The recent Reuters' article on the GS Sukuk controversy contains some very helpful insights from Sh Dr Aznan Hasan:

Aznan Hasan, one of the scholars who signed the Goldman fatwa, said there were no sharia-related problems with the sukuk. The intention to list on the Irish exchange is purely for tax purposes, he said. But he added that Goldman should consider more measures to address doubts. 'I personally think the issue now is what is the mechanism to ensure that it is not traded, and even if it is traded, that it's traded at par, and they have to come up to us with a mechanism for that,' he told Reuters.

He said Goldman might issue an additional or complementary prospectus to address this aspect and describe how it would ensure proceeds of the sukuk were only used for sharia-compliant purposes. Goldman might also agree to issue a letter to its board of sharia scholars whenever it used the proceeds, or agree to quarterly audits, he added.

"If they can put all the mechanisms in there, then there shouldn't be any problem," said Hasan. "The murabaha is not a new one -- there is nothing new in the structure."

 

Here is another article from noted IF journalist, Mushtak Parker, on the controversial proposed Goldman Sachs' sukuk. While the issues at play are more complex than the journalistic treatment of this sukuk makes them seem (they always are!), Parker does make some interesting points that sector watchers should have on their radars. Specifically, those of us who act as Shari`a advisors in the sector, sit on international Shari`ah Boards, etc need to constantly be on guard so as to safeguard our reputations against reputational attacks like the attacks that have been launched during this controversy. Another takeway: Because there is such a low level of familiarity with fiqh among non-specialists, journalists and even practitioners in the sector, it becomes possible/much easier for doubts to be raised (correctly or incorrectly) about the activity of Shari`a experts in the sector (Thanks to Sh Moustafa Kassam for this last point).

European nations ban short selling (NYT).

An answer written last year (May 10, 2010) that is posted here for possible benefit.

Al-hamdu li-llah wa s-salatu wa s-salamu `ala sayyidina Muhammad wa-`ala alihi wa-sahbihi ajma`in.

1. Introduction

Trading across currencies ( al-mutajarah fi'l-umlat) is permissible (tajuz) provided that certain ahkam (norms) and qawa`id (principles) are observed. Observing these ahkam (norms) and qawa`id (principles) is of great importance since failure to do so will result in the commission of riba.

Allah says: <<Ya ayyaha l-ladhina amanu dharu ma baqiya mina r-riba in kuntum mu'minin>>

The most noteworthy of the ahkam and qawa`id that most be observed when trading in currencies are ahkam and qawa`id in the area of currency exchange (sarf), as they apply to contemporary currency exchange. Among these ahkam and qawa`id are the following:

1. Between sovereign currencies (e.g. US-EUR), exchange must be spot (immediate). Accordingly, currency futures, currency forwards and other currency derivative contracts, in which delivery of one or both of the currencies may occur in the future are impermissible.

2. Between sovereign currencies (e.g. US-EUR), exchange may be in disimilar amounts. Example: One may exchange 10 AUD for 8.64 USD.

2.1 However, exchange between sovereign currencies (e.g. US-EUR) must be at the market exchange rate that prevails at time of execution of the exchange.

The basis ( mustanad) of the aforementioned ahkam and qawa`id is qiyas (analogy) on the basic furu` in bab al-sarf and istiqsa' (inductive analysis) of the furu` of bab al-sarf and bab al-riba respectively. Contemporary fuqaha' known for their expertise in the ahkam of modern financial applications (tatbiqat masrafiyyah mu`asirah) hold that sovereign currencies are analogous to (tuqasu `ala) gold and silver (al-dhahab wa l-fiddah), including (and this is what concerns us here) when it comes to exchange across classes (asnaf).  The adillah for the aforementioned ahkam are therefore those that the imams of fiqh have mentioned in the mutun in bab al-sarf and bab al-riba.

Now to your question.

1) Trading in currencies with the expectation that one will profit by taking advantage of the difference between the purchase price and sales price (i.e. arbitrage) is permissible provided that the relevant  ahkam and dawabit are observed (see nos 1, 2 and 2.1 above).

2) Leveraging, in currency (and other) markets, typically consists of borrowing money on interest. This is impermissible. In theory, if one could borrow without riba (interest or other fees, penalties, etc in excess of the principal) and then trade (spot) with it, this would be permissible.

3) The multiplier effect of using leveraged funds to speculate in currency exposes one to siginificant loses and debt. However, this potential exposure to loss and debt, in and of itself, does not render the practice of leveraged speculation impermissible, but rather makruh according to the sound position (`ala l sahih).

Advice: Since a) the prevailing currency trading platforms and markets are marred with riba, gharar and various other prohibited transactions and invalid stipulations, I advise that no one engage in this activity, except a person who is trained in the fiqh of this domain and has the wherewithal or financial backing that will allow him to reasonably expect to be able to cover his possible losses.

It is transmitted that Umar b. al-Khattab (radiya llahu `anhu) said <Let none approach our markets (to trade therein) except for those with the appropriate fiqh, otherwise they will fall into usury (riba), willingly or unwillingly.>

Wa-llahu a`lam.

The neediest slave of Allah,
Taha Abdul-Basser