News

Dow Jones is getting out of the Dow Jones industrial average business, selling its iconic index and other stock market gauges to the Chicago Mercantile Exchange.

The sale marks the end of a relationship going back to 1896, when Charles Dow created a 12-stock index to help investors understand how the market was faring on any given day. Dow Jones & Co. Inc. has operated the index ever since, and investors around the world associate its performance with the economic health of the world's largest economy.

"The Dow name hasn't lost any of its lustre over the years because it's what people look for when they start looking to see how stock markets are doing," said Fred Ketchen, a long-time stock market commentator and director of equity trading for Scotia Capital Inc. "There's a wonderful sense of history there."

The Chicago Mercantile Exchange (CME) - a derivatives market that offers futures contracts and options on financial products such as interest rates, stock indexes, foreign exchange, and commodities - will spend $675-million (U.S.) for a 90-per-cent stake in the Dow Jones Indexes. The deal will allow the CME to create its own derivative products under the Dow Jones brand, and allow Dow Jones to focus on its news operations.

News Corp., headed by media baron Rupert Murdoch, paid a hefty $5.7-billion for Dow Jones & Co. in 2007.

New products are about the only changes the new owners have in mind at this point, according to both companies. There is a deal to "license the Dow Jones name for the new index services business on a long-term basis," which means the historic index will not renamed. The 30 companies that make up the benchmark index will still be selected by editors at The Wall Street Journal.

While many think of indexes as a quick way to gauge the broader performance of a stock market, they are also used by large institutional investors to assess their own performances.

"That's an incredibly important benchmark for large institutions such as pension funds," said Steve Foerster, a professor at the Richard Ivey School of Business at University of Western Ontario. "It's a standard bar they can all be measured by."