Nasdaq Easy as A-B-C

The rules had been sent down from on high, engraved on stone tablets: Thou shalt not have more than three letters in thy ticker symbol if thou listest on the New York Stock Exchange. Thou shalt not have fewer than four letters in thy ticker symbol if thou listest on the Nasdaq exchange.

Like the Earth revolving around the sun, and night following day, this was the order of the world. Until now.

Under a proposal submitted by Nasdaq, companies will be able to select ticker symbols that have just one, two, or three letters beginning in 2007. Currently, they have to choose a four-letter symbol (if it has five letters, it means something). Only stocks that list on the New York Stock Exchange have been able to display tickers with fewer than four letters. When the modification occurs, it will be a visual sea change for investors, who often relied upon the number of letters in the ticker symbol to determine the exchange on which a stock was listed.

Investors knew from the three-letter symbols of IBM (NYSE: IBM  ) , ExxonMobil (NYSE: XOM  ) , and Bank of America (NYSE: BAC  ) that were listed on the world's oldest stock exchange. Cisco (Nasdaq: CSCO  ) and Motley Fool Stock Advisor pick Dell (Nasdaq: DELL  ) were conversely Nasdaq-listed companies. If companies adopt fewer letters in their ticker symbols, we'll have to spend a few more seconds to sort this out.

With a one-, two-, or three-letter stock symbol, a company would have one less reason to leave the Nasdaq for the Big Board.

It's a long-held belief that the NYSE reserved the letters "I" and "M" for Intel (Nasdaq: INTC  ) and Microsoft (Nasdaq: MSFT  ) , respectively, if they had been successfully wooed from the technology-laden exchange. This proposal might effectively let any company steal those symbols, though the one-letter tickers are generally reserved for the larger, better-known companies. Think Citigroup -- "C" -- or Ford -- "F."

The proposal is ostensibly in response to a request by the Securities and Exchange Commission for the stock exchanges to mutually agree upon a system of distributing ticker symbols. The Nasdaq, as the world's largest electronic exchange, can capably handle all 6,700 publicly traded companies. Should a disaster strike that prevents the NYSE (or the American Stock Exchange, which also uses three-letter tickers) from conducting trades, the Nasdaq exchange could step in, since it does not have a physical location at which to conduct the trades.

While it may have been true once upon a time, a Nasdaq listing is no longer seen as second-tier. It's one of the reasons why Dow Jones & Co. tore down another barrier between the exchanges back in 2000 and included both Microsoft and Intel in the venerable 30-stock industrial average. Before then, it had been the exclusive preserve of NYSE-listed stocks. Yet an established company might not rush to change its symbol. Ticker symbols have become marketing tools as well. More letters, rather than fewer, might be more advantageous to a company.

It might also mean that the Earth will start orbiting the moon.

Bring stock ticker symbols within your orbit with these related Foolish articles:

Dell is aMotley Fool Stock Advisorpick. For a 30-day free trial to the best of Tom and David Gardner's picks, click here.

Fool contributor Rich Duprey owns shares of Ford but does not own any of the other stocks mentioned in this article. The Motley Fool has a disclosure policy


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