Trading “The Old Fashioned Way”
People have bought and sold business ownership since the year dot, and done so on public stock exchanges since 1653. The Amsterdam Stock Exchange was the very first, founded by the legendary Dutch East India Company.
A megacorp with a legal monopoly on voyaging traded goods, it started the exchange to raise money, like businesses list for today. Following the world’s first initial public offering (IPO), shares soared 1,200%. The company would be worth $7 trillion in today’s money, somehow delivering an astounding 15% dividend for 48 years.
The technology in financial markets back then made investing a very different game. Let’s take a trip down memory lane, back in time through the twentieth century to see how the market’s plumbing has changed!
Before buying a stock in 1915, you first needed to know what it was selling for. Thomas Edison took care of that!
He patented a mechanical ticker-tape machine positioned at the back of New York’s bustling stock exchange (known as the ‘Curb Exchange’ at the time). It fed out a long strip of stock quotations, each giving an insight into sentiment and trading patterns.
Featured was the fractional change to the previous day’s closing price, the trading volume, the day’s highs, and the day’s lows, not dissimilar to the information you see today running along the bottom of CNBC and Bloomberg channels today. “Don’t fight the tape!” was a common phrase, meaning don’t fight the market’s dominant moves!
It would’ve been up to a “pad shover” to run with the ticker tapes from the trading floor to the brokers’ offices around Wall Street. They would hang out of windows and take orders via hand signals from traders on the curb (hence, ‘Curb exchange’).
The tick-tick era stretched one hundred years, from 1867 to the late 1960s, and it paved the way for Teleregisters!
Teleregisters were steampunk Bloomberg terminals. They looked like math calculators. You simply dial in a stock and the quotes instantly pop up on display, along with the bid and ask prices. Teleregisters were a hot business to be in back in the thirties and forties, many successful investors buying them for their own homes, and stock exchanges hooking them up to big boards.
In the seventies, however, digital displays changed everything. Starting with Bunker Ramo’s video terminal (now pointlessly owned by Honeywell), bank managers, tellers, investors, and traders could see more just than one stock quotation on a screen at once.
Bunker Ramo machines haven’t aged gracefully. The company lost its footing to another player named Quotron in the 80s. Ring a bell?
Quotron machines were the crème-da-la-crème of stock market wizardry, and are the ancestors of today’s electronic trading dashboards. They used alphabetic keyboards, not QWERTY keyboards, and gave traders complete freedom to compare endless stock prices in real-time.
Re-watch Oliver Stone’s ‘Wall Street’ with Charlie Sheen and keep your eyes open for these whirring desk units, boxy and bulky. They’re familiar staples of the eighties, and the Quotron company kept full control over its quoting data software by only building it into Quotron hardware (just like how iOS is available only on Apple devices today). Apparently, a small van rode around Manhattan delivering hardware to hopeful new upstart trading offices during the bull market!
Eventually, further technology advances leapfrogged the Quotron company. It went cash flow negative in the early nineties and was bought for £1 by Reuters Holdings. Over one-hundred million in debt made the flailing business less than worthless. Reuters used the machines before developing its own, the Reuters 3000 Xtra, and now it shares the market with Bloomberg Terminals, widely considered to be the new best thing. RIP Quotrons.
Opening and Closing Bells
New magic regularly supersedes incumbent kit, that much is clear. However, some market artefacts are less frequently replaced, such as the signals that sound every start and end of each trading session, at 9:30 a.m., and 4:00 p.m.
In the late 1800s, exchange staff used a gavel. However, no one could hear it over the raucous atmosphere, so the hammer was swapped for the loudest gong investors could find. Then, as investing became an upper-class pride around 1903, they decided to change it again.
This time, the bell we hear today was introduced. There are four located in each of the New York Stock Exchange’s physical sections, one on a grand balcony at the front of the trading floor. To stand behind that bell as your company goes through its initial public offering is said to be a great honour. You made it! You cashed out! Hundreds of famous faces have been pictured on that podium enjoying their moment.
In sum, no emerging technology can improve human emotions. We’ll always have irrationality in the markets as investors try to predict the future, big ups and downs that spell opportunity for the well-tuned in.
However, it’s been a long road to the rapidly computerized markets of today, and although they’ve occasionally caused the odd flash crash and glitch, they have generally done a lot to democratize finance. What technology in markets do you think is the best, the most dangerous, and the most easily disrupted from here?