Given that the stock market can shift rapidly on a moment-to-moment basis, advanced prop firm technology on both the hardware and software end is required to execute effective trading strategies that make the most of your own capital.
As technology has progressed, increasingly sophisticated and complex strategies, options, and processes have become available, giving innovative and brave traders the chance at a favoured fortune.
However, despite so many advances and a tremendous evolution in financial markets away from the open pits towards electronic platforms and the ability for traders to operate almost all of the time through various markets, there are still echoes of the distant past in the market.
One of the first-ever pieces of trading technology, made in the mid-19th century, still has an outsized influence on how we perceive and interact with market information.
The Tick of The Tape
Many people feel that the world is moving faster now than it ever has before, and whilst this is literally true, it is also particularly potently felt in the financial markets.
Whilst in the past trades would often operate on a timescale of days if not weeks, modern trading takes place in real-time, with automated systems able to perform precise purchases on a moment-to-moment basis.
Whilst it is rarely helpful for most traders operating their strategy, prices will constantly rise and fall incrementally on a second-by-second basis, which is why it is important to focus on overall trends rather than individual prices.
The first step towards real-time trading, however, started with the development of the stock ticker, which was initially a literal ticker-tape printing telegraph.
Whilst telegraphy has existed since the semaphore flag, the telegram, as we know it today, started to be developed in the 1830s by figures such as Samuel Morse, Sir Charles Wheatstone and Sir William Fothergill Cooke.
Interestingly, the printing telegraph, the central technology behind what would become the stock ticker, slightly predates the form of Morse code we use today.
However, it was far from suitable for commercial use, particularly where precision and speed were necessary such as on the stock market.
Early printing telegraphs were handmade, making them rare and expensive, were fragile whilst also requiring the use of a hand crank to power them, and often lost synchronisation between the sender and receiver, meaning that there was no way of knowing if a message had been sent across great distances.
Still, the potential for the technology was far greater than delivering prices by hand, or the use of pneumatic tubes that would find a very limited place in the London Stock Exchange.
The hand crank was removed in 1856 when David Hughes replaced it with clockwork counterweights, and George Phelps accidentally discovered a way to maintain the synchronisation between transmitter and receiver and resynchronise both after each character was completed.
These telegraph systems were first put into use on the stock market by Edward Calachan in 1863, before it was finally implemented in 1867, allowing for stock prices to finally be communicated outside of the pit itself using telegraph wiring in New York City.
Ever the opportunist, Thomas Edison would take the existing technology, adapt it for widespread commercial use and create the Universal Stock Ticker in 1869, capable of transmitting a character a second and could be synchronised to multiple units.
This was the first invention Mr Edison sold that was a significant success, and the legend of The Wizard of Menlo Park essentially would not exist without revolutionising how we read stock information.
The ‘Universal’, as it came to be known, was also critical to the establishment of the New York Stock Exchange (NYSE) in a way that curiously echoes the revolution of the NASDAQ a century later.
By allowing brokers to get prices transmitted directly and potentially worldwide providing there was suitable telegraph infrastructure, the NYSE became a worldwide stock exchange.
In 1890, the New York Quotation Co. was established by buying out every other ticker company and created a universal authority on volume activity and price recording.
It allowed for near real-time trading, something believed to be impossible before then, and because of this, the progression of the stock ticker is still used even if literal ticker tape printing is not.
The reason why every company on a financial market has a four-letter symbol is because of the need for abbreviation and speed when dictating stock prices, and even though it does not matter with much faster processing speeds using computers, the convention has remained ever since.
