Friday, Mar. 17, 1961

Computers to the Rescue

Not since the tumultuous days of the late '20s and early '30s has the New York Stock Exchange been so busy. Since the first of the year, as institutions and smaller investors swarmed back to the market, the volume of shares traded has on 17 trading days exceeded 5,000,000 shares (v. only one 5,000,000-share day in 1960 ).

One day last week volume vaulted over the 6,000,000 mark--an event that has happened only three times before in the past 27 years.* Though the Dow-Jones industrial average ended the week at 663.56.

off 8.01, there was no sign of a letup in activity--and each share traded meant commissions for somebody.

To cope with a daily volume of trading that the Exchange had not expected until 1965, the Exchange has hired 75 new floor employees. Even so, the trading tape--the Exchange's vital link with the outside business world--has lagged behind transactions every day this year except two. making it difficult for brokers off the floor to keep track of prices or to know which stocks are most active.

Needed: Faster Tape. The current stock ticker, in operation since 1930, can record 80 to 85 sales a minute. At present, sales sometimes run as high as 150 a minute. The ticker prints the transactions horizontally on a 3/4-in. tape, giving the issue symbols on the top line, the volume and price on the bottom line, as follows:

MGM ERP

3000s54 1/2 3s14 7/8

This means that 3,000 shares of Metro-Goldwyn-Mayer were sold at $54.50 per share, and 300 shares of Emerson Radio & Phonograph (ERP) at $14.87 1/2 (in 100-share lots the zeros are always omitted). When the tape is one minute late, the first digit is dropped from the price of the sale to speed up transmission, e.g., the M-G-M notation would read 3000s4 1/2. When three minutes behind, the last two digits of the number of shares traded are also dropped, so that the tape would read 30s4 1/2. When five minutes late, another sending machine is phased into the ticker to give flash reports on the prices of 30 representative stocks to indicate how the market in general is behaving.

Under present arrangements, moving the tape any faster would not be practical. In most brokerage houses, as in the Stock Exchange itself, the tape is projected onto--and moves across--a slim, horizontal screen usually 5 ft. long. Even if the ticker could print faster, viewers would have a hard time reading it.

Most Exchange experts think the solution is a whole new ticker system. A leading prospect: a high-speed telegraphic page printer that operates at 900 characters a minute. Developed by Teletype Inc., a subsidiary of Western Electric, it uses a 3 1/2-in. roll of paper, prints a vertical column with the stock symbol, volume and price all on one line. The Exchange will test a prototype in the summer, hopes to switch to a new system as soon as possible. But the problem is formidable: Thousands of stock tickers that are geared to the old narrower tape will have to be replaced, and new screen and projection equipment for handling the new tape will have to foe developed.

The Difference: Automation. Big brokerage houses are far ahead of the Exchange in putting automation to work. The house that hopes to be first to consolidate all its accounting processes into one computer operation is the 69-year-old firm of Goodbody & Co.. which is now phasing in an RCA 501 computer. Says Managing Partner Harold P. Goodbody: "We can't give good service today unless we 'automate.' " Goodbody. who joined the firm as a securities clerk in 1927, still remembers how during the heavy trading in 1929 he had to work straight through every other night for months to keep up with the paper work. The new automated systems have changed all that; with only small amounts of overtime. Goodbody, like other automated houses, will keep up easily.

Improved communications also help brokerage houses handle the load and keep their customers happy as well. From any of Goodbody's 39 branches outside New York City a customer's order is teletyped over A.T. & T.'s Finac network to the home office, where an operator puts it into one of the variously colored grooves in a conveyor belt to route it to the right clerk. Within minutes the order is telephoned to one of Goodbody's brokers on the Exchange floor. On normal trading days a buyer in Palm Beach can have his order executed in New York and get notification within five minutes. At Goodbody's home office the details of the transaction are punched by hand on IBM cards that are then fed into a printer that turns out the customer's confirmation notice. When Goodbody gets its 501 computer into full use. the operation will be simpler yet; the 501 will handle the calculation of the transaction,and also automatically print the confirmation.

Many brokers, cashing in on Wall Street's big volume, have already earned nearly as much in commissions in less than three months this year as they earned in all of 1960. The good news for the houses is that the computers are holding down costs so that the increased income is not being eaten up by overtime and added staff.

* The other times: on Oct. 19, 1937, when the market bounced wildly during a business downturn, 7,290,000 shares were traded; on June 9, 1945, good war news and the founding of the U.N. sparked a 6,660,000-share volume in a relatively steady market; on Sept. 26, 1955, the day after President Eisenhower's heart attack, 7,717,000 shares were traded on a sharply breaking market.

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