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Taking Interest: Difference between revisions
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===Stocks=== | ===Stocks=== | ||
#It is permitted to buy stocks and it isn't considered ribbit since it is an investment.<ref>Malveh Hashem 2:13:29 p. 169 writes that buying a stock is an investment in the company and has risk. Therefore, there is no question of interest. Marechet Hashulchan Ribbit p. 417 | #It is permitted to buy stocks and it isn't considered ribbit since it is an investment.<ref>Malveh Hashem 2:13:29 p. 169 writes that buying a stock is an investment in the company and has risk. Therefore, there is no question of interest. Marechet Hashulchan Ribbit p. 417, Mishna Halachot 5:116, and Mishpatei Ribbit v. 2 p. 356 citing Brit Yehuda 2:42 agree.</ref> | ||
# Short selling is a violation of borrowing commodities with interest. This type of transaction between two Jews is forbidden since the leniencies of borrowing commodities, namely, having a fixed market price that endures for a long time or having a position in that the stock one is short selling, are inapplicable.<ref>[https://traditiononline.org/short-selling-and-jewish-law/ Rav Aharon Levine (Tradition Spring 2010 pp. 67-71)] explains that short selling involves borrowing a commodity which is repaid with that commodity and not merely a cash loan. The commodities in this case are the stocks being sold short. Since the marketplace price is in flux constantly that doesn't permit the seah b'seah transaction. Additionally, the fact that selling outside the box is illegal prevents a person from shorting a position he already owns stock in. Therefore, it isn't possible for someone to have the stocks that he is borrowing while doing a short sell.</ref> For a Jewish marketplace this is a serious issue because either way there is an interest charge for borrowing the stocks for the time. Therefore, these issues need to be solved with a heter iska.<ref> [https://www.toraland.org.il/%D7%A9%D7%90%D7%9C%D7%95%D7%AA-%D7%95%D7%AA%D7%A9%D7%95%D7%91%D7%95%D7%AA/%D7%9B%D7%9C%D7%9B%D7%9C%D7%94-%D7%95%D7%9E%D7%A9%D7%A4%D7%98/%D7%9B%D7%9C%D7%9B%D7%9C%D7%94-%D7%95%D7%94%D7%9C%D7%9B%D7%94/%D7%9E%D7%9B%D7%99%D7%A8%D7%94-%D7%91%D7%97%D7%A1%D7%A8/ toraland.org.il] | # Short selling is a violation of borrowing commodities with interest. This type of transaction between two Jews is forbidden since the leniencies of borrowing commodities, namely, having a fixed market price that endures for a long time or having a position in that the stock one is short selling, are inapplicable.<ref>[https://traditiononline.org/short-selling-and-jewish-law/ Rav Aharon Levine (Tradition Spring 2010 pp. 67-71)] explains that short selling involves borrowing a commodity which is repaid with that commodity and not merely a cash loan. The commodities in this case are the stocks being sold short. Since the marketplace price is in flux constantly that doesn't permit the seah b'seah transaction. Additionally, the fact that selling outside the box is illegal prevents a person from shorting a position he already owns stock in. Therefore, it isn't possible for someone to have the stocks that he is borrowing while doing a short sell.</ref> For a Jewish marketplace this is a serious issue because either way there is an interest charge for borrowing the stocks for the time. Therefore, these issues need to be solved with a heter iska.<ref> Torat Ribbit 17:33 agrees that short selling is considered seah bseah and therefore forbidden. Additionally, he adds that the seller can’t return the dividends. If the stock price drops after the dividend its price reflects that then it is a shutfut and the seller who borrowed the stocks is entitled to them and returning them would be interest. A specific heter iska can be used. [https://www.toraland.org.il/%D7%A9%D7%90%D7%9C%D7%95%D7%AA-%D7%95%D7%AA%D7%A9%D7%95%D7%91%D7%95%D7%AA/%D7%9B%D7%9C%D7%9B%D7%9C%D7%94-%D7%95%D7%9E%D7%A9%D7%A4%D7%98/%D7%9B%D7%9C%D7%9B%D7%9C%D7%94-%D7%95%D7%94%D7%9C%D7%9B%D7%94/%D7%9E%D7%9B%D7%99%D7%A8%D7%94-%D7%91%D7%97%D7%A1%D7%A8/ toraland.org.il] agrees.</ref> | ||
# Buying stocks on margin is forbidden if the brokerage is Jewish since it is lending to the investor money to be able to buy the shares and charging them interest for that loan. This is Biblical interest, but it can be permitted with a heter iska.<ref>Laws of Interest 1:25, Mishnat Ribbit p. 62</ref> A regular heter iska doesn't work for this case.<ref>Mishnat Ribbit p. 62</ref> | # Buying stocks on margin is forbidden if the brokerage is Jewish since it is lending to the investor money to be able to buy the shares and charging them interest for that loan. This is Biblical interest, but it can be permitted with a heter iska.<ref>Laws of Interest 1:25, Mishnat Ribbit p. 62, Mishna Halachot 5:116</ref> A regular heter iska doesn't work for this case.<ref>Mishnat Ribbit p. 62</ref> | ||
# Buying a future contract of stocks doesn't involve interest.<ref>Ribbit Btachnit Chischon Lkol Yeled p. 33 writes that there's no ribbit with future contracts since there is no sale of the stocks until the settlement date at which point the money is paid and the stocks or the equivalent are exchanged. Therefore, he argues that it isn't similar to pesika (buying commodities at a future date). Even though there is a down payment made it is merely a security deposit and not a loan. He cites this from the Mishpat Shalom CM 209.</ref> | |||
# If a person leaves money in a Jewish investment account and it accrues interest leaving money there is forbidden since that would be Biblical interest. However, this transaction can be permitted with a heter iska.<ref>Laws of Interest 1:24, Mishnat Ribbit p. 62</ref> Some poskim would permit collecting interest if the brokerage firm is incorporated.<ref>Laws of Interest 1:24 based on Rav Moshe (Igrot Moshe 2:63)</ref> | # If a person leaves money in a Jewish investment account and it accrues interest leaving money there is forbidden since that would be Biblical interest. However, this transaction can be permitted with a heter iska.<ref>Laws of Interest 1:24, Mishnat Ribbit p. 62</ref> Some poskim would permit collecting interest if the brokerage firm is incorporated.<ref>Laws of Interest 1:24 based on Rav Moshe (Igrot Moshe 2:63)</ref> | ||
# Buying and selling options is permitted.<ref>Torat Ribbit 17:36 permits buying and selling options since they can go up or down. If you buy from the open market certainly it is a sale and even if you do it with your broker it is still like a sale and not like an advanced cash payment to get a cheaper deal later. Takanat Haribit p. 47 also permits and thinks it isn't asmachta since it is legally binding. Seder Haribit v. 1 p. 289 writes that buying options is permitted since it is a sale. It isn't like pesika al peirot since you don't necessarily get the fruit you're just buying the right to get them. This is explained by [https://www.yutorah.org/lectures/lecture.cfm/946426/rabbi-ike-sultan/ribbit-investing-in-bonds,-stocks,-short-selling,-naked-shorts,-buying-on-margin,-buying-futures,-options,-money-market-funds-as-they-relate-to-interest/ Rabbi Sultan (Investing in Bonds, Stocks, Short Selling, Buying Futures, Options)].</ref> | |||
===Lending Commodities as Part of a Work Contract=== | ===Lending Commodities as Part of a Work Contract=== | ||
