Volume 1 of 2

                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

CREDIT SUISSE FIRST BOSTON             
CORPORATION, a Massachusetts
corporation,                                 No. 03-15695
                 Plaintiff-Appellee,
                 v.                           D.C. No.
                                           CV-02-02051-SBA
MICHAEL SCOTT GRUNWALD, a                     OPINION
California resident,
               Defendant-Appellant.
                                       
       Appeal from the United States District Court
          for the Northern District of California
      Saundra B. Armstrong, District Judge, Presiding

                 Argued and Submitted
       December 2, 2003—San Francisco, California

                    Filed March 1, 2005

        Before: Edward Leavy, Richard A. Paez, and
             Marsha S. Berzon, Circuit Judges.

                 Opinion by Judge Paez;
               Concurrence by Judge Berzon




                            2265
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD         2269


                         COUNSEL

Michael Blumenfeld, Los Angeles, California, argued the case
for the appellant, and Todd M. Lander, Los Angeles, Califor-
nia, assisted on the briefs.

Michael D. Early, San Francisco, California, argued the case
for the appellee, and Dena L. Narbaitz, San Francisco, Cali-
fornia, and Suzy C. Douglass, San Francisco, California,
assisted on the briefs.

Mark A. Perry, Washington, D.C., argued the case for amicus
curiae NASD Dispute Resolution, Inc., and Douglas W.
Henkin, New York, New York, for amicus curiae New York
Stock Exchange, Inc., assisted on the joint brief of NASD and
NYSE in support of affirmance.

Michael C. Tilner and David S. Ettinger, Encino, California,
submitted an amicus curiae brief on behalf of the Judicial
Council of California.

Eric Summergrad, Washington, D.C., Deputy Solicitor for the
SEC, submitted the Statement of the Securities and Exchange
Commission, amicus curiae, in Support of the Position of the
plaintiff-appellee.


                         OPINION

PAEZ, Circuit Judge:

  In this appeal we decide whether California’s recently-
adopted ethics standards for neutral arbitrators apply to arbi-
2270         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
trations conducted in California by the National Association
of Securities Dealers (“NASD”). We conclude that the Cali-
fornia legislature intended the new ethics standards to apply
to NASD-appointed neutral arbitrators. We hold, however,
that the Securities and Exchange Act of 1934 (“Exchange
Act”), as amended, preempts application of California’s ethics
standards to NASD arbitrations. In so holding, we further
conclude that NASD rules approved by the Securities and
Exchange Commission have preemptive force over conflict-
ing state law. Accordingly, we affirm.

                                     I.

   This appeal arises out of an employment dispute between
Scott Grunwald and his former employer, Credit Suisse First
Boston (“CSFB”). After CSFB terminated Grunwald from his
position as Director of CSFB’s Technology Private Client
Services Program, Grunwald exhausted CSFB’s internal
grievance procedures and mediated his dispute with CSFB
through JAMS/Endispute—the initial steps required by
CSFB’s Employment Dispute Resolution Program (“EDRP”).
Grunwald then filed a demand for arbitration with the Ameri-
can Arbitration Association (“AAA”). CSFB, however, suc-
cessfully obtained a preliminary injunction in district court
that enjoined Grunwald from arbitrating before the AAA. The
court granted the preliminary injunction on the ground that
CSFB’s EDRP required employees registered with the NASD,
like Grunwald, to arbitrate before a NASD-appointed arbitra-
tion panel. Grunwald responded to the preliminary injunction
by filing a demand for arbitration with the NASD.

   Before the NASD appointed Grunwald’s arbitration panel,
the California Judicial Council1 adopted heightened disclosure
  1
   “Article VI, section 6 of the California Constitution requires the [Cali-
fornia Judicial Council] to improve the administration of justice by . . .
[a]dopting rules for court administration and rules of practice and proce-
dure that are not inconsistent with statute . . . .” Cal. R. Ct. 6.1(b).
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD                 2271
and disqualification standards for “neutral arbitrators.” See
Ethics Standards for Neutral Arbitrators in Contractual Arbi-
tration, Cal. Rules of Court, appen., Div. VI (hereinafter “Cal-
ifornia Ethics Standards”). The NASD, however, determined
that the California Ethics Standards should not apply to
NASD arbitrations because the standards conflicted with the
NASD’s own rules that had been approved by the Securities
and Exchange Commission. Consequently, the NASD imme-
diately suspended the appointment of arbitrators in California
when the California Ethics Standards went into effect on July
1, 2002. On August 6, the NASD announced that it would
recommence arbitrations initiated in California, but only on
the express condition that all parties agreed to arbitrate out-
side of California.2 In September, the NASD gave California
parties the additional option of waiving the California Ethics
Standards and proceeding with arbitration in California.3 In
connection with this waiver policy, the NASD successfully
sought Commission approval of a new rule4 requiring industry
  2
     Memorandum from Laura J. Hartt, Senior Attorney, NASD, to Parties
and Counsel of Record (Aug. 6, 2002).
   3
     Letter from Robert R. Glauber, Chairman and C.E.O. of NASD, to
SEC Chairman Harvey L. Pitt (Sept. 19, 2002).
   4
     NASD Rule IM-10100(f); Self-Regulatory Organizations; Notice of
Filing and Order Granting Accelerated Approval of Proposed Rule
Change by National Association of Securities Dealers, Inc. To Require
Industry Parties in Arbitration To Waive Application of Contested Califor-
nia Arbitrator Disclosure Standards, Upon the Request of Customers and
Associated Persons With Claims of Statutory Employment Discrimination,
for a Six-Month Pilot Period, 67 Fed. Reg. 62,085 (Oct. 3, 2002) (herein-
after “Industry Party Waiver Rule”); Self-Regulatory Organizations;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change by
the National Association of Securities Dealers, Inc. To Extend for an
Additional Six-Month Period a Pilot Rule To Require Industry Parties in
Arbitration To Waive Application of Contested California Arbitrator Dis-
closure Standards, Upon the Request of Customers and Associated Per-
sons With Claims of Statutory Employment Discrimination, 68 Fed. Reg.
17,713 (Apr. 10, 2003); Self-Regulatory Organizations; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change by the National
Association of Securities Dealers, Inc. To Extend, for an Additional Six-
Month Period, a Pilot Rule Regarding Waiver of California Arbitrator Dis-
closure Standards, 68 Fed. Reg. 57,494 (Oct. 3, 2003); 69 Fed. Reg.
17,010 (Mar. 31, 2004); 69 Fed. Reg. 58,567 (Sept. 30, 2004) (hereinafter
“September 30, 2004 Industry Party Waiver Rule”).
2272         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
parties to NASD arbitrations in California to waive the Cali-
fornia Ethics Standards upon waiver of these standards by
investors or associated persons. Because Grunwald qualified
as an associated person, the Commission-approved waiver
rule would have required CSFB to waive the California Ethics
Standards if Grunwald had chosen to waive the standards.5

   Grunwald, however, refused to waive the California Ethics
Standards and declined the NASD’s offer to proceed with
arbitration outside of California. Grunwald then requested that
the district court grant him leave to file a motion to reconsider
the preliminary injunction. He argued that the NASD’s sus-
pension of arbitrations in California undermined his right to
an expeditious arbitration under the Federal Arbitration Act
(“FAA”), 9 U.S.C. §§ 1-16. He also asserted that the NASD’s
waiver option amounted to a coerced waiver of his right to
have his arbitration conducted pursuant to the California Eth-
ics Standards. Grunwald’s motion sought modification or dis-
solution of the preliminary injunction so that he could re-file
his claims in state court or with the AAA.

   The district court permitted Grunwald to file his motion for
reconsideration, but ultimately denied the motion. In refusing
to modify or dissolve the preliminary injunction, the district
court determined that the California Ethics Standards did not
apply to NASD arbitrators because the standards apply only
to “neutral arbitrators” appointed directly by the parties. Thus,
Grunwald did not have a right to have his NASD arbitration
conducted pursuant to the requirements of the California Eth-
ics Standards. Additionally, the district court determined that
there was no right to a speedy and expeditious arbitration
  5
    Any “natural person who is registered or has applied for registration”
with the NASD is an “associated person.” By-laws of the NASD, Art.
I(dd). Grunwald qualifies as an associated person because he was regis-
tered with the NASD. We also note that the waiver rule applies to associ-
ated persons like Grunwald that have been terminated. September 20,
2004 Industry Party Waiver Rule, 69 Fed. Reg. at 58,567 n.7.
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD                   2273
under the FAA. Even if such a right existed, the district court
held that Grunwald could obtain a speedy arbitration by sub-
mitting to arbitration outside California or by waiving appli-
cation of the California Ethics Standards to his NASD
arbitration. Finally, the district court determined that the FAA
precluded invalidation of the parties’ agreement to arbitrate
their employment dispute before the NASD. Grunwald filed
a timely appeal from the district court’s order denying his
motion for reconsideration of the preliminary injunction.

                                    II.

   We begin by considering four jurisdictional objections
raised by CSFB. Because the district court’s order was an
“[i]nterlocutory order[ ] . . . refusing to dissolve or modify
[the] injunction[ ],” 28 U.S.C. § 1292(a)(1), we have jurisdic-
tion over this appeal.

                                    A.

   Initially, CSFB contends that Grunwald’s motion for recon-
sideration was untimely because it was filed some ninety days
after the district court granted the preliminary injunction.
CSFB points out that a motion to alter or amend a judgment
must be filed within ten days of the entry of the judgment.
Fed. R. Civ. P. 59(e). CSFB also correctly states that this ten-
day time limit applies to motions for reconsideration of a pre-
liminary injunction order.6 See Sierra On-Line, Inc. v. Phoe-
nix Software, Inc., 

, 1419 (9th Cir. 1984).
Consequently, if Grunwald’s motion was not based on events
that occurred after the district court granted the preliminary
  6
    Rule 59(e) applies to “[a]ny motion to alter or amend a judgment,” and
under Rule 54(a), a judgment is defined to include “any order from which
an appeal lies.” Because 28 U.S.C. § 1292(a)(1) establishes appellate juris-
diction over an appeal from a preliminary injunction, a preliminary injunc-
tion order is a “judgment” and is therefore subject to Rule 59(e)’s ten-day
time limit on motions for reconsideration.
2274       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
injunction, the motion would be untimely because it was filed
well after the ten-day time limit.

   Although a motion for reconsideration is subject to Rule
59(e)’s ten-day time limit, there is no time limit on a motion
to vacate or dissolve a preliminary injunction. Federal Rule of
Civil Procedure 54(b) states that a district court can modify an
interlocutory order “at any time” before entry of a final judg-
ment, and we have long recognized “the well-established rule
that a district judge always has power to modify or to overturn
an interlocutory order or decision while it remains interlocuto-
ry.” Tanner Motor Livery, Ltd. v. Avis, Inc., 

,
809 (9th Cir. 1963).

   [1] In determining whether a motion requesting the district
court to reconsider its preliminary injunction should be treated
as a motion for reconsideration under Rule 59 or a motion for
dissolution or modification under Rule 54, we agree with the
Third Circuit that “we must look beyond the motion’s caption
to its substance.” Favia v. Ind. Univ. of Pa., 

, 337
(3d Cir. 1993); see also Ortho Pharm. Corp. v. Amgen, Inc.,

, 463 (3d Cir. 1989) (“We agree with Amgen
that we must determine from its substance and not from its
form whether we should treat Ortho’s motion as a motion for
reconsideration under Fed. R. Civ. P. 59(e) or a motion to
modify a preliminary injunction under Fed. R. Civ. P.
62(c).”). While “[t]he purpose of a motion to reconsider under
Fed. R. Civ. P. 59(e) is to relitigate the ‘original issue,’ ”

, “[a] motion to modify a preliminary
injunction is meant only to relieve inequities that arise after
the original order.” 

. Thus, a motion that
merely seeks to relitigate the issues underlying the original
preliminary injunction order is subject to Rule 59(e)’s ten-day
limit, while a motion that in substance is based on new cir-
cumstances that have arisen after the district court granted the
injunction may be filed at any time before entry of a final
judgment.
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD           2275
   If we did not look at the substance of the motion, a prelimi-
nary injunction would forever be subject to challenge and
appeal. See Sierra On-Line, 

n.4. In
Sierra On-Line, the appellant conceded that it had presented
no new matter in its motion for reconsideration. We declined
to treat the district court’s order denying the motion for recon-
sideration as an order refusing to dissolve the preliminary
injunction, explaining:

    “The evident purpose of [Section 1292(a)(1)] is to
    permit review of orders made in response to claims
    of changed circumstances, not to extend indefinitely
    the time for appeal from a preliminary injunction by
    the simple device of seeking to vacate it or modify
    it.” 16 C. Wright, A. Miller, E. Cooper & E. Gress-
    man, Federal Practice and Procedure § 3924, at 88
    (1977). As a general rule, therefore, the denial of a
    motion to modify or dissolve an injunction, or to
    reconsider a request for an injunction, will be
    appealable only if the motion raises new matter not
    considered when the injunction was first issued.

task is to determine whether the substance of
Grunwald’s motion was based on changed circumstances.

   [2] Grunwald’s motion indeed “raise[d] new matter not
considered when the injunction was first issued.” 

ifornia Ethics Standards were implemented after the district
court granted the preliminary injunction. The NASD also sus-
pended arbitrations in California, absent waiver of the Cali-
fornia Ethics Standards, after the district court had issued the
preliminary injunction. Grunwald’s motion alleged that these
post-injunction events deprived him of his right to a speedy
arbitration, as well as his right to have his arbitration con-
ducted pursuant to the requirements of the California Ethics
Standards. Thus, Grunwald’s motion was based on circum-
stances that occurred after the court granted the preliminary
injunction. Consequently, Grunwald’s “Motion for Reconsid-
2276       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
eration” was, in substance, a motion to vacate or dissolve the
injunction based on changed circumstances.

   [3] In light of the nature of Grunwald’s motion, we con-
clude that it was timely filed. As we explained above, a
motion to vacate or dissolve an injunction based on changed
circumstances is not subject to the ten-day time limit in Rule
59(e). Because Grunwald’s motion alleged changed circum-
stances and did not simply seek to relitigate the issues decided
by the district court when it granted the preliminary injunc-
tion, Grunwald was not required to file his motion within the
ten-day period established by Rule 59(e). Consequently,
Grunwald’s motion, although filed some ninety days after the
district court granted the preliminary injunction, was timely.

                              B.

   CSFB next argues that this appeal is moot because Grun-
wald dismissed his claim before the AAA, and commenced
arbitration of his claim before the NASD. Although a “party
moving for dismissal on mootness grounds bears a heavy bur-
den,” Coral Constr. Co. v. King County, 

, 927-
28 (9th Cir. 1991), CSFB fails to explain why these events
render Grunwald’s appeal moot. If Grunwald had obtained the
relief he sought in his motion for reconsideration, the prelimi-
nary injunction order would have been modified to permit
Grunwald to proceed with arbitration before the AAA or to
file his case in state court. Because there is no showing that
Grunwald’s claims before the AAA were dismissed with prej-
udice, he would still be able to re-file his claims with the
AAA. In any event, Grunwald also requested that the district
court modify the preliminary injunction to allow him to file
his claims in state court. Because the outcome of this appeal
will determine whether Grunwald can pursue arbitration with
the AAA or file his case in state court, this is not a situation
where “the issues presented are no longer ‘live’ or the parties
lack a legally cognizable interest in the outcome.” Powell v.
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD                  2277
McCormack, 

, 496 (1969). Therefore, we con-
clude that this appeal is not moot.

                                    C.

   Next, CSFB argues that Grunwald is improperly attempting
to obtain judicial review of the NASD’s rule changes. How-
ever, as even CSFB appears to recognize, Grunwald only
seeks to vindicate an alleged right to have his arbitration con-
ducted in accordance with the California Ethics Standards.
Grunwald may lack such a right, but that is a question that
goes to the merits of this appeal, not to our jurisdiction.

                                    D.

   Finally, CSFB asserts that Grunwald’s appeal from the dis-
trict court’s denial of his motion for reconsideration fails to
satisfy the criteria for an interlocutory appeal under
§ 1292(a)(1). CSFB reasons that an appellant can only bring
an interlocutory appeal when “fundamental rights” are at
stake, and contends that arbitrator-disclosure rules do not
implicate fundamental rights. There is no requirement, how-
ever, in § 1292(a)(1) that an appeal from an interlocutory
order be premised on a fundamental right. Consequently, we
conclude that we have jurisdiction, and we turn to the merits
of Grunwald’s appeal.

                                   III.

   The district court concluded that the Judicial Council had
exceeded its statutory authority by applying the California
Ethics Standards to arbitrators appointed by a dispute resolu-
tion provider organization (“DRPO”) like the NASD because
the California Legislature only authorized the adoption of eth-
ics standards for arbitrators jointly selected by the parties.7
  7
   We review for abuse of discretion the district court’s decision denying
the motion to modify or dissolve the preliminary injunction. Miller ex rel.
2278          CREDIT SUISSE FIRST BOSTON v. GRUNWALD
“Because the California Supreme Court has not addressed”
whether the Judicial Council acted within its authority in this
instance, “our task is to ‘predict how the highest state court
would decide the issue using intermediate appellate court
decisions, decisions from other jurisdictions, statutes, trea-
tises, and restatements as guidance.’ ” Walker v. City of Lake-
wood, 

, 1125 (9th Cir. 2001) (quoting NLRB v.
Calkins, 

, 1089 (9th Cir. 1999)).8

   In interpreting the California statute at issue here, we look
to California principles of statutory construction. Neilson v.
Chang (In re First T.D. & Investment, Inc.), 

,
527 (9th Cir. 2001). These principles require us to “ ‘ascertain
the intent of the Legislature so as to effectuate the purpose of
the law’ ” by looking first to the words of the statute. State
Farm Mut. Auto. Ins. Co. v. Garamendi, 

, 78 (Cal.
2004) (citations omitted). We utilize the ordinary meaning of
words in a statute unless the Legislature has defined the
terms. Sec. Pac. Nat’l Bank v. Wozab, 

, 561 (Cal.
1990). “ ‘It is axiomatic that in the interpretation of a statute

NLRB v. Cal. Pac. Med. Ctr., 

, 455 (9th Cir. 1994) (en banc).
A district court abuses its discretion when it bases its decision on an erro-
neous legal standard. Sierra 

. Consequently, we
review de novo any underlying issues of law, Does 1-5 v. Chandler, 

, 1152 (9th Cir. 1996), including the district court’s interpreta-
tion of California state law. Feldman v. Allstate Ins. Co., 

,
665 (9th Cir. 2003).
   8
     We recognize that the California Court of Appeal addressed this issue
of California law in Jevne v. Superior Court, 

(Ct. App.
2003). The California Supreme Court, however, recently granted review
in Jevne thereby superceding the opinion of the California Court of
Appeal. 

(2004). Under California Rules of Court, a
superceded opinion is not considered published, and an unpublished opin-
ion cannot be cited to or relied on by other courts. Cal. R. Ct. 976, 977.
In short, an unpublished opinion does not constitute binding precedent.
Accordingly, we are not bound by the Jevne court’s analysis of California
law. See Aeroquip Corp. v. Aetna Cas. & Sur. Co., 

, 894 n.1
(9th Cir. 1994) (per curiam) (disregarding a California Court of Appeals
decision because it had been ordered depublished).
               CREDIT SUISSE FIRST BOSTON v. GRUNWALD                2279
where the language is clear, its plain meaning should be fol-
lowed.’ ” 

This “plain meaning” rule,
however, “does not prohibit a court from determining whether
the literal meaning of a statute comports with its purpose or
whether such a construction of one provision is consistent
with other provisions of the statute.” Lungren v. Deukmejian,

, 304 (Cal. 1988). Thus, “[t]he intent prevails
over the letter, and the letter will, if possible, be so read as to
conform to the spirit of the act.” 

event the letter of
the law is ambiguous, California law requires us to examine
the legislative history for further guidance. Hughes v. Bd. of
Architectural Exam’rs, 

, 649 (Cal. 1998) (per
curiam).

   [4] The California statute authorizing the Judicial Council
to adopt new ethics standards specified that “[t]he Judicial
Council shall adopt ethical standards for all neutral arbitra-
tors effective July 1, 2002.” Cal. Civ. Proc. Code
§ 1281.85(a) (emphasis added). Thus, the California legisla-
ture authorized the Judicial Council to adopt ethics standards
only for “neutral arbitrators,” a term that is defined by statute
to mean:

      an arbitrator who is (1) selected jointly by the parties
      or by the arbitrators selected by the parties or (2)
      appointed by the court when the parties or the arbi-
      trators selected by the parties fail to select an arbitra-
      tor who was to be selected jointly by them.

Cal. Civ. Proc. Code § 1280(d). The California Ethics Stan-
dards explicitly apply to arbitrators appointed by DRPOs.
Standard 2(a)(1)(C).9 However, the Judicial Council may not
  9
   Under the California Ethics Standards, “neutral arbitrator” is defined
to mean:
      any arbitrator who is subject to these standards and who is to
      serve impartially, whether selected or appointed: (A) Jointly by
      the parties or by the arbitrators selected by the parties;
2280         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
act “inconsistent with the governing statutes.” People v. Hall,

, 980 (Cal. 1994). Thus, the only question is
whether the Judicial Council exceeded its authority when it
required DRPO-appointed arbitrators to comply with the new
standards.

   [5] The district court held that because section 1281.85
plainly applies only to “neutral arbitrators” as defined by sec-
tion 1280, it could not apply to DRPO-appointed arbitrators.
Although we agree with the district court’s determination that
section 1281.85 permitted the Judicial Council to adopt ethics
standards only for neutral arbitrators, we disagree with its
unjustified assumption that all DRPO-appointed arbitrators
are not neutral arbitrators. As section 1280 sets forth, an arbi-
trator qualifies as a neutral arbitrator if he is “selected jointly
by the parties.”

   [6] Under the NASD’s Code of Arbitration Procedure
(“NASD Code”), the parties jointly select the arbitrators that
serve on the panel. After receiving a list of potential arbitra-
tors, “[a] party may strike one or more of the arbitrators from
each list for any reason.” NASD Code § 10308(c)(1)(A). The
parties then rank order all of the remaining arbitrators. 

(C). Next, the NASD’s Director of Arbitra-
tion adds the parties’ rankings together, and must appoint the
arbitrators that have the best consolidated rankings, subject
only to availability and disqualification. 

(4).
Because the parties have unlimited strikes and the power to
choose the arbitrators through the consolidated ranking pro-

    (B) By the court, when the parties or the arbitrators selected by
    the parties fail to select an arbitrator who was to be selected
    jointly by them; or
    (C) By a dispute resolution provider organization, under an
    agreement of the parties.
Standard 2(a) (emphasis added).
            CREDIT SUISSE FIRST BOSTON v. GRUNWALD           2281
cess, we conclude that NASD arbitrators are “selected jointly
by the parties” and therefore qualify as “neutral arbitrators.”
See Cal. Civ. Proc. Code § 1280.

   [7] Because NASD arbitrators are “neutral arbitrators”
within the meaning of section 1280, section 1281.85 autho-
rized the Judicial Council to adopt ethics standards that would
be applicable to NASD arbitrators. The Judicial Council
therefore did not exceed its authority by requiring DRPOs,
like the NASD, to comply with the California Ethics Stan-
dards. Accordingly, contrary to the district court’s ruling, we
hold that the Judicial Council did not act ultra vires by sub-
jecting NASD arbitrators to the new ethics standards. For a
different reason, however, we agree with the district court’s
ultimate conclusion that the new ethics standards cannot be
applied to NASD arbitrators.

                               IV.

   CSFB contends that the Exchange Act preempts application
of the California Ethics Standards to NASD-appointed arbi-
trators. We agree.

   [8] Under the Supremacy Clause, federal laws preempt
conflicting state laws. U.S. CONST., art. VI, cl. 2. Federal regu-
lations issued by an agency in the scope of its
congressionally-delegated authority are included among the
“Laws of the United States” which can preempt state law.
City of New York v. FCC, 

, 63-64 (1988). We deal
here, however, with rules adopted by private entities—self-
regulatory organizations (“SROs”) within the securities
industry—rather than federal agencies. The Exchange Act
“delegated government power” to SROs such as the New
York Stock Exchange (“NYSE”) and the NASD “to enforce
. . . compliance by members of the industry with both the
legal requirements laid down in the Exchange Act and ethical
standards going beyond those requirements.” S. Rep. No. 94-
75, at 23 (1975), reprinted in 1975 U.S.C.C.A.N. 179, 201.
2282       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
   [9] Whether SRO rules can preempt conflicting state laws
is an issue that we have not addressed. In Merrill Lynch,
Pierce, Fenner & Smith v. Ware, however, the Supreme Court
suggested by implication that SRO rules can in certain cir-
cumstances have preemptive force despite the fact that they
are adopted and enforced by private organizations. 

, 127 (1973) (“[C]onflicting law . . . should be pre-empted
by exchange self-regulation ‘only to the extent necessary to
protect the achievement of the aims of the Securities
Exchange Act.’ ” (quoting Silver v. N.Y. Stock Exch., 

, 361 (1963))). In light of the Supreme Court’s Ware deci-
sion and the 1975 Amendments to the Exchange Act, we con-
clude that SRO rules approved by the Commission preempt
conflicting state law. Because the NASD arbitration rules at
issue here were approved by the Commission and because the
California Ethics Standards conflict with the NASD arbitra-
tion disclosure rules, the California Ethics Standards are pre-
empted by the NASD rules.

                              A.

   The Securities Exchange Act of 1934 created a system of
supervised self-regulation in the securities industry whereby
organizations such as the NASD or the NYSE could promul-
gate their own governing rules and regulations, subject to
oversight by the Securities and Exchange Commission. The
original version of the statute gave SROs considerable latitude
to fashion their own governing rules. S. Rep. No. 73-792, at
5 (1934). The Commission was authorized to take action only
when “necessary or appropriate for the protection of investors
or to insure fair dealing . . . .” 15 U.S.C. § 78s(b) (1934).

   This system gave rise to questions regarding the preemptive
effect of SRO rules, issued by private organizations although
sanctioned by federal law, over conflicting state law. The
Supreme Court addressed this issue in 1973 in Ware and artic-
ulated a standard to determine when SRO rules would pre-
empt state 

, 130-31. Merrill Lynch argued
            CREDIT SUISSE FIRST BOSTON v. GRUNWALD              2283
that a NYSE rule providing for compulsory arbitration pre-
empted a California state law that afforded employees a right
of action for unpaid wages regardless of any private agree-
ment to arbitrate. The Court disagreed, and instead held that
state law applied. 

   As the Court explained, Congress’s aim in providing for
supervised self-regulation was “to insure fair dealing and to
protect investors from harmful or unfair trading practices.” 

SRO rules that contradicted this policy were subject
to Commission supervision. Conversely, however, “any rule
or practice not germane to fair dealing or investor protection
would not appear to fall under the shadow of the federal
umbrella; it is, instead, subject to applicable state law.” 

Because the arbitration rules at issue were insuffi-
ciently related to fair dealing or the protection of investors,
the Court concluded that they fell outside the federal shadow.

(“[T]he relationship between compulsory employer-
employee arbitration and fair dealing and investor protection
is ‘extremely attenuated and peripheral, if it exists at all.’ ”
(citation omitted)).

   The Court’s decision in Ware emphasized that the limited
authority granted to the Commission under the 1934
Exchange Act was central to its preemption analysis. 

see also Perry v. Thomas, 

, 490 (1987); Sil-

n.12 (“Were there Commission jurisdic-
tion and ensuing judicial review for scrutiny of a particular
exchange ruling, . . . a different case would arise concerning
exemption from the operation of laws . . . , an issue we do not
decide today.”). The authority to adopt self-governing rules
was vested in the SROs, and as Congress put it, “[i]t is only
where [SROs] fail adequately to provide protection to inves-
tors that the Commission is authorized to step in and compel
them to do so.” S. Rep. No. 73-792, at 13; see also 

. The Commission’s ability to scrutinize SRO rules
was confined to designated subject areas,10 and the direct
  10
     The Commission was authorized to compel SROs to amend their rules
relating to the following areas:
2284         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
supervisory power the Commission did enjoy was exercised
“sparingly.” 

.

   It was in this context of the Commission’s limited regula-
tory control over the SROs and the SROs’ substantial rule-
making latitude that the Court decided Ware. The arbitration
rule at issue, in fact, clearly “would not [have been] subject
to the Commission’s modification or review” under the 1934
Exchange Act. 

. The Court explained that because
the Exchange Act’s self-regulatory scheme provided for no
agency check on SRO behavior in some cases, state laws
could operate as a beneficial “ ‘form of review of exchange
self-policing . . . .’ ” 

(quoting 

).

  Just two years after the Supreme Court decided Ware, how-
ever, Congress initiated a major overhaul of the Exchange Act
and drastically shifted the balance of rulemaking power in
favor of Commission oversight. Securities Acts Amendments

    (1) safeguards in respect of the financial responsibility of mem-
    bers and adequate provision against the evasion of financial
    responsibility through the use of corporate forms or special part-
    nerships; (2) the limitation or prohibition of the registration or
    trading in any security within a specified period after the issuance
    or primary distribution thereof; (3) the listing or striking from
    listing of any security; (4) hours of trading; (5) the manner,
    method, and place of soliciting business; (6) fictitious or num-
    bered accounts; (7) the time and method of making settlements,
    payments, and deliveries and of closing accounts; (5) the report-
    ing of transactions on the exchange and upon tickers maintained
    by or with the consent of the exchange, including the method of
    reporting short sales, stopped sales, sales of securities of issuers
    in default, bankruptcy or receivership, and sales involving other
    special circumstances; (9) the fixing of reasonable rates of com-
    mission, interest, listing, and other charges; (10) minimum units
    of trading; (11) odd-lot purchases and sales; (12) minimum
    deposits on margin accounts; and (13) similar matters.
15 U.S.C. § 78s(b) (1934).
                CREDIT SUISSE FIRST BOSTON v. GRUNWALD                   2285
of 1975, Pub. L. No. 94-29, 89 Stat. 168 (codified as amended
at 15 U.S.C. § 78a to 80b-4 (1975)). The amendments were
intended to work “a fundamental reform of the economic and
regulatory structure of the securities markets and the securi-
ties industry.” S. Rep. No. 94-75, at 1. Under the amended
statute, the Commission “play[s] a much larger role than it
has in the past . . . .” 

the 1975 Amendments, the SROs’ “authority to
regulate independently of the SEC’s control” was substan-
tially curtailed. 

This limitation on the SROs’ rule-
making authority was accomplished by requiring SROs to file
a proposed rule with the Commission, along with a policy
statement justifying the basis and purpose for the proposed
rule. 15 U.S.C. § 78s(b)(1). The Commission must give public
notice of the proposed rule and provide an opportunity for
comment. 

enhanced supervisory role of the Com-
mission, SROs are no longer free to adopt new substantive
rules or modify existing rules at any time as they could prior
to the amendments. S. Rep. No. 94-75, at 30. “No proposed
rule change shall take effect unless approved by the Commis-
sion[,]” 15 U.S.C. § 78s(b)(1);11 moreover, the Commission
must give public notice of the specific reasons for its
approval. S. Rep. No. 94-75, at 30.
  11
    A proposed SRO rule may take effect upon filing, without Commis-
sion approval, where the SRO designates the rule as
       (i) constituting a stated policy, practice, or interpretation with
       respect to the meaning, administration, or enforcement of an
       existing rule of the self-regulatory organization, (ii) establishing
       or changing a due, fee, or other charge imposed by the self-
       regulatory organization, or (iii) concerned solely with the admin-
       istration of the self-regulatory organization . . . .
15 U.S.C. § 78s(b)(3)(A); see also 17 C.F.R. § 240.19b-4. The statute,
however, specifies that such “housekeeping” rules must not be inconsis-
tent with applicable federal and state law. The Commission also retains the
authority to summarily abrogate the rule within sixty days of filing and
require the SRO to refile it in accordance with the approval procedures of
§ 78s(b)(2). 15 U.S.C. § 78s(b)(3)(C).
2286         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
   The ultimate approval of a proposed SRO rule reflects the
Commission’s determination that the proposed rule is consis-
tent with the purposes of the Exchange Act. 15 U.S.C.
§ 78s(b)(2); Shearson/Am. Express, Inc. v. McMahon, 

, 233 (1987) (“No proposed rule change may take
effect unless the SEC finds that the proposed rule is consistent
with the requirements of the Exchange Act . . . .”). Moreover,
the 1975 Amendments gave the Commission the power to
abrogate, add to, and delete from the rules of any SRO “as the
Commission deems necessary or appropriate to insure the fair
administration of the self regulatory organization . . . .” 15
U.S.C. §78s(c). Unlike the restrictions in the original statute,
this new authority is not limited to specific subject matter areas.12
S. Rep. No. 94-75, at 27-28, 31. The Commission’s expanded
authority includes, for example, “the power to mandate the
adoption of any rules [the Commission] deems necessary to
ensure that arbitration procedures adequately protect statutory
rights.” Shearson/Am. Express, 

.

   Finally, the 1975 Amendments removed the original stat-
ute’s explicit requirement that all SRO rules be consistent
with “the applicable laws of the State in which [the exchange]
is located . . . .” 15 U.S.C. § 78f(c) (1934). By contrast, the
current statute requires that SRO rules be “not inconsistent
with . . . applicable Federal and State law” only when they are
promulgated as either administrative, “housekeeping” matters
that do not require Commission approval (under
§ 78s(b)(3)(A)), or when they are temporary rule changes
instituted summarily by the Commission (under
§ 78s(b)(3)(B)). The mandated approval process under
§ 78s(b)(2) does not contain a similar requirement that SRO
rules be consistent with state law.

   [11] These new provisions for Commission approval are
“now the ‘measure of congressionally delegated authority for
self-regulation in the national interest . . . .’ ” Drayer v. Kras-
  12
    See supra note 10.
              CREDIT SUISSE FIRST BOSTON v. GRUNWALD                      2287
ner, 

, 358 (2d Cir. 1978). Section 78s(b)(2) pro-
vides for vastly expanded Commission oversight and requires
that SRO rules promote the federal objectives of the
Exchange Act. Commission approval of an SRO rule under
the new § 78s(b)(2) therefore satisfies Ware’s requirement
that a rule be germane to fair dealing or investor protection
and fall under the shadow of the federal umbrella; indeed, the
Commission is in fact obligated “to refrain from imposing, or
permitting to be imposed, any new regulatory burden ‘not
necessary or appropriate in furtherance of the purposes’ of the
Exchange Act.” 

(quoting H.R. Conf.
Rep. No. 94-229, at 94 (1975), reprinted in 1975
U.S.C.C.A.N. 321, 325).13

   The Supreme Court has expressly withheld any opinion
regarding the effect of the 1975 Amendments on Ware’s hold-
ing and the preemptive effect of SRO arbitration rules
approved under § 78s(b)(2). 

n.5. But
our decision here is consistent with the Second Circuit’s anal-
ysis in Drayer, decided not long after the effective date of the
1975 

. Drayer’s wrongful termi-
nation claim against his employer, a member of the NYSE,
was stayed pending arbitration in accordance with NYSE
rules. 

The Second Circuit affirmed the district
court’s confirmation of the arbitration award, concluding that
   13
      Although we agree with the Second Circuit’s analysis, Drayer skipped
over one point that we believe was central to its analysis. The 1975
Amendments require, as a condition of SRO registration, that “[t]he rules
of the [SRO] . . . are not designed . . . to regulate by virtue of any authority
conferred by this chapter matters not related to the purposes of this chapter
or the administration of the [SRO].” 15 U.S.C. §§ 78f(b)(5), 78o-3(b)(6);
see also S. Rep. No. 94-75, at 28 (“[The Act] would limit by [these sec-
tions] the scope of the self-regulatory organizations’ authority over their
members to matters related to the purposes of the Exchange Act.”).
Because the SEC may only approve SRO rules if “it finds that [the rule]
is consistent with the requirements” of the Exchange Act, 15 U.S.C.
§ 78s(b)(2), any rule properly approved by the SEC is necessarily related
to “the purposes of [the Exchange Act] or the administration of the
[SRO].”
2288         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
the NYSE compulsory arbitration rule was within the area of
supervised self-regulation contemplated by the Exchange Act.

   The court in Drayer concluded that Ware’s specific holding
—that compulsory arbitration fell outside the Exchange Act’s
purposes—was abrogated by the 1975 Amendments. 

As the court explained, the 1975 Amendments expanded
the “federal umbrella” such that the compulsory arbitration
rule now falls within the Act’s reach as “germane to the goal
of market efficiency . . . and to the objective of fair adminis-
tration of the Exchange . . . .” 

   Having recognized the significance of the 1975 Amend-
ments, the court in Drayer held that the NYSE employment
arbitration rules were within the purposes of the Exchange
Act even though the Commission had at that time never spe-
cifically reviewed those rules. 

that the Commis-
sion had the opportunity for involvement—even though it had
not exercised that power—was sufficient to satisfy Ware’s
requirements.

   Since the Second Circuit decided Drayer, however, the
Commission has issued an affirmative statement of approval
for the SRO arbitration rules. In 1989, the SROs overhauled
their arbitration procedures. “[T]he SEC . . . specifically
approved the arbitration procedures of . . . the NASD” after
a period of public notice and comment, in line with the
Exchange Act’s requirements. Shearson/Am. Express, 

. This, of course, included a thorough review
and eventual approval of the NASD Code’s disclosure and
disqualification rules.14
  14
     Self-Regulatory Organizations; Order Approving Proposed Rule
Changes by the New York Stock Exchange, Inc., National Association of
Securities Dealers, Inc., and the American Stock Exchange, Inc. Relating
to the Arbitration Process and the Use of Predispute Arbitration Clauses,
54 Fed. Reg. 21,144 (May 16, 1989) (hereinafter “1989 Order Approving
Proposed Rule Changes”).
              CREDIT SUISSE FIRST BOSTON v. GRUNWALD                    2289
   The Commission worked closely with the Securities Indus-
try Conference on Arbitration, a group composed of represen-
tatives from each SRO that had an arbitration program, a
representative of the securities industry, and three or four pub-
lic representatives, to develop the SROs’ arbitrator-disclosure
rules.15 In addition, with respect to the current controversy, the
Commission directed a special study to examine whether the
SROs should amend their rules to incorporate the California
Ethics Standards’ disclosure and disqualification require-
ments. Michael A. Perino, Report to the Securities and
Exchange Commission Regarding Arbitrator Conflict Disclo-
sure Requirements in NASD and NYSE Securities Arbitra-
tions, at 1 (Nov. 4, 2002) (hereinafter “Perino Report”).16 The
Commission also has repeatedly approved the NASD’s
waiver rule, which requires industry parties to waive the Cali-
fornia Ethics Standards if those standards are waived by an
investor or an associated person.17 67 Fed. Reg. 62,085-88
(Oct. 3, 2002); see also 69 Fed. Reg. 58,567 (Sept. 30, 2004).

   [12] In sum, we conclude that SRO rules that have been
approved by the Commission pursuant to 15 U.S.C. § 78s(b)(2)18
preempt state law when the two are in conflict, either directly
or because the state law stands as an obstacle to the accom-
plishment of the objectives of Congress. Specifically, we hold
that the NASD arbitration procedures in dispute here have
preemptive force over conflicting state law.
  15
      See 1989 Order Approving Proposed Rule Changes, supra note 14.
  16
      The Perino Report is available at http://www.sec.gov/pdf/
arbconflict.pdf.
   17
      See supra note 4.
   18
      We are not faced with the problem of preemption in the context of
SRO “housekeeping” rules that do not require Commission approval and
take effect upon filing pursuant to 15 U.S.C. § 78s(b)(3). Section 78s(b)(3)
specifically provides that such a rule “may be enforced by [an SRO] to the
extent it is not inconsistent with . . . applicable Federal and State law.” 15
U.S.C. § 78s(b)(3)(C). Whether these rules can ever preempt conflicting
state law is a question we leave for another day.
2290            CREDIT SUISSE FIRST BOSTON v. GRUNWALD
                                    B.

   As we previously noted, if a state law prevents the NASD
from complying with its rules or if it interferes with the Con-
gressional goals underlying the Exchange Act, the state law
is preempted by federal law.19 Preemption occurs “where it is
impossible for a private party to comply with both state and
federal law.” Crosby v. Nat’l Foreign Trade Council, 

, 372 (2000). Additionally, state law is preempted if
it “stands as an obstacle to the accomplishment and execution
of the full purposes and objectives of Congress.” 

Exchange Act preempts application of the California Ethics
Standards to NASD-appointed arbitrators if it impossible for
the NASD to comply with both its own rules and the Ethics
Standards, or if the Ethics Standards would inhibit the
achievement of Congressional objectives. See Serv. Eng’g Co.
v. Emery, 

, 661 (9th Cir. 1996). We will evaluate
the disqualification rules and disclosure rules in turn.

1.        Disqualification Rules

   [13] The NASD cannot simultaneously comply with both
the NASD Code’s and the California Ethics Standards’ dis-
qualification rules. If an arbitrator fails to make a required
disclosure, the California Ethics Standards provide for manda-
tory and automatic disqualification of the arbitrator once a
party serves a timely notice of disqualification. Standard
10(a)(1). If the arbitrator fails to remove himself from the
panel, the arbitration award can be vacated. Cal. Civ. Proc.
Code § 1286.2(a)(6). In contrast, the NASD Code specifies
that the Director of Arbitration “may” remove an arbitrator if
     19
     The Exchange Act requires SROs like the NASD to “comply with . . .
its own rules.” 15 U.S.C. § 78s(g)(1); see also Sparta Surgical Corp. v.
Nat’l Ass’n of Sec. Dealers, Inc., 

, 1212 (9th Cir. 1998).
Thus, if the NASD violates its own rules, it likewise violates federal law.
By extension, if a state law makes it impossible for the NASD to comply
with its own rules, that state law prevents the NASD from complying with
federal law.
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD                  2291
he fails to make a required disclosure. NASD Code
§ 10308(d)(2) (“[T]he Director may remove an arbitrator from
an arbitration panel based on information that is required to
be disclosed pursuant to Rule 10312 and that was not previ-
ously disclosed.”). Thus, in the event of a failure to make a
required disclosure, the California Ethics Standards require
disqualification once a party serves a notice of disqualifica-
tion, while the NASD Code grants discretion to the NASD
Director of Arbitration to decide whether the arbitrator should
be disqualified.

   The NASD Director of Arbitration would find himself in a
catch-22 if the California Ethics Standards applied to NASD
arbitrations. If the NASD Director exercises his discretion
under the NASD Code by refusing to dismiss an arbitrator
that failed to make a required disclosure, the Director violates
the California Ethics Standards’ mandatory disqualification
provision. See Standard 10(a)(1). Alternatively, if the Director
determines that he is bound by the California Ethics Stan-
dards, he effectively forfeits his discretionary authority under
the NASD Code. See NASD Code § 10308(d)(2).

   [14] A similar conflict would arise if an arbitrator’s disclo-
sure revealed a possible conflict of interest. Again, under the
California Ethics Standards, disqualification is mandatory and
automatic if a party serves a timely notice of disqualification.
Standard 10(a)(2); see also Azteca Const., Inc. v. ADR Con-
sulting, Inc., 

, 146 (Ct. App. 2004)
(“There is no good faith or good cause requirement for the
exercise of this right, nor is there a limit on the number of
proposed neutrals who may be disqualified in this manner.”).
But under the NASD Code, when a party objects to an arbitra-
tor’s appointment, the NASD Director of Arbitration “shall
determine if the arbitrator should be disqualified.” NASD
Code § 10308(d)(1).20 Likewise, the disclosure rule in the
  20
   Although the NASD Director has the power to make the initial deter-
mination that an arbitrator should be disqualified, the parties can prevent
2292          CREDIT SUISSE FIRST BOSTON v. GRUNWALD
NASD Code also specifies that “[t]he Director may remove an
arbitrator based on information that is required to be disclosed
pursuant to this Rule.” 

(emphasis added).
Application of the California Ethics Standards to NASD arbi-
trations would strip the Director of Arbitration of his
federally-recognized obligation to make a determination
whether an arbitrator should in fact be disqualified. Because
the NASD Director cannot comply with both sets of disquali-
fication rules, the California Ethics Standards are preempted.
See 

.

2.   Disclosure Rules

   [15] In contrast to the disqualification rules, it is not physi-
cally impossible for a party to simultaneously comply with
the NASD Code and the California Ethics Standards. True,
the California Ethics Standards’ enumerated list of mandatory
disclosures is more extensive than the NASD Code’s disclo-
sure rule. Compare Standard 7(d)(1)-(14),21 with NASD Code
§ 10312(a);22 see also Perino Report at 44 (“While the Cali-

the disqualification by unanimously agreeing that the arbitrator should not
be disqualified. NASD Code § 10308(d)(1). Accordingly, even at this late
stage of the arbitrator-selection process, the parties are still responsible for
selecting their arbitrators, a fact which supports our conclusion that NASD
arbitrators are “neutral arbitrators.”
   21
      Standard 7(d)(1)-(14) is set forth in the appendix to this opinion.
   22
      The NASD requires its arbitrators to disclose:
     (1) Any direct or indirect financial or personal interest in the out-
     come of the arbitration;
     (2) Any existing or past financial, business, professional, family,
     social, or other relationships or circumstances that are likely to
     affect impartiality or might reasonably create an appearance of
     partiality or bias. Persons requested to serve as arbitrators should
     disclose any such relationships or circumstances that they have
     with any party or its counsel, or with any individual whom they
     have been told will be a witness. They should also disclose any
     such relationship or circumstances involving members of their
     families or their current employers, partners, or business asso-
     ciates.
NASD Code § 10312(a).
              CREDIT SUISSE FIRST BOSTON v. GRUNWALD                    2293
fornia Ethics Standards and the SRO rules clearly require dis-
closure of similar kinds of information, they are not co-
extensive. [Standard 7(d)] requires disclosures that current
rules do not.”). For example, under the California Ethics Stan-
dards “an arbitrator could be subject to disqualification
because her spouse used to serve on a bar committee with an
associate of a party’s lawyer, even if the associate is unin-
volved in the case.” Perino Report at 45.23 Because such a
remote relationship is completely unlikely “to affect impar-
tiality” or to “reasonably create an appearance of partiality or
bias,” the NASD Code would not require this disclosure. See
NASD Code § 10312(a)(2).

   [16] Nonetheless, the two sets of disclosure standards do
not actually conflict because it is “entirely possible” for an
arbitrator to satisfy both sets of disclosure requirements with-
out violating the NASD Code. See Serv. Eng’g 

(holding that federal law did not preempt a state work-
ers’ compensation program because it was possible for a
claimant to collect under both the federal and state programs).
“While the state standards are more stringent than the federal
standards, it is possible to comply with both.” North Star Int’l
v. Ariz. Corp. Comm’n, 

, 583 (9th Cir. 1983).
Nothing in the NASD Code prevents an arbitrator from dis-
closing more information than is required by the NASD
Code’s disclosure rule. See NASD Code § 10312(a). To the
contrary, the NASD encourages its arbitrators to “ ‘bend over
backwards’ to avoid any appearance of bias” by opting for
disclosure in close cases.24 Thus, an arbitrator that discloses
   23
      Standard 7(d)(8) requires the disclosure of “[a]ny other professional
relationship . . . that the arbitrator or a member of the arbitrator’s immedi-
ately family has or has had with a party or lawyer for a party.” Standard
(2)(m) defines “Lawyer for a party” to include the law firm and associates
of the lawyer representing the party. Thus, read together, these two provi-
sions require an arbitrator to disclose any professional relationship his
spouse had with anyone associated with a party’s lawyer’s law firm.
   24
      Perino Report at 14 (quoting Securities Industry Conference on Arbi-
tration, The Arbitrator’s Manual 5 (Jan. 2001)).
2294       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
all of the information required by the California Ethics Stan-
dards may go beyond the call of duty, but he does not violate
any rule contained in the NASD Code. The two sets of disclo-
sure rules, while not coextensive, do not conflict.

   We must, however, consider the second type of conflict
preemption: whether application of the California Ethics Stan-
dards’ disclosure requirements to NASD-appointed arbitrators
would stand as “an obstacle to the accomplishment and exe-
cution of the full purposes and objectives of Congress.” See

. This type of preemption naturally
requires us to look to Congressional intent in enacting the
Exchange Act, and determine whether state law would result
in a “frustration of [this] purpose.” Serv. Eng’g 

.

   The Commission contends in its amicus curiae brief that
the California Ethics Standards do interfere with Congressio-
nal goals for at least two reasons. First, permitting each state
to regulate NASD arbitration procedures would create a
patchwork of laws that would interfere with Congress’s cho-
sen approach of delegating nationwide, cooperative regulatory
authority to the Commission and the NASD. Second, the
Commission contends that the California Ethics Standards’
extensive disclosure requirements may undermine the NASD
arbitration system’s protection of investors. As the Commis-
sion points out, its study of the California Ethics Standards
concluded that the additional disclosure rules are unnecessary
because empirical evidence reveals little evidence of bias in
SRO arbitration outcomes, survey data suggests participants
in SRO arbitrations perceive arbitrators as fair and unbiased,
and SRO-arbitration awards are rarely challenged on the basis
of arbitrator bias. Perino Report at 30-37.

   At the same time, the added disclosure requirements could
have a number of costs. First, they would increase the
NASD’s administrative costs because the NASD would have
to create and maintain a more extensive database of informa-
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD              2295
tion on each of its arbitrators. These higher administrative
costs will either be shouldered by the parties, thereby making
arbitration more costly for investors and employees, or by the
NASD, which would result in the NASD having fewer
resources available for its other regulatory responsibilities.
Second, the additional record-keeping requirements may deter
well-qualified individuals from serving as NASD arbitrators,
especially in light of the relatively low honorariums that
NASD arbitrators receive.25 See 

(concluding that the
California Ethics Standards “may well deter many individuals
from participating” in SRO arbitrations). Finally, the Com-
mission expresses concern that the California Ethics Stan-
dards would “increase the complexity, cost, and uncertainty of
the arbitration process” because of the potential for a party to
seek an award’s vacature under the California disclosure
rules. As the Commission explains, these problems could sig-
nificantly undermine a primary congressional purpose in
enacting the Exchange Act—investor protection—because the
average investor is less likely than the average brokerage firm
to be able to afford the costs of protracted litigation. In sum,
the Commission has taken the position in its amicus curiae
brief that application of the California Ethics Standards dis-
closure requirements would create “an obstacle to the accom-
plishment and execution of the full purposes and objectives of
Congress.” See 

.

   The Commission has extensive experience with regulating
the SROs’ arbitration procedures, and it is in a unique posi-
tion to evaluate whether application of the California Ethics
Standards to NASD arbitrations would frustrate the objectives
of the Exchange Act. In short,

       [b]ecause the [Commission] is the federal agency to
  25
    NASD honorarium rates are substantially lower than non-SRO arbitra-
tion compensation rates. NASD arbitrators receive $200 to $275 for each
hearing session they attend, while non-SRO arbitrators receive $750 to
$1,000 per day. Perino Report at 16.
2296       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
    which Congress has delegated its authority to imple-
    ment the provisions of the [Exchange Act], the
    agency is uniquely qualified to determine whether a
    particular form of state law “stands as an obstacle to
    the accomplishment and execution of the full pur-
    poses and objectives of Congress.”

Medtronic, Inc. v. Lohr, 

, 496 (1996) (footnote
omitted) (quoting Hines v. Davidowitz, 

, 67
(1941)). Accordingly, we “place some weight upon” the Com-
mission’s conclusion that the California Ethics Standards con-
flict with the purposes of the Exchange Act. Geier v. Am.
Honda Motor Co., 

, 883 (2000).

   [17] The Commission has reasonably concluded that allow-
ing California to regulate SRO arbitrations would result in a
patchwork of inconsistent state arbitration regulations that
would interfere with Congress’s intent in delegating SRO reg-
ulatory authority to the Commission. Indeed, we have recog-
nized that “allow[ing] states to define by common law the
regulatory duties of [the NASD is] a result which cannot co-
exist with the Congressional scheme of delegated regulatory
authority under the Exchange Act.” Sparta Surgical 

. There is also nothing “arbitrary, capricious,
or manifestly contrary to statute” about the Commission’s fear
that the California Ethics Standards’ disclosure rules would
undermine the Exchange Act’s goal of protecting investors
and the public interest. See Brannan v. United Student Aid
Funds, Inc., 

, 1264 (9th Cir. 1996); see also

. The only study that has examined the
effects of applying the California Ethics Standards to NASD
arbitrators concluded that California’s disclosure rules were
unnecessary and would increase the costs of NASD arbitra-
tions. See Perino Report at 48. Because the Commission’s
determination that the state law conflicts with SRO rules is
well-supported by the record, we conclude that the Exchange
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD                2297
Act preempts application of the California Ethics Standards’
disclosure rules to NASD-appointed neutral arbitrators.26

                                   V.

   In light of our holding that the California Ethics Standards
cannot apply to NASD arbitrations because they are pre-
empted by federal law, we also reject Grunwald’s claims that
the NASD and CSFB were attempting to coerce him to waive
his rights under the California Ethics Standards and were
depriving him of his right to a speedy arbitration. Grunwald
argues that he faces an unacceptable choice: accept the
NASD’s offer to go forward with the arbitration subject to
Grunwald’s waiver of the California Ethics Standards thereby
forfeiting his right to have his arbitration conducted in accor-
dance with the Ethics Standards; or forfeit his right to a
speedy arbitration by refusing the NASD’s offer. Grunwald’s
dilemma is illusory, however, because he never had a right to
have his arbitration conducted pursuant to the California Eth-
ics Standards. Because federal law preempts the California
Ethics Standards, the Ethics Standards are “without effect.”
Cipollone v. Liggett Group, Inc., 

, 516 (1992)
(“Since . . . M’Culloch v. Maryland, it has been settled that
state law that conflicts with federal law is ‘without effect.’ ”
(citation omitted) (quoting Maryland v. Louisiana, 

, 746 (1981))).

   Even if the Federal Arbitration Act creates an enforceable
right to a speedy arbitration, a contention that we take no
position on, Grunwald could have chosen the first option—
waiver of the California Ethics Standards in exchange for a
speedy arbitration—without forfeiting any right. Instead,
Grunwald chose to litigate the issue of whether the California
  26
    Because we conclude that the Exchange Act preempts application of
the California Ethics Standards to NASD arbitrators, we have no need to
consider whether the Federal Arbitration Act also preempts application of
these standards to NASD arbitrators.
2298       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
Ethics Standards should apply to NASD arbitrators. As we
have explained, Grunwald had no right to an arbitration con-
ducted in accordance with ethics standards that were “without
effect.” See 

Having refused the option of waiving
the California Ethics Standards and proceeding with the
NASD arbitration, Grunwald cannot now complain that he
was denied a speedy arbitration.

                              VI.

   Although the district court erroneously concluded that the
California Judicial Council acted ultra vires when the Judicial
Council applied the California Ethics Standards to NASD
arbitrators, we agree with the district court’s ultimate conclu-
sion that the Ethics Standards do not apply to NASD arbitra-
tions because the Ethics Standards are preempted by the
Exchange Act. Accordingly, we affirm.

  AFFIRMED.
              CREDIT SUISSE FIRST BOSTON v. GRUNWALD          2299
                            APPENDIX

Standard 7(d)(1)-(14) requires that arbitrators disclose the fol-
lowing information:

(1) (Family relationships with party) The arbitrator or a
member of the arbitrator’s immediate or extended family is a
party, a party’s spouse or domestic partner, or an officer,
director, or trustee of a party.

(2) (Family relationships with lawyer in the arbitration)
The arbitrator or the spouse, former spouse, domestic partner,
child, sibling, or parent of the arbitrator or the arbitrator’s
spouse or domestic partner is:

      (A)    A lawyer in the arbitration.

      (B) The spouse or domestic partner of a lawyer in
      the arbitration; or

      (C) Currently associated in the private practice of
      law with a lawyer in the arbitration.

(3) (Significant personal relationship with party or lawyer
for a party) The arbitrator or a member of the arbitrator’s
immediate family has or has had a significant personal rela-
tionship with any party or lawyer for a party.

(4)   (Service as arbitrator for a party or lawyer for party)

      (A) The arbitrator is serving or, within the preced-
      ing five years, has served:

            (i) As a neutral arbitrator in another prior or
            pending noncollective bargaining case
            involving a party to the current arbitration
            or a lawyer for a party;
2300      CREDIT SUISSE FIRST BOSTON v. GRUNWALD
        (ii) As a party-appointed arbitrator in
        another prior or pending noncollective bar-
        gaining case for either a party to the current
        arbitration or a lawyer for a party; or

        (iii) As a neutral arbitrator in another prior
        or pending noncollective bargaining case in
        which he or she was selected by a person
        serving as a party-appointed arbitrator in
        the current arbitration.

    (B) [Case information] If the arbitrator is serving
    or has served in any of the capacities listed under
    (A), he or she must disclose:

        (i) The names of the parties in each prior or
        pending case and, where applicable, the
        name of the attorney representing the party
        in the current arbitration who is involved in
        the pending case, who was involved in the
        prior case, or whose current associate is
        involved in the pending case or was
        involved in the prior case.

        (ii) The results of each prior case arbitrated
        to conclusion, including the date of the
        arbitration award, identification of the pre-
        vailing party, the amount of monetary dam-
        ages awarded, if any, and the names of the
        parties’ attorneys.

    (C) [Summary of case information] If the total
    number of the cases disclosed under (A) is greater
    than five, the arbitrator must also provide a summary
    of the cases that states:

        (i) The number of pending cases in which
        the arbitrator is currently serving in each
        capacity;
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD            2301
         (ii) The number of prior cases in which the
         arbitrator previously served in each capac-
         ity;

         (iii) The number of prior cases arbitrated to
         conclusion; and (iv) The number of such
         prior cases in which the party to the current
         arbitration, the party represented by the
         lawyer for a party in the current arbitration,
         or the party represented by the party-
         arbitrator in the current arbitration was the
         prevailing party.

(5) (Compensated service as other dispute resolution neu-
tral) The arbitrator is serving or has served as a dispute reso-
lution neutral other than an arbitrator in another pending or
prior noncollective bargaining case involving a party or law-
yer for a party and the arbitrator received or expects to receive
any form of compensation for serving in this capacity.

    (A) [Time frame] For purposes of this paragraph
    (5), ‘prior case’ means any case in which the arbitra-
    tor concluded his or her service as a dispute resolu-
    tion neutral within two years before the date of the
    arbitrator’s proposed nomination or appointment, but
    does not include any case in which the arbitrator
    concluded his or her service before January 1, 2002.

    (B) [Case information] If the arbitrator is serving
    or has served in any of the capacities listed under
    this paragraph (5), he or she must disclose:

         (i) The names of the parties in each prior or
         pending case and, where applicable, the
         name of the attorney in the current arbitra-
         tion who is involved in the pending case,
         who was involved in the prior case, or
         whose current associate is involved in the
2302      CREDIT SUISSE FIRST BOSTON v. GRUNWALD
        pending case or was involved in the prior
        case;

        (ii) The dispute resolution neutral capacity
        (mediator, referee, etc.) in which the arbi-
        trator is serving or served in the case; and

        (iii) In each such case in which the arbitra-
        tor rendered a decision as a temporary
        judge or referee, the date of the decision,
        the prevailing party, the amount of mone-
        tary damages awarded, if any, and the
        names of the parties’ attorneys.

    (C) [Summary of case information] If the total
    number of cases disclosed under this paragraph (5)
    is greater than five, the arbitrator must also provide
    a summary of these cases that states:

        (i) The number of pending cases in which
        the arbitrator is currently serving in each
        capacity;

        (ii) The number of prior cases in which the
        arbitrator previously served in each capac-
        ity;

        (iii) The number of cases in which the arbi-
        trator rendered a decision as a temporary
        judge or referee; and

        (iv)The number of such prior cases in
        which the party to the current arbitration or
        the party represented by the lawyer for a
        party in the current arbitration was the pre-
        vailing party.

(6) (Current arrangements for prospective neutral service)
Whether the arbitrator has any current arrangement with a
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD             2303
party concerning prospective employment or other compen-
sated service as a dispute resolution neutral or is participating
in or, within the last two years, has participated in discussions
regarding such prospective employment or service with a
party.

(7) (Attorney-client relationships) Any attorney-client rela-
tionship the arbitrator has or has had with a party or lawyer
for a party. Attorney-client relationships include the follow-
ing:

    (A) An officer, a director, or a trustee of a party is
    or, within the preceding two years, was a client of
    the arbitrator in the arbitrator’s private practice of
    law or a client of a lawyer with whom the arbitrator
    is or was associated in the private practice of law;

    (B) In any other proceeding involving the same
    issues, the arbitrator gave advice to a party or a law-
    yer in the arbitration concerning any matter involved
    in the arbitration; and

    (C) The arbitrator served as a lawyer for or as an
    officer of a public agency which is a party and per-
    sonally advised or in any way represented the public
    agency concerning the factual or legal issues in the
    arbitration.

(8) (Other professional relationships) Any other profes-
sional relationship not already disclosed under paragraphs (2)-
(7) that the arbitrator or a member of the arbitrator’s immedi-
ate family has or has had with a party or lawyer for a party.
Professional relationships include the following:

    (A) The arbitrator was associated in the private
    practice of law with a lawyer in the arbitration
    within the last two years.
2304       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
    (B) The arbitrator or a member of the arbitrator’s
    immediate family is or, within the preceding two
    years, was an employee of or an expert witness or a
    consultant for a party; and

    (C) The arbitrator or a member of the arbitrator’s
    immediate family is or, within the preceding two
    years, was an employee of or an expert witness or a
    consultant for a lawyer in the arbitration.

(9) (Financial interests in party) The arbitrator or a member
of the arbitrator’s immediate family has a financial interest in
a party.

(10) (Financial interests in subject of arbitration) The arbi-
trator or a member of the arbitrator’s immediate family has a
financial interest in the subject matter of the arbitration.

(11) (Affected interest) The arbitrator or a member of the
arbitrator’s immediate family has an interest that could be
substantially affected by the outcome of the arbitration.

(12) (Knowledge of disputed facts) The arbitrator or a mem-
ber of the arbitrator’s immediate or extended family has per-
sonal knowledge of disputed evidentiary facts relevant to the
arbitration. A person who is likely to be a material witness in
the proceeding is deemed to have personal knowledge of dis-
puted evidentiary facts concerning the proceeding.

(13) (Membership in organizations practicing discrimina-
tion) The arbitrator’s membership in any organization that
practices invidious discrimination on the basis of race, sex,
religion, national origin, or sexual orientation. Membership in
a religious organization, an official military organization of
the United States, or a nonprofit youth organization need not
be disclosed unless it would interfere with the arbitrator’s
proper conduct of the proceeding or would cause a person
              CREDIT SUISSE FIRST BOSTON v. GRUNWALD               2305
aware of the fact to reasonably entertain a doubt concerning
the arbitrator’s ability to act impartially.

(14)     Any other matter that:

       (A) Might cause a person aware of the facts to rea-
       sonably entertain a doubt that the arbitrator would be
       able to be impartial;

       (B) Leads the proposed arbitrator to believe there
       is a substantial doubt as to his or her capacity to be
       impartial, including, but not limited to, bias or preju-
       dice toward a party, lawyer, or law firm in the arbi-
       tration; or

       (C) Otherwise leads the arbitrator to believe that
       his or her disqualification will further the interests of
       justice.
CREDIT SUISSE FIRST BOSTON v. GRUNWALD     2307
                                  Volume 2 of 2
2308          CREDIT SUISSE FIRST BOSTON v. GRUNWALD
BERZON, Circuit Judge, concurring in the judgment:

   I agree in the main with the majority opinion, with the
exception of Section IV(A).1 With regard to that section, con-
cerning whether the NASD’s arbitration and waiver rules as
applied to employer/employee disputes are capable of pre-
empting state law, I fear that the majority’s otherwise cogent
discussion oversimplifies the exceedingly challenging issue at
the heart of this litigation — the substantive extent of the
authority of self-regulatory organizations (SROs) to promul-
gate preemptive rules under the Securities Exchange Act of
1934, 15 U.S.C. §§ 78a et seq., as amended by the Securities
Act Amendments of 1975, Pub. L. No. 94-29, 89 Stat. 97.

   Nonetheless, as I explain below, the two potential results in
this case seem equally plausible and equally imperfect. Given
the apparent equipoise, I do not support creating a circuit split
with Drayer v. Krasner, 

(2d Cir. 1978). Thus,
while I write separately to explain why I cannot join in Sec-
tion IV(A) of the majority opinion, I am not sufficiently con-
vinced that the result it reaches is wrong to justify dissenting.
I therefore concur in the judgment.
  1
   I also have some disagreement with the methodology, though not the
result, of the majority’s conflict preemption analysis with regard to the
NASD’s disqualification rules in Subsection IV(B)(1). The majority
asserts that “[b]ecause the NASD Director cannot comply with both sets
of disqualification rules, the California Ethics Standards are preempted.”
Ante at 2292. The conflict, however, does not seem to arise out of the
NASD Director’s inability to comply with both the NASD and state stan-
dards. There are no state standards that the NASD Director cannot comply
with. The state standards are directed at the arbitrators, and would require
them to remove themselves from the pool of available arbitrations for a
potential case. Instead, the conflict arises from the systems envisioned by
the two regulatory schemes, which grant different authority to different
players in the arbitration administration process. On this point, I find more
convincing the district court’s analysis in Mayo v. Dean Witter Reynolds,
Inc., 

, 1105-07 (N.D. Cal.), as amended, 260 F.
Supp. 2d 979 (N.D. Cal. 2003).
            CREDIT SUISSE FIRST BOSTON v. GRUNWALD              2309
                                  I

   My concerns with the majority opinion are easy enough to
describe: The majority holds that any SRO rule purportedly
promulgated under section 19(b)(2) of the Exchange Act, 15
U.S.C. § 78s(b)(2),2 may preempt contrary state law, includ-
ing the California Ethics Standards that would otherwise gov-
ern the employment arbitration at issue in this case. See ante
at 2289. Section 19(b)(2), however, is a provision that gov-
erns the procedure by which an SRO rule is promulgated; on
its own, it does not govern the permissible substance of such
a rule. The majority thus concludes that how an SRO promul-
gates and the SEC approves (or does not need to approve, see
Exchange Act § 19(b)(3), 15 U.S.C. § 78s(b)(3)) a rule, rather
than the substance of that rule, is solely determinative of its
preemptive force. This procedure-centric focus for determin-
ing the preemptive force of SRO rules does not address or
resolve a substantive question embedded in the Exchange Act
as amended in 1975: Are the NASD arbitration and waiver
rules as applied to employer-employee disputes within the
authority of SROs to enact (and the SEC to approve) under
section 19(b)(2) in the first place?

    SRO rules approved pursuant to section 19(b)(2) must be
“consistent with the requirements of [the Exchange Act] and
the rules and regulations thereunder applicable to [the SRO].”
15 U.S.C. § 78s(b)(2). These requirements include the regis-
tration requirements in sections 6(b)(5) and 15A(b)(6) of the
Exchange Act for “exchanges” and “associations” respec-
tively, one of which mandates that “[t]he rules of the [SRO]
. . . [must] not [be] designed . . . to regulate by virtue of any
authority conferred by [the Exchange Act] matters not related
to the purposes of [the Act] or the administration of the
[SRO].” 15 U.S.C. §§ 78f(b)(5), 78o-3(b)(6). In other words,
  2
   For the sake of convenience, I provide parallel citations to the
Exchange Act itself and the corresponding U.S. Code provision through-
out.
2310         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
in its current form, the Exchange Act does not authorize
SROs to promulgate any rules, let alone preemptive rules, not
related either to the purposes of the Act or the administration
of the SRO. See ante at 2287 n.13; see also S. Rep. No. 94-
75, at 27-28 (1975), reprinted in 1975 U.S.C.C.A.N. 179,
206-07; cf. Business Roundtable v. SEC, 

, 414-
15 (D.C. Cir. 1990) (discussing the relationship between sec-
tion 6(b)(5) and section 19).3 Thus, whether the NASD had
the substantive authority, under the Exchange Act, to promul-
gate the rules at issue here is, in my view, central to the pre-
emption question before us. The majority’s analysis almost
entirely passes by this potentially determinative issue.

   Any discussion of this substantive authority question must
begin with Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Ware, 

(1973). Ware held that the arbitration of
employee/employer disputes is outside the “shadow of the
federal umbrella” created by the Exchange Act, and is there-
fore not an area in which SRO rules have preemptive force.
Without doubt, Ware would control the outcome of this case
but for the passage of the Securities Act Amendments of
1975. These Amendments substantially revised the supervi-
sory authority of the Securities and Exchange Commission
(SEC) over SRO rulemaking. As the majority recounts, see
ante at 2284-85, the changes regarding the nature of SEC
oversight of SRO rules were extensive. The impact of the
1975 Amendments on the permissible substantive reach of
SRO rules is much less clear.

   We are therefore left with a substantive question decep-
tively simple in formulation: Did the 1975 Amendments bring
employer-employee arbitration procedures such as those at
  3
    Even before the 1975 Amendments, the Supreme Court had read the
interplay between the registration requirements and SROs’ rulemaking
authority as “establish[ing] the measure of congressionally delegated
authority for self-regulation in the national interest.” Merrill Lynch,
Pierce, Fenner & Smith, Inc. v. Ware, 

, 134 (1973).
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD          2311
issue both in Ware and in this case back within the “shadow
of the federal umbrella”? If not, then Ware still controls, and
the California Ethics Standards cannot be preempted by the
NASD rules at issue here. If the 1975 Amendments did, how-
ever, make Ware obsolete on this substantive breadth point,
then the majority is correct in its preemption conclusion. Fur-
ther complicating this inquiry is an important distinction unre-
solved by Ware: In referencing the “shadow of the federal
umbrella,” Ware was unclear as to whether it meant the sub-
stantive scope of the Exchange Act or the substantive limits
of the SEC’s oversight thereunder. Although such a distinc-
tion is empty under the current Exchange Act, since the 1975
Amendments expanded SEC oversight to occupy the field of
self-regulation, it wasn’t at the time of Ware.

   Only one court, in the thirty years since the 1975 Amend-
ments, has addressed this difficult question with any care. The
Second Circuit, in Drayer, understood the issue in exactly
these terms, and offered two different explanations for why
the same New York Stock Exchange rule that was outside the
“shadow of the federal umbrella” in Ware was moved inside
that shadow by the 1975 Amendments. The majority under-
standably reads Drayer for the proposition that “the 1975
Amendments expanded the ‘federal umbrella’ such that the
compulsory arbitration rule now falls within the Act’s reach.”
Ante at 2288. What the majority does not examine, however,
is whether that holding was correct. As I explain in more
detail below, while I agree with the Second Circuit’s method-
ology, I do not agree with some of its conclusions, nor with
the extent to which the majority finds its decision controlling
here.

                               II

   I begin with the original language of the Exchange Act. As
initially enacted, the Securities Exchange Act of 1934, ch.
404, 48 Stat. 881, included one non-preemption provision,
section 6(c), which provided that “[n]othing in this title shall
2312          CREDIT SUISSE FIRST BOSTON v. GRUNWALD
be construed to prevent any exchange from adopting and
enforcing any rule not inconsistent with this title and the rules
and regulations thereunder and the applicable laws of the
State in which it is located.”4 Although the original Exchange
Act largely left SROs on their own with regard to rulemaking,
as the majority deftly summarizes, the SEC was given super-
visory authority, in particular, for thirteen designated subject
areas (the last of which was a catchall, “similar matters”)
where the Commission was authorized to “alter or supple-
ment” SRO rules. See Exchange Act § 19(b), 48 Stat. at 898-
99; ante at 2283-89 n.10. The exercise of oversight, however,
even in these discrete areas, was further conditioned on the
SEC’s determination that “such changes are necessary or
appropriate for the protection of investors or to insure fair
dealing in securities traded in upon such exchange or to insure
fair administration of such exchange.” Exchange Act § 19(b),
48 Stat. at 898. As such, under the Exchange Act as originally
enacted, there were three distinct categories of SRO rules: (1)
rules over which the SEC exercised substantive oversight; (2)
rules within the scope of the Exchange Act over which the
SEC did not exercise substantive oversight; and (3) rules out-
side the scope of the Exchange Act.

   In Ware, the Supreme Court was asked to pass on a ques-
tion largely analogous to that presented here: “[W]hether cer-
tain rules of the New York Stock Exchange [(NYSE)],
promulgated as self-regulating measures pursuant to § 6 of the
Securities Exchange Act of 1934, and a broker’s employee’s
  4
    The remainder of section 6 provided (and still provides) the registration
requirements for national securities “exchanges.” The Maloney Act of
1938, Pub. L. No. 75-519, ch. 677, 52 Stat. 1070, created the concept of
and regulatory structure for national securities “associations,” of which the
NASD remains today the sole example, by writing new section 15A into
the Exchange Act. See 

at 1070. Tracing the origins of the reg-
istration requirements is necessary because, as explained above, the regis-
tration requirements for SROs, especially after the 1975 Amendments,
place important limits on the substantive scope of SRO rulemaking. See
ante at 2309-10.
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD                  2313
pledge to abide by those rules,[5] pre-empt avenues of wage
relief otherwise available to the employee under state 

(citation omitted).6 After surveying the legis-
lative background of the Exchange Act, the Court concluded
as follows:

         It is thus clear that the congressional aim in super-
      vised self-regulation is to insure fair dealing and to
      protect investors from harmful or unfair trading
      practices. To the extent that any exchange rule or
      practice contravenes this policy, or any authorized
      rule or regulation under the Act, the rule may be sub-
      ject to appropriate federal regulatory supervision or
      action. Correspondingly, any rule or practice not ger-
      mane to fair dealing or investor protection would not
      appear to fall under the shadow of the federal
      umbrella; it is, instead, subject to applicable state
      law.

Based on this reading of the Exchange Act,
Ware interpreted the New York Stock Exchange’s rule requir-
ing mandatory employer-employee arbitration as falling far
enough outside the “federal umbrella,” so as not to preempt
state law. Stated in broader terms, any SRO rule outside the
“shadow of the federal umbrella,” according to Ware, cannot
preempt state law.

   Importantly, in conducting this analysis, the Court rejected
two lines of analysis made by Merrill Lynch and germane
here. First, and most significantly, the Court decisively
rejected Merrill Lynch’s contention that the mandatory
  5
     The rule at issue in Ware required brokers to arbitrate wage disputes
with their employers. 

n.3.
   6
     The Court had earlier suggested that certain SRO rules could have
force only to the extent to which they were directly addressed to the goals
of the Exchange Act. See Silver v. N.Y. Stock Exch., 

, 354-55,
361-62 (1963).
2314         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
employer-employee arbitration rule fell under the NYSE’s
obligation to “protect the investing public and to insure just
and equitable trade practices.”7 

As the Court
explained:

      Merrill Lynch has not alleged that arbitration will
      effect fair dealing or result in investor protection. It
      suggests only that investor confidence not be shaken
      further by public airing of employer-employee dis-
      putes. There is no explanation of why a judicial pro-
      ceeding, even though public, would undermine
      investor confidence. It is difficult to understand why
      muffling a grievance in the cloakroom of arbitration
      would prevent lessening of confidence in the market.
      To the contrary, for the generally sophisticated
      investing public, market confidence may tend to be
      restored in the light of impartial public court adjudi-
      cation. Furthermore, it should be apparent that, so far
      as investor confidence is concerned, compulsory
      arbitration of an employee-employer grievance is no
      substitute for direct effective disciplinary action
      against any abusive exchange practice. Other rules of
      the Exchange serve this very function.

-36.

   Second, the Court flatly rejected Merrill Lynch’s conten-
tion that the arbitration rule was necessary to ensure uniform
national regulation. In so holding, Ware concluded that:

      There is no revelation in the Act or in any Commis-
      sion rule or regulation that nationwide uniformity of
  7
    This latter mandate came from section 6 of the Exchange Act. The
Court rejected Merrill Lynch’s contention, however, that its mandate to
“insure just and equitable trade practices” applied to the NYSE arbitration
rule, since that language only applied to SRO disciplinary rules under sec-
tion 6(b) of the original Act. See 

& n.13.
             CREDIT SUISSE FIRST BOSTON v. GRUNWALD                2315
      an exchange’s housekeeping affairs is necessary or
      desirable. And Merrill Lynch has not demonstrated
      that national uniformity in the area of wage claims
      is vital, in some way, to federal securities policy.
      Convenience in exchange management may be desir-
      able, but it does not support a plea for uniform appli-
      cation when the rule to be applied is not necessary
      for the achievement of the national policy objectives
      reflected in the Act.

   All told, Ware appears to be a clear holding that only SRO
rules intimately related to the fundamental purposes of the
Exchange Act — which the Court identified as ensuring fair
dealing and investor protection — can preempt state law. See

(“The principle that emerged from Silver, and the
premise upon which the Court based its judgment, was that
conflicting law, absent repealing or exclusivity provisions,
should be pre-empted by exchange self-regulation ‘only to the
extent necessary to protect the achievement of the aims of the
Securities Exchange Act.’ ” (quoting 

)).
Because it held that arbitration of employer/employee dis-
putes was not so related, the Court did not allow the NYSE’s
arbitration rules to preempt California’s state arbitration laws.

                                   III

   Just over four years after Ware, the Second Circuit reached
the diametrically opposite result in Drayer. The turnaround
was premised entirely on the 1975 Amendments. Drayer fol-
lowed, rather than departed from, Ware’s “shadow” approach
— that an SRO rule, to have preemptive force, must be within
the federal umbrella. Drayer, however, offered two different
theories for why the “shadow of the federal umbrella” had
expanded since 1973.8
  8
   One reason not advanced by any of the parties here for concluding that
the 1975 Amendments left the result in Ware undisturbed might be
2316          CREDIT SUISSE FIRST BOSTON v. GRUNWALD
   At issue in Drayer was NYSE Rule 347, the same rule at
issue in Ware, which required compulsory arbitration of
employee/employer disputes. After observing that section
19(b)(2) of the Exchange Act, as amended by the 1975
Amendments, required that “[r]ule changes proposed by an
exchange must be approved by the Commission as being con-
sistent with the requirements of the Act and the rules and reg-
ulations thereunder before the changes can become effective,”

Drayer concluded that:

     Whatever the relationship of [Rule 347] to the objec-
     tive of investor protection, it is germane to the goal
     of market efficiency, reflected in § 6(b) and through-
     out the 1975 amendments, and to the objective of
     fair administration of the Exchange, implicated in
     § 6(b) and an explicit standard of § 19(c). Registered
     representatives play an important role in the flow of
     business on securities exchanges. The arbitration

derived from section 28(b) of the Exchange Act, 15 U.S.C. § 78bb(b).
That section provides, as here relevant, that: “Nothing in this chapter shall
be construed to modify existing law with regard to the binding effect (1)
on any member of or participant in any self-regulatory organization of
any action taken by the authorities of such organization to settle disputes
between its members or participants . . . .” (emphasis added).
   I emphasize the language added by the 1975 Amendments, the legisla-
tive history of which makes clear that this provision was specifically
addressed toward preserving the binding effect — or lack thereof — of
SRO arbitration rules. See, e.g., H.R. CONF. REP. NO. 94-229, at 111
(1975) (“It was the clear understanding of the conferees that this amend-
ment did not change existing law . . . concerning the effect of arbitration
proceeding provisions in agreements entered into by persons dealing with
members and participants of self-regulatory organizations.”), reprinted in
1975 U.S.C.C.A.N. 321, 342; see also Shearson/Am. Express Inc. v.
McMahon, 

, 236-37 (1987). Given that Ware explicitly held
that the NYSE compulsory arbitration rules were binding only to the
extent that they did not conflict with state law, this provision, especially
in light of the addition of “or participant in” by the 1975 Amendments,
may well be read as codifying that result.
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD              2317
    provision enables member firms to rid themselves of
    registered representatives who, as they believe, are
    dishonest or ineffective, or who have violated rules
    of the NYSE, including the “know-your-customer”
    rule, without subjecting themselves to lengthy and
    costly litigation — including, as here, a request for
    punitive damages. It is likewise in the interest of fair
    administration and market efficiency, as well as in
    the public interest, that honest and ethical registered
    representatives should have speedy, cheap and effec-
    tive remedies against their employers. At least, the
    NYSE is entitled to think this in the absence of any
    indication otherwise from the SEC.

(citations and footnote omitted). Drayer thus
expressly departed from Ware, at least in part, because (1) it
concluded that the 1975 Amendments added “market efficien-
cy” and “fair administration of the Exchange” to the purposes
of the Exchange Act; and (2) compulsory arbitration impli-
cated these “new” purposes. See 

provisions
now the ‘measure of congressionally delegated authority for
self-regulation in the national interest,’ Rule 347 would seem
to fall within them.” (quoting 

)).

   Drayer also suggested another theory, albeit implicitly, for
why the NYSE rule was back within the “shadow of the fed-
eral umbrella” after the 1975 Amendments. Unlike the origi-
nal Exchange Act, which authorized SEC oversight of SRO
rulemaking only with regard to twelve discrete subject areas
and “similar matters,” “the amended Act contains no subject
matter restrictions on this authority.” 

see also 

n.9. On this reading, the “shadow of the federal
umbrella” described by Ware referred to the substantive
breadth of the SEC’s supervisory authority over SROs, and
not to the substantive purposes of the Exchange Act as a
whole. As such, in holding the NYSE compulsory arbitration
rule to be outside the “shadow of the federal umbrella,” this
reading suggests that Ware held not that it was unrelated to
2318         CREDIT SUISSE FIRST BOSTON v. GRUNWALD
the purposes of the Exchange Act, but only that it was outside
the discrete realm of SEC oversight. Because the 1975
Amendments expanded SEC supervision to cover virtually all
areas of Exchange Act self-regulation, this theory posits the
alternative argument that, even if the purposes of the
Exchange Act were not altered, areas that were not within the
“shadow” prior to 1975 could be thereafter. I consider both of
these arguments in turn.

                                    A

   The first theory, and the one on which the Second Circuit
principally relied, is, in my view, the less plausible of the two.
Recall that Ware identified two principal purposes behind
SRO rulemaking through the Exchange Act — fair dealing
and investor protection.9 The Second Circuit’s response in
Drayer was that “market efficiency” and “fair administration
of the Exchange” were additional purposes added by the 1975
Amendments, thereby expanding the permissible substantive
scope of SRO rules beyond that recognized in Ware. See, 

. Seven of the nine provisions of the amended
Exchange Act cited in Drayer in supprt of the “new purposes”
theory arguably went to the “market efficiency” point, and the
remaining two addressed the “fair administration of the
Exchange” ideal. See 

Act §§ 2, 6(b),
11A(a)(1)(C), 15A(b)(6), 15A(b)(9), 17A(a)(1), 19(c), 19(f),
23(a)(2)).

  “[F]air administration” as a new statutory purpose cannot
pass muster.10 Section 19(b) of the Exchange Act as originally
  9
    To a certain degree, the Court had already held as much in 

(“Instead of giving the Commission the power to curb specific
instances of abuse, the Act placed in the exchanges a duty to register with
the Commission, and decreed that registration could not be granted unless
the exchange submitted copies of its rules, and unless such rules were ‘just
and adequate to insure fair dealing and to protect investors.’ ” (citations
omitted)).
   10
      As I explain below, the “fair administration” argument has more pull
under Drayer’s second theory — as relating to the expanded substantive
breadth of SEC oversight over SRO rulemaking.
            CREDIT SUISSE FIRST BOSTON v. GRUNWALD           2319
enacted had already provided “insur[ing] fair administration
of [the] exchange” as one basis for the SEC to alter or supple-
ment an SRO’s rules. See Exchange Act § 19(b), 48 Stat. at
898. In other words, the version of the Exchange Act before
the Court in Ware already included this “fair administration”
concept as an animating principle with regard to SEC over-
sight. The Court in Ware did not view that concept as inform-
ing the preemption analysis. Instead, the Court held that rules
concerning “an exchange’s housekeeping affairs” or “[c]on-
venience in exchange management” were not preemptive.

.

   As to “market efficiency,” the alternative added Exchange
Act purpose posited in Drayer, a close reading of the text of
the Amendments and the relevant legislative history suggests
that instead of adding “market efficiency” as a new indepen-
dent purpose of the Exchange Act, the 1975 Amendments
clarified what “fair dealing” and “investor protection” actu-
ally meant under the original Exchange Act.

                                1

   For its conclusion that “market efficiency” was added to
the Exchange Act as a new purpose justifying the preemptive
force of the employer-employee arbitration rule, Drayer relied
on seven provisions of the Exchange Act, as amended. 

(“Whatever the relationship of this rule to the
objective of investor protection, it is germane to the goal of
market efficiency, reflected in § 6(b) and throughout the 1975
amendments, see, e.g., §§ 2; 11A(a)(1)(C); 15A(b)(6); (9);
17A(a)(1); 19(f); 23(a)(2) . . . .”). Five provide, at best, only
weak support for Drayer’s conclusion that “market efficien-
cy” was a “new” purpose added by the 1975 Amendments.
For example, section 11A(a)(1)(C), 15 U.S.C. § 78k-
1(a)(1)(C), provides only that “[i]t is in the public interest and
appropriate for the protection of investors and the mainte-
nance of fair and orderly markets to assure” five different
goals concerning the establishment of a national securities
2320          CREDIT SUISSE FIRST BOSTON v. GRUNWALD
market, including the “economically efficient execution of
securities transactions.” 15 U.S.C. § 78k-1(a)(1)(C)(i). Simi-
larly, new section 17A(a)(1)(A) of the Exchange Act provides
that “[t]he prompt and accurate clearance and settlement of
securities transactions, including the transfer of record owner-
ship and the safeguarding of securities and funds related
thereto, are necessary for the protection of investors and per-
sons facilitating transactions by and acting on behalf of inves-
tors.” 15 U.S.C. § 78q-1(a)(1)(A). Two of the cited provisions
speak only of the extent to which SEC and SRO rules should
not unnecessarily burden competition. See Exchange Act
§§ 15A(b)(9), 23(a)(2), 15 U.S.C. §§ 78o-3(b)(9), 78w(a)(2).
Another provides nothing more relevant than an abstract ref-
erence to “the purposes of this title.” Exchange Act § 19(f),
15 U.S.C. § 78s(f).

   Two provisions, however, provided somewhat firmer foot-
ing for the market efficiency argument: Section 2 of the
Exchange Act, 15 U.S.C. § 78b, and the revisions to the regis-
tration requirements for associations in section 15A(b)(6) of
the Exchange Act, 15 U.S.C. § 78o-3(b)(6).11 These sections
require closer scrutiny.

  Section 2 of the Exchange Act, as enacted in 1934, pro-
vided that:

       transactions in securities as commonly conducted
       upon securities exchanges and over-the-counter mar-
       kets are affected with a national public interest
       which makes it necessary to provide for regulation
       and control of such transactions and of practices and
       matters related thereto, including transactions by
       officers, directors, and principal security holders, to
  11
    Drayer only cited the amended registration requirements for associa-
tions, but the 1975 Amendments similarly rewrote the registration require-
ments for exchanges as well. See Exchange Act § 6(b)(5), 15 U.S.C.
§ 78f(b)(5).
              CREDIT SUISSE FIRST BOSTON v. GRUNWALD                   2321
       require appropriate reports, and to impose require-
       ments necessary to make such regulation and control
       reasonably complete and effective, in order to pro-
       tect interstate commerce, the national credit, the Fed-
       eral taxing power, to protect and make more
       effective the national banking system and Federal
       Reserve System, and to insure the maintenance of
       fair and honest markets in such transactions . . . .

Exchange Act § 2, 48 Stat. at 881-82. The revision to section
2 in the 1975 Amendments added “to remove impediments to
and perfect the mechanisms of a national market system for
securities and a national system for the clearance and settle-
ment of securities transactions and the safeguarding of securi-
ties and funds related thereto” after “to require appropriate
reports.” See Securities Act Amendments of 1975 § 2, 89 Stat.
at 97, 15 U.S.C. § 78b. This provision might have indicated
an intent to codify “market efficiency” as a new purpose of
the Exchange Act, but for the extent to which the amendments
to sections 11A(c) and 17A(a)(1)(A), already discussed
above, linked these goals to “investor protection.” See
Exchange Act §§ 11A(a)(1)(C), 17A(a)(1)(A), 15 U.S.C.
§§ 78k-1(a)(1)(C), 78q-1(a)(1)(A). Given those later provi-
sions, however, the addition of the “national market system”
language to section 2 by the 1975 Amendments supports the
contrary conclusion — that the 1975 Amendments meant to
clarify the scope of the Act, not to broaden it.

   All that is left, then, to support Drayer’s assertion that
“market efficiency” became a new purpose of the Exchange
Act through the 1975 Amendments are the revised registration
requirements. Most of the language in these requirements,
however, had its origins in the Maloney Act of 1938, not in
the 1975 Amendments.12 With only that language which was
  12
    An important distinction, albeit one immaterial to this analysis, is that
the Maloney Act applied only to “associations.” See ante at 2273 n.6.
Thus, unlike the NASD, the NYSE, the SRO at issue in both Ware and
Drayer, was not subject to many of these registration requirements prior
to 1975.
2322          CREDIT SUISSE FIRST BOSTON v. GRUNWALD
not included in the Exchange Act in 1938 emphasized, the
1975 Amendments rewrote sections 6(b)(5) and 15A(b)(6) of
the Exchange Act to require that:

          The rules of the [SRO] are designed to prevent
       fraudulent and manipulative acts and practices, to
       promote just and equitable principles of trade, to fos-
       ter cooperation and coordination with persons
       engaged in regulating, clearing, settling, processing
       information with respect to, and facilitating transac-
       tions in securities, to remove impediments to and
       perfect the mechanism of a free and open market and
       a national market system, and, in general, to protect
       investors and the public interest; and are not
       designed to permit unfair discrimination between
       customers, issuers, brokers, or dealers, [to fix mini-
       mum profits, to impose any schedule or fix rates of
       commissions, allowances, discounts, or other fees to
       be charged by its members13], or to regulate by vir-
       tue of any authority conferred by this title matters
       not related to the purposes of this title or the admin-
       istration of the [SRO].

15 U.S.C. §§ 78f(b)(5), 78o-3(b)(6) (emphasis added).14 The
latter of the two new passages closed the procedural preemp-
tion loophole in the pre-1975 version of the Act, by barring
the possibility that SROs could promulgate rules “not related
to the purposes of [the Exchange Act] or the administration of
the [SRO].” To conclude that we may discern, from the for-
mer addition, a clear congressional intent to add a “new” mar-
  13
      This bracketed material appears only in the registration requirements
for associations — section 15A(b)(6), 15 U.S.C. § 78o-3(b)(6).
   14
      For the language from which this comparison was made, see Maloney
Act of 1938, 52 Stat. at 1071 (formerly codified at 15 U.S.C. § 78o-3(b)(7)
(1970)). The pre-1975 provisions placed the language in somewhat differ-
ent order; I have here only indicated that language which was added in its
entirety.
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD             2323
ket efficiency ideal to the Exchange Act seems at best a
dubious proposition, particularly in light of the extent to
which the other amended provisions tied these concepts to
“investor protection.”

                              2

   The relevant legislative history behind the 1975 Amend-
ments is not much more illuminating, though it seems to run,
at least to some degree, against Drayer’s expansion-of-
statutory-purpose thesis. One of the major impetuses for the
Amendments was concern that the SROs were not sufficiently
subject to federal regulation, by either Congress or the SEC.
See, e.g., S. Rep. No. 94-75, at 2 (“Meaningful reform of this
country’s securities trading mechanism will . . . be impossible
unless there is also reform of the method and manner by
which the self-regulatory organizations operate and in the way
that the SEC oversees the performance of their regulatory
responsibilities.”), reprinted in 1975 U.S.C.C.A.N. at 181.
Thus, a principal purpose of the 1975 Amendments was to
provide more SEC oversight over SRO rules. See, e.g., 

reprinted in 1975 U.S.C.C.A.N. at 207-08.

 As the authoritative Senate Report accompanying the
Amendments explained:

    The basic goals of the Exchange Act remain salutary
    and unchallenged: to provide fair and honest mecha-
    nisms for the pricing of securities, to assure that
    dealing in securities is fair and without undue prefer-
    ences or advantages among investors, to ensure that
    securities can be purchased and sold at economically
    efficient transaction costs, and to provide, to the
    maximum degree practicable, markets that are open
    and orderly. S. 249 is an important step in assuring
    that the securities markets and the regulations of the
    securities industry remain strong and capable of fos-
2324       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
    tering these fundamental goals under changing eco-
    nomic and technological conditions.

reprinted in 1975 U.S.C.C.A.N. at 182 (emphasis
added); see also 

reprinted in 1975 U.S.C.C.A.N. at
200 (“S. 249 contains a number of provisions which would
clarify the scope of the self-regulatory responsibilities of
national securities exchanges and registered securities associ-
ations . . . and the manner in which they are to exercise those
responsibilities. The bill would also clarify and strengthen the
Commission’s oversight role with respect to the self-
regulatory organizations.” (emphases added)). Thus, the intent
behind the Amendments, according to the Senate Report, was
not to expand the field in which SROs could promulgate rules
but “to strengthen the total regulatory fabric.” 

reprinted in 1975 U.S.C.C.A.N. at 202; see also 

reprinted in 1975 U.S.C.C.A.N. at 205 (“The Committee
believes that the statutory pattern governing the scope of the
NASD’s authority is basically sound.”).

   Moreover, the Senate Report suggested that, if anything,
the Amendments were meant to narrow the substantive scope
of SRO rulemaking within the fixed confines of the Act:

    The bill would eliminate present Section 6(c) and the
    open-ended authority it grants to the exchanges, and
    it would limit by Sections 6(b)(5) and 15A(b)(6) the
    scope of the self-regulatory organizations’ authority
    over their members to matters related to the purposes
    of the Exchange Act. The growing diversification of
    securities firms into non-securities activities has
    raised, and will continue to raise, significant ques-
    tions about the adequacy of the present regulatory
    structure. However, the diversification of securities
    firms should not automatically extend the jurisdic-
    tion of the self-regulatory agencies. Until it is specif-
    ically demonstrated to the Congress that the non-
    securities activities of firms which are members of
              CREDIT SUISSE FIRST BOSTON v. GRUNWALD                     2325
     self-regulatory agencies should be limited or regu-
     lated in the public interest, such firms should be free
     to undertake and pursue these activities in the same
     manner as other business organizations, subject only
     to those regulatory limitations necessary to assure
     protection of public investors and the public interest.

reprinted in 1975 U.S.C.C.A.N. at 206-07. Although
this passage relates more directly to the resolution of the pro-
cedural preemption question described above, see ante at
2309-10, this language, and the Senate Report as a whole,
suggests that an area of regulation unrelated to the purposes
of the Exchange Act before the Amendments remained unre-
lated afterwards.

                                      3

   Finally, even if these amendments can be said to have cre-
ated a new “purpose” for supervised self-regulation under the
Exchange Act, which I doubt, I have a hard time understand-
ing how employee/employer arbitration is related to “market
efficiency.” True, arbitrating rather than litigating employer-
employee disputes may in some sense make the market for
registered securities employees more efficient, by decreasing
the transaction costs involved in discharging such employees
and replacing them with others. But, as the legislative lan-
guage and history just discussed highlights, the Exchange Act
regulates the securities market, not the employment market. It
is plain from the language of the statute that it is the facilita-
tion of transactions within a national securities market with
which the statute is concerned.15
   15
      As this discussion should make clear, it is entirely possible that appli-
cation of the SRO arbitration rules in other contexts, such as arbitration
disputes between the SRO and its members, or between members and
investors, would come within the statutory purposes. See, e.g., Wilmot v.
McNabb, 

, 1206-07 (N.D. Cal. 2003); Mayo, 258 F.
Supp. 2d at 1105-12. My concern here is only with the NASD’s arbitration
rules as they pertain to internal employment disputes between an SRO
member and one of its employees.
2326       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
   It is therefore difficult to conclude, as Drayer did, that
employee/employer arbitration disputes such as those at issue
there, in Ware, and in this case, are now within the “shadow
of the federal umbrella” solely because they implicate “mar-
ket efficiency.”

                               B

   A more subtle, alternative ground for Drayer’s conclusion
was that Ware’s concept of the “federal umbrella” described
not the purposes of the Exchange Act but the substantive
breadth of the SEC’s supervisory authority over SROs under
the original language of the Exchange Act. This premise sug-
gests that the Amendments necessarily substantively broad-
ened the “shadow of the federal umbrella” at the core of Ware
not by altering the core purposes of the Exchange Act, but by
expanding the substantive scope of the SEC’s oversight.
Because it is beyond question that the 1975 Amendments
greatly increased the scope of SEC supervision over SROs, it
is at this point where I find resolution of this case difficult.
Ware, in my view, seems susceptible of two mutually exclu-
sive interpretations.

   What is unclear is the relationship between Ware’s asser-
tion that the NYSE’s compulsory arbitration rule did not
implicate the core purposes of the Exchange Act, and its par-
tial reliance on the fact that the SEC lacked oversight over
such a rule under the pre-1975 Exchange Act. See, 

n.14 (“None of the subject matter categories sug-
gests that the Commission has review authority with respect
to a rule requiring arbitration of employer-employee dis-
putes.”). At some points in Ware, it appears that the Court
meant, through the term “federal umbrella,” to refer only to
the limited substantive scope of SEC oversight over SRO
rules. At other points, the Ware Court seemed plainly to be
considering the broader purposes of the Exchange Act, with-
out regard to the precise scope of SEC oversight. Because the
SEC’s oversight authority now occupies the entire field of
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD          2327
Exchange Act self-regulation, as it did not before 1975, it now
matters, as it did not at the time of Ware, whether the
“shadow of the federal umbrella” was cast only as far as SEC
oversight, or covered the whole realm of authorized SRO self-
regulation.

  As I have already discussed, Ware was clear that arbitration
did not implicate “fair dealing” or “investor protection,” the
two central purposes of the Exchange Act identified in Silver.
What Ware was less clear about was the relationship between
arbitration and the concept of “fair administration of the
Exchange.” See 

(quoted ante at 2314-15).

   “Fair administration” appeared in the 1934 Act only in sec-
tion 19(b), which, as noted above, provided for twelve
subject-matter areas (and “similar matters”) over which the
SEC could exercise oversight by “alter[ing] or supplement[-
ing] the rules of [the] exchange.” The SEC could alter or sup-
plement rules related to those subject matters, however, if the
change was “necessary or appropriate for the protection of
investors or to insure fair dealing in securities traded in upon
such exchange or to insure fair administration of such
exchange.” Exchange Act § 19(b), 48 Stat. at 898. Without
referring to the “fair administration of such exchange” lan-
guage in the then-extant section 19(b), Ware concluded that
“[t]here is no revelation in the Act or in any Commission rule
or regulation that nationwide uniformity of an exchange’s
housekeeping affairs is necessary or 

. This conclusion may well have been premised on the
understanding that “fair administration of such exchange”
does not include such “housekeeping affairs” as the manner
in which members of the exchange settle disputes with their
employees.

   “Fair administration of such exchange” could well be inter-
preted — indeed, were we writing on a clean slate, I would
so interpret it — as pertaining to exchange-wide administra-
tive matters. The pre-1975 version of section 19(b), for exam-
2328       CREDIT SUISSE FIRST BOSTON v. GRUNWALD
ple, listed as within the SEC’s oversight authority matters
including “hours of trading,” and “the time and method of
making settlements, payments, and deliveries.” The internal
affairs of members of the exchanges and associations, in con-
trast, Ware may well have concluded, are not within the scope
of “fair administration of such exchange,” and are thus out-
side the Act’s “federal umbrella.” On the other hand, Ware
may have reflected only the conclusion that “housekeeping
affairs” concerning members of exchanges, as opposed to the
exchanges as a whole, were not among the listed areas of SEC
oversight.

   Neither Drayer nor the majority address what Ware meant
by “housekeeping affairs.” Neither explains why Ware’s hold-
ing that “housekeeping affairs” were beyond the area in which
there is a need for national uniformity was altered by the 1975
Amendments. Both Drayer and the majority do appear, with-
out so stating, to assume that the “housekeeping affairs” are
within the “federal umbrella” after 1975 because of the provi-
sions that allow — but do not always require — SEC over-
sight of SRO administrative rules. See, e.g., Exchange Act
§ 19(b)(3)(A)(ii), (c), 15 U.S.C. § 78s(b)(3)(A)(ii), (c). But
this unstated assumption rests on another, similarly unstated,
premise — that Ware tossed aside the “housekeeping” rules
because they were then beyond the SEC’s oversight authority,
not because they were outside the Act’s purposes altogether.
If the latter were the case, nothing in the 1975 Amendments
would matter. As noted earlier, “fair administration of [the]
exchange” was not a new addition in 1975.

   Ware is indeed ambiguous on this key point. Because my
two colleagues have chosen to rely on Drayer, however, and
because I cannot conclude with any reasonable certainty that
the result in Drayer is necessarily wrong given the above-
articulated concerns, the only prudent course of action for me
is to set out my views in detail, as I have done, and to concur
in the judgment, while remaining dubitante. See LON L.
FULLER, ANATOMY OF THE LAW 147 (1968) (“[E]xpressing the
           CREDIT SUISSE FIRST BOSTON v. GRUNWALD        2329
epitome of the common law spirit, there is the opinion entered
dubitante — the judge is unhappy about some aspect of the
decision rendered, but cannot quite bring himself to record an
open dissent.”).