[Federal Register Volume 65, Number 242 (Friday, December 15, 2000)]
[Notices]
[Pages 78518-78519]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31997]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43697; File No. SR-OPRA-00-08]


Options Price Reporting Authority; Order Approving an Amendment 
to the Options Price Reporting Authority Plan to Establish Standards 
for Determining a Participation Fee

December 8, 2000.

I. Introduction

    On September 12, 2000, the Options Price Reporting Authority 
(``OPRA'') submitted to the Securities and Exchange Commission (``SEC'' 
of ``Commission''), pursuant to Rule 11Aa3-2 under the Securities 
Exchange Act of 1934 (``Act''),\1\ an amendment to the OPRA Plan for 
Reporting of Consolidated Options Last Sale Reports and Quotation 
Information (``OPRA Plan'').\2\ The proposed OPRA Plan amendment would 
incorporate in the OPRA Plan factors to be considered by OPRA in 
determining the amount of the participation fee described in the 
current OPRA Plan as payable by each new party to the OPRA Plan. Notice 
of the proposed OPRA Plan amendment was published in the Federal 
Register on October 3, 2000.\3\ the Commission received one comment 
letter on the proposed OPRA Plan amendment.\4\ This order approves the 
proposal.
---------------------------------------------------------------------------

    \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 (March 18, 
1981). The OPRA Plan provides for the collection and dissemination 
of last sale and quotation information on options that are traded on 
the participant exchanges. The six exchanges that are participants 
to the OPRA Plan are the American Stock Exchange LLC, the Chicago 
Board Options Exchange, Inc., the International Securities Exchange 
LLC, the New York Stock Exchange, Inc., the Pacific Exchange, Inc., 
and the Philadelphia Stock Exchange, Inc.
    \3\ See Securities Exchange Act Release No. 43347 (September 26, 
2000), 65 FR 59035.
    \4\ See letter from Gerald D. Putnum, Chief Executive Officer, 
Archipelago, L.L.C., to Jonathan G. Katz, Secretary, Commission, 
dated October 20, 2000 (``Archipelago Letter'').
---------------------------------------------------------------------------

II. Description and Purpose of the Amendment

    The OPRA Plan currently provides that any national securities 
exchange or registered securities association whose rules governing the 
trading of standardized options have been approved by the Commission 
may become a party to the OPRA Plan, provided it agrees to conform to 
the terms and conditions of the OPRA Plan and pays a participation fee 
to OPRA The OPRA Plan does not establish the amount of the 
participation fee, but instead, states that the amount of the fee will 
be determined by OPRA in connection with each new application for 
participation, based upon standards incorporated in the OPRA Plan.\5\ 
OPRA believes that this approach provides sufficient flexibility to 
permit the determination of the fee to take into account the unique 
circumstances of each new application while, at the same time assuring 
that the amount of the fee is based upon a set of established 
standards, thus enabling the fee to be administered in a fair and 
consistent manner. Under this structure, the amount of the 
participation fee will be determined in discussions with each applicant 
in light of the standards embodied in the OPRA Plan, under the general 
oversight of the Commission. OPRA represents that this is the same 
general approach that is reflected in the plans of other registered 
securities information processor, such as the Consolidated Tape 
Association and the Consolidated Quotation System.\6\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 42817 (May 24, 
2000), 65 FR 35149 (June 1, 2000) (File No. SR-OPRA-99-01).
    \6\ See Section III(c) of the Second Restatement of the CTA Plan 
as restated December 1995, and Section III(c) of the Restatement of 
the CQ Plan as restated December 1995.

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

[[Page 78519]]

    Although the OPRA Plan currently provides for a participation fee 
to be determined in the manner described above, it does not reflect the 
specific standards to be applied in determining the amount of the fee. 
Instead, the OPRA Plan contemplates that these standards will be 
incorporated in the OPRA Plan by means of an amendment to be filed with 
and approved by the Commission prior to the determination of the 
participation fee to be paid by the International Securities Exchange, 
LLC (``ISE''), which, at present, is the only party to the OPRA Plan to 
which a fee based upon these standards will apply. OPRA proposes to 
amend the OPRA Plan for the purpose of incorporating in the OPRA Plan 
standards for determining a participation fee to be paid by a new 
participant to the OPRA Plan. OPRA represents that ISE, the only party 
currently subject to a participation fee to be determined on the basis 
of the standards now proposed, did not vote on the adoption of these 
standards, but did participate in the discussion of the proposed 
standards.
    The purpose of the participation fee is to require each new party 
to the OPRA Plan to pay a fair share of the costs previously paid by 
the other parties for the development, expansion, and maintenance of 
the OPRA system. Consistent with the purpose, the standards now 
proposed to be embodied in the OPRA Plan for the determination of the 
participation fee are, for the most part, concerned with these 
categories of costs. Because OPRA, as an administrative committee of 
exchanges, does not account for any assets of its own, it does not 
capitalize any of its costs but instead, simply passes them on to the 
exchanges. However, OPRA believes that the concept of capitalized costs 
is an appropriate factor to be taken into account in determining what 
should be a proper participation fee. Accordingly, the first factor 
proposed to be included in the OPRA Plan for this purpose is to 
consider what would have been amortized as OPRA's capital expenditures 
over the past five years if OPRA were subject to generally accepted 
accounting principles. OPRA believes that five years is an appropriate 
time frame for this purpose not only because it represents a reasonable 
life for the kinds of computer hardware and software assets that make 
up the OPRA system, but also, because it is a short enough period to 
provide a reasonable basis for determining how much of OPRA's past 
expenses should be shared by a new party.
    The next factor proposed to be considered is an assessment of costs 
incurred and to be incurred by OPRA in connection with any 
modifications to the OPRA system necessary to accommodate the new 
party, unless these costs have otherwise been paid or reimbursed by the 
new party. This, too, is a cost-based factor, and reflects OPRA's 
belief that it is appropriate for a new party to pay the costs uniquely 
associated with its becoming a party.
    Finally, OPRA proposes that the determination of the participation 
fee would also take into account previous fees paid by other new 
parties. OPRA represents that the closer in time any such prior fees 
were paid and the greater the similarity of the circumstances between 
the participation of the other parties and the party that is to pay the 
participation fee under consideration, the greater will be the weight 
given to this factor, in the interest of fairness and consistency. 
Further, OPRA represents that ISE and the other OPRA participant 
exchanges have had discussions concerning what would be the amount of 
the fee if the standard proposed in this amendment were approved, and 
they have reached agreement on both the amount of the fee and the terms 
of payment.

III. Discussion

    The Commission received one comment letter regarding the proposed 
OPRA Plan amendment.\7\ The commenter expressed support for the 
proposed amendment to the OPRA Plan. Specifically, the commenter stated 
that the proposed standards for determining participation fees would 
treat new participants to the OPRA Plan in an equitable fashion.
---------------------------------------------------------------------------

    \7\ See Archipelago Letter, supra note 4.
---------------------------------------------------------------------------

    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 OPRA Plan amendment is consistent with 
Section 11A of the Act \9\ and Rule 11Aa3-2\10\ thereunder in that it 
is 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.
---------------------------------------------------------------------------

    \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\ 15 U.S.C. 78k-1.
    \10\ 17 CFR 240.11A3-2.
---------------------------------------------------------------------------

    The Commission believes that it is reasonable for the OPRA Plan to 
provide for an initial participation fee to be paid by new parties to 
the OPRA Plan. The Commission notes that the proposal would establish 
specific factors for determining the amount of the fee payable by new 
participants to the OPRA Plan. The Commission believes that the 
proposed factors should foster a fair and reasonable method of 
determining the amount of a fee payable by new participants to the OPRA 
Plan.\11\ Accordingly, the Commission finds that the proposed factors 
for determining the amount of the participation fee in the proposal are 
consistent with the Act.
---------------------------------------------------------------------------

    \11\ The Commission notes that the amount of the participation 
fee for a new party to the OPRA Plan would be subject to review by 
the Commission if such new party and OPRA do not agree on the amount 
of the fee. See 15 U.S.C. 78k-1(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Rule 11Aa3-2 of the Act,\12\ 
that the proposed OPRA Plan amendment, (SR-OPRA-00-08) is approved.
---------------------------------------------------------------------------

    \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(a)(29).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31997 Filed 12-14-00; 8:45 am]
BILLING CODE 8010-01-M