of securities, hours of trading, the reporting of transactions,
and "similar matters." Listed ninth among these matters for
exchange rules is "(9) the fixing of reasonable rates of
commission, interest, listing, and other charges." Section 19(b)
(9), 15 U.S.C. § 78s.
It may be conceded that the rulemaking power thus conferred is
granted in a manner which is somewhat oblique. No simple
declarative sentence vests the exchange with power to fix minimum
rates. Yet the power is recognized by the plainest implication.
The SEC's authority to request changes in rules concerning "the
fixing of reasonable rates" necessarily presupposes rules of the
Exchange on that subject. If none were adopted by an exchange,
the SEC could "supplement" them, after due request.
The plaintiffs seek to support their per se attack, in the face
of this Congressional sanction for rate-fixing, by emphasizing
the requirement that rates of commission must be "reasonable."
Prescribed minimum rates, they assert, can never be "reasonable";
only free competitive rates comport with reason. The argument
imputes a contradiction which would confound the plain
Congressional intent, since it ignores the provision that the
"reasonable" rates shall also be "fixed" rates. The requirement
of "reasonable" rates must accordingly be read in the sense
employed in other statutes, where the charges of public utilities
are directed to be regulated and fixed at "reasonable rates."
E.g., Communications Act of 1934, 47 U.S.C. § 201; Interstate
Commerce Act, 49 U.S.C. § 1(4), 1(5), 316; Federal Aviation Act
of 1958, 49 U.S.C. § 1374.
Since the plaintiffs have attacked the legality of the Exchange
rules and their prescribed rates of commission solely on the
ground that fixed rates are illegal, the holding in Silver v. New
York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389
(1963) is a complete bar to their claim. Rules adopted by an
Exchange under the authority of the Act are not illegal per se.
In the Silver case, the Supreme Court went on, after holding
the rules not illegal per se, to consider the remaining questions
in the case. Since the power to sever wire connections with
non-members could be used to eliminate competition by such a
non-member as well as to serve the purposes of securities
regulation by excluding unethical or irresponsible dealers, the
Court conferred the right upon the non-member to a review of the
justification for the termination of the direct-wire connections
essential to his business. Finding that nothing in the Securities
Exchange Act of 1934 gave the SEC the power to review particular
adjudicative decisions of the Exchange in enforcing and applying
its rules, and distinguished from review of the legislative
action involved in making such rules, the Court concluded that
the remedy of review must be found in the judicial branch. Since
the misuse of the power to sever wire connections to injure a
non-member competitor would not serve the purposes of securities
regulations, there remained no policy of securities control to
exclude the application of the antitrust laws or to immunize the
conduct. Since the Exchange had refused to give notice or reasons
or to afford a hearing to determine the justification for its
action as an appropriate measure to protect the investing public,
the plaintiff prevailed.
This holding adds nothing to the claim of these plaintiffs. The
power to deny information to non-members of an exchange is
plainly susceptible to misuse as a means to destroy competition.
The power to fix rates, unlike the power to exclude, is not a
weapon that can be used to injure a particular competitor. The
rates, once fixed, apply equally to all Exchange members and to
all customers. It is not suggested by the plaintiffs here that
the rates are not uniformly applied, that the schedules are
discriminatory, or that the power has been used to eliminate
competition beyond that elimination inherent in any system of
Moreover, this aspect of the Silver decision is expressly
predicated upon the absence of SEC power to review the particular
action. "Should review of exchange self-regulation be provided
through a vehicle other than the antitrust laws, a different case
as to antitrust exemption would be presented." (373 U.S., at 360,
83 S.Ct., at 1258). This is the "different case", since the SEC
exercises a general and continuing power to change, alter, or
supplement the rules of the Exchange fixing the rates of
commission. Since review is afforded within the system of
securities regulation, there is no need to resort to the
antitrust laws for a remedy.
The plaintiffs have complained of the rates because they are
fixed. If they had complained instead that the rates were too
high, they would find no support in the antitrust laws. The
remedy for a level of rates that is unreasonably high rests with
the SEC. Ratemaking is a matter for which the courts are
ill-equipped, and accordingly a matter traditionally committed to
an administrative agency. See Board of Trade of Kansas City v.
United States, 314 U.S. 534, 546, 62 S. Ct. 366, 86 L.Ed. 432
(1942). The SEC since its establishment has exercised this power
of review over Exchange rates of commission, and it has
inaugurated a regular system of reporting from Exchange members
to furnish the necessary information.
To subject the Exchange to the perils of treble liability,
retroactively imposed, upon the variant decisions of different
courts in determining the reasonableness of rates would
inevitably disrupt the congressional plan designed to bring order
to the marketing of securities. To leave the determination of
reasonableness to the prospective decisions of the agency which
is especially qualified and responsible for the general
supervision of the industry will assure the intention of Congress
as well as the interests of the public.
Judgment will be entered, accordingly, for the defendants, with
costs to be assessed against the plaintiffs.
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