DEFINITION of Jitney
Jitney refers to a broker who has access to a trading exchange for one who does not have one. The term can also refer to trading carried out to fraudulently increase the volume. In this case, trading can only involve two brokers who trade the stock back and forth to earn commissions and increase trading volumes to give the impression of market interest.
“Jitney” in the first sense of the word could designate a broker whose business volume is not sufficient to maintain a stock trader who, therefore, would give his orders to a large dealer for execution. This can also be done fraudulently as a means of creating the impression of increased brokerage interest in a security.
In the second sense, “jitney” or “jitney game” is similar to circular trading, which is a fraudulent practice which is done to demonstrate that an action has liquidity or to maintain the price of a share. This, in turn, can prompt others to buy the stock. IPOs and penny stocks can be particularly sensitive to this practice, which serves to give the impression of intense interest in a stock. Like circular trading, jitney games are illegal.