# Appendix — Gordon v. New York Stock Exchange, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0179%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1975 - **Citation:** 422 U.S. 659 ## Text Supreme Court, U. . ED FIL JAN 2 1975 aa TF : MICHAEL RODAK, JR., CLERK | Supreme Court of the Hutte State October Term, 1974 No. 74-304 ~ — Ricuarp A. Gorpon, individually and as President of Lyvr- PENDENT Investor Protective Leacve, an incorporated asso- ciation, and in behalf of the membership thereof and in behalf of all persons similarly circumstanced, Petitioners, against New Yorx Srock Excnanog, Inc., American Srocx Ex- CHANGE, Inc., and Merritt Lyncu, Pierce, Fenner & Sutra, Inc. and Bacuz & Company, Inc., individually and as rep- resentatives of g]] member firms of the New York Stock Exchange and American Stock Exchange, Respondents. On Writ of Certiorari to the United States Court of Appeals for the Second Circuit —————- Appendix MAXIMILIAN BADER 1. WALTON BADER Attorneys for Petitioners 40 Morrow Avenue Scarsdale, N.Y. Telephone 914-779-1344 FE AES EL ETT TE Dick Bailey Printers ¢P.0. Box X, Staten island, N.Y. 16862 * Tel.: (212) 447-6396 _ TABLE OF CONTENTS Page ne TED ccniecin «ae one ba So cattieenen dict’ oeks A-1 COUIIEED | «0 0.0.00 wytydp 0% Samed 0.0008 anes donb cahets A-8 Answer of Detendant New York Stock Exchange and Ee i MM og bc dav w ones ds 00009 Rein A-17 Answer ot Defendant Merrill, Lynch, Pierce, Fenn and Smith Incorporated ..............0.000055 A.-23 Answer of Defendant American Stock Exchange, Inc. A-29 Detendants’ Motion for Summary Judgment ........ A-35 Defendants’ Rule 9(g) Statement in — of Motio1 tor Summary Judgment ..............0002 eee. A-37 Affidavit of H. Vernon Lee in Support of Defendants Motion for Summary Judgment and Exhibit: RE ES ee Ty ae ay Eee penne ee A-42 - Exhibit A—Coastitutional Provisions and Rules .... A-53 Exhibit B—C constitutional Provisions and Rules ....A-73 Exhibit C—Memorandum to Amex Members and Member Organizations on April 19, 1968 ........ A-85 Exhibit D—Letter Dated April 24, 1968 ........... A-95 Exhibit E—Letter Dated May 28, 1968 ............ A-98 Exhibit F—Letter Dated June 26, 1968 ............A-102 ul Exhibit G—Memorandum Dated September 20, , See”! A-104 Exhibit H—Letter Dated March 26, 1970.......... A-119 Exhibit I—Letter Dated April 2, 1970............. A-158 Exhibit J—Letter Dated April 2, 1970 and Copy of Rade FER... ccccccccccccccsseshaseueneneenee A-161 Exhibit K—Letter Dated April 10, 1970 ........... A-163 Exhibit L—Letter Dated June 29, 1970............ A-165 Exhibit M—Letter Dated July 16, 1970............ A-167 Exhibit N—Exchange Act Release No. 8924, dated A PTT ee ee A-176 Exhibit O—Letter Dated July 16, 1970 ............ A-177 Exhibit P—Letter Dated March 17, 1971 ......... A-185S Exhibit P—Letter Dated March 17, 1971 .......... A-198 Exhibit Q—Letter Dated March 26, 1971.......... A-206 Exhibit R—Letter Dated April 28, 1971 ........... A-210 Exhibit S—Letter Dated March 9, 1972 ........... A-213 Exhibit T—Letter Dated March 28, 1972........... A-214 Affidavit of Robert M. Bishop in Support of Defen- dants’ Motion for Summary Judgment and Exhibits POMBE occ cccccccccseseeuees eeeneneeee A-216 Exhibit 1—Copy of the Constitution and Rules relating to Commissions Submitted in 1934....... A-229 Exhibit 2—Order Dated September 28, 1934....... A-238 Exhibit 3—SEC Release Announcing Study........ A-240 Exhibit 4—Letter Dated January 28, 1959 ......... A-241 Exhibit S—Release Dated February 20, 1959....... A-247 Exhibit 6—Letter Dated Dec. 22,1965 ............ A-249 Exhibit 7—Letter Dated January 2, 1968 .......... A-253 Exhibit 8&—Release No. 8239 ..............00005. A-257 Exhibit 9—Letter Dated May 28, 1969 ............ A-284 Exhibit 10—Release No. 8324 .............0.0005 A-286 Exhibit 11—Order Dated May 28, 1969 ........... A-288 Exhibits 12 and 13—Communications Between SEC SC RGEUEGSGaGaatns eseepcedcaceccseds A-291 Exhibit 14—Special Membership Bulletin of 6/27/68 A-306 Exhibit 1S—Letter of August 8, 1968 ............. A-299 Exhibit 16—Letter of August 30, 1968 ... ........ A-310 Exhibit 17—Request for Interim Relief............ 'A-313 Exhibit 18—Letter Dated March 19, 1970 ......... A-327 Exhibit 19—Letter Dated April 2, 1970 ........... A-333 iv Exhibit 20—SEC Release No. 8923 ............. A-336 Exhibit 2i—Release No. 9007 Dated October 22, POTD oc ccccccevccccpadenmegaedecencescncees A-348 Exhibit 22—Letter Dated Oct. 22,1970 ......... A-350 Exhibit 23—Letter Dated Feb. 3, 1971 .......... A-353 Exhibit 24—Letter of March 9, 1971 ........... A-357 Exhibit 25—Statement of the Future Structure of the Someta RGR 00 oc os sesse dvSeseecsesvs A-363 Exhibit 26—Letter Dated March 17, 1972 ....... A-405 Exhibit 27—Letter Dated March 23, 1972 ...... A-409 Affirmation of I. Walton Bader in Opposition Defendants’ Motion for Summary Judgment... . A-415 Affidavit of Richard A. Gordon in Opposition Defendants’ Motion for Summary Judgment... . A-419 Matis et Agpads 2c ccccccccccccscccsccccesece -A-434 PPPTETTTTETETI TTT A-436 A-| DOCKET ENTRIES RICHARD A. GORDON INDIVIDUALLY, ETC. VS. N.Y. SFOCK EXCHANGE INC. ET-AL 1 or 2-71—Filed Complaint. Issued Summons. 4-30-71—Filed Stipulation and order extending all defendants time to answer complaint to 6-14-71. So or- dered. Motley, J. 6-21-71—Fiied stip and order that the time for defts’ to answer complaint is ext. from 6-14-71 to 7-20-71 and the time for plitff. to move, as to whether the action is to be maintained as a class action and, if so, the membership of the class, is ext. from 6-1-71 to 7-20-71. So ordered, Gurfein, J. 7-7-71—Filed Affidavit of John E. Lawler in opposition to plaintiff's motion for defendant judgment. 7-7-71—Filed Answers of Defendants Tokyo Shipping Co. Ltd. and Gannet Freighting, Inc. to Plaintiff's In- terrogatories. 7-20-71—Filed stipulation and order extending defendants time to answer complaint to 9-20-71; further stipulated that the plaintiff's time to move for a deter- mination under Rule 23(c)(1) is extended to 9-20-71. So ordered. Frankel, J. 8-24-71—Filed summons with marshal’s ret. SERVED: Merrill, Lynch, Pierce, Fenner & Smith, Inc. on 4/12/71. Bache & Co. Inc. by Melvyn J. Falis on 4/8/71. American Stock Exchange by H. Vernon Lee, Jr. on 4/22/71. New York Stock Exchange by Richard Drew on 4/12/71. 1-26-72—Filed Stip. & Order extending time to answer to 3/20/72. 3-20-72—Filed Stip. & Order extending time to answer to 5-22-72, etc. So Ordered Metzner J. A-2 3-24-72—Filed Defendant Merrill Lynch, Pierce, Fenner & Smith Inc. Change of address. 5-23-72—filed stipulation and order extending defen- dants time to answer complaint to 7-21-72; further stipulated that the plaintiff's time to move for class action determination is extended to 7-21-72. So ordered. Frankel, J. 7-24-72—Filed Stipulation & Order that time for defendants to answer re: complaint is extended to Sep- tember 21, 1972. Brieant J. 8-22-72—Filed stipulation and order extending defendants time to answer complaint to 9-28-72; further stipulated that the time to move for a determination as to class action is also extended to 9-28-72. So ordered. Lasker, J. 9-28-72—Filed ANSWER of Merrill, Lynch, Pierce, Fenner & Smith to complaint. 9-28-72—Filed ANSWER of New York Stock Exchange Inc. to complaint. 10-2-72—Filed Notice of Motion for Class Action Determination Ret. before Lasker, J. ROOM 2903 on 10- 20-72 at 10 AM. 10-2-72—Filed Memorandum in support of motion for class action determination. 10-3-72—Filed ANSWER of American Stock Exchange Inc. to complaint. 10-19-72—Filed Stip. & Order that return date for motion re: class action determination is adj. from 10-20-72 to 11-17-72. The depositions of defendants are adj. without a date subject to fixation of new times on five days’ notice. So Ordered—Lasker J. 9-1-72—Filed stipulation and order that counsel of defendant American Stock Exchange Messrs. Polk, & Wardell be replaced by Lord, Day & Lord. So O. »red Lasker J. A-3 11-16-72—Filed stipulation and order adjourning plaintiff's motion for class action determination now ret. 11-17-72 to 12-15-72. ete. So ordered. Lasker, J. 11-30-72—Filed stipulation and order adjourning plaintiff's motion for a determination of class action to 12- 29-72, etc. So ordered. Lasker, J. 12-4-72—Filed Defendants’ Affidavits in opposition to plaintiffs motion for class action determination. 12-4-72—Filed Affidavit of Isaac Shapiro in opposition to plaintiff's motion. A-4 TO: CLERK OF UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK CONTINUATION OF DOCKET ENTRIES 12-4-72—Filed Memorandum in opposition to plaintiff's motion for class action determination. 12-7-72—Filed Notice of Motion ret. 12-29-72 at 10 AM re: dismiss. summary judgment. 12-7-72—Filed Affidavit in support of defendants’ motion to dismiss and for summary judgment. (by at- torneys for New York Stock Exchange). 12-7-72—Filed Memorandum in support of motion for summary judgment. 12-7-72—Filed Affidavit in support of defendants’ motion (Robert M. Bishop) to dismiss and for summary judgment. (for N.Y. Stock Exchange, Inc. and Bache & Co. Inc.) with one red portfolio of Exhibits. 12-7-72—Filed Affidavit of John P. Foynes in support of defendants’ motion for summary judgment. 1-2-73—Filed Memorandum in opposition to defen- dants’ motion to dismiss and for summary judgment. 5-10-73—Filed Affidavit of Richard A. Gordon in op- position to motion to dismiss and for summary judgment. 6-8-73—Filed stip. and order that the plaintiff may serve reply papers with respect to his pending motion for a class action before 6-4-73, so Ordered Lasker, J. Filed stip. and order that plaintiff's time to serve reply papers with respect to motion for a class action deter- mination is extended to 7-5-73. So Ordered Lasker J. 12-4-73—Filed memorandum OPINION No. 40,086— Defendants’ motion for summary judgment is granted. In view of our decision here, we do not consider plaintiff's motion for a class action determination. It is so ordered— A-5 Lasker, J.—mailed notice. 12-6-73—Filed plaintiffs’ notice of appeal, $5.00 from Order dated Dec. 4-73, granting summary judgment to the defendants. Mailed copies. A TRUE COPY RAYMOND F. BURGHARDT, Clerk A+ DOCKET ENTRIES 12/12/73—Filed copies of docket entries and notice of appeal. 1/10/74—Received docket fee. 1/10/74—Filed record (original papers of the District Court). 2/14/74—Filed order extending time to file appellants brief and appendix to 3-29-74 (on consent). 3/7/74—Filed supplemental record (original papers of District Court). 3/28/74—Filed appendix, p/s. 3/28/74Filed brief, appellant, p/s. 4/9/74—Filed brief, Amicus Curiae, p/s (by mail) (U.S.A.). 4/29/74—Filed brief, appellee, p/s. 4/29/74—Filed order extending time to file amicus curiae brief (S.E.C.) to 5-24-74 (on consent). 4/30/74—Filed certificate of service on change in brief, appellee. 5/10/74—Filed motion for leave to participate in oral argument, p/s (U.S.A.) 5/10/74—Filed reply brief, appellant, p/s. 5/14/74—Filed order granting motion for leave to participate in oral argument of the appeal. Amicus will have ten (10) minutes for argument (U.S.A.) 5/17/74—Filed motion for leave to participate in oral argument, p/s (S.E.C.) 5/21/74—Filed order granting leave to participate in argument (10) minutes, (S.E.C.). 5/28/74—Filed brief, p/s (S.E.C.) (by mail). 6/S/74—Argument heard by: (Kaufman, Mansfield, Mulligan). 6/28/74—Judgment affirmed, Kaufman, CCJ. A-7 6/28/74—Filed judgment. 7/9/74—Filed itemized and verified bill of costs, ap- pellees, p/s . 7/10/74—Filed affirmation in opposition to proposed bill of costs w/ pfs. 7/11/74—Filed affidavit in response to affidavit in oppesition to bill of costs w/pfs. 9/18/74—Filed statement of costs. 9/18/74—IssueG nyandate (opinion and judgment and statement of costy). 9/30/74—Filed notice of filing petition for writ of certiorari (SC# 74-304). 11/26/74—Filed certified copy of order of Supreme Court granting petition for writ of certiorari (SC# 74-304). 12/17/74—Original and supplemental record returned to district court. A-8 COMPLAINT (SAME TITLE) CLASS ACTION PLAINTIFF ALLEGES: FIRST: At all times hereinafter mentioned plaintiff was, and still is, a citizen and resident of the STATE OF NEW YORK, doing business at 19 West 24th Street, New York, N.Y. SECOND: Plaintiff is a purchaser of stocks through member firms of the New York Stock Exchange and American Stock Exchange. THIRD: Plaintiff is President of the INDEPENDENT INVESTORS PROTECTIVE LEAGUE, an unin- corporated association, having its’ office and place of business at 19 West 24th Street, New York, N.Y. The said INDEPENDENT INVESTORS PROTECTIVE LEAGUE is composed of members who also are purchasers of ©‘ocks through member firms of the New York Stock Exchange and American Stock Exchange. FOURTH: Plaintiff, and the members of the IN- DEPENDENT INVESTORS PROTECTIVE LEAGUE are “small Investors” purchasing stocks in amounts less than Five Hundred Thousand ($500,000) Dollars for each purchase. FIFTH: This action is a Class Suit in behalf of plaintiff, individually, in behalf of the members of the IN- DEPENDENT INVESTORS PROTECTIVE LEAGUE and in behalf of the remaining members of the Class of ‘small investors’’ who purchase stocks listed on the New York Stock Exchange and American Stock Exchange in amounts less than Five Hundred Thousand ($500,000) Dollars for each purchase. It is believed that the members of this class amount to at least One Million (1,000,000) A-9 persons and the amount of commissions paid by these persons to member firms of the New York Stock Exchange or American Stock Exchange during the past six years amounted to at least Five Hundred Million ($500,000,000) Dollars. SIXTH: The defendants NEW YORK STOCK EX- CHANGE, INC., AMERICAN STOCK EXCHANGE, INC., MERRILL, LYNCH, PIERCE, FENNER & SMITH, INC. and BACHE & COMPANY, INC., are, on information and belief, corporations duly organized and existing under the laws of the State of New York, having offices and places of business within the territorial jurisdiction of the Southern District of New York. SEVENTH: The defendants NEW YORK STOCK EXCHANGE, INC. and AMERICAN STOCK EX- CHANGE, INC. represent the principal markets for equity securities in the United States. These organizations are, in effect, “‘public utilities’ purportedly providing honest auction market for the purchase and sale of stocks of American Business Corporations. The prices at which these securities are sold are purportedly arrived at by fair bargaining between buyers and sellers of these stocks. EIGHTH: All trading performed on the NEW YORK STOCK EXCHANGE and AMERICAN STOCK EX- CHANGE is done through the agency of ‘“‘*members”’ of the said exchanges. The number of these ‘“‘members” is ar- bitrarily limited by the said NEW YORK STOCK EX- CHANGE and AMERICAN STOCK EXCHANGE and any person, firm, corporation or association who desires trading privileges upon the said Exchanges must purchase a “‘seat’’ from an existing member at a price arrived at between the seller and purchaser. NINTH: The said NEW YORK STOCK EXCHANGE and AMERICAN STOCK EXCHANGE are purportedly subject to regulation by the SECURITIES AND EX- CHANGE COMMISSION. This regulation, however, does A-10 not affect Commission Charges or operations of the said Exchanges. TENTH: In a recent Court Decision it has been held that the said NEW YORK STOCK EXCHANGE and AMERICAN STOCK EXCHANGE are subject to the Anti-Trust Laws of the United States. ELEVENTH: This Court acquires jurisdiction of this suit by reason of the Constitution and Laws of the United States, in particular the Securities Act and the Anti-Trust Laws. The specific Anti-Trust Laws applicable to this case are 15 USC 1 and 15 USC 2 (The Sherman Act) and 15 USC 13 (The Robinson Patman Act) and plaintiff is a “person injured"’ as provided in 15 USC 15. TWELFTH: The defendants MERRILL, LYNCH, PIERCE, FENNER AND SMITH, INC. and BACHE AND COMPANY, INC. are “members” of the NEW YORK STOCK EXCHANGE and AMERICAN STOCK EXCHANGE. These defendants are being sued herein individually and as representatives of all ““members”’ of the aforesaid Exchanges. THIRTEENTH: About 1968 the defendants BACHE AND COMPANY, INC. and MERRILL, LYNCH, PIERCE, FENNER AND SMITH, INC. as well as all of the other “‘members’’ of the aforesaid Exchanges, in- stituted a “‘surcharge’’ for small investors purchasing less than One Thousand (1,000) shares of stock in any one trade. The aforesaid ‘‘members” by this device received, on information and belief, at least One Hundred Million ($100,000,000) Dollars in additional income by reason of these increased commission rates. FOURTEENTH: In truth and in fact it is no more expensive to conduct a so-called “small trade”’ than a large trade. By the use of modern computer data-processing techniques a “small trade’’ can be performed quickly and expeditiously and with minimum cost. The real additional A-11 expense to the “member firms” of the so-called “small trade’ is the expense of the so-called ‘Registered Representatives’ of these “member firms” (in reality “Commission Salesmen" who expend considerable time in soliciting these accounts. FIFTEENTH: In truth and in fact it is more expensive to consummate a “large trade’’. Such trade requires extensive negotiations and time. SIXTEENTH: As a result of the above the aforesaid “surcharge” imposed by “member firms’’ upon “small investors’’ and the increased commissions charged by said ‘*member firms” to said “‘small investors” are illegal and in violation of 15 USC 13 (The Robinson Patman Act). In addition the discounts given for “large trades’’ are likewise illegal and in violation of 15 USC 13. In addition these discounts constitute ‘‘unreasonably low prices” in violation of 15 USC 13a. SEVENTEENTH: The defendants NEW YORK STOCK EXCHANGE and AMERICAN STOCK EX- CHANGE likewise forbid these of their facilities to any “non-member”. In addition their rules and regulations prevent a division of commissions between “‘members”’ and “non-members”. As a result organizations such as the plaintiff INDEPENDENT INVESTORS PROTECTIVE LEAGUE cannot offer trading facilities to their members. By means of the computerized trading methods developed by the plaintiff and the fact that the plaintiff IN- DEPENDENT INVESTORS PROTECTIVE LEAGUE need not utilize “Registered Representatives” as Com- mission Salesmen, the said League would be in a position to offer its’ members substantial commission savings on stock trades. However, because of the present attitude on the part of the defendants NEW YORK STOCK EX- CHANGE, INC. and AMERICAN STOCK EXCHANGE, INC., it is not able to do so. Such conduct on the part of the said defendants constitutes a violation of 15 USC 1 and 15 A-12 USC 2 (The Sherman Act), since the said Acts constitute a combination and conspiracy in restraint of trade and an attempt to create a monopoly in stock trading. EIGHTEENTH: The said defendants NEW YORK STOCK EXCHANGE, INC. and AMERICAN STOCK EXCHANGE, INC. together with the “members” thereof, of which the defendants MERRILL, LYNCH, PIERCE, FENNER & SMITH and BACHE AND COMPANY are representatives, intend, on April Sth, 1971, to further deteriorate the position of the ‘small investor” by per- mitting negotiated commission rates on all trades over Five Hundred Thousand ($500,000) Dollars while keeping the extra commission rates in effect for “‘small investors’’. NINETEENTH: The aforesaid negotiated commission rates are illegal for the following reasons: (a). The opportunity of negotiating commission rates, if granted to any customer, must be granted to call customers under the provisions of 15 USC 13. Therefore, if negotiated commission rates are to be allowed for large trades they must also be allowed for small trades. (b). The negotiated commission rates would not reflect “due allowance” for any cost savings. (c). The negotiated commission rates would, in effect, restrict trading to large traders such as institutions, mutual funds, and the like. This would have the effect of “freezing out’’ the small investor from the market and would force the investor to invest through mutual funds and the like. This would, in effect, give mutual funds (in reality profit- making organizations) preferred access to the securities markets in the United States in violation of the Anti-Trust Laws. (d). The negotiated commission rates would further cause the securities markets to become “stores” offering fixed negotiated prices for the sale of securities rather than the present ‘auction market”. The possibilities of A-13 manipulation and fraud that could be had in such case are endless. NINETEENTH: SPECIAL JURISDICTIONAL ALLEGATIONS REQUIRED FOR CLASS ACTION LITIGATION (a) 1. This Court acquires jurisdiction of this Cause of Action by virtue of the Securities Act of the United States and the Anti-Trust Laws of the United States. 2. The number of members of the classes involved in this action is as follows: a. There are about One Hundred (100) member firms of the New York Stock Exchange and about One Hundred member firms of the American Stock Exchange. b. There are about Fifty Million (50,000,000) small investors in the United States affected by this litigation. 3. There are common questions of law and fact involved in this litigation relating to the legality of the “surcharges imposed by the defendants NEW YORK STOCK EX- CHANGE AND AMERICAN STOCK EXCHANGE and the legality of the “negotiated commission” rates for large trades to be instituted by the defendant Exchanges. There are also questions of law and fact in common with respect to the legality of the defendant Exchanges permitting trading utilizing their facilities only through “members : These questions predominate and are decisive over any questions involving only individual members of the Classes involved. 4. The plaintiff INDEPENDENT INVESTORS PROTECTIVE LEAGUE is the proper party to represent the Class on behalf of the “small investors” since it is the only organization specifically designed to protect small investors. The organization has, at present, less than One A-14 Hundred (100) members but it is expected that it will have over One Million (1,000,000) members before this litigation is terminated. All present members of the IN- DEPENDENT INVESTORS PROTECTIVE LEAGUE have authorized this litigation and agree to have their names listed as parties thereto if necessary. S. It is adequate to serve only the defendants MERRILL LYNCH PIERCE FENNER & SMITH and BACHE & COMPANY because these defendants are the two leading member firms of the defendant Exchanges who intend to impose negotiated commission rates and who have charged small investors surcharges. These parties are adequate to represent the Class of said member firms. 6. It is impracticable to join all members of the Classes involved herein since there are Fifty Million (50,000,000) small investors in the United States and it further would be impractical to join One Hundred (100) member firms of the defendant exchanges. 7. The claims and/or defenses of the representative parties involved herein are typical of the claims and defenses of the class. 8. A class action is the only proper way to determine the present controversy. 9. The plaintiffs have met the requirements of Rules 23 (a) and 23 (b) and Rule 23.2 of the Federal Rules of Civil Procedure. 9. The plaintiffs agree to permit any member of the Classes involved herein to intervene in this action or will permit any member of the class of ‘‘small investors” to join in this action and contribute to the expenses thereof. 10. It is expected that the Court will make appropriate orders in this case to protect the interests of the Classes involved. TWENTIET H: By reason of the illegal practices set forth in this Complaint that plaintiff and others similarly A-15 situated, have been seriously damaged for the following reasons as well as others, and, if the illegai practices are not terminated, will suffer further and irreparable damage in the future: a. The plaintiffs have overpaid commissions in their purchases by reason of the imposition by the “member tirms’’ of an illegal surcharge. b. The plaintiffs will no longer have equal access to the securities markets in the same terms and conditions as mutual funds institutional investors. c. The plaintiffs will be required to pay commissions to mutual fund managers and the like to have equal access to the securities markets and will lose discretionary control over their securities investments. d. The plaintiffs will be deprived of a true auction market with respect to the purchase and sale of securities. e. The plaintiffs will not have access to the securities markets on the same basis as “*member firms”’ and will not be aie to offer their members low cost securities purchase and sale service. TWENTY-FIRST: With respect of many of the practices set forth herein plaintiff has no adequate remedy at law. With respect to the damage claims set forth therein plaintiff deraands a Trial by Jury of all Issues triable before a jury. TWENTY-SECOND: WHEREFORE, PLAINTIFFS DEMAND: a. A perpetual injunction restraining the defendants, and all “members” of the defendant Exchanges, from putting the so-called ‘‘negotiated Commission Rates’ in effect on April Sth, 1971. b. A preliminary injunction restraining the defendants and all members of the defendant Exchanges, pending the trial of this action, from putting the so-called ‘‘negotiated commission rates” into effect on April Sth, 1971. A-16 c. A mandatory injunction requiring the defendants NEW YORK STOCK EXCHANGE, INC. and AMERICAN STOCK EXCHANGE, INC. to permit the plaintiff INDEPENDENT INVESTORS PROTECTIVE LEAGUE, to conduct trading activities on the defendant Exchanges without having to purchase “seats” thereupon. d. Damages in the sum of Five Hundred Million Dollars ($500,000,000) trebled to One Billion Five Hundred Million Dollars ($1,500,000,000) together with an at- torney’s fee of Ten Million Dollars ($10,000,000) together with interest and the costs and disbursements of this ac- tion. e. As alternative relief, if the Court should decide that the defendants are entitled to permit negotiated com- mission rates that such negotiated rates be open to all investors and not merely to large investors. f. A perpetual injunction restraining the defendants, and all ‘member firms’ from continuing their discrimination in commission rates between large investors and small investors. Yours, etc. BADER AND BADER By: I. Walton Bader Attorneys for Plaintiff 274 Madison Avenue New York, N.Y. 10016 Tel. (212) LE2-6860 A-17 ANSWER (SAME TITLE) Defendants NEW YORK STOCK EXCHANGE, INC. (the “Exchange”’) and BACHE & COMPANY, INC. ("Bache") by their attorneys, Milbank, Tweed, Hadley & McCloy. for their answer to the complaint: 1. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraphs FIRST through FOURTH. 2. Deny each ard every allegation contained in paragraph FIFTH except deny knowledge or information sufficient to form a belief as to those allegations stated to be based upon plaintiff's belief. 3. Admit the allegations contained in paragraph SEVENTH except deny that the Exchange and the AMERICAN STOCK EXCHANGE (the ‘“‘Amex’’) are, in effect, “public utilities’. 4. Deny each and every allegation contained in paragraph EIGHTH except admit that all trading of securities listed on the Exchange or the Amex is performed by respective members of those exchanges, that the number of said members is limited by the number of available memberships and that membership is acquired by pur- chase in a competitive auction market. 5S. Deny each and every allegation contained in paragraph NINTH and admit that the Exchange and the Amex are subject to regulation by the Securities and Exchange Commission (the “SEC’’). 6. Declare that they are not required to plead to the allegations of law pleaded in paragraph TENTH. 7. Deny each and every allegation contained in paragraph ELEVENTH. A-18 8. Deny each and every allegation contained in paragraph TWELFTH except admit that defendants MERRILL, LYNCH, PIERCE, FENNER & SMITH, INC. (“*Merrill, Lynch’’) and Bache are member organizations of the Exchange and the Amex and are purportedly sued individually and as representatives of an alleged class of “*members” of the defendant exchanges. 9. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraphs THIRTEENTH except admit that in or about December, 1968 the defendant exchanges, with the ap- proval of the SEC, adopted rules providing for a volume discount for transactions involving more than one thousand (1,000) shares and that in or about April, 1970, the defendant exchanges, again with the approval of the SEC, adopted rules providing for an interim service charge to be imposed upon transactions of one thousand (1,000) shares of stock or less and that in or about March, 1972, the interim service charge was discontinued and a new com- mission rate schedule adopted, with the approval of the SEC and the Price Commission, incorporating a value- related volume discount. 10. Deny each and every allegation contained in paragraphs FOURTEENTH through SIXTEENTH. 11. Deny each and every allegation contained in paragraph SEVENTEENTH except admit that only members of the defendant exchanges may use the facilities of their respective exchanges. i2. Deny each and every allegation contained in paragraph EIGHTEENTH except admit that in or about April, 1971, the defendant exchanges, pursuant to a directive issued by the SEC after a series of public hearings, adopted rules permitting the negotiation of commission rates on that portion of transactions in securities listed on the defendant exchanges in excess of Five Hundred Thousand Dollars ($500,000) and that in April, 1972 said A-19 rules were amended. pursuant to a request of the SEC, to permit negotiation of commission rates on that portion of transactions in listed securities in excess of Three Hundred Thousand Dollars ($300,000). i3. Deny each and every allegation contained in paragraph NINETEENTH. 14. Deny each and every allegation contained in paragraph NINETEENTH (a) except deny knowledge or information sufficient to form a belief as to the allegations respecting the membership of the Independent Investors Protective League or the authorization to institute suit purportedly granted by the members of said. organization contained in paragraph 19(a)(4) and declare that defen- dants need not plead in response to the allegations con- tained in paragraph 19(a)(9) through 19(a)(10). 1S. Deny each and every allegation contained in paragraphs TWENTIETH and TWENTY-FIRST. FIRST DEFENSE 16. The complaint fails to state the claim upon which relief can be granted and this Court lacks subject matter jurisdiction over the controversy alleged. SECOND DEFENSE 17. Pursuant to its self-regulatory duties under the Securities Exchange Act of 1934 (1S U.S.C. §78a et seq.) the Exchange has adopted rules limiting membership and fixing minimum rates of commission and other charges, including the specific volume discount effective from December, 1968 to March, 1972, the interim service charge (““surcharge’’) effective from April, 1970 to March, 1972 and rules relating to negotiated commissions with respect to transactions in securities listed on the Exchange. All of the said rules are subject to review and revision by the SEC A-20 _ under Section 19(b) of the Exchange Act and such review jurisdiction is continuing to be exercised. By reason thereof neither the adoption of, nor the adherence to, said rules may be the subject of an antitrust claim because exclusive jurisdiction of the subject matter is vested in the SEC. THIRD DEFENSE 18. The imposing of limitations on membership and the fixing of minimum rates of commission and charges, in- cluding the specific volume discount effective December, 1968 to March, 1972, and the surcharge effective from April, 1970 to March, 1972 and rules relating to negotiated commissions, by the Exchange are within the scope and carry out the purposes of the Securities Exchange Act of 1934 (1S U.S.C. §§78a et seq.) and are therefore exempt from the operation of the antitrust laws. FOURTH DEFENSE 19. The fixing of minimum rates of commission and charges, imposing limitations on membership and establishing the specific volume discount effective December, 1968 to March, i972, and the rules relating to negotiated commissions by the Exchange were, and are, reasonable and justified and therefore not in contravention of the antitrust laws. FIFTH DEFENSE 20. Since the Securities Exchange Act of 1934 (U.S.C. §§78a et seg.) provides for review and revision by the SEC of the Exchange’s rules relating to membership, minimum rates of commission and other charges, primary jurisdiction of the subject matter of this action is vested in the SEC. A-21 SIXTH DEFENSE 21. Plaintiff lacks standing to assert a claim under the antitrust laws either as President of the Independent In- vestors Protective League or on behalf of its members or on behalf of an alleged class of small investors and further lacks standing to sue individually because he has not been directly injured in his business or property by reason of anything forbidden in the antitrust laws. SEVENTH DEFENSE 22. Any claim for damages which accrued more than four years prior to the commencement of this action is barred by the applicable statute of limitations (15 U.S:C. §$15Sb). EIGHTH DEFENSE 23. By reason of the plaintiff's tardy assertion of the illegality of the Exchange rules and regulations with respect to the volume discount effective from December, 1968 to March, 1972 and the interim service charge instituted in April, 1970 and discontinued in March, 1972 and the payment to the defendant member organizations of commissions and other charges, including the surcharge in accordance with the schedules established by the Exchange and defendants’ reliance upon the apparent acquiescence of the plaintiff and the purported class, plaintiff and the alleged class are guilty of laches and are estopped from asserting any claim against these defendants. NINTH DEFENSE 24. All the rules challenged herein were promulgated and adopted by the Exchange and adhered to by the member organizations pursuant to an order, request or the A-22 _ approval of the SEC and consequently the Exchange and the member organizations thereof should not be held liable for any violation of law occasioned therefor by reason of the good faith reliance by the defendants upon the authority and jurisdiction of the SEC. WHEREFORE, defendants the Exchange and Bache, demand judgment dismissing the complaint with costs and disbursements. Dated: New York, New York September 18, 1972 MILBANK, TWEED, HADLEY &McCLOY P By s/ (a member of the firm) 1 Chase Manhattan Plaza New York, N.Y. 1000S Attorneys for defendants New York Stock Exchange, Inc. and Bache & Company, Inc. A-23 ANSWER OF DEFENDANT MERRILL, LUNCH, PIERCE, FENNER & SMITH INC. (SAME TITLE) Defendant Merrill Lynch, Pierce, Fenner & Smith Incorporated (‘Merrill Lynch’’) by its attorneys, Brown, Wood, Fuller, Caldwell & Ivey, for its answer to the complaint: 1. Denies knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraphs FIRST through FOURTH. 2. Denies each and every allegation contained in paragraph FIFTH except denies knowledge or information sufficient to form a belief as to those allegations stated to be based upon plaintiff's belief. 3. Admits the allegations in paragraph SIXTH of the complaint, except avers that Merrill Lynch is 9 Sgro under the laws of the State of Delaware. 4. Admits the allegations contained in paragraph SEVENTH except denies that the New York Stock Ex- change, Inc. (the ‘““Exchange’’) and the American Stock Exchange (the ““Amex’’) are, in effect, “public utilities’. 5. Denies each and every allegation contained in paragraph EIGHTH except admits that all trading of securities listed on the Exchange or the Amex is performed by respective members of those exchanges, that the number of said members is limited by the number of available memberships and that membership is acquired by pur- chase in a competitive auction market. 6. Denies each and every allegation contained in paragraph NINTH except admits that the Exchange and the Amex are subject to regulation by the Securities and Exchange Commission (the “SEC’’). 7. Declares-that it is not required to piead to the A-24 allegations of law pleaded in paragraph TENTH. 8. Denies each and every allegation contained in paragraph ELEVENTH. 9. Denies each and every allegation contained in naragraph TWELFTH except admits that Merrill Lynch is a member organization of the Exchange and the Amex and is purportedly sued individually and as representative of an alleged class of ‘“‘members” of the defendant exchanges. 10. Denies knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph THIRTEENTH except admits that in or about December, 1968 the defendant exchanges, with the ap- proval of the SEC. adopted rules providing for a volume discount for transactions involving more than one thousand (1,000) shares and that in or about April, 1970, the defendant exchanges, again with the approval of the SEC, adopted rules providing for an interim service charge to be imposed upon transactions of one thousand (1,000) shares of stock or less and that in or about March, 1972, the interim service charge was discontinued and a new com- mission rate schedule adopted, with the approval of the SEC and the Price Commission, incorporating a value- related volume discount. 11. Denies each and every allegation contained in paragraphs FOURTEENTH through SIXTEENTH. 12. Denies each and every allegation contained in paragraph SEVENTEENTH except admits that only members of the defendant exchanges may use the facilities of their respective exchanges. 13. Denies each and every allegation contained in paragraph EIGHTEENTH except admits that in or about April, 1971, the defendant exchanges, pursuant to a directive issued by the SEC after a series of public hearings, adopted rules permitting the negotiation of commission rates on that portion of transactions in securities listed on A-25 the defendant exchanges in excess of Five Hundred Thousand Dollars ($500,000) and that in April, 1972 said rules were amended, pursuant to a request of the SEC, to permit negotiation of commission rates on that portion of transactions in listed securities in excess of Three Hundred Thousand Dollars ($300,000). 14. Denies each and every allegation contained in paragraph NINETEENTH. 1S. Denies each and every allegation contained in paragraph NINETEENTH (a) except denies knowledge or information sufficient to form a belief as to the allegations respecting the membership of the Independent Investors Protective League or the authorization to institute suit purportedly granted by the members of said organization contained in paragraph 19(a)(4) and declares that defendants need not plead in response to the allegations contained in paragraph 19(a)(9) through 19(a)(10). 16. Denies each and every allegation contained in paragraphs TWENTIETH and TWENTY-FIRST. FIRST DEFENSE 17. The complaint fails to state a claim upon which relief can be granted and this Court lacks subject matter jurisdiction over the controversy alleged. SECOND DEFENSE 18. Pursuant to its self-regulatory duties under the Securities Exchange Act of 1934 (15 U.S.C. §78a et seq.) the Exchange has adopted rules limiting membership and fixing minimum rates of commission and other charges, including the specific volume discount effective from December, 1968 to March, 1972, the interim service charge (““surcharge’’) effective from April, 1970 to March, 1972 and rules relating to negotiated commissions with respect A-26 to transactions in securities listed on the Exchange. All of the said rules are subject to review and revision by the SEC under Section 19(b) of the Exchange Act and such review jurisdiction is continuing to be exercised. By reason thereof neither the adoption of, nor the adherence to, said rules may be the subject of an antitrust claim because exclusive jurisdiction of the subject matter is vested inthe SEC. . THIRD DEFENSE 19. The imposing of limitations on membership and the fixing of minimum rates of commission and charges, in- cluding the specific volume discovat effective December, 1968 to March, 1972, and the surcharge effective from April, 1970 to March, 1972 and rules relating to negotiated commissions, by the Exchange are within the scope and carry out the purposes of the Securities Exchange Act of 1934 (15 U.S.C. §78a et seq.) and are therefore exempt from the operation of the antitrust laws. FOURTH DEFENSE 20. The fixing of minimum rates of commission and charges, imposing limitations on membership and establishing the specific volume discount effective December, 1968 to March, 1972, and the rules relating to negotiated commissions by.the Exchange were, and are, reasonable and justified and therefore not in contravention of the antitrust laws. FIFTH DEFENSE 21. Since the Securities Exchange Act of 1934 (U.S.C. §78 et seq.) provides for review and revision by the SEC of the Exchange’s rules relating to membership, minimur rates of commission and other charges, primary jurisdiction of the subject matter of this action is ves‘ed in the SEC. A-27 SIX™H DEFENSE 22. Plaintiff lacks standing to assert a claim under the antitrust laws either as President of the Independent In- vestors Protective League or on behalf of its members or on behalf of an alleged class of small investors and further lacks standing to sue individually because he has not been directly injured in his business or property by reason of anything forbidden in the antitrust laws. SEVENTH DEFENSE 23. Any claim for damages which accrued more than four years prior to the commencement of this action is barred by the applicable statute of limitations (15 U.S.C. $1Sb). EIGHTH DEFENSE 24. By reason of the plaintiff's tardy assertion of the illegality of the Exchange rules and regulations with respect to the volume discount effective from December, 1968 to March, 1972 and the interim service charge instituted in April, 1970 and discontinued in March, 1972 and the payment to the defendant member organizations of commissions and other charges, including the suvcharge in accordance with the schedules established by the Exchange and defendant's reliance upon the apparent acquiescence of the plaintiff and the purported class, plaintiff and the alleged class are guilty of laches and are estopped from asserting any claim against this defendant. NINTH DEFENSE 2S. All tiie rules challenged herein were promulgated and adopted by the Exchange and adhered to by the member organizations pursuant to an order, request or the A-28 approval of the SEC and consequently the Exchange and the member organizations thereof should not be held liable for any violation of law occasioned therefor by reason of the good faith reliance by the defendants upon the authority and jurisdiction of the SEC. WHEREFORE, defendant Merrill Lynch demands judgment dismissing the complaint with costs and disbursements. Dated: New York, New York September 28, 1972 BROWN, WwoOobD, FULLER, CALDWELL & IVEY By s/Roger J. Hawke (A member of the Firm) Attorneys for Defendant Merrill Lynch, Pierce, Fenner and Smith Incorporated One Liberty Plaza New York, New York 10006 (212) 349-7500 A-29 ANSWER OF DEFENDANT AMERICAN STOCK EXCHANGE, INC. (SAME TITLE) Defendant American Stock Exchange, Inc. by its at- torneys, Davis Polk & Wardwell, answering the complaint herein upon information and belief: 1. Denies k 10owledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph FIRST. 2. Denies knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph SECOND. 3. Denies knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph THIRD. 4. Denies knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph FOURTH. 5. Denies knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph FIFTH, except admits that plaintiff purports to bring this action on behalf of those persons described in paragraph FIFTH, but denies that this action is validly brought as a class action under Rule 23 of the Federal Rules of Civil Procedure and further denies that the persons sc described constitute a class within the meaning of said Rule. 6. Denies knowledge or information sufficieut to form a belief as to the truth of the allegations set forth in paragraph SIXTH, except admits that the American Stock Exchange, Inc. is a corporation duly organized and existing under the laws of the State of New York, and has an office and place of business at 86 Trinity Place, City and A-30 State of New York and admits that the American Stock Exchange, Inc. is registered with the Securities and Ex- change Commission as a national securities exchange pursuant to Section 6 of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §78f and that the American Stock Exchange, Inc. has filed with the Securities and Exchange Commission, in accordance with said Section 6, copies of its Constitution and rules and all amendments thereto. 7. Denies each and every allegation set forth in paragraph SEVENTH, except admits that the New York Stock Exchange, Inc. and the American Stock Exchange, Inc. maintain honest auction markets for the purchase and sale of securities at prices arrived at by fair bargaining between buyers and sellers of these securities. 8. Denies each and every allegation set forth in paragraph EIGHTH, except admits that the New York Stock Exchange, Inc. and the American Stock Exchange, Inc. maintain markets where securities listed on those exchanges can be purchased and sold by members of those exchanges on behalf of themselves, their member organizations, and their customers, that the number of said members is limited by the number of available memberships and that membership is acquired by pur- chase in a competitive auction market. 9. Denies each and every allegation set forth in paragraph NINTH, except admits that the New York Stock Exchange, Inc. and the American Stock Exchange, Inc. are subject to regulation by the Securities and Exchange Commission. 10. Declares that it is not required to plead to the allegations of law pleaded in paragraph TENTH. 11. Denies each and every allegation set forth in paragraph ELEVENTH. 12. Denies each and every allegation set forth in A-31 paragraph TWELFTH, except admits that defendants Merrill Lynch, Pierce, Fenner and Smith, Inc. and Bache and Company, Inc. are member organizations of the New York Stock Exchange, Inc. and the American Stock Exchange, Inc. and are purportedly being sued in- dividually and as representatives of an alleged class of “members” of the defendant exchanges. 13. Denies knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph THIRTEENTH, except admits that in or about December, 1968 the defendant exchanges, with the ap- proval of the Securities and Exchange - Commission, adopted rules providing for a volume discount for tran- sactions involving more than one thousand (1,)))) shares and that in or about April, 1970, the defendant exchanges, again with the approval of the Securities and Exchange Commission, adopted rules providing for an interim service charge to be imposed upon transactions of one thousand (1,000) shares of stock or less and that in or about March, 1972, anew commission rate schedule was adopted, and in or about April, 1972, the interim service charge was discontinued, with the approval of the Securities and Exchange Commission and the Price Commission, in- corporating a value-related volume discount. 14. Denies each and every allegation set forth in paragraph FOURTEENTH. 1S. Denies each and every allegation set forth in paragraph FIFTEENTH. 16. Denies each and every allegation set forth in paragraph SIXTEENTH. 17. Denies each and every allegation set forth in paragraph SEVENTEENTH, except admits that only members of the defendant exchanges may use the facilities of their respective exchanges, and refers to the published rules and regulations of the American Stock Exchange, Inc. for the terms thereof. . ma Ms A-32 18. Denies each and every allegation set forth in paragraph EIGHTEENTH. 19. Denies each and every allegation set forth in paragraph NINETEENTH. 19(a). Denies each and every allegation set forth in paragraph NINETEENTH (a), except denies knowledge or information sufficient to form a belief as to the allegations set forth in paragraph NINETEENTH (a) 4 respecting the membership of the Independent Investors Protective League or the authorization to institute suit purportedly granted by the members of said organization, and declare defendant the American Stock Exchange, Inc. need _plgad in response to the allegations set forth in agg@ph NINETEENTH (a)0 (second of two such of Bragrephs through NINETEENTH (a)10. 20." Denies each and every allegation set forth in paragraph TWENTIETH. 21. Denies each and every allegation set forth in paragraph TWENTY-FIRST. AS AND FOR A FIRST AFFIRMATIVE DEFENSE 22. The complaint fails to state facts sufficient to con- stitute a cause of action. AS AND FOR A SECOND AFFIRMATIVE DEFENSE 23. Jurisdiction over the subject matter of this complaint is vested solely and exclusively with the Securities and Exchange Commission. AS AND FOR A THIRD AFFIRMATIVE DEFENSE 24. By reasons of the provisions of the Securities and Exchange Act of 1934, as amended, 15 U.S.C. §78a et seq., and the actions of the Securities and Exchange A-33 Commission thereunder, the acts of the American Stock Exchange, Inc. alleged in the complaint are exempt and immune from the provisions of the Robinson-Patman Act and the Sherman Act upon which the complaint is predicated. AS AND FOR A FOURTH AFFIRMATIVE DEFENSE 25. The subject matter of the complaint is within the primary jurisdiction of the Securities and Exchange Commission. AS AND FOR A FIFTH AFFIRMATIVE DEFENSE 26. The fixing of minimum rates of commission and charges, imposing limitations on membership and establishing the specific volume discount effective December, 1968 to March, 1972, and the rules relating to negotiated commissions by the American Stock Exchange, Inc. were, and are, reasonable and justified and therefore not in contravention of the antitrust laws. AS AND FOR A SIXTH AFFIRMATIVE DEFENSE 27. Plaintiff lacks standing to assert a claim under the antitrust laws either as President of the Independent In- vestors Protective League or on behalf of its members or on behalf of an alleged class of small investors because he has not been directly injured in his business or property by reason of anything forbidden in the antitrust laws. AS AND FOR A SEVENTH AFFIRMATIVE DEFENSE 28. Plaintiff and the alleged class are guilty of laches and are estopped from asserting the claims they make in the complaint against the American Stock Exchange, Inc. A-34 AS AND FOR AN EIGHTH AFFIRMATIVE DEFENSE 29. All the rules challenged herein were promulgated and adopted by the American Stock Exchange, Inc. and adhered to by the member organizations pursuant to an order, request or the approval of the Securities and Ex- change Commission and consequently the American Stock Exchange, Inc. should not be held liable for any violation of law occasioned therefor by reason of the good faith reliance by the defendant upon the authority and jurisdiction of the Securities and Exchange Commission. AS AND FOR A NINTH AFFIRMATIVE DEFENSE 30. Any claim against the American Stock Exchange, Inc. based on acts occurring more than four years prior to the commencement of this action is barred by the provisions of Section 4B of the Clayton Act, 14-U.S.C. § 1Sb. WHEREFORE, defendant American Stock Exchange, Inc. demands judgment dismissing the complaint together with the costs and disbursements of this action. Dated: New York, New York September 29, 1972 DAVIS POLK & WARDWELL By s/ Attorneys for the Defendant American Stock Exchange, Inc. 1 Chase Manhattan Plaza New York, N.Y. 10005 Tel. 212 HA 2-3400 A-35 DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT (SAME TITLE) SIR: PLEASE TAKE NOTICE that upon the pleadings herein, the affidavits of Robert M. Bishop, H. Vernon Lee, Jr.. and John P. Foynes, and the annexed statement pursuant to Rule 9(g) of the Genera! Rules of this Court, the undersigned will move this Court before the Hon. Morris E. Lasker at Room No. 2903, United States Court House, Foley Square, New York, N.Y., on December 29, 1972, at 10:00 a.m., or as soon thereafter as counsel can be heard, or at such other time and place as the Court shall direct, for an order pursuant to Rules 12(b) and 56 of the Federal Rules of Civil Procedure, dismissing the complaint and granting summary judgment in favor of defendants and against plaintiff, and for such other and further relief as is just and proper. Dated: New York, N.Y. December 4, 1972 Yours, etc., MILBANK, TWEED, HADLEY & McCLOY By s/Isaac Shapiro (A Member of the Firm) Attorneys for defendants New York Stock Exchange, Inc. and Bache & Co., Inc. 1 Chase Manhattan Plaza New York, N.Y. 10005 A-36 LORD, DAY & LORD By s/John Loflin (A Member of the Firm) Attorneys for defendant American Stock Exchange 25 Broadway New York, N.Y. 10004 BROWN, WOOD, FULLER, CALDWELL & IVEY By s/Roger J. Hawk (A Member of the Firm) Attorneys for defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. 1 Liberty Plaza New York, N.Y. 10006 TO: BADER AND BADER Attorneys for plaintiff 274 Madison Avenue New York, N.Y. 10006 A-37 DEFENDANTS’ RULE %g) STATEMENT IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT (SAME TITLE) Detendants respectfully submit that the following material facts are not in dispute. 1. The New York Stock Exchange (the ““NYSE”) and the American Stock Exchange (the ““Amex”’) are corporations organized under the laws of the State of New York for the purpose of providing for their members and the public two- way auction markets in exchange listed stocks, bonds and other securities. 2. The NYSE presently has 1,366 members, all of whom are individuals. The Amex presently has 650 regular members and 217 associate members, all of whom are individuals. The NYSE has 527 member organizations and the Amex has over 500 member organizations. 3. Since their founding, the NYSE and the Amex at all times have had rules limiting their membership and prescribing the minimum commissions to be charged by members and member organizations on transactions executed for the investing public in securities dealt in on the respective exchanges. 4. The NYSE and the Amex were registered by the Securities and Exchange Commission (the “SEC”) as national securities exchanges in 1934 pursuant to the provisions of Section 6 of the Securities Exchange Act of 1934 (the “1934 Act’’). At the time of said registration, the respective constitutions and rules of the NYSE and the Amex were submitted to and approved by the SEC pur- suant to the requirements of the 1934 Act. 5. Since registering with the SEC in 1934, the NYSE and the Amex have changed their respective constitutional A-38 provisions and rules prescribing minimum commission rates a number of times. Copies of each such rule change or amendment were submitted by the exchanges to the SEC as required pursuant to Section 6(a)(4) of the 1934 Act and SEC Rule 17(a)-8. 6. The SEC, in carrying out its duty of supervision under Section 19(b) of the 1934 Act, studied and reviewed all the proposed changes. After such study and review the SEC in some instances permitted the proposed changes to become effective without modification; in other instances the SEC requested modifications in the proposed changes which were then adopted by the NYSE and the Amex. 7. In 1959, at the request of the SEC, the NYSE un- dertook a study which revealed that the inflexibility of the then prevailing commission rate structure had a potential for causing market dislocations because of the growth of institutional-size business. Beginning in 1965, the Amex undertook studies of its own intra-member and non- member commission rate structures, with particular emphasis on institutional-size transactions. 8. The period of study expended on the problem of a volume discount extended over a period of some six years— from 1962 to 1968. Both the NYSE and the SEC developed proposals to deal with market problems created by the absence of a volume discount. These proposals were made public and comment invited on January 26, 1968 in the SEC's Exchange Act Release No. 8239. On May, 1968, the. SEC wrote the NYSE and the Amex advising of the Commission's determination that “changes in the present commission rate structure are required to benefit the in- vesting public,” and directing that interim adjustments be made in the exchange’s commission rate structures pen- ding a final revision at the conclusion of the SEC Rate Hearings. On December 5, 1968, the rules of the NYSE and the Amex were modified to provide for a volume discount on all public orders for securities listed on the A-39 respective exchanges involving more than 100 shares. of stock. 9. Studies prepared by the NYSE, the Amex, and the SEC indicated that the securities commission business was sorely pressed in late 1969 and early 1970 by reason of the peak volume demands, increasing costs (there had not been a commission increase in over a decade) and the diminution of revenues from institutional trades which were subject to a discount. In order to correct these dif- ficulties and protect small investors—whose trades many brokerages would no longer accept—the NYSE and the Amex proposed to ‘the SEC the imposition of an interim service charge on smaller orders. The SEC approved this proposal on the condition that the imposition of the service charge be for a strictly limited time and that the exchanges © ensure that small investors were not discriminated against and that member organizations took all steps to ameliorate their financial problems. This interim service charge became effective on both exchanges in April, 1970. It was due to expire 90 days later, but because of continuing financial difficulties, the NYSE and the Amex proposed its extension. The SEC, after public hearings in July, 1970 approved. The interim service charge remained in effect from April, 1970 until April, 1972, when the present rate structures were enacted by the exchanges. 10. As a result of the intensive investigation of the commission rate structure over nearly a decade, including two SEC reports (The Special Study of 1963 and the In- Stitutional Investor Study of 1971) and two years of testimony and evidence in the Rate Hearings, the SEC determined, in lage 1970, that fixed charges for portions of orders above a certain amount were neither necessary nor appropriate under the 1934 Act. The NYSE and the Amex each adopted the new rate proposal then urged by the SEC for the negotiation of commission rates on that portion of orders in excess of $500,000 (i. e., $500,000 was established A-40 as the “breakpoint’’ between fixed minimum and negotiated commission rates). 11. The $500,000 breakpoint was considered ex- perimental and both exchanges instituted a progrim of monitoring the impact of negotiated rates, again ai SEC direction. On February 2, 1972, the Commissioi an- nounced its determination that the breakpoint should be lowered to $300,000. Both the NYSE and the Amex ac- ceded and adopted the necessary changes in their respective constitutions in April, 1972. 12. During the course of the regulatory activity redating to the volume discount, interim service charge and negotiated commission rates, the SEC’s Rate Heerings, commencing on July 1, 1968, received evidence and testimony on every aspect of the exchanges’ commission rate structure. After the Hearings terminated in 1971, the NYSE proposed, and the SEC approved, the presert rate . schedule which was adopted by both exchanges in April, 1972. The present commission rate structure repealed the previously adopted volume discount and interim service charge and replaced it with a schedule of commission rates incorporating a cost-related discount for volume tran- sactions as well as negotiated rates of commission on that portion of orders in excess of $300,000. Dated: New York, New York December 4, 1972 Respectfully submitted, MILBANK, TWEED, HADLEY & McCLOY 1 Chase Manhattan Plaza New York, N.Y. 1000S Attorneys for defendants New York Stock Exchange, Inc. and Bache & Co., Inc. A-41 LORD, DAY & LORD 2S Broadway New York, N.Y. 10004 Attorneys for defendant American Stock Exchange, Inc. BROWN, WOOD. FULLER, CALDWELL & IVEY | Liberty Plaza New York, New York Attorneys for defendant Merrill Lynch, Pierce, Fenner & Smith, Incorporated A-42 AFFIDAVIT OF H. VERNON LEE IN SUPPORT OF DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND EXHIBITS ANNEXED (SAME TITLE) STATE OF NEW YORK ( SS.: COUNTY OF NEW YORK) » H. VERNON LEE, JR., being duly sworn, deposes and says: 1. | am Vice-President and Secretary of the American Stock Exchange (the “‘Amex’’), a defendant herein, and | am familiar with this matter. | make this affidavit in support of the defendants’ motion for an order dismissing the complaint filed in this action and granting summary judgment to the defenc ants. 2. The Amex is a New York corporation, incorporated under the New York Not-for-Profit Corporation Law, whose business and purpose is to provide a securities marketplace in New York City for its members who are brokers and dealers in securities. As a two-way auction market for securities listed on the Amex, activity in the Amex is characterized by competition both between and among buyers and sellers. The Amex presently has 650 regular members, who have direct access to the trading floor, and 217 associate members, who may do business on the trading floor only through a regular member. In ad- dition, there are over 500 regular and associate member organizations, partnerships and corporations in which the general partners or the directors and major stockholders are Amex members or are approved by the Amex’s Board of Governors. 3. The Amex was first organized in 1908 as the New York Curb Agency, an outdoor marketplace for corporate A-43 securities. In 1921 the name was changed to the New York Curb Market and a constitution was adopted to coincide with the outdoor. exchange’s move indoors to its present location on Trinity Place. In 1953 the name was officially changed to the American Stock Exchange. Since its early (lays as an outdoor exchange, the Amex has maintained rules limiting access to its facilities and prescribing the minimum commission rates which could be charged to non-members on transactions in securities listed on the Amex. Members and member organizations who violate Amex rules with respect to the minimum commission rates chargeable to non-members are subject to disciplinary action. 4. Subsequent to the enactment of the Securities Ex- change Act of 1934 (the “1934 Act’’), the Amex submitted to the Securities and Exchange Commission (the “SEC”’) an application for registration as a national securities exchange. The Amex also submitted for SEC approval copies of its Constitution and Rules, which contained provisions requiring members to charge specified minimum commissions to non-members. The Amex was registered with the SEC on September 23, 1934. At the time of its registration the Amex was required by §6(a)(1) of the 1934 Act to agree “to comply, and to en- force . . . compliance by its members, with the provisions of [the 1934 Act]... and any rule or regulation... - thereunder.” The registration was granted upon findings by the SEC, as required by §§6(d) and 6(b) of the 1934 Act, that the Amex was “so organized as to be able to comply with the provisions of [the 1934 Act] . . . and the rules and regulations thereunder and the rules of the exchange are just and adequate to ensure fair dealing and to protect investors [,]"" and further, that the rules of the Amex “include provision for the expulsion, suspension, or disciplining of a member for conduct or proceeding in- consistent with just and equitable principles of trade . . . ” A-44 5. Since the SEC originally approved the Constitution and Rules of the Amex upon its registration on September 23, 1934, the constitutional provisions and _ rules prescribing minimum commission rates chargeable to non- members have been changed by the Amex a number of times. The Amex has submitted copies of each rule change or amendment to the SEC as required pursuant to §6(a)(4) of the 1934 Act and SEC Rule 17(a)—8. The Amex’s present constitutional provisions and rules relating to commission rates (annexed as Exhibits A and B) are the product of studies conducted by the Amex and the New York Stock Exchange (the ““NYSE’’), as well as hearings and studies conducted by the SEC [Report of the Special Study of Securities Markets, House Doc. No. 815, 88th Cong., Ist Sess. (1963) and The Institutional Investor Study, House Doc. No. 92-64, 92nd Cong., Ist Sess. (1970)]. 6. In late 1962 the Costs and Revenues Committee of the NYSE, at the direction of the SEC, initiated a study of the need and feasability of implementing a volume discount for lage transactions in securities. In a report transmitted by the NYSE to the SEC on November 29, 1965, the Cost and Revenue Committee recognized the need for volume discounts due to the growing number of institutional-sized transactions and the lack of any provision in the existing non-member commission rate structure for discounts on block trades. In a later report submitted by the NYSE to the SEC on January 2, 1968, the Committee made specific proposals to minimize and control customer-directed ““give-ups”, the reciprocal and rebative methods block traders utilized to avoid commission rates. On January 26, 1968, the SEC proposed for adoption by national securities exchange Rule 10b-10, a provision which would restrict give-ups. 7. In 196S the Amex commissigned Haskins and Sells, a major accounting firm, to undertake a study of the ex- A-45 change’s intra-member commission structure and to evaluate its fairness and adequacy. In early 1968, Amex’s Board of Governors appointed a Subcommittee on Commission Structure [the ““Subcommittee"’], to review all aspects of the exchange’s commission rates in light of changing market conditions, costs of doing business, and needs of the investing public. The Subcommittee submitted its first memorandum to Amex members and member organizations on April 19, 1968 (annexed as Exhibit C), in which it reported preliminary findings on the existing intra- member commission rates and solicited the opinions and suggestions of the Amex membership. 8. Amex President Ralph S. Saul transmitted the Subcommittee’s April 19 memorandum to the SEC in a letter to Chairman Manuel F. Cohen on April 24, 1968. (Annexed as Exhibit D). In that letter, Mr. Saul informed Chairman Cohen that the Subcommittee was presently studying the commission rates charged to non-members of the Amex. Mr. Saul also expressed the Amex’s opposition to the SEC's proposed Rule 10b-10 as not in the public interest, and advised that the Subcommittee would con- sider possible alternative methods for dealing with the problem of customer-direcied give-ups. 9. On May 28, 1968, Chairman Cohen transmitted to the Amex a letter of the same date written to President Robert W. Haack of the NYSE advising that, as a result of its extensive and continuing study of the commission rate structure of national securities exchanges, the SEC believed ‘‘changes in the present commission rate structure are required to benefit the investing public.” (The letter of transmittal to the Amex and the Haack letter are both annexed as Exhibit E). The letter contained a request by the SEC, pursuant to its authority under §19 (b) of the 1934 Act to fix reasonable rates of commission, that the NYSE, on or before September 15, 1968, make changes in its commission rates which would either (a) conform to an A-46 SEC proposed commission schedule (attached to the Haack letter) or (b) eliminate minimum commission rates on all orders in excess of $50,000. This request was said to be made “‘in the context of the Commission’s responsibilities to consider the national policies embodied both in the securities laws and in the antitrust laws.” In his letter of transmittal to the Amex, Commissioner Cohen stated that “the Commission has not directed a similar letter to your Exchange because of possible differences in the situation prevailing’ but “requests that you give immediate at- tention to appropriate modifications of your commission rate structure, including any necessary interim steps.’’ The letter to President Haack also announced that the SEC, pursuant to its authority under §21(a) of the 1934 Act, would hold public hearings on the commission rate structure issue commencing July 1, 1968 (the “Rate Structure Hearings’’). 10. In a letter to the SEC on June 26, 1968, President Saul advised that after careful consideration of the Commission’s proposed Rule 10b-10 and recent studies by the Amex staff, the Amex Board of Governors “‘has agreed | in principle to eliminate . . . customer-directed give- ups..." (Annexed as Exhibit F). The letter also advised © that the Board of Governors “‘has also agreed that a modification of the present minimum commission rate structure to provide volume discounts is .also ap- propriate . . . ’ Finally, the letter stated that the Amex’s — staff had been directed by the Board of Governors “‘to work with the Commission to achieve meaningful and prompt implementation of the Board of Governors’ position with respect to discounts and give-ups.”’ 11. On September 20, 1968 the Subcommittee on Commission Structure transmitted to Amex members and member organizations a memorandum recommending adoption of a volume discount on transactions in securities involving more than 1,000 shares and an amendment to the A-47 Amex’s Constitution which would prohibit customer- directed give-ups. (Annexed as Exhibit G). 12. Pursuant to a vote of its membership, on December S. 1968 the Amex effectuated amenénents to its Con- stitution which provided for volume discounts. on tran- sactions in securities involving more than 1,000 shares, and prohibited customer-directed give-ups. 13. Between 1968 and 1970, because of a iremendous rise in the volume of public transactions on the national securities exchanges, the facilities and resources of Amex members became increasingiy overburdened. The expense of expansion needed te ineet the increased demand, as well as rising costs during a decade in which there had been no increase in commission rates, contributed to a drastic decline in the profits of the securities industry. The hardest hit were member organizations which primarily handled small orders for individual customers. The volume discount, which became effective on December 5, 1968, threatened only to exacerbate the situation because of the likelihood that it would reduce commission revenues. i4. On February 13, 1970 and March 16, 1970, the NYSE presented to the SEC statistical evidence demon- strating the financial distress of the securities industry and the need for interim relief in the form of an increase in commission rates. On March 19, 1970, the NYSE sub- mitted to the SEC a proposed rule which would impose an interim service charge, in addition to the existing minimum commission rate, on all public transactions in listed securities involving 1,000 shares of stock or less. 1S. In a letter to the SEC on March 26, 1970, the Amex expressed its support of the NYSE’s proposed interim service charge and set forth the results of a survey con- ducted among Amex member organizations which in- dicated the need for temporary relief of that nature. (Annexed as Exhibit H). A-48 16. In a letter to the NYSE on April 2, 1972, the SEC expressed its non-objection to the proposed interim service charge on transactions involving 1,000 shares or less. (Annexed as Exhibit 1). The SEC stated that its own data had confirmed the loss experience of the industry and that “past losses and the prospect of continued financial drain have influenced many member firms to impose limitations on their services to small investors."” The SEC conditioned its non-objection to the interim service charge upon its limitation to a 90 day period and the requirement that steps be taken to ensure the restoration of full brokerage services for small investors. 17. On April 2, 1972, the Amex transmitted to the SEC copies of its new Rule 396, which provided for an interim service charge essentially the same as that proposed by the NYSE. In its letter of transmittal, the Amex agreed to adhere to the conditions stated by the SEC in its letter of April 2 to the NYSE. (A copy of Rule 396 and the Amex’s letter of transmittal to the SEC are annexed as Exhibit J). The interim service charge went into effect on April 6, 1970 and was to expire on July 6, 1970. 18. On April 10, 1970 the SEC responded to the Amex’s April 2 submission with a letter expressing its non- objection to Rule 396 imposing an interim service charge. (Annexed as Exhibit K). 19. Prior to the expiration date of the interim service charge, studies conducted by the NYSE revealed that the financial condition of the securities industry had not improved. These findings were relayed to the SEC on June 18, 1970 by President Haack of the NYSE. In a letter on June 29, 1970, the Amex advised the SEC that economic conditions among its member organizations had steadily deteriorated since the interim service charge was initially requested and that the continued application of the sur- charge was urgently needed. (Annexed as Exnibit L). A-49 20. On July 2, 1970 the SEC announced that the Rate Structure Hearings, originally convened on July 1, 1968, would be reconvened on July 13, 1970 to receive evidence on the need to extend the interim service charge. In its announcement, the SEC stated that it would not act to terminate the service charge pending the outcome of the hearings on its extension. 21. On July 16, 1970, the Amex transmitted to the SEC the results of a new survey of member organizations supplementing the results of the survey conveyed in its March 26 letter which first demonstrated the need for an interim service charge. (Annexed as Exhibit M). The results of the new survey revealed that the overwhelming majority of member organizations surveyed had continued to suffer substantial losses even with the additional income provided by the service charge. 22. The SEC continued its supervision of the financial state of the securities industry and did not revoke its ap- proval of the interim service charge. The interim service charge was repealed in April, 1972, when Amex Rule 396 was changed to prohibit the imposition of any charge in excess of the prescribed commission rates presently in effect. 23. On June 30, 1970, as a result of its own studies on the commission rate structure, the NYSE submitted to the SEC a proposed permanent schedule or “rate package’’ to replace the interim commission rates then in effect. On July 2, 1970 the SEC announced that its Rate Structure Hearings would reconvene on July 20, 1970 to receive testimony and other relevant data concerning the NYSE’s proposed new rate package. (Exchange Act Release No. 8924, dated July 2, 1972, Annexed as Exhibit N). 24. On July 16, 1970, the Amex submitted to the SEC its views “as to the importance of the commission rate-making process, and the relationship of that process to the func- tioning of the exchange markets and the regulation of A-50 securities markets."’ (Annexed as Exhibit O). In its sub- missions the Amex expressed its support of the procedures followed by the NYSE in developing its June 30 commission rate schedule proposal. 25. On March 17, 1971, the SEC transmitted to the Amex copies of correspondence which had passed between the Commission and the NYSE relating to the NYSE’s June 30 commission rate proposal. (Annexed as Exhibit P.) On October 22, 1970 the SEC had advised the NYSE that “tixed charges for portions of orders in excess of $100,000 are neither necessary nor appropriate.”” On February 10, 1971 the SEC directed the NYSE to take action to im- plement, by April, 1971, negotiated commission rates on institutional-sized orders, but agreed to accept $500,000 as the breakpoint for the negotiated rates. On March 9, 1971, the NYSE responded that the April 1 deadline did not offer sufficient time to review the SEC’s proposal and implement a constitutional amendment. The SEC on March 10, 1971 reiterated its April 1 deadline, and warned the NYSE that the maintenance of minimum commission rates on portions of orders above the $500,000 breakpoint after the deadline “would be unreasonable and could be contrary to the Exchange Act.” 26. In a letter to the SEC on March 26, 1971, President Saul of the Amex stated that “in view of the Commission’s position, the Exchange is obliged to recommend ap- propriate revisions to its Constitution and Rules to eliminate fixed minimum commissions on that portion of an order in excess of $500,000." (Annexed as Exhibit Q) 27. Pursuant to a vote of the membership, the amend- ments to the Amex’s Constitution providing for negotiated commission rates on that portion of orders in excess of $500,000 became effective on May 3, 1971. 28. The SEC consistently maintained that the $500,000 breakpoint for negotiated commission rates did not represent a firal determination as to commission rate A-SI structures, and that the Commission would review the impact of the changes. Accordingly, to allow the SEC and the exchange to observe the workings of competitive rates. on May 3, 1971 the Amex effectuated Rule 398, which required members to report executions of orders exceeding $500,000. (A copy of Amex letter to SEC, dated April 28, 1971, transmitting proposed Rule 398 is annexed as Exhibit R). 29. On February 2, 1972, the SEC advised in its “Statement on the Future Structure of the Securities Markets” that the breakpoint for portions of orders subject to negotiated commission rates should be lowered from $500,000 to $300,000. The Commission directed the NYSE to take the required action implementing such a change within 90 days. In a letter on March 19, 1972 the SEC advised the Amex that it should begin to draft rule changes providing for a lowering of the breakpoint for negotiated commission rates to $300,000. (Annexed as Exhibit S). The Amex replied by letter on March 28, 1972, submitting to the SEC, pursuant to SEC Rule 17(a)-8, copies of proposed rule changes providing for a lowering of the breakpoint to $300,000. (Annexed as Exhibit T). 30. On April 24, 1972, pursuant to a vote of its mem- bership, the Amex amended its Constitution to adopt a commission rate schedule providing for cost-related discounts for volume transactions and negotiated com- mission rates on that portion of orders in excess of $300,000. Concurrently, provisions for the earlier volume discount and the interim service charge were repealed. 31. The existing commission rate structure of the Amex is the subject of continuous study by the exchange and the SEC. The SEC not determined that the Amex’s present commission rates represent a final resolution of the commission rate structure. Of particular interest to the SEC and the Amex in their continuing observation of the impact of existing commission rates, is the advisability of A-52 lowering the breakpoint between minimum and negotiated commission rates below its present $300,000 level. 32. The plaintiff in this action, Richard A. Gordon, has never applied for, or been denied application for, mem- bership in the Amex during the past six years. This in- formation is based on an examination of Amex records. It was not necessary to examine the records to ascertain whether the Independent Investors protective League has ever applied for membership in the Amex, since only in- dividuals are eligible for Amex membership. s/H. Vernon Lee, Jr. H. YERNON LEE, JR. Sworn to December 4th, 1972 A-53 EXHIBIT “A” American Stock Exchange Constitution Article VI, Revised to August 1, 1972 ARTICLE VI Commissions and Charges General Rule Sec. 1. *** Commissions shall be charged and collected upon the execution of all orders tor the purchase or sale, for account of others, of securities, including securities “when, as and if issued’’, listed or admitted to unlisted trading upon the Exchange, and these commissions shall be at rates not less than the rates in this Article prescribed, and shall be net and free from any rebate, return, discount or allowance made in any shape or manner, or by any method or arrangement direct or indirect. No bonus or percentage or portion of a commission, whether or not such commission be at or above the rates herein established, or any portion of a profit except as may be specifically per- mitted by the Constitution or by a rule adopted by the Board of Governors, shall be given, paid or allowed directly or indirectly, or as a salary or portion of a salary, to a clerk or person for business sought or procured for any member of the Exchange or member firm or member corporation. No member, member firm or member corporation shall make a proposition for the transaction of business at less than the minimum rates of commission prescribed in this Article. No member, member firm or member corporation shall, in consideration of the receipt of business in securities dealt in on the Exchange and at the direct or indirect request of a non-member or by direct or indirect arrangement with a non-member, make any payment or give up any work or give up all or any part of any com- mission or other property to which such member, member A-54 firm or member corporation is or will be entitled.*** Transactions on another exchange. Notwithstanding the provisions of this Article, any member of the Exchange or member firm or member corporation which is a member or registered firm or corporation of another exchange located in the United States or Canada, or registered with a Canadian exchange as being entitled to a return of commission from members of such exchange, may in respect of transactions made on such other exchange charge the rates of commission prescribed by such other exchange. Amendment. *** November 1, 1968, effective December 5, 1968. Schedule of Stock Commissions Sec. 2. Commissions shall be as follows: Non-Member rates (a) The minimum commission rates to non-members on stocks, rights and warrants (hereinafter referred to as stocks), shall be as follows: On 100 share orders (1) On each order for 100 shares, on stocks selling at $1.00 per share and above, commissions shall be based upon the amount involved in the order and, subject to the provisions of subsections (f), (h) and (1) of this Section 2, shall be not less than the rates hereinafter specified: Amount Involved in the Order Minimum Commission $100—but under $800 2.0% of money involved + $ 6.40 $800—but under $2,500 1.3% of money invoived + $12.00 $2,500—and above 0.9% of money involved + $22.00 A-55 Notwithstanding the foregoing: (i) When the amount involved in an order is less than $100, the minimum commission shall be as mutually agreed. (ii) The minimum commission on an order for 100 shares shall not exceed $65.00 Multiple round lot orders (2) On each multiple round lot order for 200 shares or more, on stocks selling at $1.00 per share and above, commissions shall be based upon the amount involved in the order and, subject to the provisions of subsections (f), (h) and (1) of this Section 2, shall be not less than the rates hereinafter specified: Amount Involved in the Order Minimum Commission $100—but under $2,500 1.3% of money involved + $12.00 $2,500—but under $20,000 0.9% of money involved + $22.00 $20,000—but under $30,000 0.6% of money involved + $82.00 $30,000—to and including $300,000 0.4% of money involved + $142.00 Plus a charge for each round lot of 100 shares within the order as follows: First to tenth round lot $6.00 per round lot Eleventh round lot and above $4.00 per round lot Notwithstanding the foregoing: (i) When the amount involved in an order is less than $100, the minimum commission shall be as mutually agreed. (ii) The minimum commision per round lot shall not exceed the single round lot commission computed in accordance with the provisions of paragraph (i) of subsection (a) of this Section 2. A-56 Odd Lot Orders (3) On any odd lot order, commissions shall be based upon the amount involved in the order and shall be not less than the rates specified in paragraph (1) of subsection (a) of this Section 2, less $2.00 subject to the provisions of subsections (f), (h) and (1) of this Section 2. Notwithstanding the foregoing: (i) When the amount involved in an odd lot order is less than $100, the minimum commission shall be as mutually agreed. (ii) The minimum commission on an odd lot order shall not exceed $65.00. (iii) When one or more odd lot orders plus one or more round lot orders are executed in the same security, on the same day, for the same account, on the same side of the market, the commission(s) on such odd lot order(s) shall not exceed the com- mission which would be chargeable with respect to the nearest round lot in excess of such odd lot order(s). (4) On that portion of an order involving an amount of $500,000 or less, on stocks selling below $1 per share, commissions shall be based upon the amount involved in the order and shall be not less than the rates hereinafter specified: Amount Involved in the Order Minimum Commission $0—but under $1,000 8.4% of money invoived $1,000—but under $10,000 5.0% of money involved + $34.00 $10,000—and above 4.0% of money invoived + $134.00 A-57 Notwithstanding the foregoing, when the amount involved in an order is less than $100, the commission shall be as mutually agreed. Floor brokerage and clearance rates (b) The minimum commission rates to regular and associate members on stocks, rights and warrants (hereinafter referred to as stocks) shall be based on the number of round lots and the price of the shares involved in each round lot order as follows: S66 Sid SOL o9's seei os 01 saoge pue OSs Or'6 Of 4 sso. oz 8 SOEL S M1 OS$ 4epun ing “eaoge pue Ops o8'8 seg os 6 bd Oz zt os'6 O¥$ 4epun ing ‘eroge pue org oes Srv9 $26 aed Os it sé68 O€$ 4ePuN ing ‘enoge pue ozs soz 06S sss so9 o8'01 ors OZ$ 4ePuN iNq ‘eaoge pue 91$ 004 Sys sez Oe] os 6 ord 91$ 4ePuN ing ‘enoge pue z71¢ ozs Sr'> 004 Svs oss seg ZL$ 4ePUN ING ‘enoge pue gg ses Si 06's 09» StL sos 8S 4ePuN ing ‘enoge pue yg ore orz see o9'z Oz'r Sze ¥S 4ePpun ing ‘enoge pue i¢ sot Ont oe | Ozh oz Ort b$ 4epun ing S ‘anoge pue 1¢ j0 7/1 1ey aley ey 1ey aey pue AwO auesea/5 AiwO a9uUes88)5 AO abese4019 a6esax01g pue e6es2ax01g pve Mesexo1g 100} 4 262184019 400) 4 262184019 100) 4 300} 4 peu 100) 4 1001 4 eS Peuiquos Peuiquos 49AQ Pue 107 17] Punoy yiuey _ $07) punoy PUNOY Yiuena 3 Y6no%y 4 pays PUOIeS Pue 18414 $8184 8948189) Pue a6e18%019 1004) sequiew aenrossy (Zz) $2°¢ ssc ors Sé6E 00's Sb aaoge nue Oss sr's see o19 sce ed S9'r OS$ /@Pun ing ‘enoge pus ops O's sie sos ose 30% Sty OFS 4apun ing saoge pus ors 08» séz SS oer so9 olPr O€$ 4epun ing enoge pue ozs a oLz S6 > soe sz 9 see OZ$ 4ePUN ING ‘anoge pue gi¢ So» osz Soy orz oss Ove 91$ 4epuN ING ‘enoge pus z1¢ oe'c 307 sor osz ols sit TLE 4epuN ing ‘enoge pue gg ore ost ore og OZ» oo'z 8S 48PuN ing ‘snoge pue yg oe 1 oe Set ort orz ost ¥$ 4apuN ing ‘enoge pus i¢ ori 060 ook 00° oe | ot b$ 4epun ing $20 ‘mnoge Due 1¢ 40 7/) go sro 060 sg0 so1 st) b$ 4° Z/1 sapun ing ) ey oey e1ey oey eey pus AiuO sue8s83)5 AwO 2ues88)5 Aww 26e.040.9 pue 6esa,01g pve =Bewx01g a 400} 4 60104019 400) 4 6es04019 200} 4 200} 4 1004 4 a Peurqwos Peuriquos Peurquos 40 . 10°] Punoy yiue, 107) Punoy PUnoY Yuens WOr014 1 pays Pucces Pue iss4 10) PUNd, s2d sey A-60 Notwithstanding the foregoing rates specified in this subsection (b), when the amount involved in an order is less than $100, the commission shall be as mutually agreed. When the amount involved in an order exceeds $300,000, the minimum commission to be charged pur- suant to this subsection (b) shall apply only to the maximum number of round lot transactions involving an aggregate amount not in excess of $300,000. Registered specialists’ floor rates (c) A registered specialist shall charge, as Floor rates for the execution of members’ orders in stocks rights and warrants (hereinafter referred to as stocks) given him on the Floor of the Exchange personally by a regular member, by a member representative, or by an employee of the Exchange, in writing and signed, the following commission based on the number of round lots and the price of the shares involved in each round lot order. These commissions shall apply only to transactions when the principal’s name is given up at the time of such transactions. Rate per round lot First and Third Through Eleventh Round secon n Price Per Shere ico Lot a -— on 1/266 of $1 and above, but under 3/256 of $1 $0.04 $0.03 $0.02 3/256 of $1 and above, but under 1/4 of $1 0.25 0.20 0.16 1/4 of $1 and above, but under 1/2 of $1 0.50 0.40 0.36 1/2 of $1 and above, but under $1 $0.80 $0.75 $0.65 $1 and ebove, but under $4 1.10 0.90 0.80 $4 and above, but under $8 1.96 1.55 1.40 $8 and above, but under $12 2.36 1.90 1.55 $12 and above, but under $16 2.56 2.10 1.90 $16 end sbove, but under $20 2.90 2.30 2.06 $20 and above, but under $30 3.06 2.50 2.20 $30 and above, but under $40 3.25 2.65 2.36 $40 end above, but under $60 3.50 2.80 2.50 $50 end above 3.70 2.95 2.65 A-61 Notwithstanding the above rates, when the amount involved in an order is less than $100, the commission shall be as mutually agreed. When the amount involved in an order exceeds $300,000, the prescribed commission to be charged pursuant to this subsection (c) shall apply to the maximum number of round lot transactions involving an aggregate amount not in excess of $300,000. Schedule of Bond Cor missions | (d) The Minimum Commission Rates on Bonds and Notes shall be as follows: To Regular Members, to Associate Meinbers and to Non-Members A-62 All bonds or Notes selling at less then 1, - per $1,000 per value $25 $ 50 All Bonds or Notes selling at 1 and under 10, per $1,000 per value .37% All Bonds or Notes having 6 months to — and including 5 years to run, selling between 96 and 110, per $1,000 per veiue .50 80 Less than six months to run Mutual Mutual 1.88 a ment Agreemen All Bonds or Notes having 5 years or less - " seman to run selling at 10 and under 96 and over 110, per $1,000 per value 76 All Bonds or Notes having more than 5 ae erm yeers to run selling at 10 or over, per $1,000 per value .76 1.25 Bonds called for redemption having 6 — months to and including 12 months to run and having @ current market price of not less than 96% or more than 110% of their redemption price per $1,000 per value 50 80 Less than 6 months to run Mutual Mutual 1.26 Agreement Agreemen yer ones Bonds called for redemption having 6 ¥ * Agreement months to and including 12 months to run and having @ current market price of less then 96% or more than 110% of their redemption price per $1,000 par value 75 1.25 2.50 Specialists Alle) The Specialists Floor Rates on Bonds and Notes shall be as follows: All Bonds or Notes selling at less than 1 $.10 $1,000 All Bonds or Notes selling at 1 and under 10 3.98 cor 60 £80 eer eho All Bonds or Notes having 6 months to and including 5 years to run, selling between 96 and 110, inclusive $.20 1,000 Less then 6 months to run $.10 od 000 ad ae ee ene selling under 96 and over 110 $.30 per $1,000 All Bonds or Notes having more than 5 years to run ex an selling at 10 of over $.30 per $1,000 par value Bonds called for redemption having 6 months to and including 12 months to run and having current market price of not less than 96% or more than 110% of their redemption price $.20 per $1,000 per value Less then 6 months to run $.10 . 1 Bonds called for redemption having 6 months to and heat 9 eae including 12 months to run and having a current market price of less than 96% or more than 110% of their redemption price $.30 per $1,000 par value A-63 Definition of an order (f) For the purpose of this Section 2 (1) A round lot order shall be deemed to include cither all purchases or all sales for one account, of » a single security, on the same day, amounting to 100 shares or any multiple thereof, irrespective of the unit of trading in the stock. This definition applies whether the order is received from a non- member, allied member, member, member firm or member corporation. (2) An odd lot order shall be deemed to include either all purchases or all sales of one account, of a single security, on the same day, pursuant to a single order amounting to less than i00 shares, irrespective of the unit of trading in the stock. Any odd lot order shall be deemed to be a separate order whether combined with a round lot order or standing alone. This definition applies whether the order is received from a non-member, allied member, member, member firm or member corporation. (3) With respect to stocks in which the unit of trading is less than 100 shares, the minimum commission rates to be charged to regular and associate members for Floor brokerage and clearance pursuant to subsection (b) of this Section 2 and the prescribed commission to be charged by registered specialists as Floor rates pursuant to subsection (c) of this Section 2 shall be determined as follows: (i) All purchases or all sales for one account, of a single security, on the same day, amounting to 100 shares or any multiple thereof, shall be treated as a round lot order as defined in paragraph (1) of this subection (i) and the applicable round lot com- mission rate shall be charged. A-64 (ii) The Commission to be charged on that — portion of an order which involves a number of shares equal to the unit of trading or any multiple thereof but less than 100 shares, shall be an amount equal to that proportion of the next round lot rate, after first applying subparagraph (i) of this paragraph (3), which such number of shares bears to 100. Determining amount involved in an order (g) In determining the amount involved in an order, commissions and taxes shall be disregarded. Limitation on minimum commissions (h) Notwithstanding the rates prescribed in paragraphs (1) and (2) of subsection (a) of this Section 2, when the amount involved in a single order exceeds $300,000, the minimum commission to be charged pursuant to those paragraphs shall apply only to the maximum number of round lot transactions involving an aggregate amount not in excess of $300,000. The Exchange shall from time to time prescribe the procedures to be followed in computing commissions pursuant to this Article. Special Rates (i) Notwithstanding the other provisions of this Article, when Rights or Warrants are admitted to dealings upon the Exchange whether on an issued or when issued basis, and when other securities are admitted to such dealings on a when issued basis the Board of Governors may determine special minimum rates of commission on any and all transactions in such rights, warrants or other securities. Such special rates so prescribed or provided by the Board of Governors shall be deemed to be the rates prescribed in this Article. Unless special rates have been so determined the minimum rates of commission prescribed in this Article shall apply. A-65 (j) The minimum clearing charges to members, member firms and member corporations applicable to stock, warrant and right transactions effected by them for their own account shall be as follows: Round lots: $1.00 a share and over—$3.00 for combined receipt and delivery Under $1.00 a share—as mutually agreed Odd lots: Ten shares and over—$1.00 on each side Under ten shares—as mutually agreed Warrants: Same as stocks Rights: As mutually agreed. Where any such transaction involves a purchase or sale made at one time from a single seller or buyer and involves an amount in excess of $300,000, the minimum rates specified above shall apply only with respect to that portion of such purchase or sale not in excess of $300,000. Supervised order (k) When an order is supervised by a regular member, not a partner in or a holder of voting stock in the particular member firm or member corporation whose business he is supervising, the specialist to whom the order is given, either by the member supervising such order or by the telephone clerk of the specific firm or corporation whose name is on the order, shall bill such member supervising the order the specialists’ Floor rate and such member shall, in turn bill the firm or corporation whose name is on the order slip the regular member give-up rate. Public obligations and called securities (1) Commission rates to members or non-members may be charged, as mutually agreed, on obligations of the United States, Puerto Rico, Philippine Islands and States, Territories and Municipalities therein, and on securities which, pursuant to call, are to be redeemed within twelve months, unless commission rates on any or all such securities are prescribed in this Section or by the Board of Governors. A-66 Commissions on small orders (m) Except as otherwise provided by Rule adopted by the Board of Governors, commissions shall be charged and collected at the rates prescribed in this Section 2 on the execution of any small orders or for small accounts. Broker-Dealer Discount (n) A member, member firm or member corporation may, on orders which he or it receives from a non-member broker-dealer whose principal place of business is in one of the United States, the District of Columbia or the Com- monwealth of Puerto Rico, and which is a member of the National Association of Securities Dealers, Inc. or is subject to Sec. 15(b)(8) of the Securities Exchange Act of 1934 for the account of any customer whose account is carried by such broker-dealer, or is introduced by such broker-dealer to such member, member firm or member corporation, allow not in excess of a 40% discount from the commission computed, in accordance with the provisions of subsection (a) of this Section 2, provided that the primary purpose of such non-member broker-dealer and of any parent of such non-member broker-dealer is the transaction of business as a broker or dealer in securities in one of the United States, the District of Columbia or the Commonwealth of Puerto Rico within the meaning of Section 2(d) of Article IV, and the rules thereunder and, provided, further, that such non-member broker-dealer is subject to an agreement in writing as provided by rule . adopted by the Board of Governors, which agreement has not been terminated, containing sucn provisions as may be required from time to time by rule adopted by the Board of Governors and providing that any such discount so allowed shall be retained by such non-member broker-dealer free from any rebate, return, discount or allowance made in any shape or manner, or by any method or arrangement, direct or indirect, to or for the benefit of any customer of such non-member broker-dealer except that with respect to any A-67 order for the account of a customer whose account is in- troduced to such non-member broker-dealer by a second non-member broker-dealer, the non-member broker- dealer may allow all or any portion of such discount to such second non-member broker-dealer provided that the second non-member broker-dealer would qualify for a discount under the provisions hereof had it introduced its customer's account directly to the member, member firm or member corporation and is itself subject to a similar agreement. The provisions of this subsection (n) shall expire one year after the effective date hereof, unless extended for such period of time, or from time to time, as shail be determined by the Board of Governors. Amended effective August 26, 1958, March 30, 1959, October 19, 1959, January 22, 1960, September 4, 1962, July 26, 1963, December 5, 1968, February 2, 1971, May 3, 1971, April 3, 1972 and April 24, 1972. Commissions to Firms and Corporations Sec. 3. t*A member firm having as a general partner a regular or associate member of the Exchange, and a member corporation having either a regular member who is a holder of voting stock therein and is actively engaged in its business and devotes the major portion of his time thereto or an associate member who is a director or executive officer thereof, shall be entitled to have its business transacted at the rates of commission prescribed for such member.*t Branch offices The privilege provided for in this Section shall extend to a branch house or branch office only when conducted under the same name as the parent firm and only when the partners and their respective interests therein are identical with the partners and their respective interests in the A-68 parent firm, or when conducted as part of the business of the member corporation. Members who are special partners or are not directors or executive officers t A member who is a special partner in a firm does not thereby confer any of the privileges of the Exchange on such firm, and a member who is not a holder of voting stock of a regular member corporation actively engaged in its business and devoting the major portion of his time thereto or who is not a director or executive officer of an associate member corporation does not confer any of the privileges of the Exchange on such corporation, and on all business done by him for such firm or corporation, commissions must be charged and collected at rates not less than the rates prescribed in this Article.t *Commissions, at the rates prescribed in this Article for non-members, shall be charged and collected on business done for the account of allied member and non-member partners of member firms, allied member and non-member stockholders, directors or officers of member corporations and joint-accounts to which an allied member or non- member is a party.* Amendments. * Amended January 16, 1958, effective May 1, 1958. t Amended effective February 2, 1971. Commissions to Suspended Member Sec. 4. *t**(a) A regular or associate member suspended under the provisions of Section 3 of Article V, who has not been declared ineligible for reinstatement and who has not also been suspended under the provisions of Section 4 or Section 5S of Article V, may in the discretion of the Board of Governors have his business transacted at member's rates. tt**(b) On the application of a member organization which has been suspended under the provisions of Section 3 A-6Y of Article V., but has not been declared ineligible for reinstatement and has not been suspended under the provisions of Section 4 or Section 5 of Article V, or on the application of a member organization whose only general partner who was a regular or associate member of the Exchange. or whose only voting stockholder actively engaged in its business and devoting the major portion of his time thereto who was a regular member of the Ex- change, or whose only director or executive officer who was an associate member of the Exchange, has been suspended under the provisions of Section 3 of Article V, but has not been declared ineligible for reinstatement and has not been suspended under the provisions of Section 4 or Section 5 of Article V, the Board of Governors in its discretion may in either such case permit such member organization to have its business transacted at member's rates during all or such portion of such suspension as the Board may determine and under such conditions as the Board may fix. The Board may in its discretion and during such period of time and under such terms and conditions as it may determine permit a former member organization suspended under the provisions of Section 3 of Article V to continue to have its business transacted at member's rates, notwithstanding the fact that the sole regular member of such member organization has disposed of his regular membership or the sole associat2 member of such member organization has ceased to be an associate member, provided that the transactions with respect to which such member's rates are charged are liquidating transactions or are reasonably necessary to permit such firm or corporation to wind up its business or to transfer the account of a customer. tt tt**(c) O.. the application of a member organization which has not itself been suspended under the provisions of Section 4 or Section 5 of Article V but whose only general partner who was a regular or associate member of the Exchange, or whose only voting stockholder actively engaged in its business and devoting the major portion of A-70 his time thereto who was a regular member of the Ex- change, or whose only director or executive officer who was an associate member of the Exchange, has been suspended under the provisions of Section 4 or Section 5 of Article V, the Board of Governors in its discretion may permit such mernber organization to have its business transacted at member s rates during all or such portion of the suspension of such regular or associate member as the Board may determine and under such conditions as the Board may fix, and so long as such suspended regular or associate member remains a general partner, voting stockholder, director or executive officer of such member organization.**t*tt Amendments. * Amended January 16, 1958, effective May 1, 1958. t Amended effective September 4, 1962. ** Amended effective November 19, 1969 tt Amended effective February 2, 1971. Board May Prescribe Service Charges Sec. 5. Members of the Exchange, member firms and member corporations shall make and collect, in addition to minimum prescribed commissions, such other minimum charges with respect to accounts and services as the Board of Governors may from time to time prescribe. Except as may be specifically permitted by a rule adopted by the Board of Governors, such charges shall be net and free from any rebate, return, discount or allowance made in any shape or manner, or by any method or arrangement, direct or indirect, and no bonus or percentage of such charges, whether such charges be minimum charges prescribed by the Board or greater charges, shall be given, paid, or allowed; directly or indirectly, or as'a salary or portion of a salary to a clerk or to any member of the Exchange, member firm or member corporation, or to any other person, firm or corporation for business sought or procured for any member of the Exchange, a member firm or a member corporation. A-71 Commission— Individual Regular Member in War Service Sec. 6. *Notwithstanding any other provision of this Article, the Board of Governors may permit a member, member firm or member corporation to pay to any regular member, who is actively engaged in any military, naval or other public service incident to the defense of the United States or of any nation which is then allied or associated with the United States, amounts not exceeding 50% of the minimum commissions received from time to time by such member, member firm or member corporation for the execution of orders for the purchase or sale of securities which would otherwise have been executed by such absent member in the usual course of his business. In the exercise of the discretion herein granted, the Board of Governors may condition or restrict or may withdraw or deny any such permission.* Amendments. *Amended effective September 4, 1962. Commission— Member Firm with Sole Regular Member General Partner, or Member Corporation with Sole Regular Member Director, in War Service Soc. 7. t* Notwithstanding any other provisions of this Article, when a regular. member of the Exchange who is the sole regular member general partner in a member firm or the sole regular member voting stockholder of a member corporation, is actively engaged in any military, naval or other public service incident to the defense of the United States or of any nation which is then allied or associated with the United States, the Board of Governors may permit an agreement between such member firm or member corporation and another regular member or regular member firm or regular member corporation, providing in substance that, on transactions executed on the Floor of A-72 the Exchange by such other regular member or regular member firm or regular member corporation for such firm or corporation, the commissions chargeable by the executing member or member firm or member corporation shall be less than the minimum commissions otherwise prescribed as applicable to transactions effected on the Floor of the Exchange for other members where a principal is given up, provided that (1) such commissions so chargeable shall not be less than 50% of the minimum commissions so prescribed, (2) the transactions with respect to which such reduced commissions are charged were executed at a time when the regular member in such service was absent from the Floor solely by reason of such service, (3) that such transactions would otherwise in general have been effected by such absent member as a part of his usual business, and (4) that any such agreement has been submitted to and approved by the Exchange.*t Amendments. * Amended effective September 4, 1962. t Amended effective February 2, 1971. A-73 EXHIBIT B American Stock Exchange Office Rules Section 6. Revised to August 1, 1972 Section 6. Collection of Commissions and Fees Non-Member Order Executed and Given Up Rule 380. In transactions where orders are received from non-member, and the member, member firm or member corporation executing the order is directed to give up another member, member firm or member corporation the responsibility for collecting the full commission shall rest with the member, member firm or member corporation settling the transaction. Member Order Executed and Given Up Rule 381. In transactions where orders are received from a member, member firm or member corporation and a clearing firm or corporation is given up, the responsibility for collecting the full commission shall rest with the clearing firm or corporation and it shall be the duty of the member, member firm or member corporation executing such orders to report the transactions to the clearing firm or corporation and to render his bill therefor at the rates specified. A member, member firm or member corporation who executes an order for a member, member firm or member corporation and clears the security himself must charge the rates specified. Execution of Domestic Customer's Orders in Foreign Market Rule 382. When a member, member firm or member corporation accepts an order, from a customer within the continental United States or Canada, for the purchase or sale of a security admitted to dealings on the Exchange and A-74 causes the same to be executed in a market outside the continental United States or Canada, during the time the Exchange is open for the transaction of business, such member, member firm or member corporation shall charge and collect, in addition to any commission payable to the party or parties executing such order in said market, a sum not less than the prescribed minimum member or non- member commission rate, as the case may be. Clearance of Domestic Customer’s Transaction in Foreign Market Rule 383. When a member, member firm or member corporation accepts and clears, for a customer within the continental United States or Canada, a transaction arising from a purchase or sale of a security admitted to dealings on the Exchange effected by said customer in a market outside the continental United States or Canada, during the time the Exchange is open for the transaction of business, such member, member firm or member cor- poration shall charge and collect, in addition to any commission payable to the party or parties executing such transaction, a sum not less than the specified minimum member or non-member commission rate, as the case may be. Securities Received or Delivered on Privilege Rule 384. When Securities are received or delivered for a non-member or an allied member on a privilege, the © specified commission must be charged. Amendments. April 3, 1958, effective May 1, 1958. Mutual Agreement Clearing Charge on Service to Regular Member Rule 385. When a member, member firm or member corporation receives and delivers bonds for a regular A-75 member, the clearing charge for said service may be a matter of mutual agreement based upon a fixed rate for cach one thousand dollars of bonds; the payment of a certain sum of money for said service for any period of time is forbidden. Amendments. October 1, 1959, effective October 19, 1959. Commissions on Commodity Business Rule 386. No member, member firm or member cor- poration shall, without charging the customary com- mission, transact or offer to transact for any customer who is dealing in securities dealt in on the Exchange, any business in commodities. Bunched Orders Rule 387. The execution of ‘“bunched”’ orders, without charging the required commission, is forbidden. Reverse Transactions Rule 388. No member, member firm or member cor- poration shall make any transaction “over the counter” in securities dealt in on the Exchange for his own account or for the account of his member firm or a partner thereof or for his regular member corporation or a stockholder therein or for his associate member corporation or for any account in which either he or they have a direct or indirect interest, and a reverse operation upon the Exchange at or about the same time, wherein the difference between the purchase and sale prices is less than the recognized commission on such a purchase or sale. Clearance of Commissions Rule 389. Unless otherwise agreed by the parties con- cerned, all payments between members of the Exchange on A-76 + . . .* > . ' . arecaunt oa ram mitcesaec an —-bunivoes snba~a-praienqper ss- given up shall be made through the American Stock Ex- change Clearing Corporation as provided by its By-Laws and Rules. Assumption of Loss Prohibited Rule 390. No member shall assume for his owe account or for the account of his member firm or member cor- poration, a contract made for a customer, if a loss to the customer has been established or ascertained, unless the contract was made by mistake or unless the consent of the Exchange has first been obtained. Amendments. September 6, 1962. Granting of Special Advantages to Customer Prohibited Rule 391. Any agreement or arrangement between a member, member firm or member corporation and a customer, whereby special and unusual rates of interest are given or money advanced upon unusual terms, with intent to give special or unusual advantage to such customer, for the purpose of securing his business, is forbidden. interest on Short Sales Rule 392. An allowance for interest on short sales of stock shall not be more than the loan market rates for the stocks borrowed or used for such short sales. Securities and Exchange Commission Registration Fee Rule 393. There shall be paid to the Exchange by each member, member firm or member corporation in such manner and at such time as the Treasurer of the Exchange shall direct, the sum of one cent for each $500 or fraction A-77 thereoi of the dollar volume of the sales upon the Exchange of securities (whether or not cleared by the American Stock Exchange Clearing Corporation) cleared by such member, member firm or member corporation, and any such member. member firm or member corporation required by this rule to pay any sum to the Exchange in respect to any sale upon the Exchange, shall charge and collect from the person for whom he was acting in making such transaction the sum of one cent for each $5.00 or fraction thereof of the dollar amount involved in such transaction. The monies so paid to the Exchange shall be paid to the Securities and Exchange Commission as the registration fee imposed upon the Exchange by the provisions of the Securities Exchange Act of 1934. Receipt or Delivery of Non-Member Securities Against Payment Rule 394. When a member or member organization, in connection with a transaction made by a non-member or allied member off the Exchange, receives into or delivers out of the account of the non-member or allied member against payment securities dealt in on the Exchange, the prescribed non-member commission shall be charged. Amendments. April 3, 1958, effective May 1, 1958. July 22, 1965S. Commissions on Rights and Warrants Rule 395. Pursuant to Section 2, Paragraph (i) of Article IV of the Constitution, unless otherwise determined by the Board of Governors, on rights and warrants which are admitted to dealings upon the Exchange, whether on an issued or unissued basis, and which are selling below 50 cents per right or warrant, the following special rates of commission shall apply: A-78 (1) On business for non-members or allied members, including joint account transactions in which any such person is interested, the com- mission may be as mutually agreed. (2) On business for regular and associate members: Rate per 100 Shares eT hn a US Oe SIE 068i cincis. WAIT 02 _ — 1/64 of $1 but under 2/320f$1 ......... 0s re = te i ld ie 5 = > over 2/32 of $1 but under 4/320f $1 ..... 0s = = 4/32 of $1 but under 8/320f$1 ......... 13 = = 8/32 of $1 but under 1/2of$1.......... (43 rs , ; 50 Notwithstanding the foregoing, when the amount in- volved in a transaction is less than $100, the commission may be as mutually agreed. Amendments. Adopted effective December 7, 1961. September 6, 1962. _ Small Accounts Rule 3%. No member organization which introduces or carries the accounts of customers who purchase or sell small amounts of stock shall impose any limitation of any kind on the size or frequency of customer orders in such accounts or the size of such accounts, unless such limitation was generally imposed prior to April 1, 1969 With respect to the execution of any small order for the purchase or sale of any security admitted to dealings on the Exchange, no member organization shall impose any fee commission or other charge on any customer in excess of the commission prescribed in Article VI Constitution. . Section 2(a) of the Amendments. April 3, 1972. A-79 Computation of Commission on Stocks Rule 397. The minimum commission required to be charged under Section 2 of Article VI shall be computed on the basis of the lowest priced executions first. Adopted. May 3, 1971. Reports of Executions of Orders Exceeding $500,000 Rule 398. Promptly following the 10th day of each calendar month each member or member organization shall report the following information to the [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0179%3A02. Public record. Not legal advice.