Notices

Bucket shop

From Traderpedia

Definition:
A term for a brokerage operation in which buy and sell orders are accepted, but no executions actually take place.


Bucket shop operators expect to profit when customers close out their positions at a loss. A bucket shop is similar in concept to a bookie who does not lay off bets and accepts the risk of a bettor winning.

"Bucket shop" had been a standard term in the US throughout the boom years of the 1920s, up through the stock market collapse of 1929-1931, for any place taking mere bets on the course of securities prices without ever delivering, nor intending to deliver, any actual shares to the market participants. Betting on stocks was common in the US at the time though this practice was eventually outlawed in the US, but due to a quirk of UK law bucket shops by definition still exist in the form of Spread betting firms.

The legislation outlawing bucket shops is the reason why US citizens even today cannot open spreadbet accounts to bet on stocks or other financial instruments.

The original term was originally used to refer to a cheap saloon selling liquor by the bucket.

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