The flow of information is an important part of any financial system. Whether it be in the agglomeration of important institutions in a single financial center or the communications technology used, the need for information has left its mark on financial services. For centuries, business could only be done as quickly as a courier’s legs or horse allowed. However, steady improvement in communications technology has meant that the amount of time needed to retrieve and send information has been reduced to nearly zero. Interestingly, nearly instant communication has been a part of the financial world for a long time, longer than modern fax machines and Bloomberg terminals have been around. Proof of an old but high-tech approach to transmitting financial information exists in the form of the stock ticker machines of a century ago.

History

           The late 19th century’s stock tickers were an improvement on earlier telegraphic printing machines; in fact, you could say stock tickers were really just a new application of this older technology. These telegraphic printing machines allowed telegraph operators to send messages via a keyboard to recipients who would receive readable text on the other end, rather than Morse code. This technology was not all that different from fax technology, which was surprisingly invented way back in 1843 in Britain. In fact, the first commercial fax service was operated in France by a man named Giovanni Caselli in 1865; fax machines are thus more ancient than telephones.

           Getting back to the stock ticker, the first of these machines is said to have been invented by the American Edward A. Calahan. Though, as with almost every other significant invention, the stock ticker was built on previous innovations by others, in this case, in the areas of telegraphy and printing. Nonetheless, Calahan, who was born in Boston, Massachusetts in 1838, didn’t benefit from much formal education; he left school at 11 and later went to work in the telegraph business at Western Union. That job brought him to New York and it was there that he came up with the idea of the stock ticker machine.

           Because stock tickers received their information by telegraph line, the connection between the two technologies is obvious. However, Calahan observed that securities exchanges still had to make use of hundreds of messenger boys to run information to and from the Western Union telegraph office. This daily rush inspired him to improve the flow of financial information. In time, the stock ticker would become the late 19th century’s Bloomberg terminal.

           While invented in 1867 and patented the following year, Calahan’s ticker machine would not get full credit for the invention. Just one year after he patented his creation, shown above, prolific inventor Thomas Edison created his own version of the machine, which he called the Universal Stock Ticker. Whereas Calahan’s earlier ticker printed out Morse code, Edison’s version converted the code into regular letters and numbers.

           Edison’s improved version of the stock ticker also solved the problem of keeping the hundreds of ticker machines in New York synchronized. Early on, the ticker machines had issues staying in sync. It was one thing if that meant the recipient simply got less timely information, but because of how they worked the result was that someone’s machine running more slowly would start to print out incorrect characters. At first, the issue was dealt with by having the tickers reset by exchange employees dispatched to owners of the machines when they got out of sync. Edison came up with a way to reset them remotely. By sending an electrical signal through the telegraph cables linking them, all machines could be brought into sync simultaneously by use of a part called a screw-thread unison.

How it Worked

            How did this screw-thread unison, and the overall machine, work? The process started when an exchange employee manually typed out the ticker symbols and price information on a sending machine that looked like a keyboard piano. A typewheel with each letter and number on the keyboard was located on the recipient machines as well as the sending machine and both rotated perfectly in sync. When a key was pressed on the operator’s end, an electric signal was sent as soon as the sender’s typewheel rotated over the key just pressed. When the signal got to the recipient machines, it would power an electromagnet that would press the ticker paper against the typewheel. If all had gone as it should, the typewheels would have been perfectly in sync so that the letter typed was the exact one the operator pressed; hence why it was important that the typewheels stay in sync.

           The typewheels critical to the machine can be seen on the Western Union 3-A model above; the black typewheels are in the middle of the device, just below where the spool of tape sits. Note that there are actually two wheels, one for letters and one for numbers with the letters typing above the numbers on the tape. This approach reduced the number of characters needing to fit on either wheel and allowed for faster operation and clearer typing. 

           As for Edison’s screw-thread unison, it improved the machines’ reliability. With Edison’s version of the ticker, instead of having the machines manually reset, they could be synchronized remotely. The unison worked by having a peg stick out of the shaft that turned the typewheel. When the machines needed to be remotely reset, the operator would send electric signals that would turn each recipient machine’s typewheel shaft until the peg hit a stop. The screw-thread unison on the Edison-style Western Union ticker above can be seen to the left of the black typewheels above. Below is a more detailed diagram of this component that helped make the machines commercially viable and ubiquitous.

Legacy

           Thomas Edison’s improvements to the stock ticker did not end with the screw thread unison and further improvements would be made by others. Dozens of patents related to stock ticker machines would be issued for decades to come. In fact, the last new stock ticker model was introduced in the 1960s and was able to print 900 characters per minute. However, it was not much later when new technology came on the scene to replace the old mechanical stock tickers. In the 1970s, electronic displays and computers began to replace ticker tape.

           Even the mid-20th century’s ticker tape parades in New York began to see less and less actually ticker tape used as confetti. Whereas the ticker tape parade for presidential candidate Richard Nixon in 1960 saw spools of ticker tape thrown from offices on Broadway, later parades celebrating the return of Apollo 11 astronauts saw a drought of ticker tape as the machines that used them became obsolete. Nonetheless, the stock ticker machine saw a long life and was a feature of stock trading for about a century after its invention.

Lesson

            This is a tough one. It is hard to claim that the stock ticker, for all its importance in the past, has much relevance today. Knowing how it worked and how the machines evolved over time is not the most rewarding knowledge. Still, there is probably some overlap between people interested, at least at some casual level, in financial engineering and those interested in mechanical engineering. The stock ticker was a piece of engineering that was ubiquitous in the offices of financial firms for decades and it makes perfect sense why. Once your competitors had the ability to act on up-to-the-minute quotes, no one could do without the machines. Perhaps, the most enduring legacy of the machine is as one of the first in a long line of technologies that met the need for real-time information and data in a modern financial center. 

More from the Tontine Coffee-House

While on the Tontine Coffee-House, read about how another piece of technology, the undersea telegraph cable, changed finance. Also, learn how the internet transformed the brokerage business.

Further Reading

1.     “Edward A. Calahan.” Invent.org, National Inventors Hall of Fame.

2.     The IEEE History Center Staff. “A History of Wall Street’s Stock Tickers.” The Institute , Institute of Electrical and Electronics Engineers, 7 Oct. 2017.

3.     Kerr, Douglas A. “Western Union 3-A.” Smecc.org, Southwest Museum of Engineering, Communications and Computation.

4.     Silber, Kenneth. “The Ticker’s Rise and Fall.” ThinkAdvisor, 1 Feb. 2008.

5.     “Stock Ticker.” The Edison Papers, Rutgers University, 28 Oct. 2016.

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