Jitney

Understanding 'Jitney' in Stock Trading

If your journey through the trading world brings you to the term Jitney, don't be confused. Despite its unusual name, a 'Jitney' has a simple and straightforward meaning in the world of stock trading.

What is a 'Jitney'?

In trading vocabulary, a Jitney refers to an arrangement where a brokerage firm carries out stock trades on behalf of another firm. The firm executing the trades is known as a 'Jitney'. This term has its roots from the early 20th century in the United States, where 'Jitney' was slang for a nickel, hinting at the small fee usually charged for such services.

Why are 'Jitneys' used?

The Jitney practice often occurs when a brokerage lacks access to a certain stock exchange, or when they wish to keep their trading strategy anonymous. By using a Jitney, a firm can trade on exchanges otherwise inaccessible to them, and keep their moves hidden from rivals aiming to front-run their trades.

How does 'Jitney' trading work?

Firm A wants to buy or sell a certain stock but either doesn't have the necessary exchange membership or doesn't want its trading plan discovered. Hence, Firm A approaches Firm B, a Jitney, which is a member of that particular exchange. Firm A provides the order details and Firm B executes the trade on its behalf, hence making the trade possible, discreet, and successful.

Jitney: Key Takeaway

In conclusion, a Jitney in trading is a useful instrument enabling brokerages to unlock access to a wider range of stock exchanges and maintain the element of surprise in their trading strategies. As a player in the trading game, it's an important term to grasp for understanding the behind-the-scenes mechanisms of the stock trading world.