Dubai Financial Market Standards on Shari’a-Compliance

In view of the fact that the Dubai Financial Market (DFM) is the first financial market on a regional and global level to operate in accordance with the provisions of Shari'a, and since the importance of Islamic Financial Market's stems from its commitment in all aspects of its activities and operations to the provisions and values of Sharia, and the directives of Islam in terms of formats and methods adopted, the DFM Board of Directors has entrusted its esteemed Shari'a Committee to begin the necessary preparations to identify the Sharia parameters that must be met across various financial instruments in order to be deemed compatible with the provisions of Shari'a.

In response to the initiative, the Shari'a Committee first worked on identifying the areas and activities of key priority to the Market in order to be covered within the Standards, and has developed Standards after referring to all reliable Shari'a sources and existing relevant standards. The first draft of the Standards was subsequently presented for discussion and consultation with experts and specialists until the Standards were finalized.

The Standards that are have been prepared by the Shari'a Committee and are ready now to be presented in detail are as follows:

1. DFM Standard for Issuing, Acquiring and Trading Shares

DFM is the first financial market that is compatible with the provisions of Islamic Shari’a on a global level since 2007, allowing investors from all over the world to invest in securities listed on the market according to the parameters and regulations of Islamic Law. For this purpose the DFM Fatwa and Shari'a Supervisory Board has prepared the Standard to help investors identify the Shari'a-compliant listed companies. The Standard focuses on the following key areas:

  1. The Shari’a Parameters for Acquiring Shares
  2. Acquisition of Shares of Companies of Mixed Activities
  3. Shari’a Parameters for the Trading of Shares
  4. Subscription to the Shares of Companies not Fulfilling Shari’a Parameters for the Purpose of their Conversion of Rectification
  5. Exclusion of Prohibited Income
  6. Issuance and Subscription to Shares
  7. Unlawful Transactions in Acquiring and Trading of Shares

For more information click here.

2. DFM Standard for Issuing, Acquiring and Trading Sukuk

In line with the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai in making Dubai the capital of the Islamic Economy globally, and to promote initiatives that seek to achieve this goal the Fatwa and Shari’a Supervisory Board of the Dubai Financial Market has prepared the Standard which illustrates detailed Shari’a provisions in respect to issuing, acquiring and trading of Sukuk. The Standard focuses on the following key areas:

  1. Types of Sukuk
  2. Issuance of Sukuk
  3. General Principles for the Issuance of Sukuk
  4. Shari’a Rules for the Issuance of Sukuk
  5. Sukuk Guarantees
  6. Details of the Sukuk Rules

For more information click here.

3. DFM Standard for Hedging Against Investment and Finance Risks 

Given the increasing importance of hedging and its significance for economic activities, the DFM issued a standard on Hedging Against Investment and Finance Risks, a first-of-its-kind all inclusive standard which will form a point of reference for Islamic banks and financial institutions to safeguard their funds without violating the rules of Shari’a. The standard focuses on the following: 

  1. Standard Scope
  2. Hedging: Rules, Mechanisms, Contracts and Requirements
  3. Definitions
  4. Risk types according to their nature

For more information click here.