May 18, 2020

Ticker Symbol Explained For Beginners

Ticker Symbol Explained For Beginners
Ticker Symbol Explained For Beginners

What is a Ticker Symbol?

A ticker symbol, sometimes called a stock symbol, is an organization of letters or characters (or a combination of both) that represent particular securities that are either registered in a stock exchange or a public market.

People who are interested in investing or trading securities use these symbols to place orders.

A company issuing securities in a public market, chooses an existing ticker symbol that traders and investors can use to trade the securities. Each stock that is listed on a stock market has a distinct ticker symbol.

In most cases, the ticker symbol is a shortened form of the company name.

Guidelines for Ticker Symbols

Ticker symbols vary based on the stock market they are traded on. Prior to 2007, the New York Stock Exchange (NYSE) ticker symbols had three characters, while NASDAQ symbols consisted of four.

But starting 2007, a company looking to list its shares on the NYSE could select a symbol with one to four characters. It is also now possible to find symbols of three characters on the NASDAQ.

As an example of the change on the NASDAQ, the symbol for American Airlines Group Inc is AAL. On the NYSE, Uber Technologies Inc. has the symbol UBER. Stocks listed on the American Stock Exchange also usually have four characters to five characters.

Why we Have Ticker Symbols

Ticker symbols are important for a number of reasons:

  • They make it easier for traders and analysts to identify stocks on stock market websites and trading sites.
  • They indicate the stock exchange on which shares of a company is listed
  • They show how individual stock prices rise and fall
  • Traders and analysts use them to obtain all key information such as earnings reports, stock split, dividend data, etc
  • They facilitate a smooth flow of trade orders in and out of stock markets on a daily basis
  • They help in identifying the type of stocks listed on various stock markets
  • They also may also indicate whether a company is currently undergoing bankruptcy proceedings, or if a company is delinquent in terms of its U.S. Securities and Exchange Commission (SEC) filings.

Here are examples of the most popular stocks and their respective ticker symbols:

There are also some companies that trade with two different ticker symbols on the same stock exchange because they have two classes of common shares, one with voting rights and another without voting rights.

For example, Google parent company Alphabet Inc trades under the symbols GOOGL and GOOG on the NASDAQ. The former represents Alphabet’s class A shares, while the latter represents class C shares.

History of Ticker Symbols

Edward Augustin Calahan, an American electrician, is credited with inventing the world’s first stock ticker system in 1867. According to The New Yorker, Calahan was born in 1838 and went on to serve as the chief telegrapher for Western Union’s New York office during the American Civil War.

While working for Western Union, Calahan had the first-hand experience of watching telegram boys wearing themselves out to deliver messages of buy and sell transactions to brokers in nearby stock markets.

The stock price ticker system that he invented was cutting-edge trading technology at the time. It was basically a telegraph receiver that used Morse code to print information on a paper tape.

Months later, famed inventor Thomas Edison improved Calahan’s system, creating a machine that printed one character per second and used alphanumeric numbers. Edison’s machine was almost as complex as a clock.

It was targeted at the rising new market for alphanumerical tickers that reported price fluctuations on the New York stock and gold markets to subscribing bankers and brokers.

Mechanical stock tickers dominated the financial scene for close to a century until they were made obsolete by television transmissions and computerized tickers in the 1960s. But even though they may be long gone from market floors, they build the foundation for the lightning-quick connected world of the modern financial system.

Ticker symbols were designed to be as short as possible when they were first developed, so they could fit on to the tapes printed by the stock ticker machines. This also made it easier for them to be recognized by investors and traders.

Symbols with E or LF

Traders can also take a dive deep into a company’s current status and history when trading stocks, by paying attention at the following letters attached at the end of a ticker symbol.

E or LF: When the letter “E” is tacked at the end of a ticker symbol on the NASDAQ, this indicates the company associated with the stock has missed one or more SEC filings. Similarly, a company whose ticker symbol contains “LF” on the NYSE has missed several SEC filings.

When trading Nasdaq-listed, take note of ticker symbols ending with the following letters:

  • C: This means a company has not met the listing requirements of the Nasdaq
  • Q:  This means a company has declared bankruptcy
  • V: The company is on course for planning to go through a corporate action plan that is likely to impact shareholders
  • Z or L Miscellaneous. Letter “Z” or letter “L” could have a wide variety of meanings that are important to be aware of.

Bottom Line

Ticker symbols are a series of characters or letters that represent stock or security that is listed on an exchange. Typically, these symbols consist of one to five letters.

Each stock has its own symbol, which makes it easier to distinguish between stocks of publicly-traded companies with, particularly names that sound the same.