Stock Symbols, CUSIP and Other Stock Identifiers

Posted on Friday, August 3rd, 2018 MarketBeat Staff

In this world of e-commerce, we're used to money moving rapidly and seamlessly from point A to point B without ever having to exchange hands. One thing that facilitates these transactions is the practice of having our social security number, account numbers, and even usernames and passwords as a means to verify our identity. These symbols have become so integrated into our way of life, that we could not imagine transacting business without these means for keeping our personal information protected.

All this brings us to the topic of this article, stock symbols. This article will explain what stock symbols are, what basic information they provide, why they were created, and what other symbols are used to help keep stock transactions safe and secure.

What are stock symbols?

Stock symbols are the unique alphabetical indicators that identify a particular security traded on public exchanges such as the New York Stock Exchange (NYSE), American Stock Exchange (AMEX) or the National Association of Securities Dealers (NASDAQ). They are between one and five characters long, with additional characters being used for special issues like mutual funds or different classes of stock, such as preferred stock.

Stock symbols are similar to texting language in that they are both a form of shorthand. They are both used regularly and their meaning can be recognized quickly by anyone who is familiar with them.

Today, stock symbols can be easily found through a search engine, making it easy to know that the symbol matches the stock you own or are researching. But it wasn’t always that way. My introduction to investing was sitting at the kitchen table with my Dad. He would tell me what the symbol was for a stock that he owned and have me find it. Since stock symbols are listed alphabetically, once I knew the symbol it became easy for me to find and track.

What do the additional characters after the symbol mean?

Occasionally, you'll see an additional letter or letters after the stock symbol. These special characters provide additional information about a stock. For example, some companies have more than one class of shares (class A, class B, etc.). In this case, the stock symbol will have an additional character after it. If companies offer a preferred variation of their stock, it will be accompanied by the letters “PR” after the stock symbol.

The meaning behind these additional symbols run the gamut from indicating which shares contain full, limited, or no voting rights, to indicating that a company is in bankruptcy proceedings. However, it’s like reading a box score. Once you understand what the alphabet soup means, you can glean details about the stock.

On the NYSE, these additional characters will be preceded by a period. So, for example, Class A shares of Bank of America (BAC) stock would be listed as BAC.A. The NASDAQ simply adds the additional letter without an additional punctuation mark. 

The meaning of the letters (from A to Z) is as follows:

A = Class A shares

B = Class B shares                              

C = Issuer Qualification Exception*

D = New issue of existing stock

E = The company is delinquent or has missed one or more SEC required filings*

F = Foreign issue

G = First convertible bond

H = Second convertible bond

I = Third convertible bond

J = Voting share

K = Non-voting share

L = Miscellaneous*

M = Fourth-class preferred shares

N = Third-class preferred shares

P = First-class preferred shares

Q = Company is in bankruptcy proceedings*

R = Rights

S = Shares of beneficial interest

T = With warrants or with rights

U = Units

V = When issued and when distributed *

W = Warrants

X = Mutual funds

Y = American Depository Receipt

Z = Miscellaneous situations (see L)*

OB = Over-the-counter bulletin board

PK = Pink sheets stock

SC = Nasdaq small cap

NM = Nasdaq national market

Letters marked with an asterisk means that there could be fundamental issues that will adversely affect the price of a stock. They are indicators that investors should be certain to perform due diligence before trading these securities.

Are symbols different on the NYSE and NASDAQ?

Prior to 2007, the NYSE used symbols that were between one and three letters. Some of these symbols were intuitive. For example, General Motors was GM. However, some were not as clear. As an example, U.S. Steel was simply X. These symbols, however, were critical for giving each security a unique identifier on the ticker tape that was projected for stock trading. The NASDAQ started using its own automated quotation system in the early 1970s and made a four-character symbol its standard. As an example, Microsoft was given the symbol MSFT. However, since 2007, both indices have standardized on using either a three- or four-letter symbol to identify new individual securities. And if a company that was once traded on one exchange moves to another, they do not have to change their stock symbol. However, when it comes to the symbols themselves, there is no hidden meaning behind the number of letters that are used. They are just there to provide as much clarity as possible.

What if I can’t find my company’s symbol?

A stock symbol lookup identifies the name of a publicly traded company. This may trip up new investors who are looking for a specific brand name. In many cases, a brand name is part of a larger parent company. For example, KitchenAid is a brand name for home appliances. However, you won't find their company name on any stock exchange, and they don’t have a stock symbol. While they were, at one time, a privately held company, they became part of the Whirlpool Corporation in the 1980s. So the only way to buy stock in KitchenAid is to buy stock in Whirlpool Corporation (WPL) and all the brands that are associated with the corporation. Conversely, if you were looking to buy stock in Whirlpool, the stock price is not just tied to the Whirlpool brand name, but to all the brand names that are sold by the corporation.

Why are stock symbols used?

The simple answer is that the size and scope of investing have changed and stock symbols allow transactions to happen swiftly and accurately. Stock symbols date back to the 19thcentury with the introduction of modern stock exchanges and with it the electronic ticker tape machines that would record and spit out price changes.

A floor trader would have to alert other traders about a change in the stock price of a company by saying or writing out the full name of the company. When there were only a few dozen companies on the stock exchange this was a fairly straightforward process. But as the number of publicly traded companies went from the dozens to the hundreds, this system quickly became inefficient. Information (in this case, price changes) were coming in faster than the traders could communicate them. And the problem only got worse as the ticker tape machines started providing a way to automate these transactions.

To add efficiency to their process, ensuring investors got the price change information they needed, the exchanges created a system whereby each company name was shortened to a symbol composed of three to five alphabetic symbols.

But as the list of publicly traded companies has continued to expand, there are additional reasons for using stock symbols. First, many companies have similar names. For example, there is CIT Group, Inc. and Citigroup, Inc. Although both companies are in the same sector, they are different businesses. Allowing each company to have its individual symbol (CIT for CIT Group, Inc. and C for Citigroup, Inc.) makes it easy for an investor to know which company they are trading.

Another reason for using symbols becomes clear when a company spins off one or more business units into separate, publicly traded companies. A good example of this is Hewlett Packard who split their business service and hardware division (Hewlett-Packard Enterprise) from their consumer-facing computer and printer division (HP Inc). Each division now has its own symbol. HPE for Hewlett-Packard Enterprise, and HP for HP Inc.

How are CUSIP numbers different from stock symbols?

CUSIP numbers are an additional set of numbers used to identify a security for the purposes of allowing computers to easily clear the transactions. They were developed during the late 1960s during an event called the “Paper Crunch”. As we mentioned above, stock symbols were created to make it easier for traders to relay information about price changes that would be recorded by the stock ticker. However, after the transaction was made, the money had to find its way from point A to point B. Because the process of “clearing” these transactions were done by paper, these transactions could frequently become backlogged for days. It's hard to believe today, but in 1968, the NYSE would actually close on Wednesdays just to help ensure securities were delivered. When we can make electronic transactions in real time, it’s almost incomprehensible that during this time billions of dollars’ worth of securities might have been undelivered by their due date.

Fortunately, this was also the time when computers were starting to be used to quickly process information. However, stock symbols were alphabetical. Computers function better with numbers. Enter the CUSIP number.

The CUSIP number is a nine-character code that provides a way to clear and settle trades. The first six digits (the CUSIP-6) uniquely identify the issuer. The seventh and eighth digits define the exact issue and the ninth digit is an automatically generated check to help ensure the integrity of the data. The last three digits may be letters to allow for future expansion. Here’s an example.

The CUSIP-6 for AT&T is 001957. If the transaction is for common stock the last three digits are 109 (001957109). However, if the transaction is for bonds, the last three digits become unique to that issue, in this case, AJB (001957AJB).

What is a CINS number?

The CINS number is a nine character code similar to a CUSIP number. CINS is an abbreviation for CUSIP International Numbering System and it provides a unique identification for securities sold outside of the United States and Canada. The distinction between a CINS number and a CUSIP number is that a CINS number will have an alphabetic character in the first position to designate the issuer’s country or geographic region.

Are there any other stock identification numbers?

Two additional numbers of note are the International Securities Identification Number (ISIN) and the Stock Exchange Daily Official List (SEDOL). ISIN is a code that is initiated by the National Numbering Agency (NNA) of a specific country and acts similarly to a CINS or CUSIP number. The SEDOL number is a seven-digit alphanumeric code for securities in the United Kingdom.

The bottom line on stock symbols

Stock symbols and additional safeguards such as CUSIP numbers exist to ensure the speed and accuracy of today’s digital trading. They are one way that the investment community has adapted to the increase in publicly traded companies and the continued volume of trading that requires speed and accuracy. Just as future generations won't be able to imagine what a paper check looks like or why it was needed, any investor alive today has never known what investing was like without stock symbols.

As this article shows, you can gain a lot of information about a company from the stock symbol which can guide your research. Why are they issuing different classes of shares? Why have they missed a filing date with the SEC? Which shares have voting rights? Taking a few minutes to look beyond a company’s stock price and market cap can help you see if the company has “good bones” and makes a good investment.

 

 

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