The Shariah Issues in Clearance of Stocks: An Analytical Study of Practices in PSX

Abstract

This article examines Sharīʽah issues related to the clearance of stocks in the Pakistan Stock Exchange (PSX), a critical component of the trading process. The clearance process ensures the smooth settlement of transactions but raises important Sharīʽah issues. The study focuses on two key areas: the status of the clearing house and the application of mark-to-market profits and losses. The clearing house, operating as a sub-agent under a system facilitated by the National Clearing Company of Pakistan Limited (NCCPL), plays a central role in validating and reconciling trades. However, the delegation of agency raises questions about its permissibility under classical and contemporary Islamic jurisprudence. The discussion includes an analysis of Sharīʽah principles such as wakālah (agency) and sub-agency and considers the views of classical jurists and modern standards like AAOIFI. Additionally, the article examines the mark-to-market practice, which involves daily profit and loss adjustments. This mechanism, while enhancing market efficiency, must be evaluated for its compliance with Islamic principles. The findings of the article reveal gaps in the existing framework and operational practices that hinder effective compliance with both legal and Sharīʽah requirements. The study concludes by offering recommendations to align the clearing practices with Sharīʽah guidelines, contributing to a more ethically sound trading environment in the PSX.