Stock symbols are used for unique identification of every single publicly traded stock on a specific stock exchange.
Stock symbols or stock tickers are used for unique identification of every single publicly traded stock on a specific stock exchange. They are normally very short, less than three characters, consisting of alphanumerical characters.
History of Stock Trading Symbols
Ticker symbols were invented in the Wall Street's history in 1800's, when special machines were transmitting stock market information over telegraphs and translating them into readable information to investors. Since the communication bandwidth was not that sophisticated back then like it is today, they were optimizing the data transfer by assigning only one letter stock symbols to companies with the highest trading volume and two letter symbols for all other stocks.
Interpretation of Stock Trading Symbols
Every stock that is traded on a specific stock market is identified by a unique stock market ticker. A company can pick up its own ticker, as long as it is not already used. It is quite often that companies use their brands as a ticker, like for example the brewer Anheuser-Busch, which was acquired by InBev in 2008. They have used BUD as their ticker, representing their most important brand Budweiser, globally known beer. Another example of use of the brand as a ticker is Sun Microsystems brand JAVA, which is a well known programming language as you are probably aware of. Other companies use meaningful symbols as tickers; for example AT&T's ticker is just "T", referred to "Telephone". Companies that merge often use also merged tickers afterwards; an example of such ticker is "HPQ", which is partly representing the Hewlett-Packard company on one side with former stock symbol "HWP" and the merged company Compaq with former ticker "CPQ".
Bank of America
International Use of Stock Trading Symbols
Stock symbols provide a very simple and clear way in which world countries with all the different languages can communicate the stock market data between each other. Imagine how confusing it would be to read company names from Arabia or East Asia for Western reader and vice versa. As you will see, majority of Asian stock markets use numerical stock tickers instead of alphabetical characters; the reason for that is simply the need for international understanding.
Taiwan Mobile Co.
China Mobile Ltd.
Toyota Motor Corporation
Shanghai CITIC Bank Corporation Limited
Reliance Industries Limited
Is Stock Symbol Unique Identifier of the Stock?
Stock trading symbols are uniquely identifying stocks only on the local stock exchange, but not internationally! You can find same tickers for different stocks on different exchanges. For example stock symbol CHL is a symbol for China Mobile ADR stock traded on NYSE and this same symbol is also used for China Life Insurance GDR stock traded on Frankfurt stock exchange.
The leading guideline used for global stock market trading is the ISIN code. International Securities Identification Number or shortly ISIN is a unique identification of a security with twelve alpha-numerical characters. ISIN codes can be used with different kinds of financial instruments like stocks, bonds, options and futures.
ISIN code as defined in ISO 6166 is not identifying securities as such, but serves as a unique ID of a stock in a process of trading and later on in a settlement phase. The ISIN is also not identifying the stock exchange on which the security is traded and is not a substitute for stock ticker on a specific exchange.
For example, the stock of Microsoft company trades on several exchanges: Nasdaq, Hong Kong, Deutsche Boerse, Stuttgart and Euronext; the ISIN code for Microsoft stock is the same on each exchange, while this is not true for the ticker symbol, which is different across mentioned exchanges.
If you are a beginner investor or trader, you shouldn't worry about not knowing and remembering all stock trading symbols. You will get used to them with time, at least for the stocks you will trade often.
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