History of Technology Impacts On the Stock Market Prior to World War II

                    In the history of the stock market from the nineteenth century to the Second World  War, there were few technological advances of significant impact to speak of. Those that arose, however, were huge improvements for the time, contributing to the single biggest factors of increased interest and growth in the stock market. Surprisingly, these large advances all took place in the nineteenth century; only a few small improvements were made in the 1920's. It was not until the invention of the computer after World War II, that machinery would have such an impact on Wall Street and the stock market.
                    The first major technological invention came in 1832, when Samuel Morse invented the telegraph. This was a major achievement in communications, culminating in the appearance of the first financial newsletters. By 1856, when Western Union was founded, people from cities and towns outside of Wall Street were able to place orders and buy and sell securities. Interest in stocks did grow during this time, but the telegraph did not create much new business for New York brokers. A person from outside of the city would have to know exactly what he or she wanted to buy or sell prior to making the transaction and the costs associated with using the telegraph often made it more convenient to use an exchange closer to home. Western Union and a few other telegraph companies recognized this problem and began working on a continuous telegraph apparatus, which would print current stock prices.


         In 1866 S.S. Laws invented the first successful quotation device for gold prices. It was a simple machine, which printed the prices on a continuous basis and in less than a year; there were fifty of them around the city. Just one year later, E.A. Calahan, improved the gold quote machine and dubbed it a "ticker." By 1868 he had adapted it to handle stock quotations as well and began to offer it to Manhattan brokerages for $25 a month. When Thomas Edison finally perfected his ticker, he sold it for $40,000. The ticker overcame the single biggest obstacle to the transmission of information, which was the geographical barrier. With this one apparently small minor invention, investors anywhere could finally have up-to-date information for a relatively insignificant cost.

                The next invention was also one of the most important to the stock market, but its full effect would not be felt until almost a half century after its invention. The telephone made its first appearance on Wall Street in 1878 and, just as the ticker relayed price information to other parts of the city and nation, so the telephone could be used to buy and sell securities. This was an invention of huge importance and it did contribute to the growth of interest in the stock market, but it would take the development of a mass market for securities and long distance service for the telephone's effect to reach its total potential. Its initial impact did, however, provide convenience to the brokerage firms on Wall Street and this, at the very least was significant enough for there to be 88,000 telephones in service in the Wall Street district in 1920.

            Aside from these two major inventions, there were really not many contributions to technology in the stock market to speak of during this time. In the 1920's there were two advancements which increased the efficiency of the market, both of which ironically were introduced right around the time of the crash. On February 11, 1929 a central quotation system for reporting bid and asked prices was inaugurated at all NYSE trading posts and on September 2 a new high-speed ticker service was initiated. Clearly these two improvements were helpful ones, but they both really only served to increase the volume of transactions, not necessarily to change or widen the scope of the stock market itself. Major technological improvements, as far as the stock market was concerned, were few and far between during this period, but the significance of those that occurred, and even minor adjustments and innovations, helped to shape and define the stock market. The groundwork that was laid during this early period allowed the stock market to grow and gain serious recognition by the early twentieth century. Without the invention of the telegraph, ticker and telephone, the stock market would have had to have operated on face-to-face transactions and seen little growth, no modernization of any kind and only inferior advancements.

1. Wyckoff, Peter. Wall Street and the Stock Markets, Chilton Book Company, Philadelphia, 1972.
2. Sobel, Robert. Inside Wall Street, W.W. Norton & Company, New York, 1977.
3. Pratt, Sereno. The Work of Wall Street, D. Appleton and Company, New York, 1921.