Bucket shop (stock market)

The English term bucket shop is a term from the trading industry and describes various business models that ultimately all boil down to fraud.

Original meaning

The late 19th and early 20th century there was primarily in North America betting shops for stock prices. You could buy there unlisted shares at past rates, the purchase orders were never executed in the real stock market. In addition there was a box (Bucket ), in which the securities orders were placed. In the courses were "chipped " with chalk. The owner billed the purchases and sales. He could, for example, charge a buy order for $ 10 with a sale for $ 9, and made $ 1 profit. As long as its all posted prices were within the daily fluctuation of a stock, the dizziness did not fly on.

Bucket shops demanded only low margin payments. Moved one shares by the same amount in the opposite direction, the shares of the customers were "sold" - so to speak, forced selling by margin- call. The customer then lost his money.

The shop owner knew the contents of his box. Thus he was able to adapt the recommendations of its Anschlagebrettes " market conditions ". The popularity of the bucket shops lay in the triumph of optimism over the mind - de facto guaranteed such a business model that is a quick loss.

Until the 1929 stock market crash such transactions were quite common. Some managed, however, to stand up to this business model, such as Jesse Livermore.