Understanding Stock Tickers
Stock markets rely on two important factors to function effectively. The first is cash and credit; the second is communication. Stock markets have been at the forefront of communications technology changes ever since the introduction of the telegraph in 1844. The New York Stock Exchange has presided over expansions in communications that put increasing numbers of buyers and sellers together. The development of the stock ticker was a critical and fundamental communications tool, which has endured since its invention.
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History
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The stock ticker was invented in 1867 by E.A Calahan, who worked for the American Telegraph Co. The increase in stock trading on the New York stock market and the use of the telegraph to transmit stock prices to traders outside New York, necessitated the need to shorten the time it took to transmit information. Calahan developed a machine that could use the telegraph system, transmit the prices and information and print off the information on a long continuous tape. The ticking sound made by the machine earned it the "stock ticker" name.
Developing Stock Symbols
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The introduction of the stock ticker created the need to devise a new system to transmit the information about the growing number of traded stocks. Instead of longhand company names, symbols or individual letters were used in substitution, thus the American Telegraph and Telephone Company became T.
Ticker information is used by traders, dealers and investors to evaluate the status of the stock information at any given moment. With continuous trading, more and more information is provided in real time, to accompany simple letters and prices.
Standard and Poor's was the first to standardize symbols, to prevent confusion that came with multiple symbols. -
Communicating Valuable Information
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Whereas the telegraph had its limitations, modern trading has no information constraints. However, the ticker symbol remains in use. Alongside ticker symbols are a wealth of important information about the stock, its status and its price.
For example on TV or trading screens, the following information might be seen: C 10K@ 4.35 ^0.15. This information burst communicates information about Citibank's stock, whose last trade was 10,000 shares traded at $4.35, up 15 cents from the previous day's close. Additional letters and symbols are used to provide information about the type of share such as (dot)A or B, which refer to the class of share.
Symbols at the NYSE
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The NYSE was the first market to use ticker symbols and ticker information. The NYSE provided newly listed component companies a unique combination of letters to represent them. Today NYSE uses one-, two- and three-letter symbols. Dow components Ford (F) General Electric (GE) and Kelloggs (K) were early companies. Some companies change ticker symbols as they merge with other listed companies, thus XOM, representing Exxon Mobil, was a new symbol derived from XON (Exxon) and Mobil MOB (Mobil). Hewlett Packard (HWP) and Compaq (CPQ) became HPQ.
Stock Tickers at the NASDAQ
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The NASDAQ market represents many technology and life sciences sector companies, whose listings tend to be four or five letters long . Recognizable companies include Google (GOOG), Yahoo (YHOO), Apple (AAPL) and Microsoft (MSFT).
The NASDAQ provides a ticker service that communicates the stock, its prices, changes in price in dollars, volume and percentage change.
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