GORDON v. NEW YORK STOCK EXCHANGE, INC.

422 U.S. 659 (1975)

Mr. Justice BLACKMUN delivered the opinion of the Court.

This case presents the problem of reconciliation of the antitrust laws with a federal regulatory scheme in the particular context of the practice of the securities exchanges and their members of using fixed rates of commission. The United States District Court for the Southern District of New York and the United States Court of Appeals for the Second Circuit concluded that fixed commission rates were immunized from antitrust attack because of the Securities and Exchange Commission's authority to approve or disapprove exchange commission rates and its exercise of that power.

II

Resolution of the issue of antitrust immunity for fixed commission rates may be made adequately only upon a thorough investigation of the practice in the light of statutory restrictions and decided cases. We begin with a brief review of the history of commission rates in the securities industry.

Commission rates for transactions on the stock exchanges have been set by agreement since the establishment of the first exchange in this country. The New York Stock Exchange was formed with the Buttonwood Tree Agreement of 1792, and from the beginning minimum fees were set and observed by the members. That Agreement itself stated:

"We the Subscribers, Brokers for the Purchase and Sale of Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock at a less rate than one‑quarter per cent. Commission on the Specie value, and that we will give a preference to each other in our Negotiations." F. Eames, The New York Stock Exchange 14 (1968 ed).

See generally, R. Doed, The Monopoly Power of the New York Stock Exchange, reprinted in Hearings on S. 3169 before the Subcommittee on Securities of the Senate Committee on Banking, Housing and Urban Affairs, 92d Cong., 2d Sess., 405, 412‑‑427 (1972). Successive constitutions of the NYSE have carried forward this basic provision. Similarly, when Amex emerged in 1908‑‑1910, a pattern of fixed commission rates was adopted there.

These fixed rate policies were not unnoticed by responsible congressional bodies. For example, the House Committee on Banking and Currency, in a general review of the stock exchanges undertaken in 1913, reported that the fixed commission rate rules were 'rigidly enforced' in order 'to prevent competition

amongst the members.' H.R.Rep. No. 1593, 62d Cong., 3d Sess., 39 (1913). The report, known as the Pujo Report, did not recommend any change in this policy, for the Committee believed

'The present rates to be reasonable, except as to stocks, say, of $25 or less in value, and that the exchange should be protected in this respect by the law under which it shall be incorporated against a kind of competition between members that would lower the service and threaten the responsibility of members. A very low or competitive commission rate would also promote speculation and destroy the value of membership.' Id., at 115‑‑116.

Despite the monopoly power of the few exchanges, exhibited not only in the area of commission rates but in a wide variety of other aspects, the exchanges remained essentially self‑regulating and without significant supervision until the adoption of the Securities Exchange Act of 1934, 48 Stat. 881, as amended, 15 U.S.C. Sec. 78a et seq. At the lengthy hearings before adoption of that Act, some attention was given to the fixed commission rate practice and to its anticompetitive features. See Hearings on S.Res. 84 (72d Cong.) and S.Res. 56 and 97 (73d Cong.) before the Senate Committee on Banking and Currency, 73d Cong., 1st and 2d Sess., pts. 13, 15, and 16, pp. 6075, 6080, 6868, and 7705 (1934) (hereafter Senate Hearings). See also Hearings on S.Res. 84 before the Senate Committee on Banking and Currency, 72d Cong., 1st Sess., pt. 1, p. 85 (1932); Hearings on H.R. 7852 and H.R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 320‑‑321, 423 (1934).

Perhaps the most pertinent testimony in the hearings preparatory to enactment of the Exchange Act was proferred by Samuel Untermyer, formerly chief counsel to the committee that drafted the Pujo Report. In commenting on proposed S. 2693, Mr. Untermyer noted that although the bill would provide the federal supervisory commission with

'The right to prescribe uniform rates of commission, it does not otherwise authorize the Commission to fix rates, which it seems to me it should do and would do by striking out the word 'uniform.' That would permit the Commission to fix rates.

'The volume of the business transacted on the exchange has increased manyfold. Great fortunes have been made by brokers through this monopoly. The public has no access to the exchange by way of membership except by buying a seat and paying a very large sum for it. Therefore it is a monopoly. Probably it has to be something of a monopoly. But after all it is essentially a public institution. It is the greatest financial agency in the world, and should be not only controlled by the public but it seems to me its membership and the commissions charged should either be fixed by some governmental authority or be supervised by such authority. As

matters now stand, the exchange can charge all that the traffic will bear, and that is a burden upon commerce.' Senate Hearings 7705.

As finally enacted, the Exchange Act apparently reflected the Untermyer suggestion, for it gave the SEC the power to fix and insure 'reasonable' rates. Section 19(b) provided:

'(b) The Commission is further authorized, if after making appropriate request in writing to a national securities exchange that such exchange effect on its own behalf specified changes in its rules and practices, and after appropriate notice and opportunity for hearing, the Commission determines that such exchange has not made the changes so requested, and that such changes are necessary or appropriate for the protection of investors or to insure fair dealing in securities traded in upon such exchange or to insure fair administration of such exchange, by rules or regulations or by order to alter or supplement the rules of such exchange (insofar as necessary or appropriate to effect such changes) in respect of such matters as . . . (9) the fixing of reasonable rates of commission, interest, listing, and other charges.' (Emphasis added.)

This provision conformed to the Act's general policy of self‑regulation by the exchanges coupled with oversight by the SEC. It is to be noted that the ninth category is one of 12 specifically enumerated. In Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U.S. 117, 127‑‑128, 94 S.Ct. 383, 390, 38 L.Ed.2d 348 (1973), we observed:

'Two types of regulation are reflected in the Act. Some provisions impose direct requirements and prohibitions. Among these are mandatory exchange registration, restrictions on broker and dealer borrowing, and the prohibition of manipulative or deceptive practices. Other provisions are flexible and rely on the technique of self‑regulation to acheive their objectives. . . . Supervised self‑regulation, although consonant with the traditional private governance of exchanges, allows the Government to monitor exchange business in the public interest.'

The congressional reports confirm that while the development of rules for the governing of exchanges, as enumerated in Sec. 19(b), was left to the exchanges themselves in the first instance, the SEC could compel adoption of those changes it felt were necessary to insure fair dealing and protection of the public. See H.R.Rep. No. 1383, 73d Cong., 2d Sess., 15 (1934); S.Rep. No. 792, 73d Cong., 2d Sess., 13 (1934). The latter report, id., at 15, noted that registered exchanges were required to provide the SEC with 'complete information' regarding its rules.

III

With this legislative history in mind, we turn to the actual post‑1934 experience of commission rates on the NYSE and Amex. After these two Exchanges had registered in 1934 under Sec. 6 of the Exchange Act, 15 U.S.C. Sec. 78f, both proceeded to prescribe minimum commission rates just as they had prior to the Act. App. A42, A216. These rates were changed periodically by the Exchanges, after their submission to the SEC pursuant to Sec. 6(a)(4), 15 U.S.C. Sec. 78f(a)(4), and SEC Rule 17a‑‑8 17 CFR Sec. 240.17a‑‑8. Although several rate changes appear to have been effectuated without comment by the SEC, in other instances the SEC thoroughly exercised its supervisory powers. Thus, for example, as early as 1958 a study of the NYSE commission rates to determine whether the rates were 'reasonable and in accordance with the standards contemplated by applicable provisions of the Securities Exchange Act of 1934,' was announced by the SEC. SEC Exchange Act Release No. 5678, Apr. 14, 1958, App. A240. This study resulted in an agreement by the NYSE to reduce commission rates in certain transactions, to engage in further study of the rate structure by the NYSE in collaboration with the SEC, and to provide the SEC with greater advance notice of proposed rate changes. SEC Exchange Act Release No. 5889, Feb. 20, 1959, App. A247. The SEC specifically stated that it had undertaken the study 'in view of the responsibilities and duties imposed upon the Commission by Section 19(b) . . . with respect to the rules of national securities exchanges, including rules relating to the fixing of commission rates.' Ibid.

Under subsection (d) of Sec. 19 of the Act (which subsection was added in 1961, 75 Stat. 465), the SEC was directed to investigate the adequacy of exchange rules for the protection of investors. Accordingly, the SEC began a detailed study of exchange rules in that year. In 1963 it released its conclusions in a six‑volume study. SEC Report of Special Study of Securities Markets, H.R.Doc. No. 95, 88th Cong., 1st Sess. The study, among other things, focused on problems of the structure of commission rates and procedures, and standards for setting and reviewing rate levels. Id., pt. 5, p. 102. The SEC found that the rigid commission rate structure based on value of the round lot was causing a variety of 'questionable consequences,' such as 'give‑ups' and the providing of special services for certain large, usually institutional customers. These attempts indirectly to achieve rate alterations made more difficult the administration of the rate structure and clouded the cost data used as the basis for determination of rates. These effects were believed by the SEC to necessitate a complete study of the structure. Moreover, the SEC concluded that methods for determining the reasonableness of rates were in need of overhaul. Not only was there a need for more complete information about the economics of the securities business and commission rates in particular, but also for a determination and articulation of the criteria important in arriving at a reasonable rate structure. Hence, while the study did not produce any major immediate changes in commission rate structure or levels, it did constitute a careful articulation of the problems in the structure and of the need for further studies that would be essential as a basis for future changes.

Meanwhile, the NYSE began an investigation of its own into the particular aspect of volume discounts from the fixed commission rates. App. A219‑‑A220. This study determined that a volume discount and various other changes were needed, and so recommended to the SEC. The Commission responded in basic agreement. Letter dated Dec. 22, 1965, from SEC Chairman Cohen to NYSE President Funston, App. A249. The NYSE study continued over the next few years and final conclusions were presented to the SEC in early 1968. Id., at A253.

In 1968, the SEC, while continuing the study started earlier in the decade, began to submit a series of specific proposals for change and to require their implementation by the exchanges. Through its Exchange Act Release No. 8324, May 28, 1968, App. A286, the SEC requested the NYSE to revise its commission rate schedule, including a reduction of rates for orders for round lots in excess of 400 shares or, alternatively, the elimination of minimum rate requirements for orders in excess of $50,000. These changes were viewed by

the SEC as interim measures, pending further consideration 'in the context of the Commission's responsibilities to consider the national policies embodied both in the securities laws and in the antitrust laws.' Letter dated May 28, 1968, from SEC Chairman Cohen to NYSE President Haack, App. A285. In response to these communications, the NYSE (and Amex) eventually adopted a volume discount for orders exceeding 1,000 shares, as well as other alterations in rates, all approved by the SEC. See, e.g., letter of Aug. 30, 1968, from Chairman Cohen to President Haack, App. A310; memorandum dated Sept. 20, 1968, Amex Subcommittee on Commission Structure, App. A104.

Members of the securities exchanges faced substantial declines in profits in the late 1960's and early 1970. These were attributed by the NYSE to be due, at least in part, to the fact that general commission rates had not been increased since 1958. Statement of Feb. 13, 1970, by President Haack to the SEC, App. A313. The NYSE determined that a service charge of at least the lesser of $15 or 50% of the required minimum commission on orders of fewer than 1,000 shares should be imposed as an interim measure to restore financial health by bringing rates in line with costs. NYSE Proposed Rule 383, App. A331. See also letter dated Mar. 19, 1970, from President Haack to members of the NYSE, App. A327. This proposal, submitted to the SEC pursuant to its Rule 17a‑‑8, was permitted by the SEC to be placed into operation on a 90‑day interim basis. Letter dated Apr. 2, 1970, from SEC Chairman Budge to President Haack, App. A333. Continuation of the interim measure was thereafter permitted pending further rate structure hearings undertaken by the SEC. SEC Exchange Act Release No. 8923, July 2, 1970, App. A336. The interim rates remained in effect until the rate structure change of March 1972.

In 1971 the SEC concluded its hearings begun in 1968. Finding that 'minimum commissions on institutional size orders are neither necessary nor appropriate,' the SEC announced that it would not object to competitive rates on portions of orders above a stated level. Letter dated Feb. 3, 1971, from SEC Commissioner Smith to President Haack, App. A353. See also SEC Exchange Act Release No. 9007, Oct. 22, 1970, App. A348. Although at first supporting a $100,000 order as the cutoff below which fixed rates would be allowed, ibid., the SEC later decided to permit use of $500,000 as the breakpoint. After a year's use of this figure, the SEC required the exchanges to reduce the cutoff point to $300,000 in April 1972. Statement of the SEC on the Future Structure of the Securities Markets, Feb. 2, 1972, App. A369, A387, A388 (Policy Study).

The 1972 Policy Study emphasized the problems of the securities markets, and attributed as a major cause of those problems the prevailing commission rate structure. The Policy Study noted:

'Our concern with the fixed minimum commission . . . is not only with the level of the rate structure but with its side effects as well. Of these, perhaps the most important are the following:

'(a) Dispersion of trading in listed securities.

'(b) Reciprocal practices of various kinds.

'(c) Increasing pressure for exchange membership by institutions.' Id., at A385.

Since commission rates had been fixed for a long period of time, however, and since it was possible that revenue would decline if hasty changes were made, the SEC believed that there should be no rush to impose competitive rates. Rather, the effect of switching to competition should be gauged on a step‑by‑step basis, and changes should be made 'at a measured, deliberate pace.' Id., at A387. The result of the introduction of competitive rates for orders exceeding $500,000 was found to be a substantial reduction in commissions, with the rate depending on the size of the order. In view of this result, the SEC determined to institute competition in the $300,000‑‑$500,000 range as well.

Further reduction followed relatively quickly. By March 29, 1973, the SEC was considering requiring the reduction of the breakpoint on competitive rates to orders in excess of $100,000. SEC Policy Statement on the Structure of a Central Market System 3. In June, the SEC began hearings on the rate schedules, stimulated in part by a request by the NYSE to permit an increase of 15% of the current rate on all orders from $5,000 to $300,000, and to permit a minimum commission on small orders (below $5,000) as well. SEC Exchange Act Release No. 10206, June 6, 1973, Documentary Appendix to Brief for SEC as Amicus Curiae 24 (Doc.App.). Three months later, after completion of the hearings, the SEC determined that it would allow the increases. SEC Exchange Act Release No. 10383, Sept. 11, 1973, Doc.App. 27. The SEC also announced, however, that '(i)t will act promptly to terminate the fixing of commission rates by stock exchanges after April 30, 1975, if the stock exchanges do not adopt rule changes achieving that result.' Id., at 28.

Elaboration of the SEC's rationale for this phasing out of fixed commission rates was soon forthcoming. In December 1973, SEC Chairman Garrett noted that the temporary increase in fixed rates (through April 1975) was permitted because of the inflation in the cost of operating the Exchanges, the decline in the volume of transactions on the exchanges, and the consequently severe financial losses for the members. SEC Exchange Act Release No. 10560, Dec. 14, 1973, Doc.App. 29. Indeed, without the rate increase, 'the continued deterioration in the capital positions of many member firms was foreseeable, with significant capital impairment and indirect, but consequential, harm to investors the likely result.' Id., at 36. The rate increase also would forestall the possibility that the industry would be impaired during transition to competitive rates and other requirements. This view conformed to the suggestion of Senator Williams, Chairman of the Subcommittee on Securities of the Senate Committee on Banking, Housing and Urban Affairs. See statement dated July 27, 1973, of Senator Williams submitted to the SEC, cited in Exchange Act Release No. 10560 n. 12, Doc.App. 37. Although not purporting to elucidate fully its reasons for abolishing fixed rates, the SEC did suggest several considerations basic to its decision: the heterogeneous nature of the brokerage industry; the desirability of insuring trading on, rather than off, the Exchanges; doubt that small investors are subsidized by large institutional investors under the fixed rate system; and doubt that small firms would be forced out of business if competitive rates were required.

In response to a request by the NYSE, the SEC permitted amendment to allow competitive rates on nonmember orders below $2,000. SEC Exchange Act Release No. 10670, Mar. 7, 1974, Doc.App. 42. Hearings on intramember commission rates were announced in April 1974. SEC Exchange Act Release No. 10751, Apr. 23, 1974, Doc.App. 45. The SEC concluded that intramember rates should not be fixed beyond April 30, 1975. SEC Exchange Act Release No. 11019, Sept. 19, 1974, Doc.App. 60. At this time the SEC stated:

'(I)t presently appears to the Commission that it is necessary and appropriate (1) for the protection of investors, (2) to insure fair dealing in securities traded in upon national securities exchanges, and (3) to insure the fair administration of such exchanges, that the rules and practices of such exchanges that require, or have the effect of requiring, exchange members to charge any person fixed minimum rates of commission, should be eliminated.' Id., at 63.

The SEC formally requested the exchanges to make the appropriate changes in their rules. When negative responses were received from the NYSE and others, the SEC released for public comment proposed Securities Exchange Act Rules 19b‑‑3 and 10b‑‑22. Proposed Rule 19b‑‑3, applicable to intramember and nonmember rates effective May 1, 1975, would prohibit the exchanges from using or compelling their members to use fixed rates of commission. It also would require the exchanges to provide explicitly in their rules that nothing therein require or permit arrangements or agreements to fix rates. Proposed Rule 10b‑‑22 would prohibit agreements with respect to the fixing of commission rates by brokers, dealers, or members of the exchanges. See SEC Exchange Act Release No. 11073, Oct. 24, 1974, Doc.App. 65.

Upon the conclusion of hearings on the proposed rules, the SEC determined to adopt Rule 19b‑‑3, but not Rule 10b‑‑22. SEC Exchange Act Release No. 11203, Jan. 23, 1975, Doc.App. 109. Effective May 1, 1975, competitive rates were to be utilized by exchange members in transactions of all sizes for persons other than members of the exchanges. Effective May 1, 1976, competitives rates were to be mandatory in transactions for members as well, i.e., floor brokerage rates. Competition in floor brokerage rates was so deferred until 1976 in order to permit an orderly transition. The required transition to competitive rates was based on the SEC's conclusion that competition, rather than fixed rates, would be in the best interests of the securities industry and markets, as well as in the best interests of the investing public and the national economy. Ibid. This determination was not based on a simplistic notion in favor of competition, but rather on demonstrated deficiencies of the fixed commission rate structure. Specifically mentioned by the SEC were factors such as the rigidity and delay inherent in the fixed rate system, the potential for distortion, evasion, and conflicts of interest, and fragmentation of markets caused by the fixed rate system. Acknowledging that the fixed rate system perhaps was not all bad in all periods of its use, the SEC explicitly declined to commit itself to permanent abolition of fixed rates in all cases: in the future circumstances might arise that would indicate that reinstitution of fixed rates in certain areas would be appropriate.

The SEC dismissed the arguments against competitive rates that had been raised by various proponents of the status quo. First, the SEC deemed the possibility of destructive competition to be slim, because of the nature of the cost curve in the industry. Second, there was substantial doubt whether maintenance of fixed rates, in fact, provided various subsidies that would be beneficial to the operation of the securities markets. For example, it was unlikely that small investors reaped a subsidy from higher rates charged larger investors, because of separation of the business between large and small investors. Nor did the SEC believe that regional brokers were substantially benefited by maintenance of fixed rates. Third, the possibility of an exodus from membership on the exchanges was unlikely, and should be dealt with only as it occurred. In any event, inasmuch as the SEC anticipated that there would be detailed studies of the operation of the competitive rates effectuated by its orders, any problems that arose could be effectively resolved upon further consideration.

During this period of concentrated study and action by the SEC, lasting more than a decade, various congressional committees undertook their own consideration of the matter of commission rates. Early in 1972, the Senate Subcommittee on Securities concluded that fixed commission rates must be eliminated on institution‑size transactions, and that lower fees should be permitted for small transactions with 'unbundled' services than for those having the full range of brokerage services. Senate Committee on Banking, Housing and Urban Affairs, 92d Cong., 2d Sess., Securities Industry Study (For the Period Ended Feb. 4, 1972), 4 (1972) (containing a report of the Subcommittee on Securities). The Subcommittee objected particularly to the failure of the fixed rate system to produce 'fair and economic' rates, id., at 59, and to distortion in the rate structure in favor of the institutionally oriented firms.

The Subcommittee was perturbed at the SEC's actions regarding fixed commission rates for several reasons. First, the Subcommittee noted that in litigation the SEC had taken the position that it had not approved NYSE rate changes in 1971, but had merely failed to object to the introduction of the new rates, id., at 58, referring to the SEC position in Independent Investor Protective League v. SEC (SDNY No. 71‑‑1924), dismissed without opinion (CA2 1971). This posture precluded review of the SEC action in the Court of Appeals. Second, the Subcommittee was displeased with the length of time the SEC took in arriving at its decisions regarding commission rate structure and level. Third, the Subcommittee feared that statements of the SEC lacked clarity and perpetuated uncertainty as to the status of fixed rates on transactions exceeding $100,000. Therefore, the Subcommittee report stressed:

'(I)t is essential that fixed commission rates be phased out in an orderly and systematic manner, and that a date certain be set promptly for elimination of fixed commissions on institutional‑size transactions, which have resulted in the most serious distortions. Based on the SEC's conclusions and on testimony submitted to the SEC and to this Subcommittee, this could best be achieved by eliminating fixed rates on orders in excess of $100,000.' Securities Industry Study, supra, at 60.

The House Committee on Interstate and Foreign Commerce, in a report issued only six months after the Senate Report, supra, concluded that fixed rates of commission were not in the public interest and should be replaced by competitively determined rates for transactions of all sizes. Such action should occur 'without excessive delay.' H.R.Rep. No. 92‑‑1519, pp. xiv, 141, 144‑‑145, 146 (1972). Although prodding the SEC to take quick measures to introduce competitive rates for transactions of all sizes, the House Committee determined to defer enacting legislation so long as reasonable progress was being made. These conclusions resulted from a detailed study, by the Subcommittee, of asserted costs and benefits of competitive versus fixed rates, and reflected information gained through lengthy hearings. Id., at 131‑‑146, and related Study of the Securities Industry, Hearings before the Subcommittee on Commerce and Finance of the House Committee on Interstate and Foreign Commerce, 92d Cong., 1st and 2d Sess., serials 92‑‑37 to 92‑‑37h (1971‑‑1972. Similarly, after lengthy analysis, the Senate Subcommittee on Securities concluded both that competitive rates must be introduced at all transaction levels, and that legislation was not required at that time in view of the progress made by the SEC. Securities Industry Study Report of the Subcommittee on Securities of the Senate Committee on Banking, Housing and Urban Affairs, S.Doc. No. 93‑‑13, pp. 5‑‑7, 43‑‑63 (1973), and Hearings on S. 3169 before the Subcommittee on Securities of the Senate Committee on Banking, Housing and Urban Affairs, 92d Cong., 2d Sess. (1972).

In 1975 both Houses of Congress did in fact enact legislation dealing directly with commission rates. Although the bills initially passed by each chamber differed somewhat, the Conference Committee compromised the differences. Compare H.R. 4111, Sec. 6(p), as discussed in H.R.Rep. No. 94‑‑123, pp. 51‑‑53, 67‑‑68 (1975), with S. 249, Sec. 6(e), as discussed in S.Rep. No. 94‑‑75, pp. 71‑‑72, 98 (1975), U.S.Code Cong. & Admin.News 1975, p. 613. The measure, as so compromised, was signed by the President on June 4, 1975, 89 Stat. 97.

The new legislation amends Sec. 19(b) of the Securities Exchange Act to substitute for the heretofore existing provision a scheme for SEC review of proposed rules and rule changes of the various self‑regulatory organizations. Reference to commission rates is now found in the newly amended Sec. 6(e), generally providing that after the date of enactment 'no national securities exchange may impose any schedule or fix rates of commissions, allowances, discounts, or other fees to be charged by its members.' 89 Stat. 107. An exception is made for floor brokerage rates which may be fixed by the exchanges until May 1, 1976. Further exceptions from the ban against fixed commissions are provided if approved by the SEC after certain findings: prior to and including November 1, 1976, the Commission may allow the exchanges to fix commissions if it finds this to be 'in the public interest,' Sec. 6(e)(1)(A); after November 1, 1976, the exchanges may be permitted by the SEC to fix rates of commission if the SEC finds (1) the rates are reasonable in relation to costs of service (to be determined pursuant to standards of reasonableness published by the SEC), and (2) if the rates 'do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this title, taking into consideration the competitive effects of permitting such schedule or fixed rates weighed against the competitive effects of other lawful actions which the Commission is authorized to take under this title.' Sec. 6(e)(1) (B)(ii). The statute specifically provides that even if the SEC does permit the fixing of rates pursuant to one of these exceptions, the SEC by rule may abrogate such practice if it finds that the fixed rates 'are no longer reasonable, in the public interest, or necessary to accomplish the purposes of this title.' Sec. 6(e)(2).

The new section also provides a detailed procedure which the SEC must follow in arriving at its decision to permit fixed commission rates. Sec. 6(e)(4). This procedure was described in the Conference Report as 'comparable to that provided for in Section 18 of the Federal Trade Commission Act, 15 U.S.C. (s) 58, which is more formal than normal notice and comment rulemaking under Section 553 of title 5 U.S.C. but less formal than 'on the record' procedure under Section(s) 556 and 557 of title 5 U.S.C.' H.R.Conf.Rep. No. 94‑‑

229, p. 108 (1975), U.S. Code Cong. & Admin.News 1975, p. 773. Finally, the amendments require the SEC to file regularly until December 31, 1976, with both branches of Congress, reports concerning the effect of competitive rates on the public interest, investors, and the securities markets. Sec. 6(e)(3). (FN12)

As of May 1, 1975, pursuant to order of the SEC, fixed commission rates were eliminated and competitive rates effectuated. Although it is still to soon to determine the total effect of this alteration, there have been no reports of disastrous effects for the public, investors, the industry, or the markets.

This lengthy history can be summarized briefly: In enacting the Securities Exchange Act of 1934, the Congress gave clear authority to the SEC to supervise exchange self‑regulation with respect to the 'fixing of reasonable rates of commission.' Upon SEC determination that exchange rules or practices regarding commission rates required change in order to protect investors or to insure fair dealing, the SEC was authorized to require adoption of such changes as were deemed necessary or appropriate. This legislative permission for the fixing of commission rates under the supervision of the SEC occurred seven years after this Court's decision in United States v. Trenton Potteries Co., 273 U.S. 392, 47 S.Ct. 377, 71 L.Ed. 700 (1927), to the effect that price fixing was a per se violation of the Sherman Act. Since the Exchange Act's adoption, and primarily in the last 15 years, the SEC has been engaged in thorough review of exchange commission rate practices. The committees of the Congress, while recently expressing some dissatisfaction with the progress of the SEC in implementing competitive rates, have generally been content to allow the SEC to proceed without new legislation. As of May 1, 1975, the SEC, by order, has abolished fixed rates. And new legislation, enacted into law June 5, 1975, codifies this result, although still permitting the SEC some discretion to reimpose fixed rates if warranted.