Stock Trading Then and Now

Technology has strongly changed the way stocks are traded from a decade ago to today. Historically, stock markets like the NYSE are a physical location for buyers and sellers to meet and negotiate trades. However, in the 20th Century technological improvements in stock trading have made the physical location to meet irrelevant, giving rise to electronic trading.

Before the telegraph arrived in the 1850s, brokers would place agents on top of hills and buildings between Philadelphia and New York City with signal flags and telescopes to rely stock prices between cities in about half-an-hour. Homing pigeons were also used to transmit information.

Later on, “runners” in the 1860s would carry stock prices handwritten on large chalkboards from the exchange to brokerage offices, so that the brokerages would be aware of a stock’s price. The NYSE was referred to as the “Big Board” supposedly because of these large chalkboards.

The creation of the Calahan Stock Ticker by Edward A. Calahan in 1867 simplified the matter as it allowed information on stocks, bonds, and commodities to be sent directly from stock exchanges to brokerage offices around the U.S. The data printed on a 0.75-inch wide paper tape produced a sound that gave its name, “the stock ticker.” However, the ticker tape had the issue of falling out of sync with the transmitter and often had to be reset causing employers in the stock exchanges to send employees to brokerage offices to reset them.

This problem was solved by the “Universal Stock Ticker” developed by Thomas Edison. The “Universal Stock Ticker” allowed all tickers on a line to be synchronized to print the same information throughout the country. This invention eventually became a subsidiary of Western Union in the early 20th century.

However, it was still difficult for stock tickers to keep up with the increasing volume of trades each day. The trading volumes became so high during the stock market crash of October 1929 that tickers fell behind, contributing to the panic. In December of 1930, the Teletype “Black Box” Stock Ticker was built to be a faster and more reliable machine to keep in pace with the six to eight million shares trading on the exchange. The new high speed tickers were ordered at a cost of $2,500,000 to be rented to brokers in the U.S. By 1934, the New York Quotation Company had switched almost completely to the black box ticker and by the late 1950s, over 20,000 were produced.

Soon, innovations of a rear projection system and later automatic quotation boards, helped brokerages observe stock information more conveniently. Data on the stocks’ previous day closing price, opening price, high for the day, low for the day, and current price were all displayed on a large electronic screen at brokerage offices. By 1964, over 650 brokerage offices were using automatic quotation boards as it also offered data from other exchanges, including the Chicago Mercantile and New Orleans Cotton Exchange.

In 1962, Quotron II was developed by Scantlin Electronics Inc. to allow brokers to type in stock symbols into a desk device that consisted of a magnetic tape storage unit, in which it recorded data from a ticker line to send stock information to the user. This saved brokers time from having to request stock price directly from the firm.

The Quotron II was also more advanced than its previous model, Quotron I and Ultronics as it also recorded trading data in its magnetic core memory. The ability to find the opening price, high and low for the day, and share volume of a stock was also available. Technology further developed around the late 1960s, when the Bunker-Ramo Telequote III allowed subscribers to receive updated information on stock market through a centralized computing system.

Ultimately, in December 1986 the program PC Plus introduced by Standard and Poor’s ran on personal computers to provide information of any stock in price and volume. This rendered the Quotron II and other desk devices obsolete. The computers also provided additional information of individual customers, trading records, brokers, etc.

Now in modern times, new more advanced computer systems like the Bloomberg Terminal, allows financial professionals to monitor and analyze real-time financial market data and place trades through an electronic trading platform. This system earned its creator, Michael Bloomberg, over $11 billion. It allows users to gather and analyze data on countless bonds, equities, commodities, currencies, and mutual funds. This ability to place orders for financial products in almost any location eliminated the need for floor trading and open outcry.

Although the nature of stock trading has changed over the years, evidence and narrative accounts of the old trading days still remain with us.

Julia Yeung is a summer museum intern at the Museum of American Finance and attends Pace University studying Business Economics. Her twitter handle is @YeungJulia.

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