Stephanie Wolfe gets excited whenever her company prepares to list a new ETF because she’ll get to help come up with a clever ticker name — a process she says requires a fair bit of brainstorming.
“To get there does take some thinking and creativity,” said Wolfe, executive vice-president and head of marketing with Global X Investments Canada Inc. in Toronto. “It’s a lot of fun.”
As financial products proliferate, asset managers are flexing their mental muscles to come up with memorable tickers.
Take CASH, which is the ticker for the Global X High Interest Savings ETF. It’s one of the top-traded symbols in the Toronto Stock Exchange (TSX) so far this year, according to TMX Group Ltd., which runs the senior exchange and the TSX Venture Exchange.
“CASH has done very well for us … because a good ticker is one that can communicate what the product does in just four letters,” Wolfe said.
A collaborative effort
There are roughly 1,000 ETFs listed on the TSX and 200 ETFs listed on Cboe Canada. Every month, more ETFs enter the scene. As a result, conjuring tickers that grab investor attention “has become increasingly challenging,” Wolfe said.
Her team of marketing professionals tends to drive ticker naming and also gathers input from the product, legal and compliance teams.
“We do work collaboratively across teams to make sure we’re getting the best ideas,” Wolfe said.
Sometimes, an ETF’s underlying exposure or theme provides inspiration — and the firm strikes gold. CHPS, for example, is the ticker for the Global X Semiconductor Index ETF.
Michael Kovacs, president and CEO of Harvest ETFs, said his firm has a similar strategy. For example, the ticker for the Harvest Travel & Leisure Index ETF is TRVL.
“It is more about the theme or sector than the ticker that determines if [a product] does well or not,” Kovacs said. “The ticker is a method to provide a ‘catchy’ memory trigger when deciding to make an investment.”
Repetition also helps providers differentiate their funds from those of competitors.
Most of Harvest’s tickers incorporate the “H,” such as the Harvest Healthcare Leaders Income ETF (TSX: HHL), Harvest Tech Achievers Growth & Income ETF (TSX: HTA) and Harvest Equal Weight Global Utilities Income ETF (TSX: HUTL), which allows the firm to gain name recognition in the market, Kovacs said.
Hamilton ETFs uses “MAX” at the end of the funds in its yield maximizer ETF series, including the Hamilton Utilities Yield Maximizer ETF (TSX: UMAX), Hamilton Canadian Financials Yield Maximizer ETF (TSX: HMAX) and Hamilton REITs Yield Maximizer ETF (TSX: RMAX).
Studies have shown that financial products with clever ticker symbols perform better as investments. A 2019 study from Pomona College analyzed the performance of 82 stocks and found that those with evocative tickers outperformed the market by about 8% from 2006 to 2018. The study followed an analysis done in 2009 by researchers Alex Head, Gary Smith and Julia Wilson that tested the same theory from 1984 to 2005 and found similar results.
Rob Marocco, global head of ETF listings with Cboe Global Markets in New York, said thematic funds with catchy tickers “typically resonate” with investors. Also, “having common symbology in suites — I think that’s been another area where we’ve seen [success].”
Getting a ticker listed
Firms must provide an exchange with ticker options for an ETF, and the exchange checks if they’re already in use, said Catherine Kee, senior manager, corporate communications with TMX Group in Toronto.
“The company is then provided with the tickers that are available, and they choose,” Kee said.
Tickers are shared among exchanges, Marocco said, “so just because you don’t see a ticker in use today doesn’t mean it’s not reserved or being utilized somewhere else in the ecosystem.”
The research and verification process can take several months, depending on the product.
“New and novel products like … ETFs holding spot bitcoin in the U.S — it took a lot longer,” Marocco said. “It really does run the gamut, depending on how new the product and/or security is.”
If a product is delisted, it takes about a year for its ticker to be added back to the pool of available names in Canada, Kee and Marocco said.
A five-letter future?
The TSX introduced four-letter ticker symbols in November 2016 in response to “tremendous interest from our equities markets clients,” TMX Group said at the time. Before this, tickers were limited to three letters or fewer.
Kovacs said he believes four letters will produce enough variations for tickers “for some time,” and he prefers tickers with a maximum of four letters.
Marocco said “it’s an inevitability” for exchanges to introduce five-letter tickers as products proliferate, but it would require an “industry-wide effort.”
Wolfe said she too foresees an eventual need for five-letter tickers.
For now, she’s content with what she likened to playing Scrabble: “You’re trying to take this theme, this idea, and just make it really simple with just four letters — and of course hope that nobody else has come up with the idea yet.”
This article appears in the October issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.