Each stock listed on U.S. stock exchanges has a symbol of one, two, three or four letters. You see these ticker symbols scrolling across the TV along with the price and volume of the trade.
Think of stock symbols as nicknames for stocks. They’re the immediately recognizable mark of endorsement of any company. No two businesses share the same designation. In many decades past, the symbols were used on the trader’s tickertape to denote the prices of various stocks. They perform the same function today though the tickertape is just as likely to be a digital readout on a computer terminal or television set.
Shares traded on the New York Stock Exchange (NYSE) typically have two or three letters. A handful of companies that have been around for a while have a prestigious single letter. AT&T goes by “T.” Ford has “F” and “X” is for U.S. Steel. In the past NASDAQ listed companies had four letters. In 2007, the Securities and Exchange Commission (SEC) changed its regulations to allow companies to move from the NYSE to the NASDAQ, taking their three-letter ticker symbols with them. However, companies that have one- or two-letter symbols cannot take them to the NASDAQ. There was public comment on this transition.
According to financial writer Tim Plaehn, “In 2009, the SEC turned the approval of stock symbols over to the Options Clearing Corporation. At the same time, some companies on the NYSE were allowed to change to four-letter ticker symbols. Among the first NYSE companies to get new symbols were Pike Electric, going with PIKE; and Companhia Vale Do Rio Doce, VALE.”
Most symbols are simply contractions of their companies’ full names. Dow Chemical is “DOW,” Microsoft is “MSFT” and Intel Corporation goes by “INTC.” Honeywell is “HON,” while International Business Machines is, simply enough, “IBM.” On the other hand, some companies use their symbols to designate the business they’re in. For instance, Sotheby’s is “BID,” Cheesecake Factory is “Cake,” and Yum Brands is “YUM.” Harley Davidson goes by “HOG.”
And the symbols of some companies have nothing to do with either their corporate names or their lines of business. Southwest Airlines Company is LUV. No, Southwest is not in the love business. The carrier’s home airport in Dallas is Love Field.
Larger companies that have multiple subsidiaries often have several classes of stock. That way Wall Street can invest in a single unit of a larger company without having to buy stock in the larger entity. For example, many investors didn’t want to buy General Motors stock during its troubles in the late 1980s. But they still could get a piece of Electronic Data Systems (EDS), the highly profitable data processing concern founded by Ross Perot and owned by GM. That’s because at that time EDS was represented by a separate class of General Motors stock — which had the symbol of “GME.”
Stock ticker symbols are as much about Wall Street as brokerage firms, stock exchanges and all the rest. For many listed companies their tic symbol is part of their storied history and in some cases a source of real company pride.
Quote of the week: “Variety’s the very spice of life — that gives it all its flavour.” Cowper, “The Task, II”
Bart Ward is the chief executive officer of Ward & Co. Ltd., an Anoka-based registered investment adviser – specializing in the management of stock and bond portfolios in companies which are listed on the NYSE.