ABUSES OF SPECULATION.-THE BUCKET SHOP Speculative refinements lead to abuses.—The perfection and refinement of the machinery of ex change must have been impressed upon all who have read the previous chapters of this book. It has indeed reached a high pitch of achievement. By means of it vast operations are carried thru without a hitch. Everything conceivable has been devised by it to facilitate huge transactions in stocks and produce. No sensible person will doubt that great economic services are performed by this elaborate mechanism. But like other human institutions, it lends itself to abuses which arise both within and without the ex change. It is the purpose of this chapter to consider certain abuses.
The whole modern tendency in business is toward saving expense. For this purpose all intermediate and unnecessary steps are cut out. A merchant or ders an article for a customer from a manufacturer and it is delivered direct to the customer without the merchant ever seeing it. As the system of account ing grows more refined, many forms of transactions are settled on paper and business is transacted to an increasing extent by means of ledger .balances and differences.
Even in the real estate market parcels of property often change hands many times thru the use of op tions before the title is transferred. No wonder this whole tendency has gone far on the stock and produce exchanges, where one share or one bushel is just like every other and therefore lends itself readily to the substitution. The stock exchanges have their clear ing houses and their "street" certificates but the pro duce exchanges go even further with their settlements and ring outs.
Is it not natural, then, that with speculation made so easy on the legitimate exchanges irresponsible par ties should make it still easier off the exchanges? Thus we have the bucket shop, where one may gamble in stock or grain quotations without any buying or selling whatever taking place. It is a fungus growth upon the institution of exchange speculation, an abuse and a pest, but one which would hardly have been de vised had the speculative machinery not been what it is. On the other hand if bucket shops had not ca tered to the gambling instinct it is likely that some other institution would have done so.
2. What is a bucket shop?—Like many another word the term bucket shop which we use to designate any place where men gamble on stock prices, by fic titious sales and purchases, has been used in varying senses at different times. As nearly as can be ascer
tained it was soon after 1870 that the expression was brought to us from England. It seems to trace its origin there back to the custom in London where gangs of vagabonds used to drain kegs which had been thrown out of the public houses. When they had gathered enough of this delectable liquor and a few cigar stubs, they used to withdraw to a hovel where they made merry. Their hovel was called a bucket shop and in time this name was used as a term of re proach for those places where stock and produce deal ings were feigned.
Nor does the bucket shop as we now know it al ways operate in the same field. At one period it deals mostly in stocks, at another in grain. If killed in one place it breaks out in another, altho the warfare against it gains strength from year to year, and ulti mately may conquer it.
The distinctive features of this form of gambling consists in the fact that stocks are not usually pur chased or sold for the customer, and selling and buying does not take place with a view to delivery. The in tention of the customer is merely to pocket the differ ence between the price which he pays and the price which the stock rises. Otherwise expressed, the cus tomer wagers against the bucketer on the price of a stock. The owner of a shop always takes one side of a deal, whether the patron realizes and consents to it or not, and in the long run comes out the winner as is the case in most gambling establishments. The deal ings are simply in profits and losses, not in the securi ties themselves. As prices fluctuate the differences flow into the pockets of the winners. The interest of the bucket shop is always opposed to that of its pa trons, as the profits of the shop are measured by the losses of the patrons.' It is evident that bucket shops exist only when they are able to secure the quotations made on legitimate exchanges. Occasionally the bucket shop is obliged, for reasons to be explained later, actually to buy or sell stocks. But in that case a contrary order is put in for a like amount, so that in no event does the shop carry stocks. Legitimate stock exchange brokers have been known to "bucket" their orders—accepting the customers loss or paying him the profit without any real buying or selling—but the punishment on all ex changes is sure and swift if the authorities discover any bucketing.