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THE STOCK TICKER



As recalled in August 1917 by Horace L. Hotchkiss, former Secretary and Treasurer of the Gold and Stock Telegraph Company

Electricity for the service of man was not only first utilized in the nineteenth century, but through the various discoveries and mechanisms of Morse, Wheatstone, Edison, Bell, Humstone, Farmer, Calahan, Tesla, Prescott and other famous inventors was made practical and profitable in both commercial and domestic life. In 1867 E. A. Calahan, who had been associated with the American Telegraph Company for many years as a telegraph operator and manager of its electric batteries, conceived the idea of the stock telegraph printing instrument. Mr. Calahan had noticed the congestion of business around the halls of the Stock Exchange, which was largely caused by the brokers and their clerks struggling to secure the latest quotations made on the floor. These were recorded on suitable pads and then carried by hand to the various Wall Street offices. Active brokers and their messengers were at that time often called “pad shovers” in the humorous slang of the day. It occurred to Mr. Calahan that an instrument might be constructed which would record automatically the names of securities and the figures representing quotations or selling prices. The necessity of such an invention was questioned by many of the most experienced bankers and brokers of that period, some of them declaring that they and their customers preferred to have quotations brought to their offices by the “pad shovers,” as it gave them an opportunity to send back orders to be executed on the Exchange through this medium of communication.

Calahan Stock Ticker 1867

Mr. Calahan spent several months in perfecting the printing or recording instrument, and succeeded in arranging a transmitter which could operate many instruments from one central office. He had these details completed in the summer of 1867 and a corporation under the general laws of the State of New York, called the “Gold and Stock Telegraph Company,” with a capital of $200,000, was organized on September 19, I867. Messrs. Elisha W. Andrews, William Muir, George B. Field and Horace L. Hotchkiss assisted in its organization and early development. Later, Mr. George B. Field was elected president and the writer of this article secretary and treasurer.

Mr. Robert H. Gallagher, who had charge of the night exchange uptown (which was used by operators during the exciting times of the Civil War), had a large acquaintance with Wall Street brokers and was engaged to secure patrons or subscribers who would contract to pay $6 per week for the quotations. His efforts, in conjunction with those officers of the company, resulted in agreements with a number of the prominent brokers of the Street. The governors of the Stock Exchange granted permission for employees of the company to go on the floor of the Exchange and report the market prices by this new system. In December, I867, between Christmas and New Year’s Day, the first stock quotation instrument was placed in the office of David Groesbeck and Company, where the veteran operator Daniel Drew made his headquarters. The next day an instrument was placed in the office of Work, Davis and Barton, and on the third and fourth days instruments were placed in the offices of Greenleaf, Norris and Company and Lockwood and Company, respectively. These four instruments were delivered in the order of subscription. Before they had been in operation many days the company had on its list of subscribers about one hundred of the prominent bankers and members of the Exchange. When the first instrument began work in the office of David Groesbeck and Company it naturally created a sensation as the quotations made their appearance on the tape. The crowd around it was at least six deep, and the person nearest the instrument called out the prices to the wondering assembly. At that time Mr. William Heath was an active broker; he was tall, thin and exceedingly energetic. It was his custom to run from office to office, supplied with the latest quotations obtainable from the floor of the Exchange. He was generally known as the “American Deer,” and now was surprised to find in Groesbeck’s office a crowd watching the “ticker.” He created much amusement when offering his quotations, and was told he was “too late—we have them all on the tape.” It was some months, however, before he thoroughly realized that the machine could outstrip the “American Deer” in the race of quotations, but eventually he had to surrender, and filed his order for one of the company’s instruments.

The operation of the earliest stock quotation instruments required the closest attention of Mr. Calahan and his assistants. A source of annoyance to the brokers was the liability of the instruments to get out of “unison” and thus make a jumble of unintelligible letters or figures on the tape. To adjust the instrument back to “unison” required the visit of one of the employees of the company to the office where it was out of order, and, as calls for such service were at that time quite frequent, it often became necessary for the treasurer, superintendent, and even the office boys to respond to them. Later in the history of this enterprise Mr. Henry Van Hoevenberg invented an automatic “unison” adjustment which was attached to the Calahan instrument and corrected this difficulty.

As it was at that time claimed that the stock instruments of the Gold and Stock Telegraph Company would revolutionize the old system of reporting prices, they were naturally placed under the most severe tests of adverse criticisms, not only as to their capacity for responding to the mechanical requirements in producing an accurate and immediate report of the fluctuations of stocks, but also questioning the desirability of such an innovation on the old style of making known the market.

Another difficulty which caused much annoyance to the management of the company, and also the bankers and brokers in their offices at the time of the introduction of this system, was the necessity for a local battery in each office where the instrument was placed. This battery consisted of four glass jars, then known as the carbon battery, supplied with a liquid consisting of proper proportions of sulphuric acid and other chemicals in connection with zinc and carbon. This acid had to be renewed twice a week in the early morning before the commencement of business, and it was carried around in pails to the subscribers’ offices. At times serious as well as amusing accidents occurred during the performance of this duty—carpets were spoiled, furniture injured, clothing damaged—and, in fact, at one time it looked as if the sulphurous influences of that "infernal battery” would discourage the use of the instruments. Fortunately, before the whole system was abandoned, Mr. Calahan proved equal to the crisis, and arranged a plan for operating the instruments by means of a large system of batteries placed in a building equipped for that purpose, and thereafter the local battery in the bankers’ and brokers’ offices was eliminated from the problem. The “gold indicator,” which had been inaugurated in the Gold Exchange by S. S. Laws, proved to be of great value, and had anticipated the advent of the stock ticker by several months. Mr. Laws was the vice-president and presiding officer of the Gold Exchange and displayed considerable mechanical ability when he arranged a double-faced gold indicator, one face of which was visible in New Street outside of the Gold Exchange, while the other looked inside and was visible to members on the floor. At that period the premium on gold fluctuated rapidly and highly excited crowds often stood in the street watching this indicator and the varying changes of the market. It was quite the custom to regulate the day's prices of many staple articles of commerce by the opening price of gold at the Gold Exchange. Early each morning merchants assembled on the street to watch for the first figures of the gold indicator and then hastened to their places of business to mark a corresponding value on their merchandise. This condition of affairs on New Street and the multitude of messengers that were kept running to and from the Gold Exchange suggested to Mr. Laws the plan for establishing a system of gold indicators, to be operated by an electric current from the Exchange and set up in the various offices connected therewith, so that every fluctuation of the market could be reported to all subscribers simultaneously.

Laws Gold Indicator

In August, 1869, the Gold and Stock Telegraph Company purchased from S. S. Laws his patents, inventions, good will and all his interests in the gold indicator for $25,000 in cash and $75,000 of the capital stock of the Gold and Stock Telegraph Company. They also agreed to pay to Mr. Laws $10,000 per annum during the continuance of the premium on gold, and this royalty in fact was paid until January I, 1879.

At the time of the organization of the Gold and Stock Telegraph Company there were not less than six additional general telegraph companies competing for the business of the bankers and brokers. Nearly every housetop in and about Wall Street was cobwebbed with bare and uninsulated wires. Mr. Calahan felt that it would be impossible to expose his ticker system to the danger of contact with any of these wires and therefore decided that thoroughly insulated wires should be used on the lines of the company. The difference in the cost of construction between perfectly insulated wires and the uninsulated was in the ratio of 40 to 1. The wisdom of his decision was soon proved, as the wires of the company were not disturbed. At that time the only insulated wire that could be secured for the construction of the company’s lines was A. G. Day’s “Kerite” wire. As it was then a new invention, and the facilities for producing it were very limited, the cost to the company in those early days was equal to eight cents per foot. This same wire at the present time is produced in vast quantities at a small fraction of a cent per foot and of the same standard of reliability.

Before the end of the first year’s operations of the company there was a general demand for the stock ticker by members of the Stock Exchange and others interested in the stock market. Requiring additional funds for constructing the lines of the company and placing instruments in service, they found it necessary to increase their capital from $200,000 to $500,000. This was accomplished on May 7, 1868. On September 4, 1869, the capital of the company was increased to $1,000,000, a portion of the increase being needed to purchase the gold indicator system and patents of S. S. Laws.

At the annual meeting of the company on September 7, 1869, the following gentlemen were elected directors: George B. Field, Joseph M. Cook, Tracy R. Edson, D. J. Garth, S. S. Laws, A. F. Roberts and W. B. Clerke.

The growth of the business continued with giant strides and the company soon found other fields of operation. Both the Produce Exchange and the Cotton Exchange adopted the new system of reporting their markets and the financial interests in and about Wall Street became patrons of the "General News Bureau,” which was established by the company for reporting over its wires the news of the day and the gossip of the Street appertaining to financial affairs.

In March, 1870, General Marshall Lefferts was elected a director and president of the company, and on October 11, 1870, the capital stock of the company was further increased to $1,250,000. With this additional capital it secured the Page patents and other valuable inventions. As the business of the company in 1871 grew to be very profitable, and as opportunity was constantly presented for the extension of its service to other cities, negotiations were entered into with the Western Union Telegraph Company, and a contract followed by which it was agreed that the capital stock of the Gold and Stock Telegraph Company should be augmented to $2,500,000, the increase, $1,250,000, to be issued to the Western Union Telegraph Company for its Commercial News Department. This was duly accomplished, and at the annual meeting of the company held in September, 1871, the Western Union Telegraph Company came into practical control of the Gold and Stock Telegraph Company, through the election of the following board of directors: James H. Banker. Horace F. Clark, William Astor, Tracy R. Edson. Marshall Lefferts, Alonzo B. Cornell and Joseph M. Cook.

At this election the general superintendent, Mr. Calahan, resigned for the purpose of inaugurating the system in London. The writer of this article also resigned his office of treasurer, and Western Union officials were elected to fill the vacancies.

The origin and subsequent history of the Commercial News Department of the Western Union Telegraph Company and the Gold and Stock Telegraph Company illustrate how a small beginning is often followed by a phenomenal growth.

Before the days of the Atlantic Cable, Mr. D. H. Craig, of Boston, conceived the idea of training pigeons to act as messengers for the European news brought by foreign steamers arriving at Halifax. He would take with him a half dozen of his pigeons, board the incoming steamer, and take passage thereon for Boston. Once on board the steamer, he would secure copies of the latest dates of the European papers and from their pages prepare a careful digest of the significant political and commercial news, written upon fine manifolded tissue papers. At the proper moment the pigeons were despatched from the steamer on their homeward journey and with fleet wings soon reached their destination, with the valuable reports, which were quickly transcribed and distributed to Mr. Craig’s subscribers in Boston and by telegraph to other cities. While this system seems crude and unsatisfactory in comparison with modern methods now in use, yet at that time the fortunate subscribers to Craig’s “bird mail" were often rewarded in their market operations by the possession of early information.

The alliance with the Western Union Telegraph Company proved satisfactory and the dividends on the enlarged capital were continued, and were justified by the increased earnings of the new business established in this and other cities throughout the country. The Stock Exchange, during the six years referred to, had granted to the Gold and Stock Telegraph Company, without cost, every facility for inaugurating and developing a business which then had grown to be so profitable.

Early in 1873 a formidable competitor, the Manhattan Quotation Telegraph Company, appeared in the field and offered to pay not only fixed annual rent to the Stock Exchange for the privileges enjoyed by the Gold and Stock Telegraph Company, but in addition a weekly royalty on each ticker in use. The rivalry resulted in the immediate reduction of the charge by the Gold and Stock Telegraph Company for the use of tickers from $6 per week to $10 per month. In this way a serious warfare commenced between the rival concerns which proved very interesting to the Stock Exchange by establishing the commercial value of the ownership and control of the quotations made on the floor of the Exchange.

The Manhattan Quotation Company’s instrument was the invention of Mr. J. E. Smith. Its principal features were that the name of the stock and the quotation following were printed on the tape in a single line from a single typewheel, and that it was provided with a unison device. While this instrument was accurate and rapid in its work, its method of printing in a straight line did not give entire satisfaction to subscribers; nevertheless, it was thought to be a part of wisdom to absorb this company, and within a few months thereafter an arrangement for an exchange of stock was completed and a majority interest in the Manhattan Quotation Company’s capital stock was turned over to the treasury of the Gold and Stock Telegraph Company and the competition was over. During this period of growth the Gold and Stock Telegraph Company secured many other valuable inventions, not only for protection in the future but also for the purpose of improving the system then operated. At this time the charge for use of tickers was restored to $25 per month. Such inventors as Van Hoevenberg, Gray, Phelps, Scott, Kenny, Chester, Pearson, Wessmann, Knudsen, besides those previously mentioned in this article, contributed valuable devices and improvements in perfecting the lines, batteries, instruments and systems operated by the Gold and Stock Telegraph Company.

In developing the systems of the company, one of which was known as the “Financial News Bureau,” the Gold and Stock Telegraph Company secured the cooperation of Mr. John J. Kiernan, who had been furnishing the Street with reports of the foreign markets and other news by means of "tissues” which were distributed by hand from his offices to the bankers and brokers who were subscribers to this news. After securing Mr. Kiernan’s services the company inaugurated a system of wires and instruments for this purpose. He proved to be an interesting personality and was quite popular in the Street, but his friends insisted upon his entering politics. After serving as an alderman in Brooklyn, he was elected state senator and sent to Albany. But he soon found that politics would require most of his time, and gradually withdrew from the active management of the news department.

The next competitor to appear in the field as a rival to the Gold and Stock Telegraph Company was the Commercial Telegram Company, which controlled a printing instrument, the invention of Mr. Stephen D. Field. This company ignored all patents and other rights, and claimed all privileges on the ground that its instrument was superior to all others. The Stock Exchange granted to the Commercial Telegram Company equal facilities, and the competition for business resulted in again lowering the monthly charge for tickers from $25 to $10. As the competition between the Gold and Stock Telegraph Company and the Commercial Telegram Company became more active, the Stock Exchange assumed a greater authority over the quotations made on the floor of the Exchange. In assuming this control on October 1, 1885, it employed reporters, who gathered the prices and turned these quotations over to the two companies. As a result the question of how these prices were to be sent out, and to whom as subscribers they were to be sent, reverted back to the Stock Exchange, and any applications for instruments either company was required to obtain the approval of the proper officer of the board. This prevented the bucket shops from obtaining the quotations directly from the instruments. The business continued to grow, and the rivalry between the two companies increased until the year 1890, when the Exchange secured a majority interest in the Commercial Telegram Company, which was reorganized as the New York Quotation Company, and at the same time an arrangement was made with the Gold and Stock Telegraph Company by which the latter company should practically discontinue its services to members of the Stock Exchange below Canal Street, and the rate of service should be restored to $25 per month.

In 1873 the Gold and Stock Telegraph Company paid into the treasury of the New York Stock Exchange, as its portion of rent and royalty, $4,705. In 1874 the company paid to the Stock Exchange $15,731 as rent and royalty on instruments in service. Between July, 1875, and August, 1877, it paid to the Stock Exchange $50,857.16; between August, 1877, and September, 1885, for like privileges, the company paid $144,000; between September, 1885, and July, 1889, it paid $94,162.93. Between July, 1889, and January, 1892, owing to protracted negotiations with the Stock Exchange for a new contract the Gold and Stock Telegraph Company made no payments to the Stock Exchange, but from January, 1892, until January 1, 1893, the rate was $100 per day and was paid to the Exchange. From January 1, 1893, to May 1, 1902, the Gold and Stock Telegraph Company paid an annual rental of $27,000, amounting to $252,000. On May 1, 1902, the Stock Exchange increased the rental to $100,000 per annum, which sum is now paid by the Gold and Stock Telegraph Company.

The original introduction of Mr. Calahan’s invention seemed most appropriately timed to meet the requirements of the Stock Exchange and other exchanges in the distribution of the quotations of the various markets by telegraphic printing instruments. Even the London Stock Exchange adopted the Calahan instrument in 1872. The Exchange Telegraph Company of London was organized, and Mr. Calahan was sent to London for the purpose of introducing the stock quotation system there. The writer of this article is a director of that company and for over twenty-five years has forwarded by cable to the Exchange Telegraph Company of London the opening prices made on the floor of the New York Stock Exchange and other news of financial interest.

The development of the Gold and Stock Telegraph Company has greatly depended upon the ability and character of its working force. One of its most valued employees was Timothy J. Sullivan, who operated by hand the transmitter during several years preceding the introduction of the present automatic mechanism. Another faithful adherent, Mr. Samuel M. Taylor, became the financial officer of the company in 1876 and now occupies the position of its auditor.

In referring to the financial growth of the Gold and Stock Telegraph Company it should be mentioned that its capital was increased in March, 1881, to $5,000,000, and soon after this was accomplished the Western Union Telegraph Company assumed a lease of the system of lines, instruments and property of the Gold and Stock Telegraph Company, guaranteeing six percent per annum on the capital stock. The control of the New York Quotation Company by the New York Stock Exchange, through an ownership of a majority of the capital stock of that company, has proved profitable and satisfactory to the members of the Exchange who are the patrons of the company. The wisdom displayed when the Stock Exchange, in 1890, secured a majority of the capital stock of the Commercial Telegram Company, though for some years not fully appreciated, has thus at last been demonstrated, since only through such ownership was it possible to organize the present New York Quotation Company, which corporation has placed the Stock Exchange in a position impregnable for control of the methods of collecting and distributing the quotations made on the floor of the Exchange. To the committee in charge of this matter much credit is due, but, above all, it is to the devoted services of Mr. R. H. Thomas, who is the president of the New York Quotation Company, that the Stock Exchange owes a debt of gratitude for the successful solution which brought results so fruitful out of a difficult problem. When one considers the vast network of telegraph wires reaching out to every city, town, village and hamlet throughout the continent, it would seem almost impossible to estimate how far the capacity for the distribution of the quotations can be extended. The Western Union Telegraph Company, with its trunk lines pulsating each day between 10 a. m. and 3 p. m. with a constant stream of market quotations, and by means of “relay and sounder” in every office where these trunk lines pass, and of the branch lines running in every direction to all places and to all people, even to those outside of their twenty-three thousand offices, can drop off duplicate copies of these prices or quotations from all important exchanges.

The growth of this business is of great moment to the Stock Exchange, for it is through the instant dissemination of the quotations made on its floor that the active and continuous interest in the markets is sustained.

Horace L. Hotchkiss, 1917 (August), The Stock Ticker, Telegraph and Telephone Age, Volume 35, Number 15, Pages 344-345 (Part I) & Number 16, Pages 369-370 (Part II)

 

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