Difference business

from Wikipedia, the free encyclopedia

Differential business ( English Contract for Difference ) is finance a speculative futures market in which the parties not on underlying are (commercial property) interested, but the price or price difference between the date of the transaction and the current market value of the theoretical settlement date .

General

Cash transactions are typical delivery transactions in which the contracting parties ( counterparties ) are interested in the delivery and purchase of the underlying. This is not always the case with futures. If forward transactions have the purpose of hedging the price of an underlying asset and the counterparties are interested in the turnover of the underlying asset, they are also part of the delivery business. Therefore, in the opinion of the BGH , stock market futures are not necessarily always contracts for differences. However, if there is no intent to deliver, it is a difference transaction, a so-called "degenerate forward transaction". Its name derives from the exchange rate difference that both parties achieve.

species

With regard to the recognizability of the transaction , a distinction is made between open and hidden differential transactions , both of which are derived from the wording of § 764 BGB a. F. revealed. In the case of open contracts for differences , the counterparties expressly agree that delivery should not be made. These in § 764 sentence 1 BGB a. F. defined transactions have been classified as a game according to § 762 BGB since February 1935. The hidden difference business is characterized by the - between the two parties - not expressed intention to make a difference; it is considered to be a sham deal according to Section 117 (2) BGB and as such is void . Only one of the contracting parties has the recognizable intention of not actually insisting on delivery , but of avoiding the consideration and merely having the price difference balanced. In the case of a hidden contract for difference, only one of the counterparties intends to cover itself with a counter-trade by the settlement date and to collect or provide the difference between the agreed price and that of the counter-trade. According to § 764 sentence 2 BGB a. F. was assumed that the other counterparty knows or should know this intention.

It depends on the accompanying circumstances and evidence whether a transaction is classified as a hidden difference business. Hidden contracts for differences only fall under the regulatory norm of § 762 BGB through extensive interpretation . According to the BGH, a prerequisite for a hidden difference transaction is also that the counter-transaction is concluded with the contractual partner of the first transaction and essentially corresponds to the first transaction. In the case of foreign currencies, an offsetting transaction in another currency with approximately the same volume is sufficient. Indications of a hidden difference transaction can be:

  • a noticeable mismatch between the bank client's assets and the size of the deal;
  • the provision of a (security) amount that does not cover the value of the first transaction, but rather a loss equal to the difference between the first and counter transaction;
  • the lack of a relationship between the goods or securities acquired and the buyer's business or professional background;
  • the character of the goods, securities or currencies as typical objects of speculation;
  • the frequent buying and selling of the same goods, securities or currencies with continued failure to perform effectively.

Contracts for differences include index futures contracts where only the payment of differences is intended. The equivalent of the underlying stock index is settled in cash on the due date. According to the amendment to the Stock Exchange Act of March 1989, trades for difference include, in particular, independent index options. With them, the investor cannot consider closing out a counter-transaction on the futures market from the outset, since stock index options, for example, generally do not entitle the investor to actually purchase or sell a specific stock portfolio, but rather to cash settlement of the difference between the defined base index and the current index value on the day the option is exercised.

The Supreme Court has indeed left open in June 1979 if the short sale ( "short sale") a forward contract was, however, at the same time he affirmed the characteristics of a differential business. According to the BGH, the short seller is selling the shares on the assumption that he will be able to acquire them again later at a lower price. “The effective sales transactions required for this are only the technical means to achieve the difference. Accordingly, the share turnover is not reflected in the customer's custody account ”.

Day trading does not count as cash transactions, even if the settlement takes place within one or two trading days . They are "financial contracts for differences" of Section 2 (3) No. 3 WpHG , because

  • the trader seeks "in agreement" with his contractual partner "no unrestricted power of disposal over the goods or securities",
  • the trader wants to use "neither his own capital nor credit funds agreed upon before the conclusion of the transaction for their payment, but rather the proceeds from an intended counter-transaction" and
  • the countertrade is concluded with the contractual partner of the first transaction and is “essentially the same as the first transaction”.

history

The difference business owes its name to the fact that a high percentage of commodity futures ( coffee , raw sugar ) were settled by paying the exchange rate differences. In 1848 John Stuart Mill was of the opinion that the speculation of differences by dealers was useful for the general public if it yielded (private) profit. Legislators and jurisprudence recognized the purely speculative effect of differential deals in Germany early on. The discussion about the difference business had become a permanent legal issue after 1850. The Reichsoberhandelsgericht (ROHG) was already of the opinion in June 1872 that "pure" differential transactions, in which the parties exclude effective fulfillment upon conclusion of the contract, should be qualified as a bet and lawsuits for fulfillment should be dismissed. "Only when this intention of the counterparty is expressed when concluding the contract ... is in truth no longer a purchase, but a pure differential transaction clad in the form of a delivery purchase, to be assessed according to the principles of gaming and betting".

First, in 1882, the German Lawyers ' Association recommended neither prohibiting nor restricting differential transactions. In November 1891 there were several bankruptcies of Berlin banks due to the speculation of differences ( Berlin banking scandal ), in particular the banks CW Schnoeckel Jr. (September 1891), Hirschfeld & Wolf , the exchange bank Hermann Friedländer & Sommerfeld or the bank Eduard Maass . Initially, however, the courts' legal opinion on the speculation of differences did not change. Because in a judgment of April 1891 the Reichsgericht (RG) confirmed again that there was no purely differential transaction if one of the contracting parties was only forbidden to demand actual delivery, but not the other party to make it. With a motion of November 19, 1891, the members of the Center Party in the Reichstag demanded that "the abuse of time business as a game business" should be countered, especially in "articles that are important for the nutrition of the people". In March 1892 the case law of the Reichsgericht turned things around. It now demanded that the courts have to examine whether a mutual intention to regulate the difference can be inferred from the circumstances. It no longer upheld the principle previously advocated that the express agreement of the exclusion of effective fulfillment was necessary in order to accept the pure difference transaction.

Three more Juristentage (1884, 1886 and 1892) then dealt with the stock exchange futures trading and the difference business. According to the investigations of the Stock Exchange Quete Commission , between 1887 and 1891 only between 1.79% and 3.79% of all transactions were effectively carried out on the Hamburg coffee exchange, and only 4.9% between 1888 and 1890 on the Hamburg sugar exchange. This triggered, among other things, the criticism of the economist Max Weber of futures trading in 1894 . In December 1894, the Reichsgericht reiterated its rejection of speculation about differences. The Reich Stock Exchange Act of June 1896 confirmed the validity of stock market futures in principle. It was based on the recommendations of the stock market inquiry commission and had the same purpose as the later § 764 BGB (old version), namely to prevent economically senseless difference speculation, which only wants to make a profit from market fluctuations without any relation to the actual turnover of goods in economic life.

From January 1, 1900, § 764 BGB ( old version ) classified the open differential transactions as a game and thus withdrew their legal liability via the gambling objection, because "gambling debts are debts of honor". The game or difference objection has since been the legal remedy for contesting futures transactions that meet the requirements of a difference transaction. The provision was intended to distinguish effective speculation from legal transactions considered to be game-like. The - still valid today - § 762 BGB makes it clear that gambling or betting does not create an enforceable liability ( natural obligation ). The relationship between these provisions has since been controversial in case law and specialist literature .

Legal bases

The provision of § 764 BGB old version was repealed without replacement by the 4th Financial Market Promotion Act on June 21, 2002, so that only § 762 BGB remains. This provision also makes it clear that no actionable liability arises in the event of gambling or betting debts . This also applies in general to contracts for differences in which the gambling objection could be raised by one of the counterparties, with the result that the liability from contracts for differences was not enforceable as a bond in kind. Both opponents must have an intention to play.

If trades for differences fall within the scope of protection of the WpHG , a game and difference objection is not possible. Section 99 of the WpHG provides that the game and difference objection is excluded in the case of binding derivatives within the meaning of Section 2 (3) WpHG and option transactions. Since financial contracts for differences are expressly mentioned in Section 2 (3) No. 3 WpHG, they are also covered by the exclusion of the game and difference objection. According to section 99 sentence 2 WpHG, the game or betting objection under section 762 BGB cannot be asserted if at least one contractual partner in financial futures is a company that conducts financial futures with permission. It follows from this provision that these transactions can be mere gambling or difference transactions; otherwise section 99 of the WpHG would not have been required. According to the conception of the law, the terms game or bet and differential business are therefore not opposites, but rather compatible with one another. Insofar as there is no invalidity in accordance with Section 100 (2) WpHG for prohibited financial futures transactions, other contracts for differences may still fall under Section 762 BGB. Short sales are therefore not to be regarded as a game or a bet, as their speculative character does not yet make them a game. Because the counterparty of the short seller is not aware that it is a short sale, so that there is a lack of the necessary mutual intent to play. In the event of short sales, the Spielweinwand is therefore already materially and legally excluded.

The banking supervisory perspective takes over the civil law perspective. A recognizable aim of non-physical fulfillment in a contract for difference is given if the contractual agreement provides for the payment of a settlement for the difference instead of a physical fulfillment ( open contract for difference ). A target for non-physical fulfillment can in individual cases also result from the circumstances of the contract conclusion ( hidden difference business ).

function

Contracts for differences are usually speculation, because the counterparties have no interest in the underlying, they only want to pay the financial difference between the agreed forward rate and the current market price on the settlement date. Since the parties involved are only interested in profit in contracts for difference, these transactions can reach a considerable market volume, especially since capital investment is not required or is only required for a short time. Uncovered short selling of stocks and government bonds is sometimes seen as a factor that increases the potential risk of settlement failures and market volatility . Selling short in times of significant financial instability could exacerbate the downward spiral in security prices, particularly in financials, which would ultimately threaten the existence of financial institutions and create systemic risk. This can cause or exacerbate financial crises . Out of these concerns, the provision of § 53 WpHG arose , which provides for the monitoring of short sales by BaFin and can result in an official ban on short sales.

See also

Individual evidence

  1. ^ BGH, judgment of October 11, 1988, BGHZ 105, 263.
  2. ↑ Claus Seibert, in comment: Das Bürgerliche Gesetzbuch , Volume 2, Part 4, 1978, § 764 Rn 2, p. 167 .
  3. ^ RG, judgment of February 26, 1935, RGZ 147, 112, 114
  4. ↑ Helmut Grothe, Foreign Currency Liabilities , 1999, p. 404
  5. ↑ Ulrich Stache, Capital Income and Speculative Business , 1996, p. 217.
  6. ^ RG, judgment of June 15, 1927, RGZ 117, 267, 268 f.
  7. ^ Hans Schulz, Successful futures trading , 1984, p. 54.
  8. ↑ Bundestag printed matter 11/4177 of March 13, 1989, p. 18
  9. ^ BGH, judgment of May 12, 1998, Az .: XI ZR 180/97.
  10. ^ BGH, judgment of June 12, 1978, Az .: II ZR 48/77
  11. ↑ BGH, judgment of June 12, 1978, Az .: II ZR 48/77, Rn. 11.
  12. ↑ BGH, judgment of December 18, 2001, Az .: XI ZR 363/00
  13. ^ Franz Josef Pfleger / Ludwig Gschwindt, Stock Exchange Reform in Germany, Volume II, 1897, p. 128
  14. ^ John Stuart Mill, Principles of Political Economy , 1848, p. 717
  15. ↑ Udo Wolter, Futures business ability by virtue of information , 1991, p. 25 f.
  16. ^ Decisions of the ROHG, Volume VI., 1872, p. 223.
  17. ↑ Christof Biggeleben, The "Bollwerk des Bürgerertums ": Die Berliner Kaufmannschaft 1870-1920 , 2006, p. 239 .
  18. ^ RG, judgment of April 17, 1891
  19. ↑ Stenographic Reports, Volume 124, No. 528, pp. 2860 f.
  20. ^ RG, judgment of March 26, 1892, Az .: I CS
  21. ^ Edmund Brückner, The difference trading on the stock exchange , 1894, p. 33.
  22. ↑ Knut Borchardt, Max Weber Complete Edition , Part 1, Volume 10, 1999, p. 16
  23. ↑ Max Weber, Börsenwesen: Schriften und Reden 1893-1898 , Volume 2, 1898, p. 632
  24. ↑ RGZ 34, 82, 83
  25. ^ BGH, judgment of December 20, 1971, Az .: II ZR 156/69
  26. ↑ Martin Henssler, Risk as Subject of the Contract , 1994, p. 527
  27. ↑ Erich Waclawik, The liability of foreign exchange date agreements , 2000, p. 350
  28. ↑ BAFin, information sheet: Notes on the authorization requirement for transactions in connection with electricity trading activities from February 13, 2009