[Federal Register Volume 65, Number 12 (Wednesday, January 19, 2000)]
[Notices]
[Pages 2998-3000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1170]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42328; File No. SR-OPRA-00-01]


Options Price Reporting Authority; Notice of Filing and Order 
Granting Accelerated Effectiveness of Amendment to OPRA Plan Adopting a 
Temporary Capacity Allocation Plan

    Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 7, 2000, 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 proposes to 
allocate the message handling capacity of OPRA's processor among the 
participant exchanges for a temporary period ending January 30, 2000, 
to minimize the likelihood that during this period the total number of 
messages generated by the participants will exceed the processor's 
(i.e., Securities Industry Automation Corporation) aggregate message 
handling capacity.\3\ The Commission is publishing this notice and 
order to solicit comments from interested persons on the proposed Plan 
amendment, and to grant accelerated

[[Page 2999]]

approval to the proposed Plan amendment through January 30, 2000.
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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 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\ OPRA has determined to treat this proposed capacity 
allocation as an amendment to its national market system plan and, 
accordingly, to file the proposed capacity allocation for Commission 
review and approval pursuant to paragraph (b) of Rule 11Aa3-2. Any 
determination made by OPRA to continue the effectiveness of the 
proposed capacity allocations or any revised capacity allocations 
beyond January 30, 2000 will be the subject of a separate filing 
under the same Rule.
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I. Description and Purpose of the Amendment

    As discussed above, OPRA proposes to allocate the message handling 
capacity of its processor among the participant exchanges for a 
temporary period ending January 30, 2000, to minimize the likelihood 
that during this period the total number of messages generated by the 
participants will exceed the processor's aggregate message handling 
capacity. During this period, the processor's aggregate message-
handling capacity, which is estimated by the processor to be 3,000 
messages per second, will be allocated among the participants by 
automatically limiting the number of messages that each participant may 
input to the processor as follows:
    American Stock Exchange: 870 messages per second
    Chicago Board Options Exchange: 1,200 messages per second
    Pacific Exchange: 525 messages per second
    Philadelphia Stock Exchange: 405 messages per second \4\
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    \4\ Due to its cut-over to a TCP/IP system, which is scheduled 
to occur in the coming days, the PHLX anticipates requiring 
additional messages per second. To evaluate whether there should be 
any future adjustments to the proposed allocations, on January 24 
and 25, 2000, PHLX will be permitted to input up to 500 messages per 
second.
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    OPRA proposes to allocate the message handling capacity of its 
processor in response to significant increases in the number of options 
quotations that have recently been experienced by all of the 
participant exchanges as a result of the greater number of options 
series being traded on the exchanges and the heightened volatility in 
the underlying securities. Although the aggregate amount of options 
market information messages is generally still within the capacity of 
the OPRA processor, the aggregate options message traffic is now so 
close to reaching the processor's maximum message-handling capacity 
that some short-term solution to the problem is necessary to avoid 
risking unacceptable delays and queuing in the dissemination of real-
time options market information. Although some long-term solutions have 
been proposed in the course of the Options Capacity Planning and Quote 
Mitigation Program that has been taking place over the past several 
months, these may not be in place soon enough to deal with the current 
expansion of message traffic.\5\ Accordingly, as part of that Program, 
OPRA's participant exchanges, in the presence of Commission staff 
pursuant to the September 1999 Order, have agreed upon the capacity 
allocation that is proposed in this filing. Because this allocation is 
based upon an assumed maximum processor capacity of 3,000 messages per 
second, which the processor advises is a realistic number, OPRA 
believes that it should serve the intended purpose of avoiding delays 
and queues in OPRA's real-time stream of market information. To retain 
sufficient flexibility to deal with changed circumstances within and 
among the options markets, including the planned commencement of 
options trading by the International Securities Exchange, the proposed 
allocations will remain in effect only until January 30, 2000, unless 
OPRA decides that the proposed allocation or some revised allocation 
should be continued beyond that date.\6\
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    \5\ See Exchange Act Release No. 41843 (September 8, 1999) in 
which the Commission issued an order authorizing the options 
exchanges, OPRA, OPRA's processor and other parties to act jointly 
in planning, developing and discussing approaches and strategies 
with respect to options quote message traffic and related matters 
(``September 1999 Order'').
    \6\ Any such continued allocation of OPRA capacity that might be 
approved by OPRA would be the subject of a separate filing under 
Rule 11Aa3-2. 17 CFR 240.11Aa3-2. See note 3, supra.
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II. Implementation of the Plan Amendment

    OPRA believes the temporary implementation of the proposed capacity 
allocation program is essential to avoid delays and queues in the 
dissemination of options market information, which in turn is necessary 
to achieve the objective of Section 11A(a)(1)(C)(iii),\7\ including to 
assure the availability to brokers, dealers and investors of 
information with respect to quotations for and transactions in 
securities. Accordingly, OPRA requests the Commission to permit the 
proposed allocation program to be put into effect summarily upon 
publication of notice of this filing, on a temporary basis, pursuant to 
paragraph (c)(4) of Rule 11Aa3-2,\8\ based on a finding by the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors or the maintenance of fair 
and orderly markets, to remove impediments to, and perfect the 
mechanisms of, a national market system, or is otherwise in furtherance 
of the purposes of the Act.
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    \7\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \8\ 17 CFR 240.11Aa3-2(c)(4).
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed Plan 
amendment 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 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-00-01 and should be 
submitted by February 9, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Plan Amendment

    After careful review, the Commission finds that the proposed 
amendment is consistent with the requirements of the Act and the rules 
and regulations thereunder.\9\ Specifically, the Commission believes 
that the proposed amendment, which allocates the limited capacity of 
the OPRA system among the options markets, is consistent with Rule 
11Aa3-2 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 the aggregate 
message traffic generated by the options exchanges is rapidly 
approaching the outside limit of OPRA's systems capacity. OPRA's 
processor has informed the Commission that current plans to enhance 
OPRA's systems are not expected to be completed before the end of the 
first quarter of this year, at the earliest. Consequently, the 
Commission is concerned that, absent an agreed-to program to allocate 
systems capacity among the options markets that is put in place 
immediately, systems queuing of options quotes may be the norm, to the 
detriment of all investors and other participants in the options 
markets. The Commission believes that the agreed-upon allocation 
proposal is a reasonable means for addressing potential strains on 
capacity that may

[[Page 3000]]

occur between now and January 30, 2000.
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    \9\ In approving this proposed Plan amendment, the Commission 
has considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
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    The Commission finds good cause to accelerate the proposed Plan 
amendment prior to the thirtieth day after the day of publication in 
the Federal Register. The Commission notes that the proposed Plan 
amendment is intended to allocate OPRA system capacity for a short 
period of time to mitigate potential disruption to the orderly 
dissemination of options market information caused by the inability of 
the OPRA system to handle the anticipated quote message traffic. The 
Commission believes that approving the proposed capacity allocation 
will provide the options exchanges and OPRA with an immediate, short-
term solution to a pressing problem, while giving the Commission and 
the options markets additional time to evaluate and possibly, 
implement, other quote mitigation strategies. In addition, the limited 
time frame of the applicability of the capacity allocation program 
should provide the Commission and the options exchanges with greater 
flexibility to modify the program, as necessary, to ensure the fairness 
of the allocation process to all of the options markets going forward. 
The Commission finds, therefore, the granting accelerated approval of 
the proposed Plan amendment is appropriate and consistent with Section 
11A of the Act.\10\
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    \10\ 15 U.S.C. 78k-1.
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V. Conclusion

    It is therefore ordered, pursuant to Rule 11Aa3-2 of the Act,\11\ 
that the proposed Plan amendment (SR-OPRA-00-010 is approved on an 
accelerated basis through January 30, 2000.

    \11\ 17 CFR 240.11Aa3-2.
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(29).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-1170 File 1-18-00; 8:45 am]
BILLING CODE 8010-01-M