Tuesday, March 13, 2007
Upping the war with the New York Stock Exchange for stock listings, the Nasdaq on Monday said it will start accepting companies with one, two and three letters in their stock symbols.
This removes one of the clearest demarcation lines between Nasdaq and NYSE: Until now, a Nasdaq stock had at least four letters in its symbol such as MSFT for Microsoft or GOOG for Google . While the change may seem mundane, it's significant because it:
• Makes switching exchanges easier. Allowing symbols of different lengths removes a last psychological barrier companies have when considering moving their listing to the Nasdaq from another exchange, says Bill O'Brien at Nasdaq. So companies like IBM , GM or GE, for instance, could now switch their listing to the Nasdaq without losing a symbol that has long been their badge of honor on Wall Street. Delta Financial became the first company to take up the Nasdaq's offer — though it won't be the NYSE's loss. It will carry the symbol DFS when it moves from the American Stock Exchange to the Nasdaq on March 22.
"Companies get attached to their symbol: It's part of the corporate and brand identity," O'Brien says.
Letting companies keep their symbols could be a minor selling point for listing a stock, says Larry Harris, finance professor at the University of Southern California. "Some firms care about their ticker symbol," he says. By limiting to four-letter symbols, the 423 non-Nasdaq stocks in the current Standard & Poor's 500 would have had to change symbols to list on Nasdaq.
• Helps shed lingering stigmas of Nasdaq's early days as a haven for over-the-counter shares. Last year, Nasdaq separated from its parent, the NASD, and became a full-blown, self-regulated exchange on par with the NYSE. Allowing short symbols is the next PR move. "It's generally held a short ticker symbol is a high-status item," Harris says. "It's another way the Nasdaq can show the world it's a real exchange."
• Introduces some confusion. Investors could recognize Nasdaq stocks instantly by their four-letter symbols. That goes away now.
Some question if the move alone will help Nasdaq win listings. Hans Stoll, professor of finance at Vanderbilt, says previous efforts have had mixed success. Only 11 companies have made the NYSE-to-Nasdaq switch since 2004. The NYSE will stick with one-, two- and three-letter symbols, spokesman Rich Adamonis says.
With the symbol issue eliminated, though, the NYSE and Nasdaq will compete on things like quality of trading and fees, he says. "It's nice to retain the symbol," Stoll says. "But it's not a fundamental factor in the desirability of an exchange."