Azlin Alisa Ahmad, Mohd Hafiz Mohd Dasar, Nik Abdul Rahim Nik Abd Ghani
Derivative instruments were created as a risk management tool for the financial market. Hence, the majority of market players used it as a tool for carrying out speculative activities. The Islamic shariah concept rejects the element of speculation that exists in the financial market by allowing the implementation of derivative instruments only for hedging purposes. This qualitative study used the content analysis method on relevant documents to identify the characteristics of speculative activities that implement derivative instruments, which are prohibited in Islam. Findings indicate six characteristics related to speculative activities in the derivative market that are prohibited in Islam, such as reaping profits caused by price differences, short selling trading, absence of the physical exchange of goods, one party experiences losses, manipulation of market price, and information on market price obtained from hear-say (rumours) or based on an in-depth study of the market.