What Is A Ticker Symbol?
Ticker Symbol is the use of letters to represent shares that are traded on the stock market, and it is mainly a combination of two or three alphabets that is unique and easy for investors to identify and buy/sell that particular stock with the help of this symbol on the stock exchange.
A ‘tick’ is any change in the price irrespective of the direction. The stock ticker symbol automatically displays the required tick with other essential information such as volume and other information investors need on the current market conditions.
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Ticker Symbol Explained
A ticker symbol aims to be as descriptive as possible despite being short in the US. The single-letter symbol is the most prized one. Let us understand how a ticker or stock symbol is determined:
- First Letter: It is the most common ticker symbol matching the initial letter of a company’s name. E.g., ‘F’ is the stock symbolStock SymbolA stock symbol is an abbreviation that refers to a company’s share listed on stock exchanges. It is a unique code comprising a set of characters, i.e., letters, numbers, or a combination of both. of Ford Motor, and Citigroup uses the letter’ C.’
- Company Name: This is also a relatively common symbol for identification, especially the established ones. E.g. AAPL is the ticker symbol for Apple and MSFT for Microsoft.
- Product Name: Some firms also reference the products they sell in their ticker symbol, making them easier to recollect. E.g., The Cheesecake Factory uses CAKE. On similar lines, Harley-Davidson uses the symbol of HOG (a common but informal term for their motorcycles) for easier identification in the market.
- Customer Experiences: Such symbols are mostly used in the service industry since they sell to the consumers. Say Yum! Brands, the parent companyParent CompanyA holding company is a company that owns the majority voting shares of another company (subsidiary company). This company also generally controls the management of that company, as well as directs the subsidiary's directions and policies. of KFC, Pizza Hut, and Taco Bell, uses the symbol of YUM in the form of “Yum! That food was delicious.”
- Sounds: This is a creative way to distinguish the product’s existence in the market, such as National Beverage Corporation (maker of carbonated drinks) using FIZZ to create the essence of the product.
- Numbers: This requires immaculate precision and may not be easily understood by those viewing them not familiar. It is used mainly in Japan. For instance, the ticker symbol for Sony Corporate is 6758, and Toyota Motor Corporation is 7203 on the Tokyo Stock Exchange. There is a specific method whereby the numbers from 6000 are used for machinery and electronic companies in Japan. Subsequently, numbers from 7000 are used for transportation and car companies.
How To Read?
The first digit indicates the general industry, and the random numbers in Japanese ticker numbers do not have specific descriptions making them harder to memorize.
One should also keep in mind the spelling of the tickers as there can be a thin line of demarcation between 2 stocks having close to identical tickets. E.g., in 2013, due to all the hype around the IPO of Twitter, many investors mistakenly invested in Twitter Home Entertainment, which turned out to be a bankrupt electronics firm. The ticker of Twitter was TWTR, whereas that of the latter was TWTR confusing. As mentioned in the initial part of the article, tickers ending with ‘Q’ indicate bankruptcy.
Suppose a ticker symbol is marked with the letters Eon NASDAQ or an LF on the NYSE. In that case, it is an indication that the associated company has fallen behind on its reporting obligation to the SEC (Securities Exchange Commission). These letters are added at the end of the normal symbol. The impacted companies are also set a grace periodGrace PeriodGrace periods are extra days given after the due date to undertake an unfulfilled obligation without penalties. They are a common instance in the financial world and are usually offered to clients who apply for a credit card, student loan, insurance, or mortgage to attract more customers. within which the reporting requirements should be satisfied. Once the requirement is met, these letters are subsequently removed. If the grace period has passed away and the requirements are not met, the security is threatened to getting removed from trading.
Let us consider the following company ticker symbol examples:
Some of the examples are:
- NYSE (New York Stock Exchange) uses the ticker symbol with three letters or a few – such as ‘NYT’ for the New York Times Co. or ‘T’ for AT&T.
- Symbols with four or more letters generally denote securities traded on the American stock exchange and NASDAQ.
- Those ending in ‘X’ indicate mutual funds.
- Certain symbols denote specific status or type of security; say, tickers ending in ‘Q’ indicate issuers under bankruptcy. The letter ‘Y’ denotes security as an ADR.
The below snapshot is a ticker symbol example of what a ticker looks like and the immediate indication it offers:
The position of the stock ticker keeps on scrolling on the ticker screen throughout the day and where it stands then. As the stock market is very dynamicMarket Is Very DynamicMarket Dynamics is defined as the forces of market constituents responsible for the shift in the demand and supply curve and are therefore accountable for creating and reducing the demand and supply of a particular product., the condition of the stock can keep on changing. It may be positive at one point in time and, after an hour, can fall into the red region. Additionally, if some news impacts an entire sector or the overall stock market, one can witness all the impacted stocks in the same direction.
Let us look at the importance of these symbols to understand the ticker symbol meaning more clearly. Some of the reasons indicating the criticality of tickers are:
- It is the key to facilitating the vast volumes of trade occurring globally. The targeted parties can be easily identified.
- The symbols with their additional-letter codes also communicate essential information to the investors about the trading status of a security to the issuer.
- Their absence can confuse the issuers, securities, and securities from the same issuer.
A restricted number of stocks appear on the stock ticker during any period, primarily due to many stocks getting traded at a point in time. The stock ticker with the most significant change in price compared to the previous day’s trading session or those with the highest volume appears on the stock ticker.
This article has been a guide to what is Ticker Symbol. Here we explain it with examples, how to read, and the importance to understand its unique aspects. You may also learn more about corporate finance from the following recommended articles –