bucket shop

1. A fraudulent brokerage operation in which orders to buy and sell are accepted but no executions take place. Instead, the operators expect to profit when customers close out their positions at a loss.
2. A business, such as a travel agency, that buys unsold tickets and resells them at a discount.

[From bucket shop, a saloon selling small amounts of liquor in buckets, from its resemblance to the forerunner of such brokerage operations, which dealt in small units of stocks and commodities.]

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, and 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.

Investopedia Says:
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.

Related Links:
Protecting yourself from unscrupulous practices means knowing how to spot them. Understanding Dishonest Broker Tactics
Learn why this type of investment account has come under fire. Fee-Based Brokerage: The Latest Target For Regulators
To bamboozle someone out of their money is an age-old ruse. Learn about some of the gimmicks modern-day swindlers use and avoid becoming a statistic. Online Investment Scams Tutorial

Illegal brokerage firm, of a kind now almost extinct, which accepts customer orders but does not execute them right away as Securities and Exchange Commission regulations require. Bucket-shop brokers confirm the price the customer asked for, but in fact make the trade at a time advantageous to the broker, whose profit is the difference between the two prices. Sometimes bucket shops neglect to fill the customer's order and just pocket the money. See also Boiler Room; Pump and Dump.

Bucket shop refers to a particular type of fraudulent business:

• Bucket shop (heraldry)
• Bucket shop (stock market)

The term is used as a pejorative colloquialism to refer to different kinds of businesses, indicating that the speaker believes it is a fraud or scam. In this sense it might be used as a name for stock market, unregulated credit default swaps, airline ticket consolidators, or for heraldry scams.

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