Friday, October 13, 2006

UBS to offer new tradable securities

"UBS eyes Islamic financing with new product", Gulf News, October 14, 2006

While the global market for sukuk has grown significantly, particularly in the last few years, it is still a very illiquid market, where many bonds are held until maturity. This is partly due to the prohibition of bai' al-dayn (trading of debt). UBS announced today that it had created (and applied for patents on) a new commodity-linked investment certificate (sukuk). Little details beyond this was released by UBS. One of the other objections to similar products besides their similarity to bai' al-dayn is that many of them rely in some way on bai' al-'ina (buy-back transactions) where an asset is sold under the condition that the seller will repurchase the asset in the future at a mark-up, which is also prohibited by Shari'ah law. Until more details are released for Islamic scholars to review, however, it will be unclear whether the new product is widely accepted as Shari'ah-compliant.

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