Essential Popular

Bucket Shop

A fraudulent brokerage that doesn't execute real trades, instead betting against its own clients.

Definition

A bucket shop is a fraudulent brokerage operation that accepts client orders but never actually executes them on the real market. Instead, the bucket shop takes the opposite side of every client trade, essentially betting against its customers. When clients win, the bucket shop loses, creating a direct conflict of interest. The term originated in the 1800s when illicit brokers would trade in "buckets" of securities outside legitimate exchanges.

How It Works

Client places order to buy EUR/USD
Bucket shop confirms the order but never sends it to the real market
Instead, the shop internally takes the opposite position
If client profits, the shop pays from its own funds (often refusing withdrawal)
If client loses, the shop keeps the money
Shop profits only when clients lose

Types of Bucket Shop

Classic Bucket Shop

Historical operations that mimicked legitimate brokers but never executed trades on real exchanges

Modern Market Maker Abuse

Unregulated brokers that operate as market makers but manipulate prices and refuse withdrawals

B-Book Broker

Brokers that internalize all client orders instead of hedging or passing to liquidity providers - not always fraudulent but high conflict of interest

Trading Tips

Bucket shops were outlawed in most countries after the 1929 crash

Modern equivalents still exist, especially in unregulated offshore jurisdictions

Red flags: unrealistic bonuses, withdrawal difficulties, requotes during profits

Always choose regulated brokers (FCA, ASIC, CFTC, CySEC)

Check if broker is NDD/STP/ECN or pure market maker

Read reviews about withdrawal experiences before depositing

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