[Federal Register Volume 65, Number 110 (Wednesday, June 7, 2000)]
[Notices]
[Pages 36180-36182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14262]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42849; File No. SR-OPRA-00-05]


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

May 26, 2000.
    Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 18, 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 (``OPRA Plan''). The proposed OPRA Plan amendment 
would modify the current temporary capacity allocation plan for peak 
usage periods, which minimize the likelihood that during this period 
the total number of messages generated by the OPRA participant 
exchanges will exceed the processor's (i.e., Securities Industry 
Automation Corporation (``SIAC'')) aggregate message handling capacity. 
The Commission is publishing this notice and order to solicit comments 
from interested persons on the proposed OPRA Plan amendment and to 
grant accelerated approval to the proposed OPRA Plan amendment.
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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 OPRA Plan provides for the collection and dissemination of 
last sale and quotation information on options that are traded on 
the member exchanges. The six exchanges that are participants to the 
OPRA Plan are the American Stock Exchange (``AMEX''); the Chicago 
Board Options Exchange (``CBOE''); the International Securities 
Exchange (``ISE''); the New York Stock Exchange (``NYSE''); the 
Pacific Exchange (``PCX''); and the Philadelphia Stock Exchange 
(``PHLX'').
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I. Description and Purpose of the Amendment

    OPRA proposes to modify the most recent amendment allocating the 
message handling capacity of its processor among the participant 
exchanges.\3\ This modification will

[[Page 36181]]

commence on May 26, 2000, which is the day when ISE is scheduled to 
commence trading, and will continue until the earlier of the date when 
OPRA implements a system upgrade that will increase its maximum message 
handling capacity from the current 3,540 messages per second (``mps'') 
to 8,000 mps \4\ or August 24, 2000. During the modification provided 
for in this amendment, the current allocation will continue in effect: 
from May 26, 2000, through June 22, 2000, ISE will be allocated 55 mps; 
from June 23, 2000, through July 27, 2000, ISE will be allocated 110 
mps; and from July 28, 2000, through August 24, 2000, ISE will be 
allocated 165 mps. Each of the foregoing allocations to ISE is subject 
to being reduced if, on or before the third day preceding the first day 
preceding the first day of an allocation period, ISE notifies OPRA that 
it does not need its full share of capacity for the ensuing allocation 
period and agrees to accept a specified reduced capacity share. Any 
reduction in capacity share that may be agreed to by ISE will be 
reallocated proportionately to the other exchanges, and will not affect 
the capacity share to which ISE is entitled during the next allocation 
period.
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    \3\ The current temporary allocation program is embodied in an 
amendment to the OPRA Plan proposed by OPRA and approved by the 
Commission. Securities Exchange Act Release No. 42779 (May 12, 
2000), 65 FR 31950 (May 19, 2000) (order approving File No. SR-OPRA-
00-04). As proposed by OPRA, that program was to expire by its terms 
on May 25, 2000. However, in its approval order the Commission 
modified the OPRA Plan amendment as filed by OPRA by extending the 
duration of the temporary allocation program for an additional 120 
days from the date of the order, and further modified the program by 
providing an allocation of OPRA's capacity to ISE during this 
extended period. In its order, the Commission stated that any OPRA 
Plan amendment subsequently proposed by OPRA and found to be 
consistent with the Act would supersede the Commission's order. OPRA 
questions the authority of the Commission to impose such 
modifications to the OPRA Plan by order, as opposed to acting by 
rule, which is the procedure established in Rule 11Aa3-2(c)(2) for 
national market system plan amendments initiated by the Commission. 
Because the OPRA Plan amendment proposed in this filing would extend 
the temporary allocation program until the earlier of August 24, 
2000, or the expansion of OPRA's capacity to the point where the 
allocation program is no longer needed, and because it would also 
provide an appropriate allocation of capacity to ISE during this 
period, OPRA believes that the approval of this amendment will 
obviate the need to resolve the issue of the Commission's authority 
to impose modifications to the OPRA Plan in its May 12 order.
    \4\ OPRA expects this upgrade to go into production on July 17, 
2000.
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    OPRA has filed this proposed modification of its temporary capacity 
allocation program as an amendment to its national market system plan, 
and accordingly, is filing the proposed amendment for Commission review 
and approval pursuant to paragraph (b) of Rule 11Aa3-2 under the 
Act.\5\ ISE has represented to OPRA that it finds the capacity share 
proposed to be allocated to it in the proposed amendment to be 
acceptable.
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    \5\ 17 CFR 240.11Aa3-2.
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II. Implementation of the Plan Amendment

    OPRA believes the proposed modification of the temporary capacity 
allocation program is necessary and appropriate to avoid delays and 
queues in the dissemination of options market information, which in 
tern helps to achieve the objectives of Section 11A(a)(1)(C)(iii),\6\ 
including assuring the availability to brokers, dealers and investors 
of information with respect to quotations for and transactions in 
securities. Accordingly, OPRA requests the Commission permit the 
modification of the proposed allocation program be put into effect 
summarily upon publication of notice of this filing, pursuant to 
paragraph (c)(4) of Rule 11Aa3-2 \7\ of the Act, 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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    \6\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \7\ 17 CFR 240.11Aa3-2.
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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 OPRA 
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 OPRA Plan amendment 
that are filed with the Commission, and all written communications 
relating to the proposed OPRA 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 No. SR-OPRA-00-05 and should be 
submitted by June 28, 2000.

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

    After careful review, the Commission finds that the proposed OPRA 
Plan amendment is consistent with the requirements of the Act and the 
rules and regulations thereunder.\8\ Specifically, the Commission 
believes that the proposed amendment, which allocates the limited 
capacity of the OPRA system among the options markets during peak usage 
periods, is consistent with Rule 11Aa3-2 under the Act \9\ 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, and at times surpasses, OPRA's systems capacity. OPRA 
estimates that its current plans to expand OPRA systems capacity will 
not be completed until July 17, 2000. Consequently, the Commission is 
concerned that, absent a program to allocate systems capacity among the 
options markets, 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 plan 
is a reasonable means for addressing potential strains on capacity.
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    \8\ In approving this proposed OPRA Plan amendment, the 
Commission has considered its impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \9\ 17 CFR 240.11Aa3-2.
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    The Commission notes that the anticipated enhancements to the OPRA 
system should increase systems capacity from 3,540 mps to 8,000 mps. 
The Commission does not, however, believe that the enhancement will end 
the need for a capacity allocation \10\ as the imminent move to 
decimalization and the dissemination of quotations with size will 
continue to strain OPRA systems capacity. For the above reasons, among 
others, the Commission modified the temporary allocation proposed by 
OPRA to extend its capacity allocation. \11\
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    \10\ Consequently, the Commission recently solicited comment on 
a proposed amendment to the OPRA Plan to adopt an objective capacity 
allocation formula. See Securities Exchange Act Release No. 42755 
(May 4, 2000), 65 FR 30148 (May 10, 2000) (File No. 4-434). The 
comment period on this proposal expires on June 9, 2000.
    \11\ See Securities Exchange Act Release No. 42779 (May 12, 
2000), 65 FR 31950 (May 19, 2000) (``May 12 order''). The Commission 
has authority to modify by order an amendment to a national market 
system plan submitted by plan participants as it did in the May 12 
order. Rule 11a3-2(c)(2).

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[[Page 36182]]

    The Commission believes that the proposed amendment to the OPRA 
Plan is consistent with the Act and has determined to substitute the 
provisions of this proposal for the modifications made by the 
Commission to OPRA's previous capacity allocation amendment. \12\ 
Therefore, OPRA capacity should be allocated according to the terms of 
the capacity allocation set forth in this amendment.
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    \12\ See note 11 supra.
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    The Commission finds good cause to accelerate the proposed OPRA 
Plan amendment prior to the date of publication in the Federal 
Register. The Commission notes that the proposed OPRA Plan amendment is 
intended 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 amendment 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 this capacity 
allocation program provides 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 OPRA Plan amendment is appropriate 
and consistent with Section 11A of the Act.\13\
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    \13\ 15 U.S.C. 78k-1.
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V. Conclusion

    It Is Therefore Ordered, pursuant to Rule 11Aa3-2 of the Act,\14\ 
that the proposed OPRA Plan amendment (SR-OPRA-00-05) is approved on an 
accelerated basis until the earlier of the date when OPRA implements a 
system upgrade that will increase its maximum message handling capacity 
to 8,000 mps or August 24, 2000.
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    \14\ 17 CFR 240.11Aa3-2.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority. \15\
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    \15\ 17 CFR 200.30-3(a)(29).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14262 Filed 6-6-00; 8:45 am]
BILLING CODE 8010-01-M