Quotron

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Quotron II desktop device

Quotron was an electronic system for querying and transmitting information from securities trading to stock exchanges . Quotron was based on a proprietary protocol for information transfer that could only be initiated and read by Quotron hardware . The users of the system were mostly brokers and traders who, after entering a ticker symbol in the Quotron terminal, received the current stock market price and further information via the order book , either by ticker printer or on a display .

The system was invented by John R. Scantlin and first used in 1960. A little later, Scantlin Electronics Inc. (SEI) , founded by Scantlin, raised capital as a non-listed stock corporation . 1973 SEI was renamed Quotron Systems Inc. and sold to Citibank in 1985 . In the mid-1980s, Quotron had a 70% market share in the North American market for stock market information services. With the advent of desktop computers and standard protocols for information transmission ( RFC , later Internet ), Quotron lost its strong position and was increasingly displaced from the market until the mid-1990s. In 1994 Citicorp transferred the already strongly shrunk Quotron to Reuters , where the company completely lost its independence in the course of post merger integration and further downsizing . In 2009, Reuters discontinued support for the last Quotron product, Advantage AE , which until then had been continued under the name Reuters Plus .

The rise of Quotron is, on the one hand, a textbook example of the strength of monopolies in markets with network effects and high entry barriers . On the other hand, the end of Quotron testifies to the vulnerability of a system based on proprietary technology in the event of external technological advances, which ultimately, in the sense of Schumpeter's “ creative destruction ”, not only lead to a redistribution of market shares, but also to a redefinition of the markets. Today, stock market portals on the Internet and the websites of the stock exchanges themselves not only offer current price and order information, but complex chart analyzes can also be carried out free of charge.

History of stock market information

Female clerks read ticker tape and update a bulletin board with stock market prices (New York, 1918)

Stock exchange information is data on the market development of shares and securities, in particular their prices (quotes), traded volumes and orders. Before the advent of the Internet, stock market information - especially in real time - was primarily used by professional stock brokers and stock traders.

From 1797 to 1811 the newspaper New York Price Current appeared in the USA , which was the first to publish stock prices. In 1884 the Dow Jones published the first stock index , in 1889 the first edition of the Wall Street Journal appeared . In 1863, Edward A. Calahan of the American Telegraph Company invented a telegraph printer that could send data about stocks, bonds, and commodities directly from exchanges to brokerage offices across the country: the ticker.

In 1923, the Trans Lux Corporation delivered a rear projection system that projected the running ticker onto a screen that was visible to all brokers in an office. In 1963, Ultronics introduced the Lectrascan system, the first wall-mounted electronic ticker display system. By 1964, there were more than 1,100 devices in stockbroker offices in the United States and Canada.

History of the company

Quotron (USA)
Los Angeles headquarters and product development
Los Angeles
headquarters and product development
Maryland Data Center
Maryland
Data Center
Quotron locations

Company formation until the end of independence (1957–1986)

In 1957 John R. Scantlin founded Scantlin Electronics Inc. (SEI). In November 1960, SEI raised capital as a non-listed public company . 250,000 shares were offered at the time of issue, with Loeb, Rhoades & Co. acting as the leading underwriter . As a result, SEI shares were traded over the counter , the SEI share price rose from the issue price of USD 12 until the "Ultronics crisis" at the end of 1961 to USD 42.

In 1970, Milton E. Mohr , who previously headed rival company Bunker Ramo , was appointed CEO .

In March 1984, Merrill Lynch announced that it would start a joint venture with IBM under the International Marketnet brand to offer broker information services in competition with Quotron. Merrill Lynch was by far the largest customer at the time, with a quarter of Quotron's sales. In response to this news, the Quotron share price fell by about half in over-the-counter trading. At the end of 1986, Merrill Lynch and IBM discontinued the Imnet project , which, with information transmission via satellite and teletext (in cooperation with PBS ) as well as proprietary analysis software, had led to costs that could not be enforced on the market with correspondingly high prices for stock market information. Imnet employed more than 250 people at the time of the dissolution. Also in 1986 other competing projects based on teletext were discontinued, such as the Trintex project by CBS , IBM and Sears , as well as similar offers from Knight-Ridder and Times Mirror Company / Centel .

In 1985 Quotron had a 70% market share.

Quotron as a subsidiary of Citicorp (1986–1994)

In 1986, Citibank acquired Quotron for $ 680 million in cash in a hostile takeover . Quotron's Board had the takeover offer checked by an investment bank for fair value and obtained comparative offers from other potential bidders. However, the board did not pass this information on to the Quotron shareholders, who had to decide whether to accept Citibank's cash offer. Quotron shareholders who had hoped for a higher price through a more energetic opposition to the takeover, led a damages lawsuit against the board.

Even after the takeover, Quotron was only used within Citibank according to the “ arm's length principle ”. H. Terminals and information delivery contracts were purchased as with other, external providers.

In December 1987, J. David Hann was named President and CEO of Quotron.

Although automated trading was also blamed for the stock market crash on “ Black Monday ” in October 1987, the spread of electronic networks and computers among brokers and traders did not slow down. In April 1988, the Paine Webber brokerage firm began converting to Quotron Q-1000 minicomputers , which would provide data to Quotron terminals or personal computers .

Sale to Reuters and end of Quotron (1994–2001)

In January 1994, sold Citicorp the Quotron Systems Inc. with losses to the Reuters America Holdings Inc . Citicorp took an impairment loss of $ 179 million in the last quarter of 1993 , after writing off $ 430 million for Quotron in 1991.

The German subsidiary Quotron Handelssysteme GmbH in Frankfurt am Main , founded in 1991 , was liquidated in May 1994 .

In October 1994, Reuters announced cost-cutting measures after Quotron posted an annual loss of $ 50 million prior to the acquisition. In particular, the performance-related communication costs quotron caused by the analog data network were considered four times as expensive as the systems of the competition. Among other things, all central services were to be relocated from the Quotron main data center in Silver Spring to existing Reuters data centers in Chicago and Hauppauge in order to close Silver Spring afterwards. This also made the regional Quotron data centers obsolete. In the course of this change, the analog Quotron network was to be switched off and replaced by the Reuters network American Real-Time Services ( Arts ) based on the Internet protocol . One problem with this change was that part of the 37,000 Quotron customers who were still using the outdated mainframe applications Q800 and Q1000. At the end of 1994 only half of the customers were using the new Quotron Advantage AE.

In 1998, Reuters introduced the Reuters Plus system to replace Quotron Advantage AE. Customers for Reuters Plus were won partly as new customers, partly by upgrading Advantage users. The planned for July 2000 may continue to the quotation jump ( "tick size") on American stock exchanges of 1.16 USD on the decimal system required financial information providers to estimate the SIA investment of more $ 900 million. Reuters decided to switch to Reuters Plus only and to discontinue support for Quotron Advantage as of July 2000 . Quotron users had the option of continuing their contracts by migrating to Reuters Plus . The decimal changeover on the stock exchanges was postponed due to the temporal proximity to the Y2K changeover , which had just been coped with , and took place in April 2001. This meant that the last Quotron product could no longer be used.

Technology and application

The Quotron II data format for stock market information consisted of five words with twelve bits each . (Light blue: stock market , dark blue: ticker symbol , light yellow: volume , white: closing price , light orange: highest price, light green: opening price, orange: lowest price, green: current price, gray: seven flags )
The CDC 160a was the heart of the Quotron II system

Quotron I was the first generation of Quotron devices. The architecture of the Quotron II was significantly more complicated. Several CDC 160a, mini-computers from Control Data Corporation were used as the central computer for the Quotron II system . The core memory of a CDC 160a comprised 8 kWord , the computing speed was 6.4 microseconds per computing cycle. These values ​​were sufficient for the simple I / O and retrieval operations. The maximum size of 24 kWords of the external main memory, which could be used by several CDC 160a, appeared to be problematic during the design phase. The stock market information for around 3,000 securities had to be saved there. A CDC 160a word was twelve bits wide . 24 kWords of this width correspond to 288,000 bits, or 36 kilobytes.

Quotron 800 and 801 followed by the late 1980s, then Quotron 1000. The computer screens at Quotron were monochrome monitors with green text on a black background. However, introduced by Bloomberg competitor Professional Trader had an amber font (amber) on a black background. It was easy to see in the trading room who was using which system. In the 1987 film Wall Street, stockbrokers Bud Fox and Gordon Gekko look at Quotron screens while they do their business.

In 1987 Thomas Petterfy from Interactive Brokers first used the Quotron feed for algo trading . Quotron devices were rarely used by financial analysts in the late 1980s because the data required was hardly time-critical.

Advantage AE was Quotron's first PC and Windows based application. The system introduced in 1992 consisted of at least one IBM RS / 6000 server per customer , which communicated with the Quotron data center . Up to 40 workstation PCs for brokers with 9.6 kbit / s could be connected to each of these servers  . These PCs were in the reference configuration IBM PS / 2 , but other 386 -compatible PCs were also possible. This hardware choice was the result of a 1991 contract with IBM . Advantage AE ran under Windows on the PCs . In the first version delivered, brokers could open up to eleven separate windows with stock exchange prices, financial messages and customer securities accounts . Services that initially not of Q1000 on Advantage AE were ported were over, Quotron Advantage Service are called (QAS), a virtual terminal - emulator on Windows. The financial data for up to 7,500 securities could be stored locally on each workstation PC with Advantage AE . The RS / 6000 server was able to cache the data for all 130,000 securities existing at the time with the appropriate memory equipment.

competition

In addition to Ultronics, Bunker Ramo and Automatic Data Processing (“ADP”) were Quotron's main competitors. The ADP Brokerage Service Division was established in 1962 as a division of ADP and 2007 under the new company Broadridge Financial Solutions, Inc. from ADP spun off .

Telerate Systems, Inc. ("Telerate") was part of Dow Jones and had a virtual monopoly on the government bond information service . With the acquisition of the Canadian CMQ Communications , the market leader in Canadian stock market information services, Telerate entered direct competition with Quotron in 1987.

ILX Systems Inc. ("ILX") was founded in 1988 by Bernard Weinstein and acquired by Thomson Financial in 2001 . Customers switching from Quotron to ILX named the greater flexibility and openness compared to Q1000 as the main reason.

Today the market for stock market information is dominated by Bloomberg and Thomson Reuters . Their respective terminals are the Bloomberg Terminal and Thomson Reuters Eikon . In 2017, Bloomberg had a 33% share of the global market with this terminal among professional stock traders and brokers, while Thomson Reuters held 23%. Follower FactSet had almost 5%, in addition, S&P Capital IQ and Morningstar Direct , as well as regional and special terminals were active.

literature

Web links

Commons : Quotron  - collection of images, videos and audio files

Individual evidence

  1. ↑ Electronics International Capital Common Shares Are Priced at $ 10 . In: New York Times, October 26, 1960.
  2. ^ Montgomery Phister, Jr .: Quotron II . In: Annals of the History of Computing . Vol. 11, No. 2 (Summer 1989) p. 113.
  3. ↑ a b Myrna Oliver: Milton Mohr; Architect of Quotron turnaround . In: Los Angeles Times, July 24, 2000.
  4. ^ Threat to Quotron discounted . In: New York Times, September 11, 1984.
  5. ^ David E. Sanger: Merrill, IBM end venture . In: New York Times, January 1, 1987.
  6. ^ John M. Olson, The Fiduciary Duties of Insurgent Boards . In: The Business Lawyer . Vol. 47, No. 3 (May 1992), pp. 1011-1029. (In particular footnote 64)
  7. ^ Dav v Quotron Systems , No. 8502. Court of Chancery of the State of Delaware, New Castle, November 20, 1989. In: 16 Del. J. Corp. L. 297 (winter 1991).
  8. ↑ a b David Bradley Godes: Use of heterogeneous data sources: three case studies . Massachusetts Institute of Technology, 1989, p. 69. (Thesis MS at Sloan School of Management )
  9. ↑ Andrea Adelson: Head of Quotron Unit Is Named by Citicorp . In: New York Times, December 16, 1987.
  10. ^ Barnaby J. Feder: Securities Firms Streamlining Computer Systems Despite the Crash . In: New York Times, March 2, 1988.
  11. ↑ Citicorp sells Quotron to Reuters . In: Handelsblatt of January 14, 1994, p. 9.
  12. ↑ Commercial register announcements of May 26, 1994, Quotron Handelssysteme GmbH, Frankfurt am Main, commercial register number HRB 33 265, Frankfurt am Main local court.
  13. ↑ Reuters Details Plan: Shut Quotron Hub And Build New Wan  ( Page no longer available , search in web archives )  Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice. @1@ 2Template: Dead Link / db.riskwaters.com   . In: Inside Market Data . Vol. 10, No. 3 (October 24, 1994).
  14. ↑ Reuters' Rollercoasting Share Price, Speculation On Job Is Big News In 1999 ( Memento of the original from March 4, 2016 in the Internet Archive ) Info: The @1@ 2Template: Webachiv / IABot / db.riskwaters.com archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . In: Inside Market Data . Vol. 15, No. 14 (January 3, 2000).
  15. ↑ Market Data Vendors Explain Their Strategies At SIA Conference ( Memento of the original from March 4, 2016 in the Internet Archive ) Info: The @1@ 2Template: Webachiv / IABot / db.riskwaters.com archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . In: Inside Market Data . Vol. 15, No. 26 (March 27, 2000).
  16. ↑ David Serchuk: decimalization And Its Discontents . In: Forbes . October 3, 2009.
  17. ^ Montgomery Phister, Jr .: Quotron II . In: Annals of the History of Computing . Vol. 11, No. 2 (Summer 1989), p. 113.
  18. ↑ A Father Of High-Speed ​​Trading Thinks We Should Slow Down , NPR Planet Money, August 27, 2012
  19. ↑ Quotron Shifts To Open Systems With Advantage AE ( Memento of the original from March 4, 2016 in the Internet Archive ) Info: The @1@ 2Template: Webachiv / IABot / db.riskwaters.com archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . In: Inside Market Data . Vol. 7, No. 15 (April 27, 1992).
  20. ↑ About Broadridge: Our History on the Broadridge website. (Retrieved September 3, 2012)
  21. ^ Andrzej Targowski: Global Information Infrastructure . Idea Group, 1996 ISBN 1878289322 , p. 187.
  22. ↑ Telerate Absorbs CMQ Communications, Adapts Technology To New Data Feed Strategy ( Memento of the original from March 4, 2016 in the Internet Archive ) Info: The @1@ 2Template: Webachiv / IABot / db.riskwaters.com archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . In: Inside Market Data . Vol. 3, No. 6 (March 1, 1988).
  23. ↑ ILX Swipes Bunch Of Small Clients From Quotron ( Memento of the original from November 25, 2015 in the Internet Archive ) Info: The @1@ 2Template: Webachiv / IABot / db.riskwaters.com archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . In: Inside Market Data . Vol. 10, No. 3 (October 24, 1994).
  24. ↑ Hannah Murphy: Bloomberg and Reuters lose data share to smaller rivals . In: Financial Times of March 22, 2018.