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What Is a Ticker Symbol & How Does It Work?

May 13, 2022
7
min

Knowing a firm’s ticker symbol is important when buying or selling shares. Ticker symbols help investors quickly research the companies they’re interested in.

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Viewers of financial news and business programs are used to seeing the scrolling ticker at the bottom of their screens, with its combination of letters, arrows, and numbers. The alphanumeric string includes a stock ticker symbol. Think of it like an abbreviation that helps an investor identify security that trades on a stock exchange. 

A stock ticker symbol often resembles a company's name, such as CVNA for Carvana or WMT for Walmart. When ticker symbols are displayed on trading platforms or websites, they often are accompanied by arrows and numbers that show "ticks" in movement. Each stock ticker symbol acts as a unique identifier for security, which can be a company's shares, an exchange-traded fund (ETF), or a mutual fund. Looking at stock ticker symbols and how they function on a ticker tape can help investors gauge market sentiment throughout the day.

What is a stock ticker symbol?

A stock ticker symbol, or stock symbol, is an abbreviation for a company that offers shares that trade publicly on a stock exchange. Ticker symbols generally consist of letters, although they can include numbers and hyphens, and each of the exchanges has its own naming conventions.

Stock tickers in the United States generally contain between one and four letters, and are related to the name of a publicly-traded company in some way. For example, piano maker Steinway once traded on the New York Stock Exchange (NYSE) under “LVB,” for Ludwig van Beethoven, but a ticker might also simply contain part of the name, such as “AADI” for AADI Bioscience Inc. Tickers for stocks that are listed on the NYSE can have four or fewer letters while Nasdaq exchange stocks may contain up to five. Tickers are regulated by the Securities and Exchange Commission (SEC).

History of ticker symbols

When the New York Stock Exchange began trading as a modern stock exchange in the 1800s, floor traders shouted out the name of the company or wrote a company name—often in its entirety—on a slip of paper to be traded. “Open outcry,” or the practice of communicating trades via signals and shouts, had dominated markets for centuries. Information from the stock exchange was conveyed to investors by mail or messenger.

Then, in 1867, the ticker tape machine became the first dedicated financial information delivery system for the markets when inventor Edward Calahan configured a telegraph machine to print stock quotes on paper tape. The new technology revolutionized market trading. It printed out a series of easy-to-read ticker symbols followed by information about the company’s stock price.

As more and more companies introduced stocks into the markets and the ticker tape machine sped up the delivery of trade information, stock exchanges had to develop a way of codifying the abbreviated company names. They shortened company names to between one and five letters. Abbreviating the names of companies made trading, especially with the aid of the faster ticker tape system, more efficient. By the 1960s, television and computers increasingly rendered paper ticker tape obsolete. However, the concept of the stock ticker remained—as did ticker symbols.

What is an example of a ticker symbol?

Most companies in the stock market request a ticker that easily identifies their business. Some are one-letter symbols, some are cleverly named contractions of a company’s name or business identity, and some are acronyms. 

  • Single-letter ticker symbols. Because company names were originally written on transaction slips and later fed into ticker tape machines, it was faster to write a single letter down for a company. Today, some of the largest companies listed on the New York Stock Exchange have a coveted single-letter ticker symbol, such as “F” (Ford Motor Company) and “Z” (Zillow). But a one-letter identifier does not necessarily signify blue-chip status or even a U.S. company. And some letters are not currently assigned.
  • Memorable names. Companies may choose a symbol that is fun or easy to associate with their brand. Examples on the NYSE include:

o   Harley-Davidson Motorcycles (HOG)

o   Sotheby’s (BID)

o   Dutch Bros. Coffee (BROS)

o   Roundhill Sports Betting & iGaming ETF (BETZ)

o   Ginkgo Bioworks Holdings Inc. (DNA)

o   The Cheesecake Factory Inc. (CAKE)

  • Company name. Most companies request a symbol that represents the company. For instance, Apple uses AAPL, The New York Times uses NYT, and Microsoft uses MSFT.

Ticker symbol modifiers

Most stock tickers are three or four letters—and in some cases, numbers or hyphens—with optional modifiers or extensions.

These modifiers can be used to convey the type of security (such as an “X” following a mutual fund), the type of stock, or the class of stock. Some companies issue different classes of shares to allow management to hold a higher percentage of the vote than they hold equity. For instance, Class A stock comes with shareholder privileges that might not be available to holders of other classes of the same company’s stock. For example, Berkshire Hathaway, which has two classes of shares that trade on NYSE, is listed with the symbol CRK. A and BRK.B for its Class A and B shares.

Some common modifiers are:

  • A: Class A stock
  • D: Newly issued shares or a reverse stock split
  • F: Companies listed on foreign exchanges
  • J: Nasdaq modifier for stocks with voting rights
  • P: Preferred shares
  • Q: A company that has filed for bankruptcy protection
  • U: New issues and group shares of a stock
  • X: Mutual funds 

Companies usually change their ticker symbol in a merger, and companies that move from the NYSE to Nasdaq can keep their stock symbol.

How do ticker symbols work?

Ticker symbols can help identify the stocks they represent in several ways, though each exchange has its own naming convention. The ticker symbol may include some extensions. When a ticker symbol is followed by “E” or “LF,” for example, the company has not met the SEC’s reporting requirements and may be barred from trading.

The most commonplace for ticker symbols to appear is on stock tickers, or the real-time report of market activity. On the ticker, the symbol is followed by letters, numbers, and arrows that show the security’s pricing—whether the last trade was up or down—and the trading volume.

Investors can simply search on a broker or exchange website by company name or ticker symbol and find the investment data they need. Usually, this will display the stock chart showing price movements, dividend and price history, current bid and ask prices, plus daily volume, dividend rate, and price-to-earnings ratios.

Companies can sometimes pick their own ticker symbol if the abbreviation they chose is not already listed on their exchange. The exchange may also assign a symbol to a company.

Why is the ticker symbol important?

The stock ticker is still important in the digital age because:

  • The symbol is easy for investors to look up and remember. They can research company and trading information on the exchanges by ticker symbol.
  • The NYSE and Nasdaq are the two largest stock exchanges in the world by market capitalization, and trade in enormous volume. You can see the volume of shares traded daily on Nasdaq here—currently in the range of 4 billion shares daily. Fast identification of companies makes high trading volumes possible.
  • The ticker, which is the running record of the market’s trading activity, shows investors' general market sentiment during the day, as well as significant movers in the market. The stock symbols with the most significant changes in price, or highest volume, appear on the ticker.
  • Ticker symbols sometimes contain extra information that lets investors know crucial information (such as the class of shares or if a company is in bankruptcy) without having to research.

The bottom line

Knowing a firm’s ticker symbol is important when buying or selling shares. Ticker symbols help investors quickly research the companies they’re interested in, both by containing information right in the symbol and providing an easy and fast way to look up company information. Finally, understanding that the thousands of companies that list their stocks on the public exchanges in unique ways can help investors avoid confusion, since the ticker symbol of one company might resemble the full name of another.

At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective. Get started today.
Disclosures

Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.

Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.

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