6. Bucket shops and quoted in these concerns are usually so fixed as to favor the proprietor. Moreover all advantage of fractions is against the patron as the house does business in a "rough-shod" manner. The organized exchanges wage relentless war upon the bucket shops and try to put them out of business by preventing quotations made upon the exchanges from reaching the bucketers. This requires the exercise of vigilance and the more powerful of the bucketers resort to endless legal con troversies to defeat this aim.
The Federal Government also relentlessly fights the bucket shops and more have been closed by the Gov ernment than thru any other legal agency. The basis for Federal action is the misuse of the mails for pur poses of fraud. In addition to governmental action nearly all the states have laws prohibiting these con cerns. The test as to whether a business is operated as a bucket shop or not rests on the ability'of the com plainant to prove that it was not the intentions of the one party or both parties to the transaction actually to deliver the property, but merely to settle by a pay ment of the differences. Some states make it possible for a business to be so considered if it can be shown that only the proprietor had this idea of non-delivery of property while other states require proof that both parties had such intention.
7. Evils of bucket shops.—In actual practice it is not always easy for a customer to know whether his orders are really being executed or bucketed, altho of course there are very many brokers, who are above sus picion in such matters. To make sure the customer need only ask for the names of the brokers on the opposite side of the transaction, that is, the one from whom his security was bought or to whom it was sold.
On May 19, 1909, the New York Stock Exchange adopted the following by-law with regard to bucket shop operations on the part of members of the ex changes: That any member of this Exchange who is interested in or associates in business with, or whose office is connected, di rectly or indirectly, by public or private wire or other method or contrivance with, or who transacts any business directly or indirectly with or for, any organization, firm or individual engaged in the business of dealing in differences or quotations (commonly called a bucket shop) shall on conviction thereof, be deemed to have committed an act or acts detrimental to the interest and welfare of this exchange.
Another of the greAt evils of the bucket shops is that all the money spent in them by the Customer has little or no effect upon the market. The bucketer steals from his customer a most valuable asset, his effect upon the market. If a man buys 100 shares of a stock he is entitled to the strengthening effect which his buying has upon the price of that stock. But as the bucket shops buy practically nothing there is no effect. In a previous paragraph it was noted that customers of bucket shops bet on 8300 shares of stock in a single day when only 1500 were bought and sold on the exchange. If the entire 9800 shares had gone through the exchange the price would probably have risen far more than it did. Indeed, efforts have been made to show that the advance in stock prices during the years 1915-1916 was partly due to increased odd , lot buying secured by legitimate brokers after the closing of hundreds of bucket shops. The pretended buying of hundreds of thousands of bushels of grain in bucket shops will not add a fraction of a cent to the price of the product, nor will the pretended selling of this amount either increase the supplies of the con sumer or lessen their cost.
The real curse of the bucket shop is that so many people are willing to deceive themselves and are will ing to act under false pretenses.
The stock of the Anaconda Copper Mining Com pany may serve to illustrate this point.—The company is one of the largest producers of copper in the world. If one really believes such a business is to become more valuable in the course of months, and is prepared to stake a considerable sum on that belief, he is engag ing in legitimate speculation. In that case a certifi cate of ownership in this vast copper-mining concern will be made out to him. But in the bucket shop a man simply guesses that in a few hours or days the person just described will buy enough of that stock to put it up, and he who has done nothing will benefit by the other man's action and bet upon its result. This is making a mockery of the great processes of indus try and trying to live upon them without taking part in them.