There is some debate regarding whether you own the shares that you purchase using Trading212, on their website it supposedly claims that they hold the shares on your behalf, but you are the “beneficial owner” of them.
This question has previously been asked on this forum but wasn’t answered by one of the Mufti’s, so I’m unsure as to whether it’s permissible or not to us Trading 212.
Upon further reading it seems that Trading212 acts as a nominee, which I believe many similar platforms do as well, which makes more sense and to me sounds permissible and possibly confirms our ownership of the shares.
May Allah bless you.
Before I answer your question, allow me to explain something.
When you trade shares, there are two important points to take into consideration:
You must have ownership of the shares
You must bear its liability (which can be characterised by having possession of the shares, be it physical or constructive)
To ensure these two points, it is imperative that your shares go through the process of clearance and settlement. Only then, you will be able to trade those shares to someone else.
Clearance is the process carried out by the clearing house, for reconciling trading orders. Furthermore, the clearing house is a central counterparty, acting as buyer to every seller and as a seller to every buyer.
Settlement is the process of transfer of ownership of the shares.
The whole process usually takes 2 to 3 days to be completed. Which means until the process is not completed, you have not acquired the ownership and liability of the shares. So trading a share before this, will not be permissible, as the prophet (pbuh) taught us to not trade something that we do not own, and to not profit from things which do not have liability of.
Going back to your question. Brokers usually keep shares on your behalf in nominee accounts. If these shares are truly allocated to its owner and kept safe on their behalf, then it is fine to trade the shares whilst in the nominee account. However, the same process of waiting for clearance and settlement must be observed before you are able to sell shares to another buyer.
I do not know any broker, neither I have worked with one, so I cannot tell you, but one question you should be asking Trading212 is at what point would they send your order to the clearing house for clearance and settlement, and how long does it take for the process to be completed?
