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Bucket Shop
Posted By: TradersLog
Describes a brokerage facility that books (takes the opposite side of) retail customer orders without actually having them executed on an exchange. The term comes from the practice of placing an order in a bucket rather than transmitting it to an exchange as a broker would normally do. Bucket Shops were popular during the 1920′s at a time when many stocks traded at over $100 a share and the average salary was $1,000 a year, making investment in the stock market too expensive for most people. The most sophisticated bucket shops, known as bucketeers, were hard to distinguish from legitimate brokerage offices, having their own ticker tapes and chalkboards. The bucketeers would often take opposite positions in the market to ensure that their customers could not win.
See also: Jesse Livermore
By Pat
On 10-31-2011 at 8:01 am
Interviews by Morley Safer with Madoff family show just how easy it is for brokers (under the guise of legitimacy) to operate such a firm under the pretense of legitimacy without really being legitimate.
Bucket shop definitions support that illegal component within the securities industry since the production of false financial statements for customers is relatively easy, and without more, there is no reason to believe that any brokerage operation is legitimate, especially when securities are unauthenticated, commonly held in “street name,” and do not carry any sort of identifying data for identification and verification purposes.
Why should any firms under such circumstances be considered legitimate rather than simply security scams?
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