Every stock, ETF, and mutual fund that is publicly traded is assigned a unique ticker symbol by which investors and regulators can track it.
In many cases, a ticker is an abbreviated or truncated version of the company name: Microsoft, for instance, has MSFT as its ticker. Boston Beer Company, on the other hand, uses SAM as its ticker in homage to its Sam Adams label.
Because tickers are often similar to one another, investors must take care that they're buying and selling the correct company. The Wall Street Journal once reported that Petrobras Energia Participaciones experienced a two-week mistaken buying spree when commentators mistakenly recommended its ticker (PZE) instead of the ticker of parent company recommendation Petroleo Brasileiro (PBR).
The term derives from the way stock quotes were communicated to investors. Historically, movements in stock prices were printed by "tickers" onto "ticker tape," and abbreviations in the company name made that printing more efficient. In those days, a company could have different ticker symbols for every individual stock market.
Standard & Poor's standardized those various ticker symbols, and the securities industry later enhanced that standardization further. Today, different exchanges have different rules. Stocks traded on the NASDAQ exchange typically have 4 letters, while stocks traded on the NYSE have 3 (or fewer) letters. In 2007 the SEC approved a rule allowing companies to keep their ticker symbols when they moved between stock exchanges, so ticker symbols are no longer a reliable way to tell on which exchange a stock trades.
Recent Mentions on Fool.com
- Here's How to Play Low Oil Prices
- Are Gilead Sciences, Inc.'s Expectations Too High for This Drug?
- Better Buy After the Separation: eBay or PayPal?
- Hewlett-Packard Company Reveals More Spinoff Detail (But Investors Still Need to Know Even More)
- Stocks to Watch in E-Commerce: eBay (and PayPal)
- What Investors Need to Know About the Alarm.com Holdings IPO