a sequence of letters that represent a company on a stock exchange
Ticker symbols are used to represent securities, such as stocks, on exchanges. They are usually a combination of letters that abbreviate the name of a company or commodity – preventing confusion and making it easier for traders to complete orders with speed. Examples of ticker symbols include Apple (AAPL,) Facebook (FB) and Amazon (AMZN.)
Why they exist
Letter-only tickers were invented in order to create consistency in investing and to ensure trades were executed correctly. Back on the trading floors of the 1800s, traders had to shout the names of companies in full. This became impractical as the number of publicly traded companies expanded, and as ticker tape machines (the technology that inspired the name of this format) went mainstream – rendering this old-fashioned practice obsolete.
As well as being used to execute trades, tickers are exceptionally useful for people who are trying to keep track of share prices. Although paper-based machines are a thing of the past, digital tickers offer a stream of information about companies that have had stock recently traded, the price per share, and whether this is an increase or decrease compared with prices when trading closed the day before. This intelligence gives investors an at-a-glance look at how the markets are faring, and data from ticker tapes is often used to drive the charts relied upon for technical analysis.
Companies are given the right to pick their ticker symbol whenever they go public, but what’s allowed varies between stock exchanges. While the New York Stock Exchange and NASDAQ allows businesses to use symbols that are up to four characters long, others have stricter guidelines. Extra letters may also be added on the end of a ticker symbol to denote that a company has failed to meet deadlines on delivering financial filings to regulators.
Although most companies will opt for a ticker symbol that resembles their full name, this is not an obligation. Some may choose a seemingly unrelated string of letters to avoid confusion with other firms that have a similar ticker symbol.