Every industry has its own argot, often incorporating a specialized symbology that is foreign to the uninitiated. Investors speak the language of ticker symbols, short sequences of letters that uniquely identify each particular stock. From "A" (Agilent Technologies) to "Z" (Zillow Group), every publicly traded stock, mutual fund and ETF carries its own designated symbol.
With roughly 30,000 different symbols in use in the U.S. alone, some are easily recognizable (IBM, GM, GE), while some are inscrutable (X for U.S. Steel).
So how did we end up with this thicket of cryptic symbols?
Formalized stock trading traces its origin to 1792, when 24 investors established a rudimentary exchange under a buttonwood tree in New York City. By 1817, the "Buttonwood Agreement" had evolved into the New York Stock Exchange. Prior to electronic communications, transaction reports were hand-carried by courier or posted via the mails.
Christopher HopkinsShortly after the Civil War, Edward Calahan modified a standard telegraph to transmit stock transactions over a wire to a remote machine that printed the information onto thin paper tapes. By 1868, another enterprising telegrapher, Thomas Edison, perfected the device and made it commercially viable (Edison's first significant invention). The device emitted a distinct ticking sound, and soon "stock tickers" could be heard clacking away in dozens of brokers' offices.
Inevitably, the data being transmitted required substantial abbreviation as the volume increased. Simple one- or two-letter symbols sufficed at first, but gradually the number of traded securities required a more expansive system.
Standard and Poor's created the modern schema of multi-letter symbols currently in use. Until 2007, stocks traded on the NYSE carried one to three letter ticker symbols, while securities traded over-the-counter or on the NASDAQ quotation network carried four and five letter monikers. Since then, companies leaving the NYSE are allowed to retain their shorter symbols even on the NASDAQ.
Given their scarcity, single-letter symbols are highly coveted. Some trace their lineage to the early 20th century, including Sears (S), AT&T (T) and Ford Motor Co. (F). When a firm vacates its ticker, a scramble often ensues to claim the identifier, as when Chrysler was delisted and surrendered the ticker C to Citigroup.
Companies pursuing listing as a public company often exercise some creativity in selecting their stock tickers. Southwest Airlines, originally based at Love Field in Dallas, debuted on the NYSE as LUV. Harley Davidson (HOG), Cedar Fair Amusement Parks (FUN) and Brinker Restaurants (EAT) are readily recalled by potential investors.
The trend toward clever or even funky symbols has accelerated with the explosion in exchange traded funds (ETFs). Some notable examples include: RING (gold), AMPS (utilities), CANE (sugar), WOOD (timber), and MOO (agribusiness). Additional examples abound and are growing weekly.
The choice of a trading symbol is not unimportant. While research on the subject is sparse, there have been academic papers suggesting that stock performance is tangentially correlated to the "likeability" of the ticker symbol.
Given the known psychological factors that impede rational investment decisions (discussed previously in this space), it is perhaps not surprising that stocks with familiar, clever or likeable symbols tend to evoke more positive mental associations than those with more obscure, meaningless or "ugly" tickers.
While the ticker machine disappeared in the 1970s (and with it the iconic ticket tape parade), the concept lives on in the scrolling electronic crawl retained as a paean to an older time in the lobbies of brokerage firms and across the screen on CNBC. Still, the ticker symbol remains central to investing even in the modern era of internet trading. Only now, the computer can find it for you.
Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett & Co. in Chattanooga.