[Federal Register Volume 65, Number 106 (Thursday, June 1, 2000)]
[Notices]
[Pages 35147-35149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13616]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42817; File No. SR-OPRA-99-01]


Options Price Reporting Authority; Notice of Filing and Order 
Granting Accelerated Effectiveness of Amendment to OPRA Plan Adopting a 
Participation Fee Payable by Each New Party to the Plan

May 24, 2000.
    On August 16, 1999, pursuant to Rule 11Aa3-2 under the Securities 
Exchange Act of 1934 (``Act''),\1\ the Options Price Reporting 
Authority (``OPRA'') \2\ submitted to the Securities and Exchange 
Commission (``Commission'') an amendment to the Plan for Reporting of 
Consolidated Options Last Sale Reports and Quotation Information 
(``OPRA Plan''). The proposed amendment would add provisions applicable 
to a participation fee payable by each new party to the OPRA Plan and 
codifies procedures applicable to the admission of new parties to the 
OPRA Plan. Notice of the proposed OPRA Plan amendment was published in 
the Federal Register on October 20, 1999.\3\ The Commission received 
three comment letters on the proposed OPRA Plan amendment.\4\ On 
January 3, 2000, April 28, 2000, and May 18, 2000, OPRA submitted 
Amendments Nos. 1, 2, and 3, respectively.\5\ The Commission is 
publishing this notice and order to grant accelerated approval to the 
proposed OPRA Plan amendment, as revised by Amendment No. 3, and to 
solicit comments from interested persons on Amendment No. 3.
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    \1\ 17 CFR 240.11Aa3-2.
    \2\ OPRA is a National Market System Plan approved by the 
Commission pursuant to Section 11A of the Act and Rule 11Aa3-2 
thereunder. See Securities Exchange Act Release No. 17638 (Mar. 18, 
1981). The OPRA Plan provides for the collection and dissemination 
of last sale and quotation information on options that are traded on 
the member exchanges. The five exchanges which agreed to the OPRA 
Plan are the American Stock Exchange (``Amex''); the Chicago Board 
Options Exchange (``CBOE''); the New York Stock Exchange (``NYSE''); 
the Pacific Exchange (``PCX''); and the Philadelphia Stock Exchange 
(``Phlx'').
    \3\ See Securities Exchange Act Release No. 42002 (October 13, 
1999), 64 FR 56543.
    \4\ See letters from Gerald D. Putnam, Chief Executive Officer, 
Archipelago, L.L.C., to Jonathan G. Katz, Secretary, Commission, 
dated November 10, 1999 (``Archipelago Letter''); the United States 
Department of Justice, to the Commission, dated November 10, 1999 
(``Justice Letter''); and Michael J. Simon, Senior Vice President, 
General Counsel, and Secretary, International Securities Exchange, 
to Jonathan G. Katz, Secretary, Commission, dated November 17, 1999 
(``ISE Letter'').
    \5\ See letters to Deborah L. Flynn, Division of Market 
Regulation, Commission, from Joseph Corrigan, Executive Director, 
OPRA, dated December 31, 1999 (``Amendment No. 1'') and April 26, 
2000 (``Amendment No. 2''). See also letter to John Roeser, Division 
of Market Regulation, Commission, from Joseph Corrigan, Executive 
Director, OPRA, dated May 17, 2000 (``Amendment No. 3''). In 
Amendment No. 1, OPRA responded to the issues raised by commenters, 
but proposed no changes to its original filing. In Amendment No. 2, 
OPRA proposed to revise the list of factors to be considered in the 
determination of a participation fee and to implement the proposed 
fee structure on a temporary basis to expire at the end of calendar 
year 2000. In Amendment No. 3, as described below, OPRA proposes to 
modify its initial filing to incorporate into the OPRA Plan the 
concept of a participation fee, with the specific standards 
applicable to the determination of the amount of a participation fee 
to be added by a future OPRA Plan amendment, subject to Commission 
approval. OPRA also proposes to make conforming changes to its 
Application Agreement.
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I. Background

    Currently, the OPRA Plan provides that any national securities 
exchange or registered securities association whose rules governing the 
trading of standardized options have been approved by the Commission 
may become a party to the OPRA Plan, provided it agrees to conform to 
the terms and conditions of the OPRA Plan. However, the OPRA Plan does 
not provide procedures for the application process or for a 
participation fee to be paid by an exchange at the time it becomes a 
party to the OPRA Plan.
    In response to the application recently received from the 
International Securities Exchange (``ISE'') to become a party to the 
OPRA Plan and in anticipation of the receipt of additional applications 
from other new options exchanges, OPRA's initial filing proposed to 
incorporate into the OPRA Plan certain application forms and procedures 
to be used to apply to become a party to the OPRA Plan and to obtain 
interim access to the OPRA system and to the OPRA Processor for 
planning and testing purposes. The initial filing also proposed to add 
to the OPRA Plan provisions for a one-time participation fee payable by 
each new party to the OPRA Plan.
    The Commission received three comment letters on the proposed OPRA 
Plan amendment.\6\ None of the commenters oppose the proposed 
establishment of an OPRA participation fee. However, the commenters 
raise concerns regarding the factors OPRA proposed to consider in 
determining the amount of the participation fee, asserting that the 
proposed OPRA Plan amendment could create a barrier to entry into the 
options industry that could harm competition. In response to

[[Page 35148]]

the commenters, OPRA proposes to modify the proposal.\7\
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    \6\ See Archipelago Letter, Justice Letter, and ISE Letter, 
supra note 4.
    \7\ See Amendment No. 3, supra note 5.
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II. Description and Purpose of Amendment No. 3 to the Plan 
Amendment

    The purpose of Amendment No. 3 to the proposed OPRA Plan amendment, 
as described above, is to further modify that part of the proposed OPRA 
Plan amendment concerning the participation fee, and to make conforming 
changes to the Application Agreement filed as part of the original 
filing. Because the OPRA Plan participants and the Commission have not 
yet reached agreement on the precise standards to be applied in 
determining the amount of the participation fee, OPRA proposes, in 
Amendment No. 3 to the OPRA Plan amendment, to eliminate the proposed 
factors to be considered in determining the participation fee and the 
requirement that the fee be paid as a condition to becoming a party to 
the OPRA Plan.\8\ Instead, Amendment No. 3 would incorporate into the 
OPRA Plan only the concept of a participation fee, with the specific 
standards applicable to the determination of the amount of the fee to 
be added by a future OPRA Plan amendment that would be subject to a 
separate filing and Commission approval. Although any new party to the 
OPRA Plan would be subject to the new participation fee, the fee would 
not be payable until after the applicable standards have been approved 
by the Commission and a specific fee based on those standards has been 
agreed upon by OPRA and the new participant.
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    \8\ See Amendment No. 3, supra note 5.
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    A new exchange would not have a vote on the adoption of the 
specific standards applicable to the determination of the fee to be 
paid by that party or on the determination of the amount of the fee 
based on those standards, although it may participate with the other 
parties in the discussion of the specific standards to be adopted. As 
was provided in the proposed OPRA Plan amendment as originally filed, 
in the event OPRA and the new participant do not agree on the amount of 
the participation fee, the amount of the fee will be subject to review 
by the Commission pursuant to Section 11A(b)(5) of the Act.\9\
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    \9\ 15 U.S.C. 78k-1(b)(5).
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 3 to the proposed OPRA Plan 
amendment, including whether it is consistent with the Act. Persons 
making written submissions should file six copies thereof with the 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, 
Washington, DC 20549-0609. Copies of the submission, all subsequent 
amendments, and all written statements with respect to Amendment No. 3 
to the proposed OPRA Plan amendment that are filed with the Commission, 
and all written communications relating to the Amendment No. 3 to the 
proposed OPRA Plan amendment between the Commission and any person, 
other than those withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. Copies of the filing 
also will be available at the principal offices of OPRA. All 
submissions should refer to file number SR-OPRA-99-01 and should be 
submitted by June 22, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Amendment No. 3 to the Proposed OPRA Plan Amendment

    After careful review, the Commission finds that the proposed OPRA 
Plan amendment as revised by Amendment No. 3, is consistent with the 
requirements of the Act and the rules and regulations thereunder.\10\ 
Specifically, the Commission believes that Amendment No. 3 to the 
proposed OPRA Plan amendment is consistent with Rule 11Aa3-2 \11\ in 
that it will contribute to the maintenance of fair and orderly markets 
and remove impediments to and perfect the mechanisms of a national 
market system. The Commission notes that any new party to the OPRA Plan 
would be subject to a participation fee. The fee, however, would not be 
payable until after specific standards for determining the fee have 
been approved by the Commission and a specific fee based on those 
standards has been agreed upon by OPRA and the new participant.
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    \10\ In approving this proposed OPRA Plan amendment, the 
Commission has considered its impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f)
    \11\ 17 CFR 240.11A3-2.
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    The Commission believes that is reasonable for the OPRA Plan to 
provide for an initial participation fee to be paid by new parties to 
the OPRA Plan. Until specific standards can be agreed upon by the OPRA 
participants and approved by the Commission, however, the Commission 
believes it is appropriate for new exchanges to be admitted as parties 
to the OPRA Plan without requiring such new parties to pay a 
participation fee immediately.
    In addition, Amendment No. 3 to the OPRA Plan amendment would allow 
new parties to the OPRA Plan to participate in discussions regarding 
the specific standards on which the participation fee is to be based, 
but would prohibit new parties from voting on the adoption of such 
standards. The Commission believes that because specific standards 
would be the subject of a separate filing and published by the 
Commission for notice and comment, new parties would have a voice, if 
not a vote, regarding the propriety of such standards. Further, the 
Commission notes that such standards will ultimately be subject to 
Commission approval, which will ensure further review of this issue.
    The Commission finds good cause to accelerate the approval of 
Amendment No. 3 to the proposed OPRA Plan amendment prior to the 
thirtieth day after the date of publication in the Federal Register. 
The Commission notes that Amendment No. 3 to the proposed OPRA Plan 
amendment is responsive to concerns expressed by commenters and 
Commission staff regarding the propriety of the proposed factors to be 
considered in the determination of a participation fee. In addition, 
approving Amendment No. 3 to the proposed OPRA Plan amendment on an 
accelerated basis will permit the OPRA Plan to provide for a fee as ISE 
becomes a party to the OPRA Plan. The Commission believes that 
approving the amended proposal on an accelerated basis will provide the 
OPRA Plan participants additional time to develop appropriate standards 
upon which a participation fee should be based, without unnecessarily 
delaying ISE's bid to become a party to the OPRA Plan. The Commission 
finds, therefore, that granting accelerated approval of Amendment No. 3 
to the proposed OPRA Plan amendment is consistent with Section 11A of 
the Act.\12\
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    \12\ 15 U.S.C. 78k-1.
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V. Conclusion

    It is therefore ordered, pursuant to Rule 11Aa3-2 of the Act,\13\ 
that the proposed OPRA Plan amendment, as amended by Amendment No. 3, 
(SR-OPRA-99-01) is approved on an accelerated basis.
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    \13\ 17 CFR 240.11Aa3-2.


[[Page 35149]]


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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(29).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-13616 Filed 5-31-00; 8:45 am]
BILLING CODE 8010-01-M