Silver v. New York Stock Exchange

Background

Harold J. Silver ran two nonmember broker-dealer firms that relied on private direct telephone wires and ticker service to trade in over-the-counter securities. The New York Stock Exchange ordered member firms to cut the private wires and stopped ticker service without notifying Silver, giving reasons, or holding a hearing. After the wires were removed petitioners said their business and profits fell and they sued the Exchange for violating federal antitrust law and other tort claims.

Reasoning

The Court examined whether the Securities Exchange Act of 1934 impliedly exempts exchanges from the antitrust laws. It concluded exchanges have a statutory duty of self-regulation, and many exchange rules properly govern members’ dealings with nonmembers. But the Act contains no express antitrust exemption, and an implied repeal is disfavored. The Court held that removing the wires was a group boycott that would violate the Sherman Act unless justified by the Exchange Act; here the Exchange gave no notice or opportunity to be heard, so its self-regulation was unjustified.

Real world impact

The decision means antitrust rules can check exchange self-regulation and that exchanges must use fair procedures when enforcement harms nonmembers. The case was reversed and remanded for further proceedings consistent with this rule. The remedy can include damages where antitrust violation is shown, though this opinion leaves some legal standards for later decision.

Dissents or concurrances

Two Justices disagreed, arguing the Exchange should be immune when acting in good faith to police members, and warning against using antitrust law to enforce procedural expectations.