Chapter 8: Forward Trading and Futures Markets in an Ethical Finance Perspective

This chapter explores the development of forward and futures markets from an Islamic ethical finance perspective, focusing on sharīʿah-compliant alternatives to conventional speculative trading. It examines the permissibility and structure of Islamic forward contracts, namely salam, istisnāʿ, and joʿālah, which align financial transactions with real economic activity while prohibiting gharar (contractual uncertainty) and maysir (gambling). The chapter highlights the economic necessity of such markets for producers, particularly in agriculture and infrastructure, by providing liquidity, price stability, and risk management. It outlines key principles for Islamic futures markets, including mandatory delivery, standardisation, and integration with real commodity markets, and proposes institutional frameworks for their implementation. The discussion underscores the potential of these markets to promote financial inclusion, ethical investment, and systemic stability, offering a viable alternative to conventional derivatives.