Runoff: What It Means, How It Works, History

What Is Runoff?

In the past, the term "runoff" referred to the procedure of printing end-of-day prices for every stock on an exchange onto ticker tape.

Since actual ticker tape isn't used anymore, the runoff period is now used to describe trades at the end of a session that may not be announced or reported until the start of the next session.

Understanding Runoff

In the days of paper ticker tape, stock trades that occurred at the very end of the trading day—and thus which represented the closing price of a stock for the day—were inputted into an analog system and then fed to ticker tapes around the world for reporting. Newspapers, for example, would rely on the runoff to print stock quotes in the next morning's newspaper. The runoff could last for several minutes or even hours and produce yards of physical paper documentation.

Ticker tape from the runoff was often cut and saved to function as confetti, to be thrown from the windows above parades, primarily in lower Manhattan. Ticker tape parades often celebrated some significant event, such as the ends of World War I and World War II, or the safe return of one of the early astronauts or a winning home team's championship.

History of Ticker Tape and Runoff

The first stock ticker was invented by Edward Calahan in 1867 for the Gold and Stock Telegraph Company in New York. Thomas Edison developed the Universal Stock Printer in 1871, which continued to be used well into the next century for the transmission of data such as sports scores.

Ticker tape itself was a paper strip that ran through a machine called a stock ticker, which printed abbreviated company names as alphabetic symbols followed by numeric stock transaction price and volume information. The term "ticker" came from the sound made by the machine as it printed.

Newer and better tickers became available in the 1930s, but they still had an approximate 15-to-20-minute delay. Ticker tape became obsolete in the 1960s, as television and computers were increasingly used to transmit financial information. Although paper ticker tape is no longer used, the concept of ticker tape lives on in the scrolling electronic ticker boards found on the walls of many offices across the country.

They still convey the same information. Many of today's tickers and ticker simulators use colored characters to indicate whether a stock is trading higher than the previous day's (green), lower than previous (red), or has remained unchanged (black, blue, or white).