Miller v. American Stock Exchange

The trading of equity options and regulation thereof has had a complicated history. In 1973, national exchanges began trading equity options, beginning with the Chicago Board of Options Exchange (CBOE) (defendant). The Securities Exchange Commission (SEC) regulated options trading under SEC Rule 9b-1, promulgated by the SEC pursuant to the Securities Exchange Act of 1934 (Exchange Act). Shortly thereafter, other exchanges proposed to allow options trading. In 1974, the SEC also authorized the American Stock Exchange (AMEX) (defendant) to engage in options trading. The SEC noted, however, that AMEX did not intend to allow multiple trading, meaning the trading of options that were traded on other exchanges. Meanwhile, the SEC held a public hearing and concluded that more study was needed before authorizing multiple trading. In 1977, after inviting public comment, the SEC expressed concern about the practice of multiple trading. Later that year, the SEC requested that national exchanges (defendants) voluntarily cease the listing of new options classes. The exchanges complied with the request. In 1980, the SEC approved a plan formulated by the exchanges in which new listings would be traded exclusively on a single exchange, with the new listings allocated on a rotating basis among the different exchanges. At the time it approved the plan, the SEC stated that it was concerned that unlimited multiple trading could result in deleterious structural changes in the markets. Then, in 1987, the SEC proposed Rule 19c-5 to allow multiple trading. Rule 19c-5 was to be implemented gradually. Eventually, under the terms of Rule 19c-5, exchanges would be prohibited from adopting any rule, policy, or practice that limited multiple trading. Nonetheless, before Rule 19c-5 went into effect, the SEC requested that exchanges once again refrain from multiple listing of options that had previously been traded exclusively on a single exchange. Over time, this moratorium was lifted, and by the end of 1994, all equity options were eligible for multiple trading. The SEC retained oversight over the practice. In 2000, the SEC found that various exchanges improperly limited multiple trading by denying their member firms’ requests to do so. Various purchasers of equity options (plaintiffs) filed suit against the national exchanges under the Sherman Antitrust Act (Sherman Act). The purchasers alleged that the exchanges conspired to restrict competition in the trading of options. The exchanges moved to dismiss on the basis that the Exchange Act repealed § 1 of the Sherman Act for the conduct at issue. The district court granted the motion to dismiss, and the options purchasers appealed.