New investors have a lot of new information to take in when they enter the market. Not only do you have to navigate and monitor your financial situation carefully, but you have to do so while cramming in dozens of new definitions and daily practices. When you start delving into securities exchanges to learn more or get a feel for the market, the problems don’t go away. In fact, you’re inundated with a veritable soup of numbers, strange words – and stock symbols.
While learning the symbols is a matter of time and immersion, learning what they are – and how they came to be – is much simpler. Once again, Financial Professional is here to help!
Before we continue, Financial Professional wants to remind you that this article is educational in nature. Any securities or firms named are for illustrative purposes only and do not constitute financial advice. Always do your due diligence and consider your situation – and the help of a licensed financial professional – when making investment decisions.
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A stock symbol, also called a stock ticker or ticker symbol, is a series of letters or numbers exclusively assigned to a single security for the purposes of trading on a particular exchange. “Stock ticker” and “ticker symbols” are synonymic references to years gone by when the ticker-tape machine was in common use.
Stock symbols first came about in the 1800s with the advent of the modern stock exchange. At the time, floor traders communicated information such as stock price by shouting or writing down the full name of the company.
Over time, as industries expanded and the number of publicly traded companies grew, it became apparent that too much time and effort was wasted on this process.
Furthermore, the current method was detrimental to the function of the stock market, as shouting the full name of every company led to backlogs in the information queue and was impractical for traders who wanted to keep abreast of rapidly changing stock prices.
When the stock-quoting ticker tape machine was first introduced in 1867, this method of communication became outmoded practically overnight. Information began to flow so rapidly that traders couldn’t physically keep up with the demand.
Enter stock symbols.
Stock symbols aren’t just useful when it comes to speeding financial transactions on specific companies. Tickers can be helpful in identifying and differentiating companies with similar names, as well as spin-offs of a corporation.
For instance, when companies use the same words as another company’s name, tickers allow traders to easily tell the companies apart – especially when the words are homonyms.
An excellent example of this is Sysco, a food distribution company, versus Cisco, a technological corporation. While these companies have no affiliation, different spellings, and do not trade on the same exchange, they have identical pronunciations. This is where stock symbols really become useful. For instance, Sysco trades on the New York Stock Exchange (NYSE) under the ticker SSY. Alternatively, Cisco trades on the NASDAQ under the symbol CSCO.
Companies and corporations who split or create spin-offs also benefit from the use of stock symbols. However, this can also cause confusion if the companies choose similar symbols for their stock.
A famous example of this is Hewlett-Packard, the business product-oriented corporation that split in November of 2015 into Hewlett-Packard Enterprise and HP, Inc. While the companies are related in industry, Hewlett-Pack Enterprise focuses on business services and hardware such as storage, servers, and security; while HP, Inc focuses on consumer printers and computers. With the stock symbols of HPE and HP, respectively, investors who aren’t paying close attention may accidentally purchase the wrong company’s stock.
On the other hand, stock symbols can reflect mergers or when a company renames itself, as well. Furthermore, symbols can be “recycled” after a short period of time if a company delists from the exchange in question.
Stock symbol convention is determined by the exchange on which the security is listed.
Two of the largest exchanges in the world, the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX) allow stocks to list symbols up to three characters. On the other hand, stocks listed on the Nasdaq can have four or five characters apiece. (Companies that move between indexes are usually permitted to keep their original symbols).
In the United States, single-letter tickers are coveted as a metaphorical “vanity plate” for companies. For instance, C is currently in use by Citigroup, while F is famously listed to Ford. V was reassigned to Visa in 2008 after the previous owner, Vivendi, delisted.
Many European exchanges stick with the three-letter system, although a few allow four or five. In several Asian countries, however, stocks are denoted by three to four numbers instead of letters. This is done so as to not cause confusion for foreign investors who are unfamiliar with non-Latin scripts.
Because stock symbols are shorthand for the issuing company’s name, there is no distinction between tickers that use a different number of characters. The difference is determined solely by the exchange on which the company is listed.
As companies can trade more than one class of shares simultaneously, tickers also denote the differences by adding the appropriate suffix. For simple additions, such as denoting Class A or Class B stocks, a simple “A” or “B” suffices. An example here is Berkshire Hathaway’s Class A stock, which lists as BRK-A, versus their Class B stock, which appears as BRK-B.
However, these are not the only designations that a ticker can reflect. Preferred stock, for instance, is often differentiated from common shares by a “PR” suffix, which is then followed by the class-specific symbol. In addition to its common stock, Cincinnati Bell Inc (stock symbol CBB), trades a preferred Series B stock, which is denoted as CBB-PR-B.
While the reporting format changes depending on the source you visit, the suffixes themselves remain the same. Using the above example of Cincinnati Bell, the designations after the ticker are noted as:
There are more than two different possible designations for a stock, depending on which index the stock lists and the current trading status. On the NYSE, additional information is added by placing the appropriate symbol after a dot (BRK.A, for instance). The Nasdaq, on the other hand, adds the letter with no additional punctuation.
Some of these additional indicate if a stock confers voting rights versus another class issued by the same company, such as the difference between Nasdaq’s listing of Google’s Class C non-voting stock (GOOG) and their Class A single-vote stocks (GOOGL). Others note bankruptcy proceedings if a stock current has warrants, or “miscellaneous situations.”
Furthermore, there are a few special codes that can follow stock symbols outside of the A to Z. For instance, PK designates a pink sheet stock, while SC reflects security in the Nasdaq Small Cap, and NM in the Nasdaq National Market.
Modern letter-only stock symbols became a widespread practice in the United States after Standard & Poor’s developed the practice in an effort to standardize investing practices. Before this point, one company could have as many unique ticker symbols as the number of exchanges they listed on. Over the years, the new system became ingrained in the investing world and remains to this day. Note, however, that the practice of denoting preferred stocks is not standardized.
Another common practice in the United States is for a company to select a symbol representative of the company in some way. These can range from sensible pronunciations (AAPL for Apple) to puns or other clever wordplays.
For instance, before the Exxon merger in 1999 changed the symbol to XOM, they used a homonymic ticker: XON.
InBev, the company that brews Budweiser beer, lists as BUD; while competitor Molson Coors Brewing Company uses TAP.
Harley-Davidson motorcycle company exemplifies their company in their HOG ticker for the Harley Owners Group.
There are also a few examples of companies taking their name from their well-known tickers. Perhaps the most famous example is when the owner of KFC, Pizza Hut, and Taco Bell, then-named Tricon Global, changed its name to YUM! Brands to match its symbol: YUM.
Seeing stock tickers roll by under a news broadcast or listed in a newspaper or online can be exactly the sort of small – but confusing – a hurdle that seems intimidating. But, as you’ve already seen by now, there’s no secret language or code known only to experts. People who trade in stocks are just people in a hurry, and shortening a fifteen-syllable name for a corporation to three or four letters is just a way to get you the info you need even quicker.
When you pursue investing, you’ll often find bits of jargon that might feel like a barrier, but you should never let jargon get between you and your future, and Financial Professional will be here to help.