[Federal Register Volume 62, Number 69 (Thursday, April 10, 1997)]
[Notices]
[Pages 17652-17653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9174]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38467; International Series No. 1069; File No. SR-OPRA-
97-2]


Options Price Reporting Authority; Notice of Filing and Immediate 
Effectiveness of Amendment to OPRA Plan Revising the Allocation of 
Expenses Between the Basic, Index Option and Foreign Currency Option 
Accounting Centers

April 2, 1997.
    Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 
(``Exchange Act''), notice is hereby given that on March 27, 1997,\1\ 
the Options Price Reporting Authority (``OPRA'') \2\ submitted to the 
Securities and Exchange Commission (``SEC'' or ``Commission'') an 
amendment to the Plan for Reporting of Consolidated Options Last Sale 
Reports and Quotation Information (``Plan''). The amendment revises the 
allocation of expenses between the basic, index option, and foreign 
currency option (``FCO'') accounting centers. Moreover, OPRA is 
proposing to eliminate a few out-of-date provisions from the Plan. OPRA 
has designated this proposal as concerned solely with the 
administration of the Plan, permitting the proposal to become effective 
upon filing pursuant to Rule 11Aa3-2(c)(3) (ii) and (iii) under the 
Exchange Act. The Commission is publishing this notice to solicit 
comments from interested persons on the amendment.
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    \1\ The amendment was originally submitted on March 4, 1997, but 
was subsequently amended on March 27, 1997.
    \2\ OPRA is a National Market System Plan approved by the 
Commission pursuant to Section 11A of the Exchange Act and Rule 
11Aa3-2 thereunder. Securities Exchange Act Release No. 17638 (Mar. 
18, 1981).
    The Plan provides for the collection and dissemination of last 
sale and quotation information on options that are traded on the 
five 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 Stock Exchange (``PSE''); and the Philadelphia Stock 
Exchange (``PHLX'').
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I. Description and Purpose of the Amendment

    The purpose of the amendment is to revise the Plan to provide 
greater flexibility in the allocation of various costs and expenses 
among OPRA's three internal accounting centers: the basic accounting 
center, the index option accounting center, and the FCO accounting 
center. OPRA's accounting centers were created when the Plan was 
amended effective January 1, 1996, to provide for the unbundling of 
OPRA's FCO service and to provide a framework for the then contemplated 
unbundling of its index option service.
    The Plan currently provides for the allocation of operating costs 
applicable to more than one accounting center in proportion to each 
accounting center's share of OPRA's total output capacity. However, 
because OPRA has not yet unbundled the index option service and has no 
current plans to do so, there is no specific portion of the system's 
output capacity dedicated to the index option service. As a result, 
output capacity is not a meaningful measure for the allocation of costs 
to the index accounting center. Therefore, in order to provide a fair 
and workable method of allocation, the amendment provides for the 
allocation of operating costs and expenses to the index option 
accounting center in the same proportion as revenues are allocated to 
that center.\3\
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    \3\ The Plan provides that so long as the basic service and the 
index service are not unbundled, revenues are allocated between 
these two accounting centers on the basis of a 75% allocation to the 
basic accounting center and 25% to the index option accounting 
center.
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    The proposed amendment also addresses the allocation of 
administrative and general overhead costs and expenses between OPRA's 
bundled basic and index accounting centers on the one hand, and its 
unbundled FCO accounting center on the other hand. Currently, a share 
of these expenses is allocated to the FCO accounting center in 
proportion to the relative number of accounts maintained by OPRA in 
respect of these two categories. However, since revenues from the FCO 
accounting center have remained relatively small compared to revenues 
from the bundled index and basic accounting centers, OPRA has concluded 
that this does not provide for a fair allocation of costs to the FCO 
accounting center. OPRA believes that a more flexible approach to the 
allocation of this category of costs and expenses to the FCO accounting 
center is appropriate. Therefore, the amendment eliminates any fixed 
formula for the allocation of administrative and general overhead costs 
and expenses to the FCO accounting center, and instead provides for the 
allocation of these costs and expenses to the FCO accounting center in 
a fair and reasonable manner as determined by OPRA. This flexible 
approach will enable OPRA to adjust the allocation of such costs and 
expenses to the FCO accounting center in a manner that fairly reflects 
circumstances from time to time.\4\
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    \4\ Pursuant to a resolution adopted at a meeting held in 
November 1996, OPRA determined that effective retroactively as of 
July 1, 1996 and continuing through December 31, 1996, 
administrative and general overhead costs and expenses will be 
allocated 88% to the basic/index accounting centers and 12% to the 
FCO accounting center. It also was determined that the 88% allocated 
to the basic/index accounting center will be further allocated (75% 
to the basic accounting center and 25% to the index accounting 
center).
    This same allocation was adopted as the tentative allocation for 
these costs and expenses during 1997, subject to adjustment in the 
fourth quarter to reflect the final allocation agreed upon by OPRA 
for that year. The final allocation then will be used as the 
tentative allocation for 1998, and this same pattern of tentative 
and final allocations will apply in succeeding years.
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    OPRA also proposes to amend the Plan to add comparable flexibility 
to the allocation among accounting centers of costs and expenses 
associated with

[[Page 17653]]

facilities development. Currently, this category of costs is allocated 
equally among OPRA's accounting centers. Based on experience to date, 
OPRA determined that, depending on the nature of the facility in 
question, this allocation may result in too large a share of 
development costs being allocated to the relatively small FCO 
accounting center. OPRA believes that greater flexibility is called for 
so that the allocation of facilities development costs may bear a 
closer relationship to the nature and functionality of the particular 
facility being developed. Accordingly, the amendment provides that 
facilities development expenses shall be allocated among the accounting 
centers as OPRA may determine for the particular facility in question, 
and only if no specific allocation is determined for a particular 
facility will the allocation be made equally among the accounting 
centers that are expected to make use of the facility. OPRA will 
determine the allocation of facilities development costs and expenses 
prior to the commencement of each facilities development project.\5\
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    \5\ At its November 1996 meeting, OPRA determined that the 
development costs associated with the implementation of the Common 
Software and Internet Protocol projects, which are the only pending 
facilities development projects applicable to the FCO accounting 
center, will be allocated between the basic/index and the FCO 
accounting centers on the basis of the output line capacity 
availability to those accounting centers. This results in \6/7\ of 
such costs being allocated to the basic/index accounting centers and 
\1/7\ to the FCO accounting center. OPRA also determined that the 
share of these costs allocated to the basic/index accounting centers 
shall be further allocated (75% to the basic accounting center and 
25% to the index accounting center).
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    Moreover, OPRA proposes to simplify and make more flexible the 
provision of the Plan governing the allocation of facilities 
development costs to an accounting center based on that center's use of 
a facility that was not contemplated at the time the facility's 
development costs were first allocated. Therefore, OPRA proposes to 
eliminate the fixed allocation formula that depends upon whether the 
use of the facility commences in the first or second year after the 
facility becomes operational. Instead, OPRA will provide that the 
allocation of a share of facilities development costs to such an 
accounting center will be as determined by OPRA where such use 
commences within 24 months of the time the facility first became 
operational. Further, OPRA believes that all categories of cost 
allocations will be specifically provided for and, therefore, proposes 
to eliminate the ``catch-all'' provision in the Plan.
    Finally, OPRA proposes to make several non-substantive amendments. 
OPRA intends to remove the references to January 1, 1996, as such date 
no longer has any relevance in the Plan.

II. Solicitation of Comments

    Pursuant to Rule 11Aa3-2(c)(3), the amendment is effective upon 
filing with the Commission. The Commission may summarily abrogate the 
amendment within 60 days of its filing and require refiling and 
approval of the amendment by Commission order pursuant to Rule 11Aa3-
2(c)(2), if it appears to the Commission that such action 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 Exchange Act.
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. Copies 
of the submission, all subsequent amendments, and all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change 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-97-2 and should be submitted by April 30, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(29).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-9174 Filed 4-9-97; 8:45 am]
BILLING CODE 8010-01-M