Bucket shop, in Britain and the United States, a brokerage house, usually dealing in securities, grain, or cotton, whose operators would secretly “bucket”—i.e., hold out—rather than execute a customer’s orders, in the hope that the house would later be able to buy or sell the stock or commodity at more favorable prices. The name may have originated with the activities of small-time U.S. wheat dealers who handled odd lots known as “bucketsful.”
When a customer placed a purchase order, the bucket shop operator expecting a market decline would hold the order.
If the stock price did decline and the customer told the broker to sell, the bucket shop operator would return the lower price of the stock to the customer, having pocketed the difference.
The bucket shop operator, in this way, gambled against the customer on market trends. Bucket shops are now illegal, and the common requirement that specific confirmation slips be sent to all customers aims to eliminate the bucketing practice.
Unfortunately, bucket shops are still out there, so beware!
Luckily for you, we at BabyPips.com are more than willing to help you avoid entrusting your hard-earned cash to these nasty buckets.
To help you separate the good brokers from the bad ones, make your way to the Forex Brokers Forum, where fellow forex traders kindly share their feedback and experiences about a vast collection of brokers.
So, before you deposit your money with just anyone, make sure to do your due diligence and espionage so that you avoid fraudulent brokers and forex scams. Mind you, there are plenty out there, and we’ll look more into that later on!