This content is from: Local Insights

UAE’s DMCC commodity Murabaha trading platform

Mian Muhammad Nazir
The exponential growth of the Islamic finance industry mandates innovative product development to support the stakeholders without compromising on the principles of Shariah. The Dubai Multi Commodities Centre (DMCC) Commodity Murabaha Trading Platform (CMTP) is one such initiative. It is now fully functional and aligns with the vision of HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE vice-president and Prime Minister and ruler of Dubai, for the Emirate to become a global hub for Islamic finance and economy.

The CMTP enables electronic transfer of ownership and possession through tradable warrants. It provides a holistic solution to the Islamic finance industry through a fully electronic commodity murabaha trading platform with a complete transfer of ownership and possession of locally stored Shariah-compliant commodities in accordance with the applicable laws.

Transfer of ownership and possession in any commodity murabaha transaction for treasury placements and corporate funding have been a cause of concern for scholars from a Shariah compliance perspective. Under the guidance of Dar Al Sharia (Shariah adviser to DMCC Tradeflow), the CMTP has specifically endeavoured to address Shariah concerns in relation to the existence of the underlying commodities, transfer of ownership and possession such commodities in commodity murabaha transaction.

The transactions taking place at the CMTP are fully electronic with complete transfer of title and possession. Each of the commodities available for trade in treasury murabaha transactions can be inspected by the relevant transacting party before the conclusion of the trade, if required. The underlying warrants are legally recognised documents, duly representing title and possession to the underlying commodities.

The DMCC's halal inspection and ratings programme ensures all storage facilities storing the commodities being traded in treasury murabaha transactions are certified facilities that comply with the principles of Shariah. The CMTP provides a fully retrievable document trail to the relevant transacting party in relation to their respective treasury murabaha transaction hosted on DMCC Tradeflow, enabling full transparency and full audit capabilities.

With DMCC's CMTP, it is now possible to have a commodity murabaha transaction for treasury placement in accordance with the resolution of AAIOFI Shariah standards which necessitate a greater degree of Shariah compliance in relation to such transactions.

Mian Muhhamad Nazir

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Instant access to all of our content. Membership Options | 30 Day Trial