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Jitney

Definition

Jitney refers to an informal or unlicensed transportation system, often involving shared rides in private vehicles. In the financial context, a jitney is an arrangement where one broker executes trades for another broker’s client without the client’s knowledge. This practice is considered unethical and is prohibited by financial regulations in many jurisdictions.

Phonetic

The phonetic pronunciation of the keyword “Jitney” is: /ˈdʒɪtni/

Key Takeaways

  1. Jitney is a play written by August Wilson, set in 1970’s Pittsburgh, as part of his ten-play cycle called The Pittsburgh Cycle, each set in a different decade of the 20th century.
  2. It follows the lives of African-American men working as drivers for an unregulated car service called Jitney and explores themes of family dynamics, generational tensions, and the impact of urban renewal on a marginalized community.
  3. The play delves into the personal struggles and relationships of each character while weaving in broader socio-political issues, highlighting the African-American experience and the importance of community resilience in the face of adversity.

Importance

The term “Jitney” is important in the business and finance world as it refers to an informal system of smaller brokerage firms that allows trading of securities or stocks by extending credit to each other. This enables them to bypass the need to pay fees or commissions to larger brokerage firms or clearinghouses. As a result, Jitney operations provide increased flexibility and cost savings for smaller brokers, facilitating market efficiency and encouraging competition. Although these practices are generally less regulated, they still play a vital role in making capital markets more accessible to smaller players, ultimately promoting liquidity and investment opportunities within the financial sector.

Explanation

Jitney, a term that has its roots in the early 20th century, serves a unique purpose in the world of finance and business. Essentially, it refers to an informal network of firms or brokers who engage in reciprocal or circular trading of their clients’ securities among themselves, often without charging a commission. The purpose of a jitney in finance is to create an impression of increased trading volume and liquidity in a particular security or stock, even though there may not be any actual demand. This seemingly heightened activity can stimulate interest from potential investors, as it falsely portrays a security as a popular and sought-after option in the market.

Despite previous bans on jitney activity, it continues to serve a function in the financial landscape. Some brokerage firms or traders may employ jitney arrangements as a strategy to manipulate the market perception of a security’s demand and value. Such actors may also use this mechanism to discreetly establish equity positions or facilitate transactions without drawing too much attention to their actions. While jitney activity can adversely impact the integrity of the market, it remains a tool that unscrupulous traders can use to achieve their objectives in the ever-evolving and competitive financial world.

Examples

1. Jitney Transportation Services: Jitney refers to a type of informal or shared transportation service, usually using small buses or vans that operate on a semi-fixed route with flexible schedules. An example of this is the Dollar Vans operating in New York City, targeted towards urban commuters. These vans provide an affordable alternative to regular public transportation, often in areas with limited transit options or during off-peak hours.

2. Airport Shuttle Services: Airport shuttle services often use the jitney model, providing travelers with a more cost-effective transportation option compared to taxis or ride-sharing services like Uber and Lyft. Companies like SuperShuttle are examples of these services. Passengers typically reserve a spot in one of these vans online or over the phone, and the vehicle transports multiple people between the airport and hotels or specified pick-up/drop-off points.

3. Casino Jitney Services: Several casinos in Atlantic City, New Jersey, offer a jitney service to shuttle players and visitors between different casinos and hotels. The Atlantic City Jitney Association operates a fleet of minibuses that run on fixed routes, providing transportation services 24/7. This service helps promote tourism and encourages people to visit multiple casinos during their stay in the city.

Frequently Asked Questions(FAQ)

What is a Jitney?

A Jitney is a colloquial term referring to a small transportation vehicle that carries passengers on a fixed or semi-fixed route, typically operating within a localized area. In the finance and business world, the term is often used to describe an arrangement between stockbrokers who carry out small transactions for each other at a discounted fee.

What is the origin of the term “Jitney”?

The term “Jitney” originated in the early 1900s in the United States, where it referred to an informal or unlicensed public transit system. It was often used to describe small-scale, localized transit systems that provided an alternative to more expensive public transportation options.

How is the term “Jitney” used in the finance and business context?

In the finance and business environment, “Jitney” refers to the stockbrokers who are members of an exchange or trading platform who agree to execute small trades for each other at discounted rates. This informal arrangement may occur when a broker is unable or unwilling to execute a trade on behalf of a client and instead relies on another broker for assistance.

What are the benefits of a Jitney arrangement in finance?

Jitney arrangements offer several benefits for stockbrokers and clients. The primary advantage is increased efficiency in the execution of trades, as brokers can rely on each other for assistance in completing transactions. Additionally, in some cases, the reduced fee structure for these trades may result in lower costs for clients.

Are there any drawbacks or potential risks associated with Jitney arrangements?

While Jitney arrangements have several benefits, they do present some potential risks. One key concern is the informal nature of these arrangements; because they may not be documented or regulated, there is the potential for disputes between brokers or a lack of consistency in fee structures. Additionally, lack of regulation could increase the potential for unethical behavior among participants.

Are Jitney arrangements regulated by any financial institutions?

Jitney arrangements, due to their informal nature, may not be regulated directly by any single financial institution. However, the stockbrokers involved in these arrangements are typically subject to regulation by other financial governing bodies, such as the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These organizations could implement rules and guidelines that indirectly impact Jitney arrangements.

In which regions or countries is the term “Jitney” commonly used?

The term “Jitney” is most commonly associated with the United States, particularly in the finance and business context. However, the concept of small-scale, localized transportation systems and similar trading arrangements can also be found in other parts of the world, sometimes under different names or terminologies.

Related Finance Terms

  • Informal Transportation System
  • Shared Ride Services
  • Alternative Transit Options
  • Public Transportation
  • Fixed-route Minibuses

Sources for More Information

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