Pass by any stock exchange, and you'll likely see numbers and letters flying by, but do you know what they are? Ticker symbols serve as the base language of any stock exchange, and it's important to understand them if you plan to invest.
What Is a Ticker Symbol?
A ticker symbol is an abbreviation—generally represented as a collection of letters— used to identify a publicly traded security. Ticker symbols vary depending on what stock market they are traded on. They can consist of letters, numbers, or a combination of both. Sometimes they are also called "stock symbols."
When they were first developed, they were designed to be as short as possible so they could fit onto the tapes printed by the stock-quoting ticker machines of the mid-1800s. While digital displays are used today, ticker symbols remain short in length.
Ticker symbols are most closely associated with stocks, but other types of publicly traded securities like ETFs, mutual funds, and cryptocurrencies have them, too.
How Do Ticker Symbols Work?
Each stock exchange uses a different naming convention for ticker symbols. Typically, securities listed on New York Stock Exchange or American Stock Exchange have three or fewer characters. Stocks listed on Nasdaq usually have four to five characters.
Often, a stock's ticker symbol is an abbreviation of the company's name, although this isn't always the case. Most companies get to select their ticker symbol once they become publicly traded entities.
You will see ticker symbols most often on stock tickers—the digital screens that show the prices of securities and how they are being traded in real-time. When looking at a stock ticker, each ticker symbol might be followed by additional letters and numbers that provide information about the company's pricing, whether that price is going up or down, the stock's trading volume, and more.
Why Are Ticker Symbols Important?
In short, ticker symbols are important because they are used to accurately identify publicly traded stocks and equities. They are the backbone of being able to read and understand a stock ticker.
They become especially useful when multiple companies have similar names but are not affiliated with one another. They can also help differentiate company divisions that perform entirely different services or carry entirely different products.
If an investor hopes to put money into a stock, it's important for them to identify the correct ticker symbol. This ensures that they are performing their due diligence and ultimately investing in the correct company.
What Do the Letters After Ticker Symbols Mean?
Ticker symbols and any additional letters that follow them can provide information about which type of securities they represent.
Option ticker symbols are based on the asset and contract terms. Mutual fund ticker symbols usually consist of letters and end with the letter "X." When a ticker symbol has an "E" or "LF" following its name, this shows that the company has not met the Securities and Exchange Commission's reporting requirements. If the company never follows up on this reporting, it could be barred from trading publicly until the requirements are met.
On the Nasdaq in particular, the letters that come after a ticker symbol can be a good indicator of when to take a dive deep into a company's history and current status before investing. This is especially important when seeing the following letters tacked to the end of a ticker symbol name:
- C: This indicates that the company does not meet the stock exchange's listing requirements
- E: This indicated that the company is missing one or more SEC filings
- L: This is a miscellaneous indicator that could have a wide variety of meanings depending on the context.
- Q: This indicates that the company has declared bankruptcy.
- V: This indicates that the company's shares are preparing to go through a corporate action plan that could impact shareholders.
- Z: This is another miscellaneous indicator. Like the letter L, it could have a wide variety of meanings that are important to be aware of.
Ticker Symbol Examples
Securities listed on the New York Stock Exchange typically have three or fewer characters and are similar to the company names. Here are some examples of NYSE ticker symbols and the companies they represent:
- Advanced Auto Parts: AAP
- Delta Air Lines: DAL
- General Electric: GE
Securities listed on Nasdaq have longer ticker symbols, such as:
- Amazon: AMZN
- Bed Bath & Beyond: BBBY
- Starbucks: SBUX
