[Federal Register Volume 60, Number 235 (Thursday, December 7, 1995)]
[Notices]
[Pages 62908-62910]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29775]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36542; International Series No. 896; File No. S7-8-90]


Order Approving Proposed Amendment to the Options Price Reporting 
Authority's National Market System Plan for the Purpose of Updating the 
Current Fee Structure and Eliminating the Use of Separate News Service 
Agreements

November 30, 1995.
    On April 25, 1995, the Options Price Reporting Authority 
(``OPRA'')\1\ filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') pursuant to Rule 11Aa3-2\2\ under the 
Securities Exchange Act of 1934 (``Exchange Act'')\3\ a proposed 
amendment to its National Market System Plan (``OPRA Plan'') for the 
purpose of updating the current fee structure and eliminating the use 
of separate news service agreements. Notice of the proposed amendment 
was provided by issuance of a Commission release\4\ and by publication 
in the Federal Register.\5\ The Commission received 220 comment 
letters. For the reasons discussed below, the Commission is approving 
the proposed amendment.

    \1\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 dissemination of last sale 
and quotation information 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'').
    \2\17 CFR 240.11Aa3-2.
    \3\15 .S.C. 78K-1.
     \4\Securities Exchange Act Release No. 35804 (June 5, 1995).
    \5\60 FR 30905 (June 12, 1995).
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I. Description

    OPRA proposes to establish a new redistribution fee of $1800 per 
month that will be payable by every vendor that redistributes options 
market information to nay person, whether on a current or delayed 
basis. The redistribution fee, however, will not apply to a vendor 
whose redistribution of options information is limited solely to 
``historical'' information.\6\ With the introduction of the 
redistribution fee, the amendment eliminates the vendor and news 
service pass-through fee, previously $2800.\7\ Further, OPRA proposes 
to reduce the direct access change from $2800 to $900 per month.\8\

    \6\Under the proposal, information becomes ``historical'' upon 
the opening of trading in the next succeeding trading session of 
that same market. For example, reports of transactions completed in 
a trading session on Wednesday become historical reports from and 
after the opening of trading on the following Thursday.
    \7\This $2800 monthly fee currently is payable by every vendor 
and news service that receives options information from another 
vendor on a current basis.
    \8\Currently, the direct access charge is payable by every 
vendor, subscriber or news service that has been authorized by OPRA 
to receive options information via the consolidated high-speed 
service from OPRA's Processor.
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    In addition to restructuring its fees, OPRA proposes to eliminate 
the separate news service agreement. Instead, OPRA will categorize news 
services as vendor and will seek to have news services sign vendor 
agreements. OPRA also is proposing to make conforming changes to the 
OPRA Plan.

II. Summary of Comments

    As noted above, the Commission received 220 comments letters 
regarding the proposal. Most comments were submitted by suers of 
delayed data, primarily small investors who expressed concern about the 
impact the redistribution fee will have on their owns fees. While some 
commenters did not object to existing and proposed OPRA fee for real-
time data, virtually all commenters opposed the proposed redistribution 
fee as it applies to delayed data. The commenters claimed that the 
proposal will set a bad precedent that will lead other markets also to 
charge for delayed data.
    Many commenters expressed a belief that all market information 
should be 

[[Page 62909]]
available to the public at no charge. Some equated market data to a 
form of advertising for which markets should not charge consumers. 
These commenters argues that the Commission should ensure the 
availability and accessibility of market information; that even a small 
increase in fees will force them to give up access to delayed data 
services; and that reduced access to market data will reduce trading 
activity by same investors. These commetners argued, therefore, that 
the proposal will reduce overall market liquidity.
    Some commenters claimed that the proposal discriminates against he 
small investor because real-time data, while far more useful than 
delayed data, in their view is not affordable to the average investor. 
They argued that the effect of the redistribution fee on vendors of 
delayed data will be to price the small investor our of the information 
market altogether.
    A few commenters challenged whether the exchanges have a 
proprietary interest in quote or transaction data. They claimed that 
OPRA should not be entitled to charge for information that OPRA does 
not own. One commenter claimed that while the manner in which the 
information is displayed may be protected under copyright laws, OPRA 
has no exclusive right to the information itself.\9\

    \9\See Letter from Carl Hendrix, to Jonathan G. Katz, Secretary, 
SEC (June 27, 1995).
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    OPRA responded to these comments in a letter dated August 1, 
1995.\10\ In its letter, OPRA stated that the Exchange Act contemplates 
the recovery of a portion of the costs of operating and maintaining 
exchange markets through fair, reasonable and nondiscriminatory fees 
for access to securities market information, and that the proposal is 
consistent with these standards. OPRA claimed that the fair allocation 
of costs among all persons that derive a commercial benefit from 
options market information will help level the playing field for all 
users of market data by eliminating an unintended subsidy for 
redistributors of less useful delayed data at the expense of more 
useful current information. OPRA noted that the proposal would not 
establish fees for end users of market data. Instead, the 
redistribution fee would apply to vendors. OPRA acknowledged, however, 
that vendors of securities market information most often pass their 
costs on the customers. Nevertheless, in OPRA's views, the proposal 
would more fairly allocate distribution fees and would reduce fees 
payable by some vendors. OPRA stated that the proposal would reduce 
fees payable by vendors that receive direct access to OPRA data from 
$2800 (current direct access charge) to $2700 per month (the $900 
direct access change plus the $1800 redistribution fee). Further, fees 
payable by vendors whose access includes indirect access to real-time 
and delayed data will be reduced from $2800 (the current pass-through 
fee) to $1800 per month (redistribution fee). Only vendors whose access 
is limited to indirect access to delayed data would be subject to 
higher fees (an increase from zero to $1800 per month).

    \10\See Letter from Michael L. Meyer, Schiff Hardin & Waite, 
Attorney for OPRA, to David Oestreicher, Attorney Division of Market 
Regulation, SEC (August 1, 1995).
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    OPRA argued that most, if not all end-users will benefit from the 
proposed fee changes, assuming vendors of real-time data pass on their 
savings to real-time and delayed data subscribers. OPRA claimed that 
even customers of an indirect access vendor whose business is 
exclusively delayed data distribution should not see any significant 
increase in vendor charges. For example, OPRA stated that is such a 
vendor has 1,000 subscribers, the vendor would have to increase the 
subscriber charge by only $1.80 per month in order to receiver the 
entire redistribution fee. In addition, OPRA claimed that the proposal 
would not impose any fee on redistributors or end-users of 
``historical'' information, facilitating the affordability and 
availability of market data for long-term monitoring and analysis. OPRA 
also noted that it provides several methods by which an individual 
investor may access real-time data at a low cost.\11\

    \11\For example, OPRA excludes non-professional subscribes from 
its real-time data subscriber fees. Instead, OPRA charges that 
vendor at $2.00 per month fee for each non-professional subscriber 
that receives real-time data from the vendor. Further, OPRA imposes 
no fees on end users of telephone dial-up services. Vendors of such 
services, however, are charged a port-based fee.
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III. Discussion

    Section 11A of the Exchange Act sets forth the standards under 
which the Commission must consider whether to approve fees proposed by 
exclusive securities information processors (``SIPs''), such as the 
pending OPRA proposal. Among other things, the proposal must assure 
that exchange members, brokers, dealers, SIPs, and investors would be 
able to obtain information with respect to quotations for and 
transactions in securities published or distributed by any self-
regulatory organization or SIP on terms that are not unfair, 
unreasonable, or unreasonably discriminatory.\12\

    \12\15 U.S.C. 78k-1; S. Rep. No 75, 94th Cong, 1st Sess. 9-12 
(1975) (``Senate Report'').
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    The Commission believes that the proposed fee changes satisfy the 
standards set forth by Congress with regard to the permissible terms 
for access to market information and, therefore, believes that the 
proposed fees are consistent with the Exchange Act. In this case, the 
proposal represents a reduction in fees for several vendors; the 
delayed data fees do not appear unfairly to restrict access to market 
information; and the reduction in fees for access to current 
information will further other statutory goals. In addition, historical 
price information, such as is used for academic and analytical 
purposes, will continue to be available exclusive of OPRA fees.\13\

    \13\The Commission understands the concerns of commenters, 
including the potential consequences of fee increases. As a related 
matter, the Commission believes that user comment on proposed OPRA 
fees could be even more effective if sought prior to filing such 
fees with the Commission. The Commission encourages OPRA to solicit 
comment on fee proposals before filing those proposals for 
Commission review.
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    In 1978, the Commission stated that three sections of the Exchange 
Act directly relate to the terms upon which securities information is 
obtained: (1) The standards set forth in Section 11A(b)(3) governing 
the registration of SIPSs; (2) the standards set forth in Section 
11A(b)(5) for review of prohibitions or limitations on access to 
services of registered SIPS; and (3) the standards set forth in the 
Commission's rule-making authority under Section 11A(c).\14\ The 
Commission found that these sections permit a registered SIP to impose 
terms of access on vendors, including access fees.\15\ The Commission 
also noted that the ability to impose such terms is subject to 
Commission review as to fairness and reasonableness, and may be limited 
by the Commission's adoption of a rule specifically prohibiting the 
terms or fees as being unfair, unreasonable or unreasonably 
discriminatory.\16\

    \14\See Securities Exchange Act Release No. 15372 (November 29, 
1978) (``OPRA Order'').
    \15\Id.
    \16\Id. To date, the Commission has not exercised its rulemaking 
authority under Section 11A(c) of the Exchange Act with respect to 
the fees charged by registered SIPs.
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    The Commission also has addressed the issue of whether, pursuant to 
a joint industry plan, charges for the retransmission, on a current and 
continuing basis, of consolidated market data are permissible.\17\ The 
Commission 

[[Page 62910]]
found a proposed Consolidated Tape Association retransmission fee 
consistent with the Exchange Act.\18\

    \17\See Securities Exchange Act Release No. 17161 (September 24, 
1980) (Order approving proposed amendment to the Consolidated Tape 
Plan).
    \18\Id. See also 17 CFR 240.11Aa3-1(d) (relating to 
retransmission of transaction reports or last sale data); 17 CFR 
240.11Aa3-1(e) (permitting the imposition of reasonable, uniform 
charges for the distribution of transaction reports or last sale 
data).
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    In addition, the appropriate scope of fees was addressed in a 
denial of access petition filed by Instinet against the National 
Association of Securities Dealers, Inc. (``NASD'').\19\ The NASD 
attempted to impose certain vendor and subscriber fees on the quotation 
information (referred to as the National Quotation Data Service) sought 
by Instinet. In its review of the denial of access petition, the 
Commission noted that in a situation where a monopolistic supplier of 
market information is in direct competition with vendors in providing 
such information, there is the potential for the supplier to erect 
barriers to entry by charging higher fees to vendors of competing 
information services.\20\ The Commission determined, therefore, that 
because Instinet sought to distribute certain quotation information in 
competition with the NASD, an exclusive processor of that information, 
the NASD's proposed fees were required to be cost-based to ensure 
neutrality and reasonableness of the vendor and subscriber fees.\21\

    \19\Securities Exchange Act release No. 20874 (April 17, 1984) 
(``Instinet case'').
    \20\Id. at 40-41.
    \21\Id. Although the fee restructuring proposal is not cost-
based in the sense described in the Instinet case, the purpose of 
the restructured fee schedule is fundamentally different. OPRA's 
proposal is designed to reallocate costs fairly and equitably among 
all persons that derive a commercial benefit from the information 
obtained from exchange markets. Because ORPA is not in direct 
competition with the vendors that will be subject to the 
redistribution fee, the analysis applied in the Instinet case is not 
strictly applicable. Although OPRA's posture with respect to the 
vendors that will be affected by the redistribution fee is different 
than the relationship between the NASD and Instinet, the Commission 
continues to have the duty to ensure that OPRA's fees satisfy 
applicable standards.
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    OPRA's proposal will encourage the use of real-time data by 
reducing the OPRA fees charged to vendors of real-time data. The 
Commission believes that investment decisions should be based on the 
most accurate, up-to-date information available. Thus, this proposal 
marks a step toward making real-time data more accessible to a greater 
number of market information users. Recent technological innovations 
have further enhanced the feasibility of providing easy access to real-
time market data to a larger segment of the investor community. The 
Commission encourages OPRA to utilize these new technologies to 
encourage additional steps to promote the use of real-time information 
on a fair, reasonable and non-discriminatory basis.
    The Commission recognizes that not all subscribers can afford 
regular real-time service and, as noted by some commenters, not all 
subscribers believe their use of market data justifies the cost of such 
service (even assuming that real-time vendors pass on their savings to 
their subscribers). As to these subscribers, there is a continued need 
for access to affordable delayed data. One adverse consequence of the 
fee restructuring will be to increase the costs to vendors of delayed 
data which, in turn, may result in a modest increase in the cost of 
delayed data to subscribers. The Commission has long been committed to 
protecting the public's right of access to market information and 
believes that any modest increase in costs to subscribers of delayed 
data under OPRA's proposed fee restructuring will not act as a barrier 
to fair and reasonable access to information for those subscribers. 
Competition among technology and information providers continues to 
thrive. Over the past few years, individual inventors have enjoyed 
unprecedented access to market data through varied media, including 
CNN, CNBC, satellite services, on-line computer services, the World 
Wide Web, and the Internet. The Commission believes that those 
innovations will continue to facilitate the fair and reasonable 
distribution of delayed data even though redistributors of delayed 
options data will be required to pay a redistribution fee.
    It is therefore ordered, pursuant to Section 11A(a)(3)(B) of the 
Act,\22\ that the amendment (S7-8-90) to the OPRA Plan be, and hereby 
is, approved.

    \22\15 U.S.C. 78k-1(a)(3)(B).
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    For the Commission by the Division of Market Regulation, pursuant 
to delegated authority.\23\

    \23\17 CFR 240.30-3(a)(29).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-29775 Filed 12-6-95; 8:45 am]
BILLING CODE 8010-01-M