How do companies 'list' on an exchange?

Q: It was mentioned that Google is going to be listed on the Nasdaq instead of Dow. Could you explain why a company would be listed on one instead of the other?  How does the NYSE or Nasdaq benefit by listing the companies?  Is there some kind of bidding process?  What does the newly listed company get out of the deal? I don't really understand the behind-he-scenes details. —Jim H., Warren, Mich.

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A: You're not alone. The inner workings of Wall Street are a lot like the political process or the manufacture of sausage: Most people would prefer not to look too closely. And Wall Street, for its part, prefers it that way. The less you know about the mechanics of buying and selling stock, the easier it is to charge you fees you're probably not even aware of. (Which is one reason we write the column.)

As for stock trading regulations, there are several layers — some set by the SEC or state securities regulators, others by the exchanges that "list" shares for trading. In general, the New York Stock Exchange requires that companies have a greater market capitalization (the total value of all shares being traded) than the Nasdaq.  These exchanges have various sources of income, but one of them is the fees they charge companies to be listed.

In the past, most companies "moved up" to the NYSE as they grew. But following the tech bubble of the 90s, many larger cap tech stocks chose to remain on the Nasdaq.

The Dow, on the other hand, is not an exchange: It's an index maintained by the publishers of the Wall Street Journal. It's simply a way to track the movement of the overall stock market. But it consists of 30 large companies listed on both the NYSE and Nasdaq, so many people prefer to watch a broader index (like the S&P 500) which tracks 500 stocks.

One reason we all still follow the Dow is that it's been around the longest, started over a hundred years ago by company founders Charles Dow, Edward Jones and Charles Bergstresser.  The three eventually settled on the shorter Dow, Jones and Co. as the name for their company — to the great relief of radio and TV announcers ever since.