The "CFD" or "Contract for Difference" was developed to allow clients to receive all the benefits of owning a stock without having to physically own the stock itself. Is this halal (permissible)?

Fatwa, posted 4.22.2010, from South Africa, in:
Religious Authority: 
Ebrahim Desai
Fatwa Question or Essay Title: 
The "CFD" or "Contract for Difference" was developed to allow clients to receive all the benefits of owning a stock without having to physically own the stock itself. Is this halal (permissible)?

In a "Contract for Difference" (CFD), the client does not become the owner of the shares. In fact, he does not receive any asset or service in exchange for the money he invests. He may gain money or he may have to pay more money (and also lose the initial amount) based on the difference of the value of the shares between the time the CFD contract opens and closes. Therefore, in essence, CFD is tantamount to exchanging fewer amounts of money for more, or vice versa. Such an exchange is not permitted in the sharia as it falls in the purview of riba (interest). CFD trading resembles Qimaar (gambling), in which two people agree that whoever loses the bet on an uncertain outcome, will pay the other a specific amount. Additionally, interest is applied daily to open CFD contracts by many CFD providers. In short, CFD contracts contain elements of interest and gambling, both of which are explicitly prohibited in the Holy Quran. It is therefore, not permissible for a Muslim to trade in CFD.

This is also the opinion of Hazrat Mufti Taqi Uthmani Saheb Maddazillohu, who despite our difference with him on the issue of shares states: “Thus, wherever this scenario exists, that the delivery of the shares does not take place (i.e. the client does not become the owner of the shares), and neither is buying the shares the purpose, nor selling them; instead the purpose is, through wagering, to settle the difference, then this set-up is undoubtedly haraam (prohibited) and impermissible in the shari'a.