clearing and settlement which is two business days.

#5

Jazak Allah khair for your answer.

#6

@Mufti_Faraz_Adam

Just to make it more crystal clear about these 2 business days, I would like to demonstrate with an example

X Share bought on Monday 1st Dec @ 8:30pm GMT = T DAY (which is 30 minutes before close of business COB)

When is the earliest, the X share can be sold

  1. Wednesday 3 Dec @ 8:31pm = T + 48 hours
  2. Thursday 4 Dec @ 2:30 pm (Start of Business) = T + 2 complete business days
  3. Wednesday 3 Dec @ 2:30 pm (SoB) = T + 2 business days

This is to guage the viability of timing a trade especially during an earnings reporting season, where any positive reporting sentiment does not last for more than a few hours but if you are not entitled to sell within the T+2 rule, you lose out.

Jazakallah