Hi fellow traders & investors,
Wondering if there is an easy way to determine whether a brokerage firm is a market marker or bucket shop?
As I understand it, a broker that is also a "Market Maker" may, instead of placing your order on the open market, place it within an in-house market where the players consist of the broker itself and the brokers clients, and that in this in-house market the broker can manipulate bid/sell prices to its advantage and potentially to your disadvantage - this all being fully legal!
I further understand that bucket shops are an illegal practice where the broker may not even place your order on the market, and even if they do, they may decide not to report or distribute your gains to you, and instead keep any gains for themselves, but happily pass on the losses.
I am researching potential brokers and find this information difficult to determine. Perhaps I am not looking in the right places. It would make sense that if a broker did engage in any of these activities it would more likely be discoverable via online forums like this one rather than their websites.
It'd be good to hear any advice on this if anyone can help.