bucket shop

Bucket Shop

1. A fraudulent brokerage firm that uses aggressive telephone sales tactics to sell securities that the brokerage owns and wants to get rid of. The securities they sell are typically poor investment opportunities, almost always penny stocks.

2. A brokerage that makes trades on a client's behalf and promises a certain price. The brokerage, however, waits until a different price arises and then makes the trade, keeping the difference as profit.

Notes:

1. Bucket shops are sometimes called the boiler room. The U.S. has laws restricting bucket shop practices by limiting the ability of brokerage houses to create and trade certain types of over-the-counter securities.

2. The second definition for a bucket shop comes from over 50 years ago, when bucket shops would do trades all day long, throwing the ticket into a bucket. At the end of the day they would decide which accounts to award the winning and losing trades.

See also: Boiler Room, Broker, Bucketing, Churning, Circular Trading, Front Running, Penny Stock, Pump and Dump

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Bucket shop

An illegal brokerage firm that accepts customer orders but does not attain immediate executions. A bucket shop broker promises the customer a certain price, but waits until a price discrepancy is present and the trade is advantageous to the firm and then keeps the difference as profit. Alternatively, the broker may never fill the customer's order but keep the money.

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bucket shop

An illegal operation in which buy and sell orders are accepted, but no executions actually take place. Instead, the 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.