[Federal Register Volume 65, Number 47 (Thursday, March 9, 2000)]
[Notices]
[Pages 12597-12599]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-5757]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42493; File No. SR-OPRA-00-03]


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

March 3, 2000.
    Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 3, 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 May 13, 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 approval to the proposed Plan 
amendment through May 13, 2000.
---------------------------------------------------------------------------

    \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 that 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 May 13, 2000 will be the subject of a separate filing under 
the same Rule.
---------------------------------------------------------------------------

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 May 13, 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 3,540 
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: 1,024 messages per second
Chicago Board Options Exchange: 1,366 messages per second
Pacific Exchange: 635 messages per second
Philadelphia Stock Exchange: 515 messages per second

    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.\4\ For this reason, beginning in January 
2000, OPRA's

[[Page 12598]]

participant exchanges have agreed to allocate the assumed maximum 
processor capacity among themselves. The agreed-upon capacity 
allocations have been filed and approved under Exchange Act Rule 11Aa3-
2 as amendments to the OPRA Plan.\5\
---------------------------------------------------------------------------

    \4\ See Securities 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'').
    \5\ See Securities Exchange Act Release Nos. 42328 (January 11, 
2000), 65 FR 2988 (January 19, 2000) (File No. SR-OPRA-00-01) and 
42362 (January 28, 2000), 65 FR 5919 (February 7, 2000) (File No. 
SR-OPRA-00-02).
---------------------------------------------------------------------------

    OPRA's processor now estimates that the capacity allocation may 
prudently be adjusted upwards to reflect an assumed maximum processor 
capacity of 3,540 \6\ messages per second. Accordingly, OPRA's 
participant exchanges, in the presence of Commission staff pursuant to 
the September 1999 Order, have agreed to the allocation that is 
proposed in this filing to be effective through May 13, 2000. Because 
this allocation is based upon an assumed maximum processor capacity of 
3,450 messages per second, which the processor advises is a realistic 
number, it should serve the intended purpose of avoiding delays and 
queues in OPRA's real-time stream of market information.
---------------------------------------------------------------------------

    \6\ The proposed Plan amendment incorrectly referred to 3,518 
messages per second. It has been modified here pursuant to OPRA's 
verbal request. Telephone conversation between Joseph Corrigan, 
Executive Director, OPRA, and Deborah Flynn, Special Counsel, 
Division of Market Regulation, Commission, on March 3, 2000.
---------------------------------------------------------------------------

    To retain sufficient flexibility to deal with the 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 May 
13, 2000, unless OPRA or the Commission decides that the proposed 
allocation or some revised allocation should be continued beyond that 
date.\7\
---------------------------------------------------------------------------

    \7\ 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.
---------------------------------------------------------------------------

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),\8\ 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,\9\ 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \9\ 17 CFR 240.11Aa3-2(c)(4).
---------------------------------------------------------------------------

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, N.W., Washington, 
D.C. 20549-0609. Copies of the submission, all subsequent amendments, 
and all written statements with respect to the proposed Plan amendment 
that are filed with the Commission, and all written communications 
relating to the proposed 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-00-03 and should 
submitted by March 30, 2000.

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

    After careful review, the Commission finds that the proposed Plan 
amendment is consistent with the requirements of the Act and the rules 
and regulations thereunder. \10\ 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 
second 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 the options quotes may be the norm, to 
the detriment of all investors and othehr 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 occur between now and May 13, 2000.
---------------------------------------------------------------------------

    \10\ 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).
---------------------------------------------------------------------------

    The Commission finds good cause to accelerate the proposed Plan 
amendment prior to the thirtieth day after the date 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, that granting accelerated approval of 
the proposed Plan amendment is appropriate and consistent with Section 
11A of the Act. \11\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78k-1.
---------------------------------------------------------------------------

V. Conclusion

    It Is Therefore Ordered, pursuant to Rule 11Aa3-2 of the Act, \12\ 
that the proposed Plan amendment (SR-OPRA-00-03) is approved on an 
accelerated basis through May 13, 2000.
---------------------------------------------------------------------------

    \12\ 17 CFR 240.11Aa3-2.
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority. \13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(29).


[[Page 12599]]


---------------------------------------------------------------------------

    Dated:
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-5757 Filed 3-8-00; 8:45 am]
BILLING CODE 8010-01-M