Conventional futures: derivatives in Islamic law of contract Md Akther Uddin School of Business, University of Creative Technology Chittagong, Chittagong, Bangladesh, and Abu Umar Faruq Ahmad Islamic Economics Institute, King Abdulaziz University, Jeddah, Saudi Arabia Abstract Purpose – This paper aims to compare and contrast the concept of conventional futures contract from the Islamic law of contract perspectives. The underlying theory and practice of Islamic finance is based on the principles of Islamic law of contract. Although the necessity of derivative instruments such as the case with futures contract is essential for developments in Islamic finance, the permissibility of using these instruments still remains a debatable issue. Design/methodology/approach – The paper discusses arguments for and against using derivative instruments as in futures, for example, in light with the Qur’an and Sunnah (the Prophet’s traditions), as well as the views of classical scholars, jurists and contemporary researchers. Arguments for and against are analysed systematically to derive a logical conclusion. Findings – The study finds that majority scholars consider futures contracts as non-compliant with the Islamic law due to the fact that selling something that does not exist, deferment in the both counter values, gharar or ambiguity and excessive risk taking, pure speculation and sale of one debt for another. Research limitations/implications – The study focuses narrowly on conventional futures contract. Analysing other financial derivative contracts could be a future research endeavour. Practical implications – The study has so far found the verdict of impermissibility of conventional futures contract in its current form as has been argued by majority scholars in the premise that they do not comply with the Islamic law. Policymakers and industry practitioners need to take this opinion of majority scholars while developing new Islamic financial derivatives. Originality/value – To the best of the author’s knowledge, the present research is the first attempt so far that explained the validity of conventional futures by analysing arguments of classical and contemporary jurists, scholars and researchers. Keywords Derivatives, Futures contract, Gharar, Islamic law of contract, Maysir, Speculation, Sale of debt Paper type General review 1. Introduction Conventional futures are derivatives, values of which derive from other financial products. A futures contract is essentially a standardised forward contract, is an agreement between a buyer and seller to deliver a specified asset at a certain time in the future for a certain price. Trading volume of futures contracts is often much larger than underlying assets, and this is due to the presence of the elements of speculating activities and maysir or games of chance in derivatives. Some researchers asserted that those who participate in futures contracts do We would like to thank two esteemed reviewers and the editor of the journal for their constructive comments. Derivatives in Islamic law of contract 315 Received 18 October 2017 Revised 27 March 2018 Accepted 15 March 2020 International Journal of Law and Management Vol. 62 No. 4, 2020 pp. 315-337 © Emerald Publishing Limited 1754-243X DOI 10.1108/IJLMA-10-2017-0242 The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/1754-243X.htm