We are corporate stockbrokers offering an ‘execution only’ service to buy or sale shares on behalf of our clients. Our fee is fixed to X amount of money per a fixed value of shares traded e.g. £100 commission to trade £25,000 worth of shares.
Sometimes, the shares can be bought/sold in one transaction, and sometimes it may take a few transactions; however, the fee does not fluctuate. Is this permissible?
Scholars differ on whether a fee can be fixed based on the performance of broker. For example, if a person says to a broker, “if you buy £10,000 worth of shares for me, I will pay you £50.”
According to an old opinion of the Hanafis, this sort of agreement is not permissible. This is due to the amount of uncertainty surrounding the amount of work require to complete the task.
According to one opinion of the Malikis, it will be permissible under certain conditions.
According to the Shafi’is, this is permissible only if the task requires the broker to do make a real effort in completing it.
According to the later Hanafis, Hanbalis, and one opinion of the Malikis, this transaction is unconditionally permissible. Some scholars argue that brokering services were known in the time of the prophet (pbuh) and yet, there is no indication from the Quran or Hadith that the brokering fee must not be fixed in this manner.
And Allah knows best!
(Mufti) Billal Omarjee