DEFINITION of 'Bucket Shop'

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.

BREAKING DOWN 'Bucket Shop'

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 more than 50 years ago, when bucket shops would do trades all day long, throwing the tickets into a bucket. At the end of the day they would decide which accounts to award the winning and losing trades to.

RELATED TERMS
  1. Bucketing

    A situation where, in an attempt to make a short-term profit, ...
  2. Bucket

    1. A group of swaps with similar or identical maturities. 2. ...
  3. Brokerage Account

    An arrangement between an investor and a licensed brokerage firm ...
  4. Brokerage Company

    A business whose main responsibility is to be an intermediary ...
  5. Payment For Order Flow

    The compensation and benefit a brokerage receives by directing ...
  6. Firm Order

    1. A market order to buy or sell a security for a brokerage's ...
Related Articles
  1. Managing Wealth

    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. Investing

    What's a Brokerage Account?

    A brokerage account is a contractual arrangement between an investor and a licensed securities broker or brokerage.
  3. Retirement

    A Sanity-Saving Retirement Stock Portfolio

    The market rollercoaster has many retirees calling it quits on stocks. Big mistake.
  4. 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.
  5. Financial Advisor

    Why Near-Retirees Shouldn't Sweat the Volatility

    With the stock market bumpy, some folks nearing retirement might be nervous. Here's how to create some wiggle room for your portfolio.
  6. Financial Advisor

    Top Tips for Retiring in a Bear Market

    What you need to know if you have the unfortunate timing of retiring in a bear market.
  7. Investing

    Opening Your First Brokerage Account

    Learn what steps you should take before you open your first brokerage account.
  8. Retirement

    Tips For Retiring In A Bear Market

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

    What is a Prime Brokerage?

    A prime brokerage offers special services to certain clients.
  10. Retirement

    The Rise of 401(k) Brokerage Accounts

    Many 401(k) plans now allow participants to trade stocks and bonds by offering brokerage accounts inside the tax-deferred plan. Good idea or too risky?
RELATED FAQS
  1. How can an investor profit from the increase in popularity of discount brokerages?

    Find out how investors benefit when brokerages compete with each other, and how discount brokerages are changing the market ... Read Answer >>
  2. Can you short sell stocks that are trading below $5? My broker says that I can't.

    Short selling can be very risky for both the investor and the broker. Brokers will often tell investors that only stocks ... Read Answer >>
  3. Why are most brokerage firms owned by banks?

    Learn about the differences between investing with a bank-owned brokerage firm or with an independent broker. Get real answers ... Read Answer >>
  4. Why won't my broker allow me to sell one stock and buy another on the same day?

    There are two likely reasons why a customer would be unable to buy and sell a stock in the same trading day. For simplicity's ... Read Answer >>
  5. When short selling a stock, how long does a short seller have before covering?

    There are no general rules regarding how long a short sale can last before being closed out. A short sale is a transaction ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center