Bucket shop (stock market)

According to The New York Times 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".

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.

[5] Typically the criminal law definition refers to an operation in which the customer is sold what is supposed to be a derivative interest in a security or commodity future, but there is no transaction made on any exchange.

[10] Edwin Lefèvre, who is believed to have been writing on behalf of Jesse Lauriston Livermore, described the operations of bucket shops in the 1890s in detail.

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.

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.

[13] Shortly after the failure of many brokerages on the Consolidated Stock Exchange in 1922, the New York assembly passed the Martin Act, which essentially banned bucket shops.