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Embarrassingly, I always though bucket shops meant something else. (I thought that this is what you call brokers with heavy flow that could cross much of their
by joshu 16y ago
Embarrassingly, I always though bucket shops meant something else. (I thought that this is what you call brokers with heavy flow that could cross much of their traffic internally without going to the exchange.)
- nl 16y agoThat's pretty funny. If you'd said that was what it was I'd have believed it (it sounds right, and you worked in finance in NY didn't you?)
- joshu 16y agoI did, but only at legitimate ones :)
- alex1 16y ago> (I thought that this is what you call brokers with heavy flow that could cross much of their traffic internally without going to the exchange.) What you describe here sounds like dark pools[1]. [1] http://en.wikipedia.org/wiki/Dark_pools_of_liquidity http://en.wikipedia.org/wiki/Dark_pools_of_liquidity
- joshu 16y agoI think they generally don't go to the exchange, but yeah, pretty similar.
- byrneseyeview 16y agoI believe your definition is correct. My understanding is that the way bucket shops operate is that they are the customer's counterparty. So if you buy stock, they short it in equal amounts. The business model, at least in the 1920's, was to get customers to take big positions on margin, then to manipulate the actual stock (on an actual exchange) to the point that customers were wiped out. If the manipulation cost less than what the customers put up, the bucket shop would win. People occasionally accuse forex companies of doing something similar, but the market is probably too deep for any retail-facing forex company to successfully manipulate prices like this. Reminisces of a Stock Market Operator talks about bucket shops--and trading against them--in detail.