Bucketing

DEFINITION of 'Bucketing'

A situation where, in an attempt to make a short-term profit, a broker confirms an order to a client without actually executing it. A brokerage which engages in unscrupulous activities, such as bucketing, is often referred to as a bucket shop.

BREAKING DOWN 'Bucketing'

If the eventual price that the order is executed at is higher than the price available when the order was submitted, the customer simply pays the higher price. On the other hand, if the execution price is lower than the price available when the order was submitted, the customer pays the higher price and the brokerage firm pockets the difference

RELATED TERMS
  1. Bucket

    1. A group of swaps with similar or identical maturities. 2. ...
  2. Bucket Shop

    1. A fraudulent brokerage firm that uses aggressive telephone ...
  3. Firm Order

    1. A market order to buy or sell a security for a brokerage's ...
  4. Market Order

    An order that an investor makes through a broker or brokerage ...
  5. Executing Broker

    The broker or dealer that finalizes and processes an order on ...
  6. Execution

    The completion of a buy or sell order for a security. The execution ...
Related Articles
  1. Financial Advisors

    Which Withdrawal Strategy is Best?

    The bucket strategy and systematic withdrawal strategy are similar in theory but differ greatly in practice. Here's a comparison.
  2. Retirement

    A Sanity-Saving Retirement Stock Portfolio

    The market rollercoaster has many retirees calling it quits on stocks. Big mistake.
  3. Retirement

    Do You Have Too Much Stock in Your 401(k)?

    Is there an ideal percentage of U.S. stocks for a 401k? Explore the implications of the volatile stock market on your retirement accounts.
  4. Trading Strategies

    Tips For Retiring In A Bear Market

    Retiring in the midst of a bear market can strike quite a blow to your retirement savings.
  5. Investing Basics

    Strategic Asset Allocation: What Percent Belongs in Startups?

    The ability to now invest in an emerging class of individual startup securities motivates investors to rethink their strategic asset allocations and achieve better outcomes.
  6. Financial Advisors

    How to Prep Your Portfolio for Down Markets

    Down markets are a reality that can kneecap your retirement withdrawal plans. Minimize the pain with these strategies.
  7. Trading Strategies

    Making The Trade: Understand Order Types

    Buying and selling stock can be a lot like buying or selling a car. Traders should use and understand tools such as market orders, limit orders, day orders, and good-'til-canceled orders to ensure ...
  8. Active Trading Fundamentals

    The Basics Of Trading A Stock

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  9. Professionals

    Is The Series 24 Exam Hard?

    What makes the series 24 so challenging? The exam focuses very heavily on the supervision of trading and market making and the supervision of investment banking.
  10. Brokers

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
RELATED FAQS
  1. What's the difference between a market order and a limit order?

    Buy and sell trades with market orders at the present stock price and execute limit orders if the stock price falls within ... Read Answer >>
  2. Why do limit orders cost more than market orders?

    Learn the difference between a market order and a limit order, and why a trader placing a limit order pays higher fees than ... Read Answer >>
  3. How do financial advisors execute trades?

    Understand how financial advisors normally execute an investor's trades. Learn about the different type of markets and exchanges ... Read Answer >>
  4. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ... Read Answer >>
  5. How do I place a limit order online?

    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
  6. Why can't I enter two sell orders on the same stock?

    To answer this question, let's look at a few different situations. You bought a stock for $10 but want to be able to protect ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center