```

[Federal Register Volume 89, Number 223 (Tuesday, November 19, 2024)]
[Notices]
[Pages 91451-91455]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26959]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101625; File No. 4-820]

Options Price Reporting Authority; Order Disapproving a Proposed 
Amendment To Modify the OPRA Plan Relating to Dissemination of Exchange 
Proprietary Market Data Information

November 14, 2024.

I. Introduction

    On November 8, 2023, the Cboe Exchange, Inc. (``Cboe Options''), 
Cboe C2 Exchange, Inc. (``C2''), Cboe BZX Exchange, Inc. (``BZX''), and 
Cboe EDGX Exchange, Inc. (``EDGX'') (collectively, ``Cboe'') \1\ filed 
with the Securities and Exchange Commission (``Commission'') a proposal 
(the ``Proposed Amendment'') to amend the plan of the Options Price 
Reporting Authority

[[Page 91452]]

(``OPRA'') for reporting of consolidated options last sale reports and 
quotation information (``OPRA Plan'' or ``Plan'').\2\ The Proposed 
Amendment was published for comment in the Federal Register on January 
22, 2024.\3\ The Commission has received comment letters on the 
Proposed Amendment.\4\
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    \1\ Cboe Global Markets, Inc. operates Cboe Options, C2, BZX, 
and EDGX. See https://www.cboe.com/us/options/overview.
    \2\ The terms under which exchanges participate in OPRA are set 
forth in the Limited Liability Company Agreement of Options Price 
Reporting Authority, LLC. See https://cdn.opraplan.com/documents/OPRA_Plan.pdf.
    \3\ See Securities Exchange Act Release No. 99345 (Jan. 16, 
2024), 89 FR 3963 (Jan. 22, 2024) (``Notice'').
    \4\ Comments received in response to the Notice are available on 
the Commission's website at https://www.sec.gov/comments/4-820/4-820.htm.
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    On April 19, 2024, the Commission instituted proceedings under Rule 
608(b)(2)(i) of Regulation NMS,\5\ to determine whether to approve or 
disapprove the Proposed Amendment or to approve the Proposed Amendment 
with any changes or subject to any conditions the Commission deems 
necessary or appropriate after considering public comment.\6\ On July 
11, 2024, pursuant to Rule 608(b)(2)(i) of Regulation NMS, the 
Commission extended the period within which to conclude proceedings 
regarding the Proposed Amendment to September 18, 2024.\7\ On September 
18, 2024, pursuant to Rule 608(b)(2)(ii) of Regulation NMS, the 
Commission extended the period within which to conclude proceedings 
regarding the Proposed Amendment to November 15, 2024.\8\
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    \5\ 17 CFR 242.608(b)(2)(i).
    \6\ See Securities Exchange Act Release No. 99994 (Apr. 19, 
2024), 89 FR 31785 (Apr. 25, 2024) (``Order Instituting 
Proceedings''). Comments received in response to the Order 
Instituting Proceedings are available on the Commission's website at 
https://www.sec.gov/comments/4-820/4-820.htm.
    \7\ See Securities Exchange Act Release No. 100495 (July 11, 
2024), 89 FR 58212 (July 17, 2024).
    \8\ See Securities Exchange Act Release No. 101091 (Sept. 18, 
2024), 89 FR 77951 (Sept. 24, 2024).
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    This order disapproves the Proposed Amendment.

II. Summary of the Proposed Amendment

A. Background

    There are eighteen registered national securities exchanges that 
list and trade standardized listed options (``options''),\9\ which are 
issued and cleared by The Options Clearing Corporation. While the 
market structure for options resembles that of equities in certain 
respects, there are important differences. For example, while stocks 
can be traded on any of the sixteen national securities exchanges that 
trade them, as well as on off-exchange venues, options can be traded 
only on an options exchange,\10\ and certain index options are 
exclusively listed only on one exchange (or affiliated exchanges) 
pursuant to a licensing agreement with the index provider (e.g., Cboe's 
index options on the S&P 500 Index and Nasdaq's index options on the 
Nasdaq-100 Index) or based on an index the exchange creates and 
calculates (e.g., Cboe's VIX volatility index).\11\ On Cboe Options, 
its highest volume options are typically its proprietary index 
options.\12\
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    \9\ Those exchanges are: (1) Cboe Options, (2) C2, (3) BZX, and 
(4) EDGX (all under the common control of Cboe Global Markets, 
Inc.); (5) Miami International Securities Exchange LLC, (6) MIAX 
Emerald, LLC, (7) MIAX PEARL, LLC, and (8) MIAX Sapphire, LLC (all 
under the common control of Miami International Holdings, Inc.); (9) 
Nasdaq BX, Inc., (10) Nasdaq GEMX, LLC, (11) Nasdaq ISE, LLC, (12) 
Nasdaq MRX, LLC, (13) Nasdaq PHLX LLC (``Nasdaq Phlx''), and (14) 
The Nasdaq Stock Market LLC (all under the common control of Nasdaq, 
Inc.); (15) NYSE Arca, Inc. and (16) NYSE American LLC (both under 
the common control of Intercontinental Exchange, Inc.); (17) BOX 
Exchange LLC; and (18) MEMX, LLC.
    \10\ See By-Laws of The Options Clearing Corporation, Article I, 
Section 1(C)(27) (defining ``confirmed trade'') and Article VI, 
Section 1.
    \11\ See, e.g., Standard & Poor's Corp. v. Commodity Exchange, 
Inc., 538 F. Supp. 1063 (S.D.N.Y. 1982), aff'd, Standard & Poor's 
Corp. v. Commodity Exchange, Inc., 683 F.2d 704 (2d Cir. 1982). See 
also Dow Jones & Company, Inc. v. International Securities Exchange, 
Inc., and Options Clearing Corporation, 451 F.3d 295 (2d Cir. 2006). 
Cboe, which has the largest number of proprietary index options, has 
expanded its proprietary product offerings through a licensing 
agreement to develop and list options based on FTSE and Russell 
indices, an agreement that has been extended to 2030. See Rick 
Rosenthal, What to Know about the Cboe and FTSE Russell Combination 
(Apr. 29, 2020), available at https://www.cboe.com/insights/posts/what-to-know-about-the-cboe-and-ftse-russell-combination/.
    \12\ See Cboe Options Exchange Symbol Data, available at https://www.cboe.com/us/options/market_statistics/symbol_data/?mkt=cone.
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B. OPRA

    Congress directed the Commission to facilitate the establishment of 
a national market system for securities in accordance with the findings 
and objectives set forth in Section 11A(a)(1) of the Securities 
Exchange Act of 1934 (``Act'').\13\ Among other things, Congress found 
that it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure 
``the availability to brokers, dealers, and investors of information 
with respect to quotations for and transactions in securities.'' \14\ 
In furtherance of this objective for the options market, the Commission 
directed the exchanges, through a national market system plan (``NMS 
Plan''), to create a centralized system for options market data 
pursuant to which the exchanges created, and the Commission approved, 
OPRA.\15\
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    \13\ See 15 U.S.C. 78k-1(a)(1).
    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \15\ See Securities Exchange Act Release No. 17638 (Mar. 18, 
1981), 22 SEC. Docket 484 (Mar. 31, 1981). New NMS Plans, and 
amendments to an effective NMS Plan, are published by the Commission 
after which the Commission may approve with such changes or subject 
to such conditions as the Commission may deem necessary or 
appropriate, disapprove the plan or amendment, or institute 
proceedings to consider whether to disapprove the plan or amendment. 
See 17 CFR 242.608(b)(2).
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    The purpose of OPRA is to collect from each exchange information on 
the quotes displayed on, and transactions that occur on, each exchange, 
process and consolidate that information into a single ``consolidated 
tape,'' and then distribute the information to subscribers, including 
the exchanges and market participants, who pay subscription fees to 
OPRA.\16\ OPRA performs these functions through a contract with the 
Securities Information Automation Corporation, which acts as the 
securities information processor (``SIP'') for OPRA.\17\
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    \16\ See OPRA Plan, Article II, Section 2.4 (Purpose) and 15 
U.S.C. 78c (a)(22). See also Securities Exchange Act Release No. 
43621 (Nov. 27, 2000), 65 FR 75564, 75565 (Dec. 1, 2000) (File No. 
4-434) (``The OPRA Plan governs the process by which options market 
data are collected from participant exchanges, consolidated, and 
disseminated. Consolidated data, when it is disseminated in a timely 
manner, enable broker-dealers and investors to know the best price 
that is currently available for a particular product. It assists 
customers in setting the terms of their orders and in monitoring how 
well their brokers execute their orders. Consolidated data also 
assist investors' brokers to obtain, as well as exchange market 
makers and specialists to provide, the best execution possible for 
an order.'').
    \17\ See 15 U.S.C. 78c (a)(22)(A) (defining ``securities 
information processor''). See also 15 U.S.C. 78k-1(b) (concerning 
registration of SIPs). See also Securities Exchange Act Release No. 
43621 (Nov. 27, 2000), 65 FR 75564, 75565 (Dec. 1, 2000) (File No. 
4-434) (``The OPRA committee selected the Securities Industry 
Automation Corporation (`SIAC') as the facility for gathering the 
last sale and quote information from each of the participant 
exchanges and consolidating and disseminating such data to approved 
vendors. All of the transactions executed on, and price quotations 
for options generated by, each options exchange are communicated to 
the public by OPRA through the facilities of its exclusive 
processor, SIAC. The messages are sent to OPRA and distributed to 
market data vendors on a consolidated basis for use by options 
market participants, including retail investors, broker-dealers, and 
the exchanges themselves.'').
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    As parties to OPRA, all options exchanges are responsible for 
``act[ing] jointly with respect to matters to which they share 
authority . . . in planning, developing, operating, or regulating'' 
OPRA.\18\ To carry out this responsibility, each exchange appoints one 
member to the OPRA Management Committee, which is responsible for ``all 
policy decisions on behalf of OPRA in furtherance of the functions and

[[Page 91453]]

objectives of OPRA under the [Act] and under [the OPRA Plan]'' 
including determining the products that OPRA offers and the level of 
fees for subscribers.\19\
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    \18\ See OPRA Plan, Article II, Section 2.4 (Purpose).
    \19\ See OPRA Plan, Article IV, Section 4.1 (OPRA Management 
Committee).
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    As the Commission has previously stated, the transparency provided 
by the consolidated OPRA data feed is a central feature of the U.S. 
securities markets that, ``in turn, contributes to efficient price 
discovery, offsets the fragmentation of buying and selling interest on 
multiple exchanges, and facilitates the best execution of customers' 
orders by broker-dealers.'' \20\
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    \20\ Securities Exchange Act Release No. 43621 (Nov. 27, 2000), 
65 FR 75564 (Dec. 1, 2000) (File No. 4-434). See also Securities 
Exchange Act Release No. 90610 (Dec. 9, 2020), 86 FR 18596, 18598 
(Apr. 9, 2021) (File No. S7-03-20) (``Market Data Infrastructure 
Final Rule'') (stating that the widespread availability of 
consolidated market data is ``critical to the ability of market 
participants to participate effectively in the U.S. securities 
markets.'').
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    In addition to their responsibility to govern and administer the 
dissemination of consolidated options data through OPRA, today some 
exchanges separately sell their own ``proprietary market data.'' \21\ 
Unlike the consolidated SIP data that aggregates all quotes and 
transactions across all options exchanges, an exchange's or an 
affiliated exchange group's proprietary market data contains only those 
quotes and transactions that occur on its market alone or together with 
its affiliated exchanges.
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    \21\ See, e.g., Securities Exchange Act Release No. 88827 (May 
6, 2020), 85 FR 28702, 28704 (May 13, 2020) (File No. 4-757) (``CT 
Plan Order'') (explaining in the equities context that ``the 
proliferation of proprietary exchange data products have heightened 
the conflicts between the [exchanges'] business interests in 
proprietary data offerings and their obligations as [self-regulatory 
organizations] under the national market system to ensure prompt, 
accurate, reliable, and fair dissemination of core data through the 
jointly administered [equities plans].'').
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    Exchange proprietary market data might be of interest, for example, 
to registered options market makers or non-market maker liquidity 
providers who might want to get exchange data directly and consolidate 
it themselves rather than wait for the OPRA SIP to consolidate and 
disseminate the data, which might help liquidity providers better 
manage their risk and thereby facilitate their ability to provide 
better-priced displayed quotes to investors.\22\
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    \22\ See, e.g., Market Data Infrastructure Final Rule, supra 
note 20, at 86 FR 18599 (discussing why market participants might 
purchase exchange proprietary data from equities exchanges).
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C. Equivalent Access

    Options exchanges have not always been able to offer proprietary 
market data products. When the Commission approved the OPRA Plan in 
1981, the Plan as filed by the options exchanges (including Cboe 
Options as one of the founding members) made OPRA the exclusive means 
for the dissemination of last sale reports and quotation information 
for options and did not allow the options exchanges to offer their own 
proprietary market data separately.\23\
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    \23\ See Securities Exchange Act Release No. 44580 (July 20, 
2001), 66 FR 39218 (July 27, 2001) (SR-OPRA-2001-02) (``2001 
Order'') (discussing the OPRA Plan's exclusivity clause).
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    In 2001, the Commission approved an amendment to the OPRA Plan 
proposed by the Plan participants to allow exchanges to offer 
proprietary market data to their members under certain conditions, 
provided that those members have ``equivalent access'' to the 
consolidated options market data disseminated by OPRA for the same 
classes or series of options that are included in the exchange 
proprietary market data.\24\ In that approval order the Commission 
cited the language used in the proposed amendment to the Plan when it 
stated that ``[a]ccess would be deemed to be `equivalent' if the 
information were equally accessible on the same terminal or 
workstation.'' \25\
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    \24\ See id. at 39219.
    \25\ Id. at 39218 (emphasis added). In addition, in 2003, the 
Commission approved an amendment to the OPRA Plan proposed by the 
Plan participants to allow an exchange to offer proprietary market 
data to any person, not just to members of the exchange. See 
Securities Exchange Act Release No. 48822 (Nov. 21, 2003), 68 FR 
66892 (Nov. 28, 2003) (SR-OPRA-2003-01).
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    The provisions in the OPRA Plan that govern the ability of an 
exchange to offer its own proprietary market data are contained in 
Section 5.2(c)(ii) and (iii), including the ``equivalent access'' 
provision in Section 5.2(c)(iii)(A) (``Equivalent Access Provision''), 
which states:

    (ii) A Member may disseminate information pertaining to 
quotations and transactions in its market (``Proprietary 
Information'') through a network separate from the OPRA System only 
if such dissemination meets the requirements of subparagraph (iii) 
of this paragraph (c).
    (iii) A Member may disseminate its Proprietary Information 
pursuant to subparagraph (ii) of this paragraph (c) provided that:
    (A) such dissemination is limited to other Members and to 
persons who also have equivalent access to consolidated Options 
Information disseminated by OPRA for the same classes or series of 
options that are included in the Proprietary Information. For 
purposes of this clause (A), ``consolidated Options Information'' 
means consolidated Last Sale Reports combined with either 
consolidated Quotation Information or the BBO furnished by OPRA, and 
access to consolidated Options Information and access to Proprietary 
Information are deemed ``equivalent'' if both kinds of information 
are equally accessible on the same terminal or work station; and
    (B) a Member may not disseminate its Proprietary Information on 
any more timely basis than the same information is furnished to the 
OPRA System for inclusion in OPRA's consolidated dissemination of 
Options Information.

D. Cboe One Options Feed and the Equivalent Access Provision

    The Cboe exchanges offer a proprietary market data product called 
the ``Cboe One Options Feed.'' \26\ Cboe describes it as offering ``a 
comprehensive view of the U.S. options market through a single 
connection,'' though it contains data on quotes and trades that take 
place only on the four Cboe exchanges (Cboe Options, C2, BZX, and 
EDGX).\27\
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    \26\ See, e.g., Securities Exchange Act Release No. 97996 (July 
26, 2023), 88 FR 50249 (Aug. 1, 2023) (SR-CBOE-2023-034) (notice of 
filing and immediate effectiveness of a proposed rule change to 
amend the market data section of Cboe Option's fee schedule 
including, among other things, to establish fees for the Cboe One 
Options Feed).
    \27\ See Cboe One Options Feed, available at https://www.cboe.com/market_data_services/us/options/cboe_one/. The Cboe One 
Options Feed consolidates such data from Cboe Options, C2, BZX, and 
EDGX into a single data product, which allows a subscriber to 
purchase one product rather than four separate proprietary products 
that the user would then need to consolidate itself. See id.
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    Cboe has stated that the Equivalent Access Provision can be 
satisfied if a subscriber to an exchange's proprietary market data, 
such as the Cboe One Options Feed, subscribes to a ``usage-based'' plan 
from OPRA, which requires users to request information on a quote or 
trade and pay based on the amount of data consumed, instead of 
subscribing to the full streaming OPRA feed.\28\ Doing so would allow a 
subscriber of the Cboe One Options Feed to subscribe to OPRA's less 
expensive usage-based product instead of OPRA's more expensive 
nonprofessional subscriber product. In turn, a person that wants to 
purchase a Cboe One Options Feed subscription while minimizing the fees 
it would pay for the OPRA subscription that it also would be required 
to purchase because of OPRA's Equivalent Access Provision, would have 
an incentive to minimize use of consolidated OPRA data under a usage-
based OPRA subscription to greatly reduce or eliminate the fees it 
would otherwise pay to OPRA.\29\
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    \28\ See Notice, supra note 3, 89 FR 3965.
    \29\ The OPRA ``Usage-based Vendor Fee'' is $0.0075 per quote 
packet or $0.03 per options chain, subject to a $1.25 maximum per 
month, whereas the ``Nonprofessional Subscriber'' fee is $1.25 for 
each nonprofessional subscriber per month for up to 75,000 such 
subscribers with lower tiered fees (down to $0.60) for more 
subscribers. See OPRA Fee Schedule, available at https://cdn.opraplan.com/documents/OPRA_Fee_Schedule.pdf. For comparison, 
Cboe offers the Cboe One Options Feed for a $0.25 non-pro user fee 
for the Summary feed. See Cboe One Feed Pricing, available at 
https://www.cboe.com/market_data_services/us/equities/cboe_one/.

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[[Page 91454]]

E. Cboe's Proposed OPRA Plan Amendment

    Cboe filed the proposed OPRA Plan amendment without obtaining the 
unanimous vote of the Plan participants. Cboe sought to amend the 
Equivalent Access Provision of the OPRA Plan by filing with the 
Commission the Proposed Amendment, stating that it was filing it 
pursuant to Rule 608(a)(1) of Regulation NMS.\30\ The Proposed 
Amendment would change the OPRA Plan to, among other things, allow a 
per usage OPRA subscription to satisfy the Equivalent Access Provision. 
Specifically, the Proposed Amendment would ``clarify that access to 
consolidated Options Information and access to Proprietary Information 
are deemed `equivalent' if `Proprietary Information' and `consolidated 
Options Information' (as those terms are defined in the OPRA Plan), are 
equally accessible on the same terminal or work station, regardless of 
whether the OPRA data is disseminated on a streaming or per usage-
basis.'' \31\ Cboe states that ``[t]he new language would clarify that 
the Equivalent Access Provision is satisfied if a recipient of an 
exchange proprietary data product also is simultaneously authorized and 
entitled to receive OPRA data in one of the ways that OPRA makes its 
data available; that is, by maintaining a streaming subscription to the 
OPRA feed or having the ability to query OPRA data on a usage-basis.'' 
\32\
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    \30\ Rule 608(a)(1) provides that, ``Any two or more self-
regulatory organizations, acting jointly, . . . may propose an 
amendment to an effective national market system plan . . . by 
submitting the text of the . . . amendment to the Commission by 
email, together with a statement of the purpose of such . . . 
amendment and, to the extent applicable, the documents and 
information required by paragraphs (a)(4) and (5) of this section.'' 
17 CFR 242.608(a)(1).
    \31\ Notice, supra note 3, 89 FR 3965.
    \32\ Id. (emphasis in original). In addition, Cboe proposes to 
amend the Equivalent Access Provision by adding a new subparagraph 
(C) under Section 5.2(c)(iii) of the OPRA Plan that would address 
the display of ``consolidated Options Information'' by specifying 
two requirements. See proposed Section 5.2(c)(iii)(C) of the OPRA 
Plan. First, Cboe proposes to require that dissemination of 
``consolidated Options Information'' for the same classes or series 
of options that are included in the ``Proprietary Information'' must 
be displayed in a context in which a trading or order-routing 
decision can be implemented (i.e., the point of order entry or 
modification). Cboe states that its proposal would not require the 
display of consolidated data when ``market data is being provided on 
a purely informational website that does not offer any trading or 
order-routing capability.'' Notice, supra note 3, 89 FR 3966. 
Second, Cboe proposes to require that ``consolidated Options 
Information'' must also be provided if a registered representative 
of a broker-dealer provides a quotation to a customer that can be 
used to assess the current market or the quality of trade execution. 
Specifically, proposed Section 5.2(c)(iii)(C) of the OPRA Plan would 
state the following requirement: ``dissemination of consolidated 
Options Information for the same classes or series of options that 
are included in the Proprietary Information must be displayed in a 
context in which a trading or order-routing decision can be 
implemented (i.e., the point of order entry or modification). 
Consolidated Options Information must also be provided if a 
registered representative of a broker-dealer provides a quotation to 
a customer that can be used to assess the current market or the 
quality of trade execution.''
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III. Discussion

    Under the terms of the OPRA Plan, the plan ``may be amended from 
time to time when authorized by the affirmative vote of all of the 
[Plan participants], subject to the approval of the [Commission].'' 
\33\ Cboe did not obtain such authorization for the Proposed 
Amendment.\34\
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    \33\ See OPRA Plan, Article X, Section 10.3 (Amendments).
    \34\ See Notice, supra note 3, 89 FR 3963.
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    Though the Proposed Amendment did not receive the affirmative vote 
of all of the members of the OPRA Plan in accordance with Section 10.3 
of the OPRA Plan,\35\ Cboe nevertheless states that the Proposed 
Amendment was appropriately filed with the Commission pursuant to Rule 
608(a)(1) of Regulation NMS, which provides that ``[a]ny two or more 
self-regulatory organizations, acting jointly, may file a national 
market system plan or may propose an amendment to an effective national 
market system plan. . . .'' \36\ Cboe states that more than two self-
regulatory organizations (``SROs'')--Cboe Options, C2, BZX, and EDGX--
jointly filed the Proposed Amendment with the Commission.\37\
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    \35\ See id. at 3965.
    \36\ See Letter from Corinne Klott, Assistant General Counsel, 
Cboe Global Markets, dated Feb. 23, 2024 (``Cboe Letter''), at 2. 
See also 17 CFR 242.608(a)(1).
    \37\ See Cboe Letter, supra note 36, at 2 (emphasis in 
original).
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    Cboe states that under Rule 608(a)(1) of Regulation NMS ``there is 
no requirement to separately satisfy the voting requirements of the 
OPRA Plan'' for plan amendments and the OPRA Plan ``nowhere directs 
that its amendment avenue is the only path to propose an amendment. . . 
.'' \38\ Under Cboe's view, Section 10.3 of the OPRA Plan provides 
``one method for seeking to amend the OPRA Plan'' where Rule 608(a)(1) 
provides an ``additional method[ ]'' to do so.\39\ Cboe states that 
Section 10.3 of the OPRA Plan ``does not foreclose any other route'' to 
amend the Plan, ``let alone one authorized by Commission regulation.'' 
\40\ Rather, Cboe states that Section 10.3 of the OPRA Plan provides an 
avenue for ``OPRA as an entity to offer an amendment, unanimously'' 
and, in contrast, Rule 608(a)(1) of Regulation NMS ``offers an 
amendment path where exchanges, without unanimous consent of OPRA 
members, wish to bring a proposed amendment to the Commission's and 
public's attention.'' \41\ Accordingly, Cboe states that it has 
complied with both the OPRA Plan and Regulation NMS.\42\
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    \38\ Id. at 2.
    \39\ Id. at 1 (emphasis in original).
    \40\ Id. at 3.
    \41\ Id.
    \42\ See id.
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    The OPRA Operating Committee disagrees with Cboe and states that 
the Commission should disapprove the Proposed Amendment ``as improperly 
filed, violating the explicit terms of the OPRA Plan.'' \43\ OPRA 
states that the Proposed Amendment ``did not receive unanimous approval 
from all of the [Plan participants] as required by the OPRA Plan.'' 
\44\ Stating that ``Rule 608(c) provides that, `[e]ach self-regulatory 
organization shall comply with the terms of any effective national 
market system plan of which it is a sponsor or a participant,' '' OPRA 
states that ``[t]he general requirements of Rule 608(a)(1) cannot 
override the more specific requirements set forth in the OPRA Plan.'' 
\45\
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    \43\ See Letter from James P. Dombach, Davis Wright Tremaine 
LLP, dated Feb. 12, 2024 (``OPRA Letter''), at 1.
    \44\ Id. at 2.
    \45\ Id.
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    OPRA further states that ``Cboe is attempting to circumvent the 
requirements of the OPRA Plan through its incorrect interpretation of 
Rule 608'' and states that ``[n]ever has an NMS Plan amendment been 
submitted in the manner Cboe utilized rather than in accordance with 
the explicit requirements of the relevant NMS Plan.'' \46\ OPRA states 
that ``by requiring heightened approval requirements, the market can be 
assured that any proposal has broad support among entities that have 
competing interests, thereby ensuring that only those proposals that 
are viewed as truly beneficial to the national market system are 
proposed.'' \47\ OPRA states that Cboe's view would render Section 10.3 
of the OPRA Plan as ``superfluous'' and states that ``Rule 608(a)(1) 
must be interpreted as a floor to the requirements of submitting an NMS 
plan or amendment,

[[Page 91455]]

and the [Plan participants] have agreed to the heightened requirements 
set forth in the OPRA Plan (which have been approved by the 
Commission).'' \48\
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    \46\ Id.
    \47\ Id.
    \48\ Id.
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    A group of affiliated OPRA Plan participants similarly requested 
that the Commission disapprove the Proposed Amendment.\49\ Stating that 
``Rule 608(c) under Regulation NMS provides that, `Each self-regulatory 
organization shall comply with the terms of any effective national 
market system plan of which it is a sponsor or a participant,' '' and 
that ``the [Proposed] Amendment did not receive the affirmative vote of 
all of the members of the OPRA Plan pursuant to Section 10.3 of the 
OPRA Plan,'' the commenter states that ``Cboe's submission of the 
[Proposed] Amendment violated Rule 608(c).'' \50\ The commenter further 
states that
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    \49\ See Letter from Greg Ferrari, Vice President, U.S. Options, 
Nasdaq, dated Feb. 12, 2024 (``Nasdaq Letter''), at 2.
    \50\ Id. at 2.

    Cboe's reading of Rule 608(a)(1)--that it alone can move to 
amend the OPRA Plan without regard to the views of other OPRA 
members--is nonsensical, contrary to Rule 608 as a whole, and, if 
accepted by the Commission, would undermine the ability of all 
national market system plans to govern themselves. Cboe is 
contending, in effect, that any two SROs disappointed in the outcome 
in any NMS plan deliberations should be able to file their proposal 
with the Commission and rehash the same debate in a different forum. 
This will inject uncertainty in all NMS plan operations, and 
unnecessarily complicate the plan amendment process.\51\
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    \51\ Id.

    Cboe cannot use Rule 608(a)(1) to bypass the requirements of the 
OPRA Plan. The Plan participants have included a clear and specific 
amendment clause in the OPRA Plan (Article X, Section 10.3) to govern 
the process of amending the Plan by the Plan participants. This 
amendment clause provides the specific requirements for amendments of 
the Plan and is more stringent than the requirements of Rule 608(a)(1). 
That is, the Plan requires unanimous participant approval for plan 
amendments, and the Commission approved the OPRA Plan with that 
unanimous consent amendment requirement.\52\ Such provisions are not 
uncommon, as other NMS Plans contain requirements to amend that are 
more restrictive than Rule 608 \53\ though some contain no general 
amendment provision.\54\ Rule 608(a)(1) provides the minimum for plan 
amendments, but the Commission has approved many NMS Plans that include 
additional criteria that must be met for plan amendments to be filed 
with the Commission.\55\
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    \52\ See Securities Exchange Act Release No. 17638 (Mar. 18, 
1981), 22 SEC. Docket 484 (Mar. 31, 1981). See also OPRA Plan, 
Article X, Section 10.3 (Amendments).
    \53\ See, e.g., Joint Self-Regulatory Organization Plan 
Governing the Collection, Consolidation and Dissemination of 
Quotation and Transaction Information for Nasdaq-Listed Securities 
Traded on Exchanges on an Unlisted Trading Privilege Basis, Article 
XVI (Modifications to the Plan), available at https://www.utpplan.com/utp_plan.
    \54\ See, e.g., Plan for the Purpose of Developing and 
Implementing Procedures to Facilitate the Listing and Trading of 
Standardized Options, available at https://www.theocc.com/getmedia/198bfc93-5d51-443c-9e5b-fd575a0a7d0f/options_listing_procedures_plan.pdf.
    \55\ Rule 608 would, however, apply where an NMS Plan is silent 
on the topic and does not provide a specific voting clause to govern 
amendments.
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    Rule 608 permits the inclusion in NMS Plans of more stringent 
requirements for plan amendments that go beyond the ``any two or more 
SROs acting jointly'' minimum requirement in Rule 608. Specifically, 
the Rule states that any NMS Plan or amendment filed with the 
Commission must be accompanied by certain statements and 
representations, including ``[i]n the case of a proposed amendment, a 
statement that such amendment has been approved by the sponsors in 
accordance with the terms of the plan.'' \56\ In Cboe's Proposed 
Amendment, it stated ``Not Applicable'' in response to that 
requirement,\57\ though an applicable provision does exist and was not 
satisfied. As stated by OPRA, Cboe has not complied with the terms of 
Section 10.3 of the OPRA Plan in that it failed to obtain the 
affirmative vote of all Plan participants to amend the OPRA Plan as 
required by the OPRA Plan.\58\
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    \56\ See 17 CFR 242.608(a)(4)(ii)(E).
    \57\ Notice, supra note 3, 89 FR 3967.
    \58\ See 17 CFR 242.608(c) (``Each [SRO] shall comply with the 
terms of any effective national market system plan of which it is a 
sponsor or a participant.'').
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    When reviewing amendments to an NMS Plan pursuant to Rule 608(b), 
the Commission evaluates whether a proposed amendment ``is necessary or 
appropriate in the public interest, for the protection of investors and 
the maintenance of fair and orderly markets, to remove impediments to, 
and perfect the mechanisms of, a national market system, or otherwise 
in furtherance of the purposes of the Act.'' \59\
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    \59\ 15 U.S.C. 78k-1(b)(2).
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    The terms of the OPRA Plan are applicable to Cboe as Plan 
participants, and therefore unanimous agreement was needed for the 
amendment. Accordingly, the Commission cannot make a finding that the 
Proposed Amendment is necessary or appropriate in the public interest, 
for the protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.\60\
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    \60\ In light of Cboe's failure to obtain the required 
affirmative vote for the Proposed Amendment, the Commission need not 
make a determination on the merits of the proposal.
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IV. Conclusion

    For the reasons set forth above, the Commission does not find, 
pursuant to Section 11A of the Act, and Rule 608 thereunder, that the 
Proposed Amendment is necessary or appropriate in the public interest, 
for the protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act.
    It is therefore ordered, pursuant to Section 11A of the Act, and 
Rule 608(b)(2) thereunder, that the Proposed Amendment (File No. 8-420) 
be, and hereby is, disapproved.

    By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-26959 Filed 11-18-24; 8:45 am]
BILLING CODE 8011-01-P
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