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166:. The transaction goes "in the bucket" and is never executed. Because no trading of actual securities occurs, the customer is essentially betting against the bucket shop operator in a game based on abstract security prices. In a bucket shop, the parties agree to imagine themselves as following the events occurring in a real exchange. Alternatively, the bucket shop operator "literally 'plays the bank', as in a
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231:, with the losses flowing entirely to the bucket shop. In this situation, if the stock price should fall even momentarily to the limit of the client's margin (highly likely with thin, highly leveraged margins in volatile markets), the client instantly forfeits the entire cash investment to the shop's account.
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as "an establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain, oil, etc., there being no transfer or delivery of the
132:. The children sold the alcohol to unlicensed bars, where it was mixed together and sold to unwary patrons. These bars became known as "bucket shops." The idea was transferred to illegal brokers who sought to profit from trading activity that was too small or disreputable for legitimate brokers.
227:. The elimination of margin calls was portrayed as a benefit and convenience to the client, who would not be burdened by the possibility of an additional cash demand, and touted as a feature unavailable from genuine brokerages. This actually made the client more vulnerable to a heightened
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in 1958, a bucket shop is "an office with facilities for making bets in the form of orders or options based on current exchange prices of securities or commodities, but without any actual buying or selling of the property". Bucket shops are sometimes mentioned together with
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in the real market, the shop likewise made no real margin loans, but did collect interest in cash from the client. The client could easily imagine that he had been loaned a great sum of capital (in fact an illusion) for a small cash deposit and interest payment.
201:. This embargo instead proved a severe hindrance to the Exchange's wealthy local clients, as well as the Exchange's brokers in other cities across the country. It also had the surprising effect of favoring competing exchanges, and was abandoned within days.
509:'Bucketing' is commonly done by a so-called 'bucket shop':  a business that allows customers to speculate on movements in commodity prices by entering into contracts with the shop rather than by finding a trading partner on the floor of an exchange.
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as examples of securities fraud, but they are distinct types. While a boiler room operator seeks to broker actual security trades, the bucket shop's emphasis is on creating the appearance of brokerage activity where none exists.
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In the United States, the traditional pseudo-brokerage bucket shops came under increasing legal assault in the early 1900s, and were effectively eliminated before the 1920s. Shortly after the failure of many brokerages on the
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David
Hochfelder | "Where the Common People Could Speculate": The Ticker, Bucket Shops, and the Origins of Popular Participation in Financial Markets, 1880–1920 | The Journal of American History, 93.2 | The History
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schemes to customers, with leverage ratios as extreme as 100:1 (a deposit of $ 1 cash would permit the client to "buy" $ 100 in stock). Since the trades were illusory and not
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to momentarily move down enough to exhaust the client's margins. Through its opportunistic actions, the bucket shop thereby gains 100% of the client's investment.
74:. Bucket shops were found in many large American cities from the mid-1800s but the practice was eventually ruled illegal and largely disappeared by the 1920s.
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the operation of a bucket shop. Typically the criminal law definition refers to an operation in which the customer is sold what is supposed to be a
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addressed the "ticker trouble" (bucket shops operating on intraday stock price movements), and attempted to suppress bucket shops by disconnecting
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Bucketing of orders violates several provisions of U.S. securities law. These prohibitions apply to legitimate brokerages as well as bucket shops.
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211:, described the operations of bucket shops in the 1890s in detail. The terms of trade varied among bucket shops, but they typically offered
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Bucket shops specializing in stocks and commodity futures appeared in the United States in the 1870s, corresponding to the innovation of
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Margin trading theoretically gives speculators amplified gains, but trading in a bucket shop exposes traders to small
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To further tilt possible outcomes in their favor, most bucket shops also refused to make
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105:: "Peering down the jaws of a deep pit he sees the souls of the bucket-shop gamblers."
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John Hill, Gold Bricks of
Speculation 39 (Chicago Lincoln Book Concern, 1904).
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Business that allows gambling based on the prices of stocks or commodities
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United States Court of
Appeals, Fourth Circuit. (22 January 2002).
493:"00-1488: Commodity Trading Futures Commission v. Esfand Baragosh"
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599:"The Role of Information Failures in the Financial Meltdown"
664:. Vol. 4 (11th ed.). Cambridge University Press.
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drained the beer and liquor kegs that were discarded from
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A person who engages in the practice is referred to as a
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The term originated from
England in the 1820s, when
608:SCHOOL OF INFORMATION, UC BERKELEY, SUMMER 2009
481:, "It shall be unlawful to bucket an order ..."
242:. In a form of what is now considered illegal
143:is a defined term in the many U.S. states that
621:AMEX: A History of the American Stock Exchange
70:and the practice is sometimes referred to as
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286:Contract for difference § Bucket shops
262:in 1922, the New York assembly passed the
182:In the United States (ca. 1870–1920)
162:, but there is no transaction made on any
63:stock or commodities nominally dealt in".
276:Binary option § Regulation and fraud
266:, which essentially banned bucket shops.
190:upon which they depended. In 1889, the
543:. 3 April 1889 – via Google Books.
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348:"Peter J. M'Coy, 70, Former U.S. Aide"
584:of the life of actual stock operator
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358:from the original on April 10, 2017
34:A scene from a bucket shop in 1892.
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577:Reminiscences of a Stock Operator
559:Reminiscences of a Stock Operator
499:from the original on 6 June 2008
398:For example, see California's
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389:, New York: Routledge, p.189.
99:'s 1901 retelling of Dante's
93:Through Hell with Hiprah Hunt
387:Card Sharps and Bucket Shops
301:Guinness share-trading fraud
624:. Beard Books. p. 30.
438:September 27, 2007, at the
260:Consolidated Stock Exchange
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604:December 22, 2009, at the
337:, 27 S.Ct 167, 168 (1906).
335:Gatewood v. North Carolina
83:Definition and term origin
42:is a business that allows
209:Jesse Lauriston Livermore
170:, against the customer".
661:Encyclopædia Britannica
192:New York Stock Exchange
177:History of bucket shops
46:based on the prices of
618:Sobel, Robert (2000).
281:Boiler room (business)
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452:"Bucket Shop Secrets"
409:, Washington State's
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597:YALE M. BRAUNSTEIN,
236:market manipulations
527:August 1, 2012, at
431:, or Mississippi's
655:"Bucketshop"
463:The New York Times
457:2018-06-16 at the
427:2008-06-07 at the
416:2011-05-22 at the
405:2009-02-08 at the
385:Ann Fabian (1999)
352:The New York Times
238:due to the shop's
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56:U.S. Supreme Court
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296:Fuller case
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145:criminalize
141:Bucket shop
60:bucket shop
52:commodities
40:bucket shop
673:Categories
433:definition
422:definition
411:definition
400:definition
322:References
291:Forex scam
264:Martin Act
149:derivative
479:§ 6b
362:April 10,
157:commodity
97:Art Young
68:bucketeer
54:. A 1906
18:Bucketing
602:Archived
557:(1923).
525:Archived
503:30 March
497:Archived
455:Archived
436:Archived
425:Archived
414:Archived
403:Archived
356:Archived
270:See also
164:exchange
153:security
136:Legality
78:Overview
44:gambling
574:(1923)
217:settled
102:Inferno
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240:agency
160:future
48:stocks
626:ISBN
505:2008
364:2017
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