What is a Bucket Shop.
I have frequently been requested to define bucket shops—a most difficult task, owing to the variety of disguises which they assume and the outward similarity which they bear to legitimate brokerage. The following definition covers the essential features of bucket shops from the standpoint of an expert.
A bucket shop is an establishment conducted nominally and ostensibly for the transaction of a grain, cotton or stock exchange business.
The proprietor, with or without the consent of the patron, takes one side of every deal that is made in his place, the patron taking the other, no article being bought or sold in any public market.
Bucket shops counterfeit the speculative trading on exchanges.
Continuous market quotations of an exchange are the essence, the very sinew of the gambling business carried on in a bucket shop, being used as dice are used, to determine the result of a bet.
The market quotations posted in a bucket shop are exactly similar to those posted in a legitimate broker's office, but they are displayed for a different purpose. The broker posts the quotations for the purpose of showing what the market has been on the exchange as a matter of news.
The bucket shop posts them as the terms upon which its patrons may make bets with the keeper. A bucket shop is destroyed if it loses its supply of quotations.
Margins deposited with the bucket shop proprietor by the patrons are nothing but the patrons' stakes to the wager, and are appropriated by the proprietor when the fluctuations of the price on the exchange whose quotations are the basis of the bet, reach the limit of the deposit, one party (the proprietor) to the bet acting as stakeholder. The commissions charged by the bucket shopkeepers are odds in its favor, and necessary in order to maintain their pretense of being legitimate brokers making the transaction on an exchange.