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Bucket Shop

Bucket shop is a term used to describe a brokerage that executes orders on the client's behalf while promising a specific price; however, the broker often executes the order at a different price and gains profit from the price difference. The term was coined by Edwin Lefèvre in his 1923 book ‘Reminiscences of a Stock Operator’, but there is however some disagreement in regards to the term's origin. Some argue that it refers to the 'buckets' in which phone orders were placed instead of being executed. Others oppose that the term originated from Georgian England where street urchins would pour abandoned beer kegs into a bucket and get drunk in deserted buildings; known as the bucket shops. In trading the term was adapted to refer to fraudulent businesses that profit from market dregs which are thought to be insignificant for bigger brokers. Bucket shops are sometimes confused with boiler rooms; which refer to brokers who use high-pressure sales tactics that are often biased and untruthful. However the two terms refer to different business models.

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