Cash transaction

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Spot transactions ( English spot deal or spot ) are standardized financial instruments on certain underlying assets , the latest two trading days after the transaction by either party train to train by payment (purchase) and delivery (sales) to meet are. Forward business is a complementary term .

General

Today's cash transactions began in the trade in goods and raw materials , which initially used the terms locomotive, prompt, delivery or effective business. The expressions "prompt delivery" or "by cash register" (afterwards cash, comptant or bank transaction [ kõ tã: ]) indicated the immediate due date . The Komptant store got its name from the French “marché au comptant” (cash market). The locomotive business derived its name from the Latin word "locus" (place, place, tangible). The English “spot cash” (immediate cash payment) also assumed that the goods were available on the market or stock exchange (“place business”) or were available within a very short period and had to be paid for immediately. Buyers and sellers submitted to the custom of trading, either immediately or a few days later, to fulfill their obligations. The simplest form of purchasing goods was the locomotive deal, which consisted of "tangible goods" in stock, immediately available.

history

In the Middle Ages , most of the trade took place in markets and fairs ; the trade fair business was a locomotive business. Hand buying, hand buying or locomotive trading were the hallmarks of trading activity in the Middle Ages. A characteristic feature was the ability of the buyer to view the goods, for example in the grocery or animal trade. The commercial objects could only be purchased against cash (payment) and immediate acceptance. Locomotive business was already common on the Augsburg Stock Exchange , which was founded in 1540 . With the discovery of the new sea ​​routes , the situation for the cash trade changed. The colonial goods were already "floating" traded on the date of the arrival of the Indian fleets. Purchase of credit and purchase of delivery (forward transaction) now appeared alongside the actual business. Until the 19th century, however, the trade remained essentially locomotive trade.

In the case of “day (s) sales” in 1833, “deliveries were made immediately after the conclusion of the contract ...”. For the banking manual , the stock exchange business was divided into the “comptant or cash business and the time business (speculation business)” in 1874: “The comptant business is one where delivery and payment are immediate, i.e. H. on the same day after the close of the stock exchange on which the transaction has to take place. ”According to the Reichsstempelgesetz of April 1894,“ those transactions which are contractually to be fulfilled by the delivery of the item by the obligated party on the day of the transaction ”are considered to be constant transactions. (Tariff II 4). Since the stamp duty exempted cash trading from taxation, there was a transition from futures to cash trading. The term “comptant business” was also used in Austria and Switzerland .

While the frequently amended German stock exchange laws dealt in detail with the futures business, they neglected the - much more common - cash business. The first Reichsbörsengesetz from June 1896 originally only dealt with futures trading in securities and obliged the official brokers to participate in the daily fixing of the unit exchange rate without defining the cash transaction. Due to this stock exchange act, part of the stock exchange business had migrated abroad; so that now the cash trade was intensified. Because the obligations entered into had to be fulfilled immediately, a greater capital requirement was necessary.

In the coffee trade, Willy Kranke made a distinction in his dissertation Organization and Pricing in German Wholesaling in 1928 between delivery and time trading, whereby the locomotive business is a business with immediate delivery that is "concluded based on a sample or description of the goods, but mostly after they have been viewed". From the middle of the 19th century, the locomotive gave way to the delivery trade and this again to the exchange-based futures trade. The emergency ordinance issued on July 25, 1931 dealt exclusively with futures transactions that were prohibited; This left only the cash transactions, which usually had to be completed within three days. When the stock exchanges closed on September 18, 1931, cash trading came to a standstill; the reopening of the stock exchanges on February 26, 1932 only brought about a revival of the cash business.

According to a market survey carried out by the central banks in 1995, there were generally at least two business days between the point in time from which a party involved in a foreign exchange spot transaction could no longer unilaterally revoke the payment order for the currency sold and the point in time when the currency purchased was finally received. In addition, it could take another business day or two before a bank could reliably determine whether the payment had actually been received. This meant that more than three business days - plus any intervening weekends and holidays - could pass before the bank knew with certainty that it had received the purchased currency.

Demarcation

Typical for real cash transactions is the mutual fulfillment of the obligations entered into at the latest two trading days after the transaction and the interest of both counterparties in the delivery and purchase of the underlying. Any type of transaction that does not meet these conditions is not considered a cash transaction. The probability that the counterparties are not guided by a genuine interest in performance is much lower with cash transactions than with futures transactions. The cash business regularly leads to fulfillment, the futures business not always. The delimitation is made according to the agreed fulfillment time, i.e. depending on whether the transaction is to be fulfilled by both sides immediately within the specified short period (cash transaction) or whether this has to be done at a later, postponed point in time (futures transaction). A congruent hedging transaction with a cash transaction can only be a spot transaction and thus a real sales transaction.

Day trading is not a cash transaction, even if fulfillment 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”.

In addition, according to the BGH , non-serious cash transactions also belong to the forward transactions in which the parties - without agreeing a postponed fulfillment date - rule out an immediate exchange of services as a characteristic of the cash transaction by means of ancillary agreements or the actual type of contract execution, in truth they do not intend to deliver, but want to achieve speculative profits through credits from transactions of the same type (“bogus cash transactions”). It is therefore no longer important whether it is formally a forward transaction if the immediate exchange of services between the contracting parties - however - is excluded and the parties are only interested in profit. The short sale can also be formally represented as a cash transaction, but is a forward transaction in which the seller does not yet have the underlying assets sold at the time the contract is concluded.

According to the case law, cash transactions also include transactions with severed warrants from a bond, transactions with currency warrants that have been severed from a foreign DM bond, and severed stock warrants from convertible bonds . Transactions with separate warrants from bonds issued by foreign stock corporations are cash transactions even if the relevant foreign law does not regulate the issue of bonds with warrants. Spot transactions in energy trading and electricity supply contracts aimed at effective delivery are basically to be regarded as spot transactions and therefore not derivatives within the meaning of Section 1 (11) sentence 4 no. 2 KWG .

Underlying (English underlying ) a spot transaction may securities , money market instruments , foreign exchange , varieties , precious metals , swaps , derivatives or other negotiable financial instruments and goods and raw materials ( "commodities") to be.

Legal bases

Legal regulations

For a long time there was no legal regulation for cash transactions. When performing cash transactions, the step by step regulation of Section 298 of the German Civil Code (BGB ) is to be applied, according to which the obligee is in default if he is willing to accept the service offered by the debtor , but does not offer his own counter-performance . Therefore, according to a ruling by the Reichsgericht in December 1924, the claim in a cash transaction is in accordance with the contract if the buyer pays the purchase price step by step against delivery of the goods. According to this judgment, the buyer is in default of acceptance if, contrary to the contract, he does not offer payment of the purchase price due step by step. On the other hand, the performance time of Section 271 (1) BGB does not apply to cash transactions because the provision only applies to cases in which the performance time is neither contractually determined nor derived from the circumstances. In the case of cash transactions, however, there is an agreement regarding the due date (2 trading days after the conclusion of the transaction), so that each counterparty has to effect its obligation on the fulfillment date.

Long time under spot transactions fell due to lack of legal regulation as a commercial practice which § 346 HGB . The commercial custom is a rule that merchants in a more or less large spatial area uniformly and voluntarily comply with and which is borne there by a uniform view of the people involved. Since August 2006, Article 38 (2) of Regulation (EC) No. 1287/2006 ( Mifid Implementing Regulation 1287/2006 of August 10, 2006) , which applies in all EU member states, offers a legal definition according to which a cash transaction is a sales transaction for a Is a good, asset or right, the terms of which are subject to delivery within two trading days or a standard delivery time accepted by the market. According to Article 4 (1) of this Ordinance, the trading day is the day on which the relevant trading venue is open for trading.

Jurisprudence

In February 1935, the Imperial Court of Justice classified the cash business as a real delivery business and therefore not a game. This case law is still valid today with the restriction that if both contracting parties agree that no delivery will be made and a price will not be paid or owed, but rather some circumstance should decide what and to whom is to be paid, a cash transaction can be exposed to objection. The BGH thus confirmed the legal opinion already expressed by the Reichsgericht. Foreign exchange transactions that are to be fulfilled within the usual period of two days for cash transactions are, conversely, not exchange futures transactions. The serious cash transaction cannot be a difference transaction , because the buyer must immediately invest cash or take out a loan.

Contract content and form

The content of the contract is in particular the counterparty, the base value, the amount, the due date and the settlement . The seller undertakes

  • a certain amount of an underlying asset (contract size)
  • in two trading days
  • at a fixed price / rate (spot, spot rate)
  • to deliver to a specific buyer.

The buyer undertakes

  • in two trading days
  • to pay the agreed price and
  • take the amount of the underlying asset from the seller.

Functions

The motives for cash deals can be arbitrage , speculation or hedging . Cash trading requires the buyer to invest assets or credit , while the seller requires the delivery of the underlying assets with an inflow of liquidity . Arbitrage occurs when cash purchases and cash sales of the same underlying take place at the same time in different locations. To speculation is, if between a spot purchase and a spot sale thereof underlying a larger period is located or a short sale takes place, with a spot purchase closed out is.

A risk transformation takes place between the cash buyer and the cash seller because the cash buyer loses his market price risk and at the same time the cash seller can give up his inventory risk . As part of the (intertemporal) resource allocation, cash buyers use their funds for arbitrage, speculation or hedging and then decide against other uses such as saving , consuming or investing .

Official trading on the German stock exchanges is spot trading, the result of which is the daily determination of the spot price . However, this price has lost its former importance because all shares have been admitted to variable trading since May 2011 . Exchange cash trading is now limited to federal bonds , in which the Deutsche Bundesbank can intervene on the exchange to secure market liquidity if necessary. Since January 1999, spot foreign exchange transactions have mainly been carried out over the counter in interbank trading .

To determine the market value , the spot rate must be multiplied by the nominal value or the number of units .

Cash markets

In comparison to futures transactions, cash transactions are the most important type of transaction in general stock exchange trading. The cash market is like the futures market, a part of the capital market . The cash and futures markets are linked to one another via arbitrage. There are on-exchange and over-the-counter cash transactions; the latter are also known as OTC transactions (abbreviation for over the counter ). In exchange-based spot transactions, market participants choose the mediating function of the stock market as they either directly occur in off-exchange spot transactions contact with each other or through a clearing house to handle . Since cash markets do not reflect all information from market participants, the complementary futures market can improve the information efficiency of the cash markets. In particular, the forward rates form an important information basis for pricing on the cash markets.

The spot markets for “ commodities ” such as crude oil , electricity , natural gas and metals are also known as “spot markets”.

Special rules for credit institutions

Credit institutions conclude cash transactions primarily in interbank trading and with non-banks . According to Article 286 (2a) of the Capital Adequacy Ordinance , credit institutions must subject the creditworthiness of their business partners (“ counterparties ”) to a creditworthiness check. Credit decisions must lead to the granting of internal credit lines for counterparties in order to limit the business volume for each individual counterparty. For cash transactions, "settlement limits" are to be set in which the nominal values ​​of the contracts are to be booked. If the counterparty risk of a receivable is zero in a cash transaction, it can be assigned to payment transactions that are carried out outside a central counterparty (e.g. via a clearing house); it is not to be backed with own funds .

Accounting

For accounting purposes, spot transactions are considered pending transactions if the balance sheet date is between the trading day and the settlement date. Under German commercial law , pending transactions are only to be taken into account in the event of an impending loss in the form of provisions ( Section 249 (1) sentence 1 HGB). Unsettled foreign currency spot transactions are according to § 340h HGB in conjunction with § 256a HGB with the average spot exchange rate in euros converted. According to IAS 39.AG55, the trading day is the day on which the reporting company entered into the obligation to buy or sell an asset. Settlement date is the day on which an asset is delivered to or by the accounting company (IAS 39.AG56). Pending cash transactions can optionally be accounted for on one of the two days (IAS 39.38). In the case of cash transactions, any fluctuations in value between the trading day and the settlement date are not recorded as derivative financial instruments due to their short duration (IAS 39.AG12); instead, according to IAS 39.AG56, only any change in fair value must be taken into account. According to accounting law, cash transactions are the purchase or sale of a financial asset within the framework of a contract, the terms of which provide for the delivery of the asset within a period that is usually determined by the regulations or conventions of the respective market (IAS 39.9).

Individual evidence

  1. ↑ Josef Hellauer , System der Welthandelslehre: a teaching and manual of international trade , Volume 1, 1920, p. 303
  2. ↑ Julius Kähler, World Trade and German Import: A Description of the Production Areas, the World Trade Goods and the Technology of the Import Business , 1926, p. 351
  3. ↑ Horst Niessen, Pricing on Special Markets: Auctions - Fairs - Commodity Exchanges , 1974, p. 19
  4. ↑ Hans Buddeberg, Betriebslehre des Binnenhandel , 1959, p. 34
  5. ↑ August Oncken , Geschichte der Nationalökonomie , Volume 1, 1902, p. 188
  6. ^ Egon Tuchtfeldt, Freedom of Trade as an Economic Policy Problem , 1955, p. 88
  7. ^ Edward Baumstark: Political Science Trials on State Credit, National Debt and Government Papers , 1833, p. 479
  8. ↑ Maximilian Wirth, Handbuch des Bankingwesen , 1874, p. 42
  9. ↑ Bruno Buchwald, Die Technik des Bankbetriebes , 1931, p. 507
  10. ^ Rainer Gömmel, Hans Pohl: Deutsche Börsengeschichte , 1992, p. 177
  11. ^ Willy Kranke: Organization and Pricing in German Wholesale , 1928, p. 16
  12. ^ Willy Kranke: Organization and pricing in German wholesale , 1928, p. 12
  13. ^ Rainer Gömmel, Hans Pohl: Deutsche Börsengeschichte , 1992, p. 266
  14. ^ Bank for International Settlements , Committee on Payment and Settlement Systems (CPSS) , 1996
  15. ↑ Bank for International Settlements, The Settlement Risk in Foreign Exchange Trading and the CLS Bank , Quarterly Report December 2002, pp. 64–65.
  16. ↑ Martin Henssler, Risk as Subject of the Contract , 1994, p. 577
  17. ↑ BGH, judgment of December 18, 2001, Az .: XI ZR 363/00
  18. ↑ Julius von Staudinger / Norbert Engel, BGB , 13th edition 1996, § 764 marginal note 21
  19. ↑ BGH WM 2002, 283
  20. ^ Mathias Habersack, BGB / Munich Commentary, 3rd edition, § 764 marginal note 16; Otto Palandt / Hartwig Sprau, BGB, 61st edition, § 764 marginal note 6
  21. ↑ BGHZ 133, 200, 206
  22. ^ BGH WM 1998, 274, 275
  23. ↑ BGHZ 114, 177, 179
  24. ↑ BGH WM 1996, 1620
  25. ↑ BaFin, information sheet - information on financial instruments according to Section 1 (11) sentence 4 KWG (derivatives) , as of July 2013
  26. ↑ RGZ 109, 324, 326
  27. ↑ RGZ 147, 112, 115
  28. ↑ BGH, judgment of January 18, 1988, Az .: II ZR 72/87
  29. ↑ RGZ 147, 112, 119
  30. ↑ BGH, judgment of December 18, 2001, Az .: XI ZR 363/00
  31. ↑ BGH, judgment of January 18, 1988, Az .: II ZR 72/87
  32. ↑ Joachim Prätsch / Uwe Schikorra / Eberhard Ludwig, Finanzmanagement , 2012, p. 227
  33. ↑ Hans E. Büschgen / Kurt Richolt, Handbook of the international banking business , 1989, p. 284
  34. ^ Siegfried Kümpel / Horst Hammen, Börsenrecht: A systematic representation , 2003, p. 261
  35. ^ Sanford J. Grossman , The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities , in: The Review of Economic Studies , October 1977, p. 431
  36. ↑ Thomas Book, Electronic Exchange Trading and Global Markets , 2001, p. 66