America Risks Running Out of Tickers for Single-Stock ETFs
(Bloomberg) -- Securing a snappy ticker is a high-stakes mission in the $10 trillion exchange-traded fund arena. For issuers launching funds riding the boom in single stocks – Tesla Inc., Apple Inc. and more – standing out from the crowd is only getting harder by the day.
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US exchanges currently allow a four-character limit for tickers, which produces a functionally infinite number of combinations: 456,976, theoretically. However, if you narrow it down to the burgeoning world of single-stock ETFs, the possibilities dwindle dramatically, given that the symbol must be built around an existing ticker — that of the company it’s tracking.
Take the recent wave of MicroStrategy-inspired ETFs. MicroStrategy carries the ticker MSTR, leaving issuers with one character of real estate if they chop off the letter ‘R’ (MS by itself belongs to Morgan Stanley). That leaves just 52 or so realistic options, assuming the extra letter is placed either before or after ‘MST’ — and at least five MicroStrategy single-stock ETFs have already launched in the US.
It’s a growing concern in the ETF arena given that catchy tickers are serious business. Not only is a memorable ticker a way to differentiate in a congested field of similar products, but research shows that stocks with tickers that are actual words tend to benefit from lower spreads and greater liquidity. As a result, issuers are under pressure not just to be creative, but to be quick as well — and in some cases, start hoarding.
“Competition for them has never been fiercer,” said Gavin Filmore, chief revenue officer of white-label firm Tidal Financial Group. “In a way similar to ‘cybersquatting,’ we can see market participants constantly grabbing tickers, especially as certain sectors or themes become more crowded.”
For anything related to Bitcoin, for example, tickers with ‘BTC’ or ‘BIT’ in them are hard to get, he added.
That has made some issuers hoard tickers. Take Matthew Tuttle, chief executive officer of Tuttle Capital. He, along with Rex Shares, recently launched the T-REX 2X Long MSTR Daily Target ETF (ticker MSTU). Tuttle estimates that he’s sitting on about 20 tickers at the moment. In fact, he’s had monikers including DUMB and DUMP on reserve for years, just in case.
“There are guys who are going to stockpile symbols — maybe me, for example — and on the good names, you are potentially going to run into an issue,” Tuttle said. “You also really want like the ‘U’ or something like it for the bull, and a way to discern between the bull and the bear if you do both sides.”
That scarcity mindset is making life a little bit harder for the likes of Will Rhind, chief executive officer of GraniteShares, the company that’s home to dozens of single-stock ETFs across the US and Europe. Nowadays, GraniteShares is turned down “more often than not” by the exchanges for single-stock ETF ticker requests. That’s either because the combinations they’re seeking have already been reserved or belong to funds that have been delisted, Rhind said.
Issuers could get some wiggle room if US exchanges expand the character limit, some argue. Bloomberg Intelligence research shows that while older ETFs launched with three-character symbols, four-letter tickers have made up the bulk of new launches for nearly 15 years.
Nasdaq doesn’t currently have plans to expand the character limit, Jeff Thomas, its chief revenue officer and global head of listings, said in a Bloomberg Television interview.
“I don’t think there are any concerns today around a ticker shortage,” he said. “We do occasionally get questions from companies saying, hey, how can I get more creative on these tickers? Can I include numbers in addition to letters?”
Cboe declined to comment. Douglas Yones, head of exchange-traded products at New York Stock Exchange, said the firm “has always been able to satisfy the ticker symbol needs” of issuers.
Another workaround could be to allow numbers, which is common practice in places such as Europe and Asia. Rhind of GraniteShares said that the ability to add numbers would help communicate a product’s leverage level to investors, such as with the Europe-listed GraniteShares 3x Long Rolls-Royce Daily ETP (ticker 3LRR).
“I personally think that would be a good addition. Certainly for leveraged products, that makes all the difference in the world,” Rhind said. “All our products in Europe follow that naming architecture, so I think that does help and would add some additional breathing space for people who find it difficult to find tickers.”
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