Overview
According to a May 2021 article published by Reuters, the Islamic finance sector is worth about $2.2 trillion, which analysts expect to grow by 10-12% in 2022. One of the contributors to this industry is, of course, the existence of Islamic forex brokers.
As a Muslim client, upholding the principles of Sharia is understandably crucial. Therefore, using a trading account in line with this law will put one at ease. The challenge is there’s an ocean of brokers to choose from, which can make your search time-consuming.
Fortunately, we have streamlined this process by picking only the top options with a feature and pros/cons overview. We have also provided educational material about Islamic accounts and how to best select a broker offering this service.
What is a swap free forex account?
A swap free forex account is specifically designed for traders of the Islamic faith not to incur or be credited with overnight interest. We trade currencies based on leverage, meaning we are technically ‘borrowing’ from the broker.
Similar to a traditional loan, interest is payable over a fixed period. Yet, the only exception is that traders may only be charged interest or swaps when a position is held overnight, typically after 17h00 EST (Eastern Standard Time) or 23h00/00h00 MT4 server time.
The presence of interest is because we ‘borrow’ different currencies in pairs with positive and negative differentials. When you’re buying a currency with a higher rate while simultaneously selling one with a lower rate, you will earn interest for every day you hold the position overnight.
Conversely, you’d incur interest if you purchased a currency with a lower rate against another with a higher rate. Islamic forex accounts are part of the Islamic finance system offering Sharia-compliant products.
Sharia is essentially Islam’s legal system guiding Muslims in making decisions related to investments and finance, particularly around borrowing and lending. It is haram (forbidden under Islam) to earn or pay interest, including with any forex account.
The conditions of Islamic forex accounts are nearly the same as with other accounts, bar a few exceptions that we’ll explore as we go along.
How do you get an Islamic forex account?
In almost all cases, traders will need to prove they are Islamic to use a swap free forex account. In other cases, brokers will have a system associating the countries where Islam is a prominent religion to assign the swap free status.
Therefore, some brokers may not provide this account type even if a client identifies as Muslim. Getting this account is the same as any other, from registration, funding to trading.
It’s worth noting that you will need to consider whether you will incur administration charges when trading (covered later).
Factors to consider when choosing an Islamic forex
Here are the main factors to consider when observing Islamic forex brokers.
Look for trusted and regulated brokers
Regardless of the account type, the first point of reference for any potential broker is their regulation. A well-regulated firm is far less likely to engage in unethical practices and will consistently provide a fruitful relationship and service with its clients.
Generally, the vast majority of Islamic forex brokers will be licensed by any of the following:
- ASIC (Australian Securities and Investments Commission) – primarily for Australia
- CySEC (Cyprus Securities and Exchange Commission) – primarily for most of Europe
- CFTC (Commodity Futures Trading Commission) – primarily for the United States
- FCA (Financial Conduct Authority) – primarily for the United Kingdom
Of course, this doesn’t downplay the relevance of many other top-tier regulators from Asia, North America, and Asia. You’ll want to avoid brokers who are licensed by regulatory authorities from offshore destinations as their primary supervisory body.
Verifying the broker can provide a swap free forex account for your nation
Some brokers may not offer a forex swap free account if Islam is not the predominant religion in your country. Others might provide this account to a client from any country if they can verify their faith.
Regardless, you should check beforehand whether the firm can provide you with this feature or not. Alternatively, a broker like Exness does have a swap free forex option for non-Islamic nations.
However, there are terms and conditions to note, and not all instruments are devoid of rollover.
Check for the admin charges and other trading costs
This section is perhaps the most important. While Islamic forex accounts don’t incur overnight swaps, virtually all brokers will levy an administration/financing/handling after a certain period, like after a day or a few days.
This fee could be as high as the swap you’d ordinarily incur or more and is usually charged per lot for each position daily (and can be applied even on weekends) until the order is closed.
In other cases, the charge may apply to both long and short positions or for only one of these. Furthermore, specific pairs like exotic markets will generally always have an applicable swap, while major and minor pairs may be excluded.
Regardless, you need to perform a thorough comparison to ensure you’re getting the most cost-effective deal.
Other trading charges to note with any Islamic forex broker include commissions (if the account doesn’t charge variable spreads), potential fees for depositing/withdrawing (depending on the payment method), inactivity costs, and conversion costs.
Observe the minimum deposit requirement
Some brokers may apply a different starting balance for the privilege of a swap free forex account. Therefore, you’ll want to use a broker with an affordable minimum deposit for this feature.
Explore the broker’s range of tradable markets
This factor primarily relates to which markets may be swap free or not. As previously mentioned, some instruments like exotics almost always incur rollover, even with a swap free forex account.
Therefore, clients need to determine which markets they typically trade and which ones might be excluded from being entirely swap free.
Find out the customer support options available
Last but certainly not least is excellent customer service, which is particularly important for any financial services provider. Nowadays, live chat is necessary for any Islamic forex broker, along with an active telephone line and email support.
List of the 5 top forex swap free account brokers
Let’s now explore the best 5 options for swap free forex trading by looking at an overview of the main features and the notable pros and cons.
Exness
Features
- Licensed by CySEC, FSCA, FSA, and FCA
- MT4, MT5 trading platforms
- 107 forex pairs
- Unlimited leverage
- Swap free account provided for non-Islamic countries
- No admin charges
- $10 minimum deposit
- 45 base account currencies like USD, EUR, GBP, JPY, etc.
- Bank wire, bank card, Skrill, Neteller, Webmoney, Mybux, Ozow, and crypto available as payment methods
Exness was established in 2008 and now processes some of the highest trading volumes in the industry. The firm provides one of the most attractive features for a swap free forex account. Unlike most brokers, Exness doesn’t levy an admin charge for Islamic traders.
Non-Islamic clients can also get a swap free forex account and not incur any rollover on particular forex, gold, indices, crypto, and equity markets. You can start trading with a reasonable $10 and access unlimited leverage.
Overall, Exness is one of the best options since no admin charge is applied, making it a cost-effective Islamic forex broker.
Pros
- Multi-regulated
- No admin charge applied for swap free accounts
- swap free option available for non-Muslim traders on certain markets
- Traders can open their accounts in 45 base currencies
- MT4 and MT5 trading platforms offered
- Extensive range of forex and non-forex markets
Cons
- Inactivity fee applies
IC Markets
Features
- Regulated by ASIC, CySEC, FSA
- No admin charges applied for major and minor pairs
- MT4, MT5, and cTrader trading platforms
- 64 forex pairs
- 1:500 max. leverage
- $200 minimum deposit
- USD, AUD, EUR, GBP, SGD, NZD, JPY, CHF, HKD, and CAD base account currencies
- VISA/Mastercard, bank wire, PayPal, Neteller, Skrill, UnionPay, Bpay, Fasapay, POLI, Rapidpay, Klarna available as payment methods
IC Markets burst onto the scene in 2007 and, like Exness, processes some of the highest trading volumes for forex trading globally, sometimes surpassing the $1 trillion mark.
You can speculate in 64 pairs along with several other CFDs like crypto, commodities, bonds, shares, and futures. IC Markets is one of the few recognized brokers providing the cTrader, an advanced alternative to MetaTrader.
Moreover, no financing charge applies for all currencies, metals, and indices except exotic pairs, brent, natural gas, and WTI. Overall, IC Markets commits to offering their customary top-notch trading conditions for Islamic traders as they do with other accounts.
Pros
- Been in existence since 2007
- No admin charge for major and minor pairs
- MetaTrader and cTrader platforms are available
- Wide selection of markets provided
- Flexible leverage
- Numerous payment options offered
Cons
- No negative balance protection offered
- Admin charges apply for exotic pairs
Tickmill
Features
- Regulated by FSA, FCA, LFSA, FSCA, CySEC
- Admin charge only (applies to exotic pairs)
- MT4, MT5 trading platforms (also integrated with TradingView)
- 62 forex markets
- 1:500 maximum leverage
- $100 minimum deposit
- USD, EUR, GBP base account currencies
- VISA/Mastercard, bank transfer, Skrill, Sticpay, Neteller, Fasapay, QIWI, UnionPay, NganLuong, WebMoney available as payment methods
Tickmill was first established in 2014 and now has offices in Estonia, the United Kingdom, Malaysia, Cyprus, and Seychelles.
Islamic clients can benefit from competitive trading conditions with a swap free feature on Tickmill’s Classic (standard), Pro (zero spread), and VIP accounts. Similar to IC Markets, a daily handling charge only applies to exotic markets, brent, WTI (XTIUSD), Bitcoin, Ethereum, and Litecoin.
Moreover, one gets tight spreads on the standard account and some of the lowest commissions for the zero spread account. Tickmill doesn’t apply any deposit/withdrawal and inactivity charges.
You can receive all these favorable features with a decent $100 minimum deposit. So, overall, Tickmill is another viable choice for Islamic clients who are cost-conscious.
Pros
- Multi-regulated
- Integrated with TradingView
- Low spreads and commissions overall
- Numerous account types are available
- Reasonable $100 minimum deposit
Cons
- Tight margin call percentage
- Admin fee applicable for exotic markets
Oanda
Features
- Licensed by CFTC, IIROC, FCA, MAS, ASIC
- Admin charge only applies after five days
- MT4, MT5 trading platforms (also connectable to TradingView)
- 45 forex pairs
- 1:50 max leverage
- Zero minimum deposit
- USD base currency
- VISA/Mastercard, bank wire, Skrill, Neteller,
Oanda is one of the oldest CFD brokers in the industry, as it was first established in 1996. Due to its several decades of existence and growing dominance, it now has offices in the United States, Japan, Singapore, the United Kingdom, and Canada.
However, Oanda is well-known among US clients and is one of the very few brokers regulated to offer services for this demographic. Therefore, traders from this region can benefit from an Islamic forex account with excellent conditions.
No admin charge applies if you hold your position for less than five days. With OANDA, you can trade tens of forex markets, along with stocks, indices, metals, commodities, and Bitcoin.
Pros
- Been in business since 1996
- Multi-regulated
- Accepts US clients
- Integrated with TradingView
- No minimum deposit
- Several base account currencies to open trading accounts
Cons
- Admin fee per lot on the high side
- Inactivity fee applies
- Steep bank wire withdrawal fee
- Only one base currency is available
eToro
Features
- Regulated by CySEC, FCA, ASIC, CFTC
- No admin charges
- 1:30 max. leverage
- $1000 minimum deposit
- 49 currency pairs
- USD, GBP, EUR base currencies
- VISA/VISA Electron/Maestro/Mastercard, PayPal, Neteller, Skrill, Rapid Transfer, iDEAL, Klarna, POLI, bank wire available as payment methods
eToro is a multi-asset CFD broker initially established in Israel back in 2007. Aside from providing trading services for numerous securities, the firm is well known as one of the pioneers and current leaders in social investment platforms.
The other advantage is that eToro, like Oanda, is one of the few brokers authorized to serve the US market. However, unlike most firms, eToro doesn’t levy an admin or financing charge for their forex swap free account, making it another cost-effective option for Islamic traders to consider.
Pros
- Regulated in numerous regions
- No admin charges apply
- Accepts US traders
- Been operating since 2007
- Runs one of the leading social trading services globally
Disadvantages
- Levies inactivity fee
- Minimum $50 for subsequent deposits
- It doesn’t provide any MetaTrader platforms
- High minimum deposit
Frequently Asked Questions
How do you avoid swap fees?
Aside from getting a swap free account, you can decide not to hold your positions overnight.
Can swap fees be positive?
Yes, if the currency you’re buying has a higher interest rate than the one you’re selling.
Can you legally trade forex under Islamic law?
All parts of currency trading are halal or permissible under Islamic law, except for the accumulation of interest.
