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Money Matters: Tax Day, Stocks, and How We Get Our Data

April 17, 2019

There’s a Keystone in every great invention.

Unless an extension was requested, you’re probably well aware of Tax Day, April 15th, the day when taxpayers submit individual income tax returns and pay their portion to the U.S. government. One of the trickier components of tax returns involves reporting any income made from stocks. For many individuals, this involves scrambling through various retirement accounts, investment portfolios, and other documents.

When it comes to stocks, many technological developments have evolved to streamline the stock investment process, allowing more people from around the world to participate. One of the key innovations in the history of stocks is the stock ticker, an electronic device devised in the mid-1800s to monitor changes in stock value in real time.

About Tax Day and Stocks

The very first Tax Day took place on March 1, 1913, when the 16th Amendment implemented the national income tax and formed the Internal Revenue Service. At this time, the federal government sought to raise revenues so that it could increase funds and compete on an international stage.

Taxpayers, however,  had trouble accounting for all their income streams in the past year before this March 1 deadline, so in 1918, the federal government moved the filing date to March 15. It remained this date until 1954, when Congress overhauled the tax code and also changed Tax Day to April 15. 

Stocks are an important element of the tax documents submitted by April 15.  The evolution of today’s stock tracking devices and software can trace their origins back to the stock ticker.

 

The Invention of the Stock Ticker

The concept of a stock exchange goes further back than one may think. In the 1300s, moneylenders in Venice were the first to start trading securities from other governments. Moneylenders functioned like unofficial, small banks. They often bought and sold debts amongst themselves, and it was a natural next step for them to begin trading securities with governments. The moneylenders kept track of these transactions on slates, which they took with them to client meetings.

From these humble beginnings, the stock exchange system was born. As these systems grew larger and more complex, tracking stocks became increasingly difficult and time-consuming. Investors had to use couriers to send and receive information about stock market prices, and the handwritten tablet system was inefficient and prone to tampering. It was time for a better solution. And the amount of money in the business prompted innovations that led to the birth of the stock ticker. 

In 1867, E.A. Calahan sought to simplify the use of the time’s revolutionary telegraph technology as it applied to finance, developing blueprints that led to the creation of the first stock ticker. His system assigned alphabetical symbols to every company participating in the stock exchange, and transmitted changes in transaction price and volume via telegraph. The information was then printed on long reels of paper called ticker tape, which owes its name to the ticking sound the machine would make as it printed.

The first stock ticker was a huge step forward, as traders could then send stock information all over the country at speeds that seemed breathtaking at the time. However, Calahan’s ticker wasn’t perfect—if the transmission came through too quickly for the machine, attendants had to reset it by hand, which was labor intensive and risked errors in communication. 

Enter Thomas Edison. In 1871, he sought to improve the original stock ticker by making a better typewheel and paper feed. He solved many of the problems surrounding tickers’ inefficiency by inventing a “screw-thread unison” device, which made it possible to synchronize stock tickers while also eliminating the need to reset them by hand. After patenting his improved stock ticker, this machine became Edison’s first profitable invention. The money he made off this machine enabled him to set up his Menlo Park lab, from which he went on to invent such wonders as the light bulb and phonograph.

Although current-day traders typically track stock movements through digital means, the stock ticker has made its mark on tracking devices and the stock exchange in general. Exchange systems still use abbreviated company names that stock tickers put into place, and the digital software that transmits changes in value echo those employed by the telegraph system years ago. Additionally, words like “uptick” owe their meaning to the use of ticking machines, and parades in Lower Manhattan became known as “ticker tape parades” due to stock exchange workers’ tendency to throw entire spools of tape out of office windows in celebration. 

Tax Day, Stock Tickers, and Beyond

When it comes to tracking income and stocks, the right tools make all the difference.   While the ticker tape machine may be a thing of the past,  today’s high tech electronic devices continue to evolve and require high performance electronic interconnect components and hardware like Keystone has been producing for over 70 years.

To learn more about Keystone Electronics’ capabilities and services, contact us today.

 


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