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Stock Market Data Systems
Introduction
In the Stock Market Securities are traded on Stock Exchanges. For the market to work, it is necessary that information about Securities and about stock trades be communicated from the exchanges to Stock Brokers and Stock Traders.
Contents
1. History
2. Chalk Boards
3. Ticker tape
4. Automatic quotation boards
5. Stock Market quotation systems
1. History
The earliest stock exchanges were in France in the 12th century and in Bruges and Italy in the 13th. Presumably data about trades in those times was printed in newspapers or special pamphlets, or sent by word of mouth and by horseback. In the early 1800’s carrier pigeons were used by Reuters to send trading information between Germany and Belgium 1 In London early exchanges were located near coffee houses 2 which must have played a part in trading.
2. Chalk boards
In the late 1860’s in New York young men called “runners” carried prices between the exchange and broker’s offices, and often these prices were posted by hand on large blackboards in the offices. 4
The New York Stock Exchange is known as the “Big Board”, perhaps because of these large chalk boards. Until recently, in some countries chalkboards were still used in broker offices to display prices. The Morse code was used in Chicago until 1967 for traders to send data to clerks called ‘board markers‘, who posted prices in chalk on large blackboards. 3
3. Ticker tape 4
In 1863 Mr. Edward A. Calahan of the American Telegraph company invented a stock telegraph printing instrument which allowed data on stocks, bonds, and commodities to be sent directly from the exchanges to broker offices around the country. It printed the data on ¾ inch wide paper tape which then accumulated during the day. He soon had orders for 100 of these gadgets. The sound of printing earned it the name of a “stock ticker”. Other inventors improved on this device, and ultimately Thomas Edison patented a “universal stock ticker” of which over 5000 were sold in the late 1800‘s.
In the early 1900’s Western Union acquired rights to an improved ticker which could deal with the increasing volume of stocks sold per day.
At the time of the stock market crash in October, 1929, the tickers could not keep up with the number of trades, and that fact contributed to the panic. Clearly a faster ticker was needed, and in the 1930’s the New York Quotation Stock Ticker became widely used. A further improvement was in place in 1960.
In 1923 the Trans Lux Corporation delivered a rear projection system which projected the moving ticker on a screen where all in a broker’s office could see it. These systems were widely used, and Trans Lux improved them in the 1960’s and again in the 1980‘s 5.
4. Automatic quotation boards
A quotation board is a large vertical display located in a broker’s office, which automatically gives current data on a number of stocks. The stock displayed are chosen by the local broker. In 1929 the Teleregister Corporation installed the first such display, and by 1964 over 650 brokerage offices had them installed.
The information shown included previous day’s closing price, opening, high for the day, low for the day, and current prices. Teleregister offered data from the New York, American, Midwest, Chicago Mercantile, Commodity, New York Cocoa, New York coffee and sugar, New York Mercantile, New York Produce, New York Cotton, and New Orleans Cotton exchanges, along with the Chicago Board of Trade. 6
In some firms there were departments in which a battery of telephone operators seated in front of a Teleregister board supplied commission houses with price and volume data. In 1962 two such departments handled over 39,000 calls per day. 7
In 1955 Scantlin Electronics, Inc., (see below) introduced a competitive system very similar in appearance but based on a different technology. The Scantlin display had digits twice the size of Teleregister’s, though it occupied the same board area. It was less expensive than the Teleregister system, and soon was installed in many broker offices.
Today such systems are no longer in use, being supplanted by stock market quotation systems.
5. Stock Market quotation systems
In the late 1950’s brokers had become accustomed to several problems doing business with their customers. If an investor wanted to make a trade, he had to know what he would have to pay for the stock he was buying or selling. He called his broker and asked for the current price. If the broker had a quotation board, and if the stock was one of those displayed on that board, the customer got a quick reply. The last trade had been printed on the broker’s ticker tape, and if the stock wasn’t on the board, or if the broker had no board, he could try manually running that tape back, looking for a trade. But that was impractical, so in fact he telegraphed a request for the price to the “wire room” in his Headquarters office in New York. There, several such requests would be collected and forwarded to the floor of the appropriate exchange, where messengers could copy down prices at the locations where those stocks were traded, and phone answers back to the wire room. Typically it would be between 15 and 30 minutes before the broker had the information, and could call his customer.
Recognizing this problem, Jack Scantlin of Scantlin Electronics, Inc. (SEI) found a way to solve it. SEI developed the Quotron system, consisting of a magnetic tape storage unit which could be located in a broker’s back room, and Desk Units each having a keyboard and printer. The storage unit simply recorded the data on the ticker line already in the office. Several desk units could be located around the office. When a customer asked for the latest price on a stock, the broker entered the stock symbol on his desk unit. This caused a backward search on the magnetic tape (which continued recording incoming ticker data). When a transaction for that symbol was located on the tape, the price was sent to the desk unit, which printed it on a tape.
The first Quotron units were delivered in 1960, and were an immediate success. By the end of 1961 brokers were leasing Quotrons in some 800 offices, serving some 2500 desk units all over the United States.
Quotron’s success attracted the attention of Robert S. Sinn, who observed its disadvantages: it could only give a last price; the opening price, high and low for the day, and volume of shares sold were not available. He determined to build an improved system in which a digital computer would read ticker data, keep records of the open, high, low and last price, and update the volume of shares sold on a magnetic drum storage unit, for each stock. This data would then be transmitted to other magnetic drums in the major cities around the United States. And these local drums could send data to nearby brokers who would access it through desk units.
Sinn formed Ultronic Systems Corp. in January of 1961. By the Fall of that year Ultronics installed the first units in New York and Philadelphia, followed by San Francisco and Los Angeles. Ultimately Ultronics and General Telephone (which bought Ultronics in 1967) installed 10,000 units world-wide.
Scantlin Electronics reacted immediately to the Ultronic threat. In early 1962 they began design of their own computer-based system, and it went into service in December of that year. There were four Control Data 160A computers in New York which ‘read’ the ticker data and kept opening, last, high, and low prices along with volume information in the computer magnetic core memory. In major cities there was Central Office equipment connected to local brokers. The brokers had newly-designed Quotron desk units on which they entered requests for last price and net change from the opening, or a summary which included high, low, and volume (later SEI added other features like dividends and earnings). The requests were sent to the local Central Offices, which condensed them and forwarded them to the New York computer. A reply was sent at once.
In 1963 the new system was accepted by many brokers, and was installed in hundreds of their offices.
In 1964 the Teleregister Corp. introduced the Am-Quote system 8 with which a broker could use his own telephone to provide stock data for a customer. He simply enters the code numbers of the stock he needs information on; a second later he hears a pleasant (prerecorded) voice which repeats the code numbers and then gives the required price information. This system, like Ultronics’, made use of magnetic drums.
Ultimately all of these specialized systems were replaced by market programs which ran on personal computers. “Desk units” were no longer required, and the personal computer could provide other information like data on individual customers, summaries of total business in the office, broker address books, and so on.
See Also
Stock Market
Stock Trader
Stock Exchange
Electronic Trading
Securities
Stock Brokers
Ticker Tape
References
1. (http://www.wysinfo.com/Pigeons/History_of_pigeons_doves.htm).
2.
3. http://www.heartland.org/publications/looptour/LoopTour.pdf
4. http://www.stocktickercompany.com/stc/history/index.php
5. http://www.trans-lux.com/corp_overview_history.htm
6. http://archive.computerhistory.org/resources/text/Teleregister/Teleregister.SpecialPurposeSystems.1956.102646324.pdf
7. Report of Special Study of Securities Markets, 1963
8. http://www.time.com/time/magazine/article/0,9171,871115,00.html
Further reading
Phister, Montgomery, Quotron II: An Early Multiprogrammed Multiprocessor for the Communication of Stock Market Data, Annals of the History of Computing (1989) 11:109-126
Sinn, Robert S., Reminiscences of a Stock Quotation System: The Real Story of Ultronic Systems Corporation, (Feb. 2009) http://www.inductive.com/Ultronic_Systems.pdf
External Links
Understanding the ticker tape: http://www.investopedia.com/articles/01/070401.asp
Stock Ticker History: http://www.stocktickercompany.com/stc/history/index.php