Stock symbols help facilitate a huge number of trades every day. Before the ticker tape system, floor traders communicated orders by shouting the name of a company – stock symbols were introduced to reduce the time needed to disseminate information.
In addition to speeding up transactions, stock symbols meant that traders could easily differentiate between companies with similar names. For example, Citigroup Inc and CIT Group Inc are completely separate companies but it is easy to see why their names might confuse traders. Their ticker symbols mark this difference more clearly – Citigroup Inc is ‘C’, while CIT Group Inc trades under ‘CIT’.
Stock symbols also enable traders to differentiate between classes of a stock. For example, Berkshire Hathaway (BRK) has two different classes of shares listed on the NASDAQ – its class A shares trade as BRK.A, while its class B shares (that have fewer voting rights) trade as BRK.B.
The tickers can be used to convey other information about a company’s status as well. For instance, if the letter ‘Q’ follows the stock symbol, it is an indication that the company is bankrupt.
Although each stock symbol is unique for the exchange it is listed on, similar combinations or exact matches can exist on different exchanges. For example, TSCO is the stock symbol for Tesco Plc on the London Stock Exchange but is the ticker for Tractor Supply Co. on the NASDAQ. Traders should always make sure that they are taking a position on the right share price.