Document Type : Science - Research (Islamic Capital Market)

Authors

• MOHAMMAD HOSSEIN shariaty nia ¹
• Hossein hasanzadeh ²
• MohammadAli Rezaei ³
• Pouya Ahmady ⁴
• Mahdi Sadeghi Shahdani ²

¹ M.A. student of ISU

² faculty member of ISU

³ Finance student at ISU

⁴ finance student at ISU

Abstract

The current research aims to provide a comprehensive picture of dark trading (both in opaque trading networks (dark pools) and through hidden orders) in stock markets and to elucidate the regulatory considerations based on Sharia regarding the issue of order and quote concealment in today’s stock markets. This research is a mixed-method study that, through describing the subject and analyzing its financial, regulatory, and jurisprudential aspects, leads the audience to a complete understanding of the market and Sharia considerations of each of the regulatory patterns and policy approaches in interaction with opaque trading networks and dark trading. At the end of the research, in addition to providing a ranking of the various regulatory patterns in this area using one of the non-parametric statistical tests (Friedman), diverse policy suggestions are proposed to optimize the policies of the regulatory authority of Islamic capital markets in interaction with dark pools and hidden orders. Regarding the types of regulatory patterns in the area of order concealment, it seems that both from the perspective of market efficiency and based on Sharia criteria, the priority lies with transparent patterns, and the development of dark patterns conflicts seriously with some of the mentioned jurisprudential rules; however, regarding the regulatory patterns in the area of market darkening, the prohibition of Gharar creates considerations and limitations; although with some minor structural changes mentioned in the suggestions section at the end of the research, it seems that many of the mentioned considerations can be addressed to develop legitimate dark trading and markets to prevent harmful market effects, imitation trading, and herd behavior.

Keywords

• Pre-Trade Transparency
• Dark Trading
• Dark Pools
• Hidden (Iceberg) Orders
• Sharia-Compliant Regulation

Main Subjects

• Science - Research (Islamic Capital Market)