A bucket shop was an illegal financial trading operation that took customer orders to bet on stock or commodity price movements without ever executing the trades on a real exchange, so that customers were in effect gambling against the shop's operator rather than trading actual securities. The United States Supreme Court described a bucket shop in 1906 as an establishment nominally conducting stock exchange business but really registering bets on price movements with no transfer or delivery of the underlying stock or commodity. Bucket shops typically offered extreme, undisclosed leverage of up to one hundred to one and refused to issue margin calls, exposing customers to losing their entire investment, while some operators also engaged in front running and self dealing to manipulate prices against their clients. Increasing legal action in the early twentieth century, including New York's Martin Act passed after a wave of brokerage failures in 1922, effectively eliminated bucket shops before the 1920s ended.
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