What is Jitney?
A jitney is an illegal scheme in which two brokers trade a stock back and forth in order to increase the trading volume and earn commissions. In some circles, a jitney is also scheme in which a broker performs trades for another broker who does not have access to a certain exchange.
How Does Jitney Work?
Let's say John Doe and Jane Smith are brokers. They are trying to drive up demand for Company XYZ stock, which is a penny stock that trades on the OTC markets.
To do this, John buys 2,000 shares of the stock and sells them to Jane. Jane then sells them back to John, who sells them back to Jane. Each time the shares trade, the reported trading volume of the shares increases by 2,000. Soon, other investors notice the spike in trading volume, and not knowing that it's because two brokers are acting illegally, decide to invest in the stock.
Why Does Jitney Matter?
Jitneys are illegal because they distort the market. Their name comes from the slang term for anything that is of poor quality or cheaply made.
