## Facts

- Two Texas over-the-counter broker-dealers (nonmembers of the New York Stock Exchange (NYSE)) arranged for “direct-wire” telephone connections with NYSE member firms, which were important to their businesses.
- NYSE rules required Exchange approval for member firms to maintain such connections with nonmembers; temporary approval was granted and the wires were installed.
- The NYSE later disapproved the member firms’ applications and required the direct wires to be terminated.
- The NYSE acted without prior notice to the broker-dealers and, despite repeated requests, refused to provide a hearing or disclose the reasons for its action.
- The broker-dealers alleged the termination operated as a collective refusal to deal (group boycott), forcing one firm out of business and substantially harming the other.

## Issues

1. Whether the NYSE’s self-regulatory responsibilities under the Securities Exchange Act of 1934 impliedly exempted its collective termination of direct-wire connections from the antitrust laws.
2. Whether the NYSE’s collective removal of an essential service, undertaken without notice or an opportunity to be heard, violated § 1 of the Sherman Act.

## Decision

- The Supreme Court reversed the court of appeals and held for the broker-dealers.
- The Exchange Act did not create a blanket antitrust exemption for exchange self-regulation.
- The NYSE’s collective termination of the direct-wire connections constituted an unlawful group boycott and violated § 1 of the Sherman Act.
- The NYSE was liable under §§ 4 and 16 of the Clayton Act for damages and injunctive relief.
- The absence of notice, reasons, and a hearing prevented the NYSE from justifying the restraint as a protected self-regulatory measure within the Exchange Act’s purposes.

## Legal Principles

- Securities-exchange self-regulation under the Securities Exchange Act of 1934 does not, by itself, displace the Sherman Act.
- Implied antitrust immunity is not automatic; it may exist only for particular self-regulatory actions that fit within the scope and purposes of the securities laws and are supported by adequate safeguards or oversight.
- A collective refusal to provide or continue an essential business service can be treated as a per se unlawful group boycott under Sherman Act § 1 absent a valid statutory justification.
- When an exchange takes self-regulatory action with substantial anticompetitive effects, basic procedural protections (notice and an opportunity to be heard) are relevant to determining whether the action can be justified as consistent with the securities regulatory scheme.

## Conclusion

The Court held that the NYSE’s self-regulatory role did not immunize it from antitrust scrutiny and that terminating nonmembers’ essential direct-wire connections through collective action, without notice or hearing, amounted to an unlawful group boycott violating Sherman Act § 1, supporting relief under the Clayton Act.


Silver v. N.Y. Stock Exch., 373 U.S. 341 (1963)