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U.S. Supreme Court

Silver v. New York Stock Exchange, 373 U.S. 341 (1963)

Silver v. New York Stock Exchange

No. 150

Argued February 25-26, 1963

Decided May 20, 1963

373 U.S. 341


Petitioners, two Texas over the counter broker-dealers in securities, who were not members of the New York Stock Exchange, arranged with members of the Exchange in New York City for direct-wire telephone connections which were essential to the conduct of their businesses. The members applied to the Exchange, as required by its rules promulgated under the Securities Exchange Act of 1934, for approval of the connections. Temporary approval was granted and the connections were established; but, without prior notice to petitioners, the applications were denied later, and the connections were discontinued, as required by rules of the Exchange. Allegedly as a result, one of the petitioners was forced out of business and the other's business was greatly diminished. Notwithstanding repeated requests, officials of the Exchange refused to grant petitioners a hearing or even to inform them of the reasons for denial of the applications. Petitioners sued the Exchange and its members in a Federal District Court for treble damages and injunctive relief, claiming that their collective refusal to continue the direct-wire connections violated the Sherman Act.

Held: The duty of self-regulation imposed upon the Exchange by the Securities Exchange Act of 1934 did not exempt it from the antitrust laws, nor justify it in denying petitioners the direct-wire connections without the notice and hearing which they requested. Therefore, the Exchange's action in this case violated §1 of the Sherman Act, and the Exchange is liable to petitioners under §§ 4 and 16 of the Clayton Act. Pp. 373 U. S. 342-367.

(a) Absent any justification derived from the Securities Exchange Act of 1934 or otherwise, removal of the direct-wire connections by collective action of the Exchange and its members constituted a per se violation of §1 of the Sherman Act, since it was a group boycott depriving petitioners of a valuable business service which chanroblesvirtualawlibrary

Page 373 U. S. 342

they needed in order to compete effectively as broker-dealers in the over the counter securities market. Pp. 373 U. S. 347-349.

(b) In the light of the design of the Securities Exchange Act of 1934 to give the exchanges a major part in curbing abuses by self-regulation, the rules applied in the present case were germane to the performance of the duty implied by §§ 6 (b) and 6 (d) to have rules governing members' transactions and relationships with nonmembers. Pp. 373 U. S. 349-357.

(c) The statutory scheme of the Securities Exchange Act of 1934 is not sufficiently pervasive to create a total exemption from the antitrust laws, but particular instances of exchange self-regulation which fall within the scope and purposes of the Act may be regarded as justified in answer to the assertion of an antitrust claim. Pp. 373 U. S. 357-361.

(d) In denying petitioners the direct-wire connections without according them the notice and hearing which they requested, the Exchange exceeded the scope of its authority under the Securities Exchange Act of 1934 to engage in self-regulation. Therefore, it was not justified in doing what otherwise was an antitrust violation. Pp. 373 U. S. 361-367.

302 F.2d 714, reversed.

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