NYSE vs Dow Jones

The trade of valuable goods has been there since Neanderthal days with skin trading to today’s hi tech global real-time exchanges. People perceive value differently for different things at different times. Hence we trade and figure out our buys and sells in order to get the maximum value for us. New York is undeniably the financial nerve centre of the world and NYSE and the Dow are undoubtedly its biggest.

Definition of NYSE and the Dow
The Dow is an index and the NYSE is an exchange, a place where people come to trade, i.e. to buy and to sell. The Dow gives an indication as to how the market is doing since it averages the 30 top blue chip stocks of the economy. The NYSE exchange is where all the trades for thousands of companies happen.

• NYSE lists all kinds of stocks and has both floor as well as electronic trading. The largest exchange in the world.
• The Dow lists the 30 top stocks of some of the biggest companies in the world. Although the Dow Empire has now grown into many exchanges, ‘the Dow’ refers to the Dow Jones Industrial Average Exchange in NYC.

A Brief History of NYSE and the Dow

• The NYSE began in 1792 in a room. It was created with the Buttonwood Agreement signed by 24 stock brokers at present day Wall Street. After tremendous growth between 1896 and 1901 and mergers with Archipelago and Euronext, the company has today morphed into NYSE Euronext. The world’s first transatlantic exchange.
• The Dow was created in 90 years later in 1882 by three journalists. Recently News Corporation has taken over it after a 105 ownership by the Bancroft Family which has 64% stake. It was worth $5 Billion at the time of sale.

Functions of NYSE and the Dow

• The NYSE trades via the Hybrid system which got installed after the Archipelago merger. The most liquid stocks get traded through machines while the least liquid stocks get traded on the floor through Open Outcry. Thus it is not electronic like the NASDAQ.
• The Dow was created by industry by putting the 30 stocks into a group making up the index of the biggest companies which are similar in terms of scale and firm returns. In days of yore when computers did not exist, a small sample of the top 30 firms was created to track the entire market and cut the effort for making market decisions.

Examples of NYSE and the Dow trades

• The NYSE trades companies of all sizes including those in Dow.
• The Dow is an index in 30 fixed stocks.

Summary
1)NYSE has seen it all – the Black Thursday, Tuesday & Mondays as well as the recent manic meltdown.
2)NYSE 2009 Market Cap is US$10.8 Trillion
3)The NYSE is an auction oriented market where floor traders conduct most of the trades.
4)The Dow is usually made up of the top 30 NYSE Stocks.

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