Alexander J. Field (afield@mailer.scu.edu)

"Telegraphic Transmission of Asset Prices and Orders to Trade: Implications for Economic Growth, Trading Volumes, and Securities Markets"

     The telegraph gave rise to a quantum leap forward in the peak daily capacity of the American securities exchange system, giving rise to a trading regime that lasted a century, from the 1870s through the 1960s. It shrunk the importance of the regional exchanges as it increased the dominance of New York. It virtually eliminated regional and international differences in the prices of similar securities at moments of time. But the value to the primary markets of the increased liquidity represented by the higher trading volumes was attenuated by its uneven concentration in particular time periods and among particular securities. And the value of the increase in the speed whereby new information was incorporated into prices was limited by the different clockspeeds under which the secondary and primary markets operated. Moreover, the telegraph was a two-edged sword with respect to the pricing function. While it drastically reduced regional differences in securities prices at moments of time, it also provided an expanding range of technological opportunities for those who made money through pool operations, bucket shops, and other manipulative strategies.