Stock Exchange | Stock Exchange Symbols - How The Dynamic Stock Ticker Was Formed

It all starts in the 1800s when Thomas Edison invented the telegraph machine. This made the trading easier, where information was now able to be sent straight to the stock brokers.

So, with the invention of this machine, also came the invention of stock exchange symbols.

Now, we all know of the word stock ticker, but where does the "ticker" part come from?

Well now you know that stock tickers came about with the telegraph machine. It just happens that the telegraph machine made a ticking sound and that is where the "ticker" of stock ticker comes from.

We also know that a stock ticker is a short one to five letter symbol that represents a company. Well, that begs the question, just...

Why Not The Whole Company Name?

So, why exactly is an abbreviation of the company name used?

In actuality, it isn't.

At times the stock exchange symbols associated with a company takes the first few letters (Disney: DIS) or the first letters and the last letter or maybe even (if its a multiple-name company) the first letter of each of the words. But, its not always like that. Sometimes it's something associated with what the company does, such as with AT&T's first stock ticker, T (for telephone).

But back to my main question, why not the whole company name?

Simple answer really...

When the stock market was first starting out and all the rules were being made, they were using the telegraph. And since technology was just getting developed, we didn't have enough bandwidth to transfer the whole company name over the wires.

As you can see today, we still have the same system. But why?

Simply, convenience. Its easier to just memorize the stock symbols because you can view more in the same period of time.

How Are The Stock Exchange Symbols Are Chosen?

Now, lets get into why exactly the stock exchange symbols have the amount of letters that they have, between one and five.

Well, lets start with what happened with the first companies ever to receive stock ticker symbols.

Of course, in the beginning all the letters were available, just like the shorter domain names were available when the internet first came out.

So, because of this, the first companies to join the stock market were lucky enough to receive the tickers that were easiest to remember, the ones with only one or two letters. However, since there were only 26 letters in the alphabet (obviously), the one-letter tickers were awarded to only the companies that were most actively traded.

At the time that this was happening, the only market available was the NYSE, which is another benefit of being one of the first to join since (as you may have known) the NYSE is the most prestigious of all the American exchanges.

Another way that stock tickers are similar to domain names, is that companies can trade them amongst one another. However, with stock tickers (obviously) it is a much more high-stakes game.

Finally, the simple stock exchange symbols evolved to something we know today as the...

Dynamic Stock Ticker

So, what we have today is what is known as the modern day dynamic stock ticker.

These stock tickers (dynamic stock tickers) were invented in 1923 and consist of five different things. Here is an example of what you would see today as a stock ticker:

DIS 2K @ 15.23 ^ 0.07

So, lets break it all down.

The "DIS" is the stock, which we have covered so far.

Next is the "2K". This is the number of shares traded in the most recent trade. In this case, two thousand.

Then the "@" symbol, which simply means "at".

"15.23" stands for the price at which the most recent trade took place at.

From these simple numbers, you can tell how much money traded hands. You simply take the number of securities being traded (2k) and the price at which the securities were traded at and multiply them with each other. You get $30,460.

So, this was a decent size trade.

The "^" symbol simply states that this trade is "up" from the closing price from the previous day.

Finally, the number at the end, "0.07" states the difference between this trade and the closing price from the previous day. In this case, this trade took place 0.07 dollars above the closing price from the previous day.