Why Do We Need A Ticker Symbol?

Halal Investment Series Part 2

A ticker symbol, also known as a stock symbol, is an abbreviation used to identify a publicly-traded company. A stock symbol can be letters, numbers, or both. So, why do we need a ticker symbol? Investors will not be confused by companies with similar names. It is also easier to write, read, and remember. 

Some companies often trade under two separate ticker symbols on the same stock exchange. This is because companies have two types of common shares, one with voting rights and one without one. On the NASDAQ, Alphabet Inc, the parent company of Google, trades under the symbols GOOGL and GOOG. GOOGL represents Alphabet’s class A shares with voting rights, while GOOG represents Alphabet’s class C shares without voting rights.

History

When modern stock exchanges first appeared in the 1800s, floor traders had to communicate the stock price of a traded company by writing or shouting out the company’s full name. Publicly traded companies grew from dozens to hundreds. It became clear that this process was time-consuming and clogged the information queue. Unable to keep up with rapidly changing prices—especially after the invention of the stock-quoting ticker tape machine in 1867.

Company names used one to five alpha symbols to be more efficient in relaying price changes on company stock to investors.

By using a stock research website online, you can search a ticker symbol and find numerous important pieces of information to help you decide if you should invest. 

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