256 THE BOOK OF WHEAT 



of any speculative transaction which may be proposed. It deals 

 on margins only, and as a rule its transactions are never exe- 

 cuted either in a market or on a board of trade. It acts as a 

 clearing house for the deals of its patrons by matching con- 

 tracts, that is, purchases and sales. Those contracts that are 

 matched cancel each other, at least as far as the bucket shop is 

 concerned. Being simply booked, they never come into the 

 market, and can have no effect on prices. It is only when the 

 bucket shop has a large balance of contracts on one side of the 

 market that it sometimes fears a loss and seeks insurance by 

 itself making the counterbalancing transactions in the specu- 

 lative market. It is only this small fraction of the bucket 

 shop's transactions that really comes into the market and af- 

 fects prices through the medium of the speculative supply and 

 demand. 



According to the law of chances, the bucket shop has an en- 

 tirely safe and sound basis from its own point of view. By 

 matching contracts it makes its patrons carry the greatest part 

 of its insurance. The remainder of the insurance is carried by 

 the bucket shop itself. Its advantages over its patrons are in 

 three ways. It carries the risks of only a small fraction of the 

 contracts involved. As a result of this, on a relatively smaller 

 amount of capital, its chances of permanency are greatly in- 

 creased. By being in continuous existence it secures the effects 

 of advantageous changes in price as well as the disadvantageous 

 ones. These will, at least in a measure, offset each other. It 

 charges the same commissions as the exchanges and thus has 

 a substantial income. The speculator, however, not only must 

 carry all of his risks himself, but usually his capital is also very 

 limited and he has no regular income from transactions. When 

 his capital has been engulfed by a disadvantageous change in 

 price, his operations must cease, and he secures no benefits from 

 subsequent advantageous changes. The great revenue of the 

 bucket shop consists chiefly of its commissions, but it is also 

 continually acquiring the capital which is sunk by its patrons. 

 How certain a process this is, is shown by the fact that the list 

 of names of those dealing with the bucket shop usually changes 

 completely within a few years. If the game were a profitable 

 one to the speculator, it is quite safe to assume that his name 

 would remain permanently on the list. 



