Article — Noldin, Summa of Moral Theology
Article Fifth. On Stock-Exchange Speculations
632. Notions. 1. The stock exchange (Borse) signifies a place constituted by public authority in which certain businesses are transacted and certain contracts are celebrated. Since the object of these contracts is especially twofold, namely money or securities, such as shares and obligations, and merchandise, such as grain and oil, a twofold exchange is distinguished: money exchange (Geldborse) and commercial exchange (Warenborse).
The exchange, which in itself is useful, indeed necessary in a well-ordered republic, especially so that occasion of trading securities may be available, began to have a bad reputation from the time when aleatory contracts were frequently celebrated in it, from which very great damages and dangers arise both for the contracting parties and for others. These contracts are called by the generic name speculations or operations of the exchange; but in species there are distinguished operations for a term (Termingeschafte) and operations for a premium (Pramiengeschafte).
Operations for a term are called those in which securities or merchandise are bought in such a way that the price must be paid after a certain time, namely on a day established in the exchanges, for example, the first or fifteenth of the month, which day is called liquidation. But the price to be paid is that which will be in force on the day of liquidation in the exchange. Since price is subject to perpetual changes, it ordinarily happens that the future price obtains an increase or decrease. Now on the change of price which can occur up to the day of liquidation the whole speculation of the contracting parties is founded: for generally they do not intend to hand over securities and merchandise, but only this, that from him whom the change of price disadvantages the difference be paid to the other. If the price has increased, the seller must pay the difference to the buyer; if the price has decreased, the buyer must pay the difference to the seller: for the seller is said to play for depression (a la baisse), the buyer for elevation (a la hausse).
A and B on March 15 enter a contract concerning 100 modii of wheat and 500 florins, in such a way that A is obligated on September 15 to hand over 100 modii and B on the same day is held to pay 500 florins. Now if meanwhile the price of wheat increases so that it is sold for 540 florins, the buyer gains; but if meanwhile the price of wheat decreases so that it is sold for 470 florins, the seller gains. But A and B can also enter the contract in such a way that they are not bound to hand over the merchandise and price, but only to pay the difference between the price established in the contract and the common price which wheat has on the determined day. If the price has increased, therefore A will be held to pay the buyer 40 florins; but if the price has decreased, B will be held to pay the seller 30 florins. This same thing must also be transferred to purchase-sale of securities.
- Operations for a premium are called those in which the buyer reserves to himself the right of rescinding the contract on a certain day, for example, the day before liquidation. If he does this, he must pay the seller a certain sum, which is called the premium; but if he declares that he wishes to stand by the contract, the purchase, which previously was conditioned, becomes absolute.2
1 Villada, Casus conscientiae etc.^3 (Brussels: Vromant, 1885), II, p. 272 ss.; Ballerini-Palmieri III, n. 927 ss.; Gury, Casus conscientiae I, n. 947 ss.; Gopfert, Moraltheologie^6 (Paderborn: Schoningh, 1906), II, n. 125.
2 Genicot I, n. 664.
633. Their liceity. 1. Operations of the exchange considered in themselves are not unjust: for they are recalled to aleatory contracts and in species to wagering and game. Therefore if the conditions are observed which make these contracts licit, especially if the contracting parties have or hope to have at the established time what they promise, stock-exchange speculations in themselves are licit.
a. In operations for a term each one hopes that he will gain; therefore since on each side there is hope and danger, a wager is in reality entered. Yet the contract is not merely aleatory, since by prudence and sagacity the future price can be foreseen in some way, for which reason this speculation is rightly compared to an industrial or mixed game.
b. In operations for a premium a right is sold which in reality is estimable by price; therefore if the premium is equivalent to this right, the contract is not opposed to justice.
Nor are these speculations to be called illicit for this reason, that they furnish a means of procuring great riches for oneself without labor: for if it is permitted to become rich without labor by other modes, for example, by accepting a great gift or rich inheritance, or by occupying goods which until now belonged to no one, it will also be permitted by means of these speculations, provided injustices are avoided and duties, whether social or religious, owed from another source are fulfilled.
- But per accidens several vices can be joined with stock-exchange speculations.
a. Because unjust means are employed by which the price of the thing sold is increased or decreased, for example, by spreading false rumors concerning the state of a kingdom or of some society.
b. Because so great a sum is exposed in speculations that there is danger of losing one's entire substance with detriment to family and creditors.
c. Because the price of saleable things is artificially increased or decreased in such a way that many fall into poverty from it: for although this is done by means just in themselves, for example, by buying up a great supply of securities or merchandise and thus constituting something like a monopoly, nevertheless charity forbids anyone to seek riches with the ruin of others.