[Federal Register Volume 66, Number 145 (Friday, July 27, 2001)]
[Notices]
[Pages 39218-39220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18764]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44580; File No. SR-OPRA-2001-02]


Options Price Reporting Authority; Order Granting Partial 
Approval to the Portion of an Amendment to OPRA Plan To Permit 
Exchanges To Disseminate Unconsolidated Market Information to Certain 
of Their Members Under Certain Circumstances

July 20, 2001.

I. Introduction

    On April 12, 2001, the Options Price Reporting Authority 
(``OPRA''),\1\ submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 11A of the Securities 
Exchange Act of 1934 (``Act''),\2\ and Rule 11Aa3-2 thereunder,\3\ an 
amendment to the Plan for Reporting of Consolidated Options Last Sale 
Reports and Quotation Information (``OPRA Plan''). The proposed 
amendment would permit options exchanges to disseminate unconsolidated 
market information to certain of their members under certain 
circumstances. Notice of the proposed amendment was published in the 
Federal Register on May 31, 2001.\4\ No comments were received on the 
proposal. This Order grants partial approval to the portion of the 
proposed amendment to the OPRA Plan that precisely mirrors the 
conditions set forth in exemptive letters previously issued by the 
Commission.\5\
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    \1\ OPRA is a national market system plan approved by the 
Commission pursuant to Section 11A of the Exchange Act, 15 U.S.C. 
78k-1, and Rule 11Aa3-2 thereunder, 17 CFR 240.11Aa3-2. See 
Securities Exchange Act Release No. 17638 (March 18, 1981), 22 
S.E.C. Docket 484 (March 31, 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 five 
signatories to the OPRA Plan that currently operate an options 
market are the American Stock Exchange, the Chicago Board Options 
Exchange (``CBOE''), the International Securities Exchange 
(``ISE''), the Pacific Exchange, and the Philadelphia Stock 
Exchange. The New York Stock Exchange is a signatory to the OPRA 
Plan, but sold its options business to the CBOE in 1997. See 
Securities Exchange Act Release No. 38542 (April 23, 1997), 62 FR 
23521 (April 30, 1997).
    \2\ 15 U.S.C. 78k-1.
    \3\ 17 CFR 240.11Aa3-2.
    \4\ See Securities Exchange Act Release No. 44347 (May 24, 
2001), 66 FR 29612.
    \5\ See infra notes 5-8 and accompanying text.
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II. Description and Purpose of the Amendment

    OPRA proposes to change the provision of the OPRA Plan that 
requires the participants to use the OPRA System as the exclusive means 
for the dissemination of options last sale reports and quotation 
information (the ``exclusivity clause''). The proposed amendment, in 
part, would modify the exclusivity clause to incorporate two 
conditional, temporary exemptions from the exclusivity clause that the 
Commission previously granted to the ISE and the CBOE.\6\ These 
exemptions, which expire on September 1, 2001, permit these two 
exchanges to disseminate to all of their members, but not to other 
persons, unconsolidated market information pertaining to options traded 
in their respective markets by means of communication networks other 
than the OPRA System, subject to certain conditions.
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    \6\ These exemptions were granted pursuant to Exchange Act Rule 
11Aa3-2(f), 17 CFR 240.11Aa3-2(f). See letters from Robert L.D. 
Colby, Deputy Director, Division of Market Regulation, Commission, 
to Michael J. Simon, Senior Vice President and General Counsel, ISE, 
dated May 25, 2000 and to Edward J. Joyce, President and Chief 
Executive Officer, CBOE, dated November 6, 2000. These letters, 
originally drafted to expire on May 26, 2001, have been extended 
until September 1, 2002. See letters from Robert L.D. Colby, Deputy 
Director, Division of Market Regulation, Commission, to Michael J. 
Simon, Senior Vice President and General Counsel, ISE, dated May 24, 
2001 and to Edward J. Joyce, President and Chief Executive Officer, 
CBOE, dated May 24, 2001.
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    The proposed amendment would modify the exclusivity clause so that 
each OPRA participant could disseminate its own market information by 
means of communication networks separate from the OPRA System under the 
following conditions. First, an OPRA participant could disseminate its 
own market information through means separate from the OPRA System only 
to other OPRA participants, and to its members for display on terminals 
or workstations used by persons associated with such members who are 
authorized to enter or transmit orders or quotations in the options 
market maintained by the OPRA participant.\7\ This condition means that 
an exchange's market information could not be furnished to a customer 
of a member, whether over a terminal sponsored by a member or 
otherwise.
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    \7\ See proposed OPRA Plan amendment, Section V.(c)(iii)(A).
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    Second, each member to which an OPRA participant disseminates its 
market information would be required to have equivalent access to 
consolidated options market information disseminated by OPRA for the 
same classes or series of options that are included in the market 
information.\8\ Access would be deemed to be ``equivalent'' if the 
information were equally accessible on the same terminal or 
workstation. Both of these conditions are consistent with conditions 
set forth by the Commission in the exemptive letters to the ISE and 
CBOE.
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    \8\ See proposed OPRA Plan amendment, Section V.(c)(iii)(B).
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    Finally, the proposed amendment would prohibit OPRA participants 
from disseminating their market information through means other than 
the OPRA System on a more timely basis than the same information is 
furnished to the OPRA System for inclusion in the consolidated 
information disseminated by OPRA.\9\ While this condition mirrors one 
set forth in the exemptive letters because it would not consider market 
information to be disseminated more timely than information is 
furnished to the OPRA System simply because the market information 
includes additional or more frequently updated information, so long as 
it does not include additional or more frequently updated price 
information with respect to the best bid or best offer for any series 
of options as compared with price information furnished to OPRA. 
Accordingly, the proposed amendment would permit an OPRA participant to 
provide market information through a network separate from the OPRA 
System that is in addition to, or different from, the information 
furnished to the OPRA System, including information concerning orders 
and quotations in the OPRA participants' market that do not represent 
the best bid and offer and size information.
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    \9\ See proposed OPRA Plan amendment, Section V.(c)(iii)(C).
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    The proposed amendment to the current OPRA Plan is reproduced 
below. Additions are italicized.
* * * * *

[[Page 39219]]

V. Collection and Dissemination of Options Last Sale Reports and 
Quotation Information

    (a)-(b) No change.
    (c) Dissemination of Last Sale Reports, Quotation Information and 
Other Information.
    (i) The OPRA System shall provide for the uniform, 
nondiscriminatory dissemination of Options Information, on fair and 
reasonable terms over a network or networks to vendors, subscribers and 
other approved persons. Last sale reports and quotation information 
with respect to eligible securities shall be disseminated only through 
the OPRA System, and only such reports and information, together with 
other information that satisfies the conditions of paragraph (iv) of 
this Section V(c) or is approved by OPRA, shall be disseminated through 
the System.
    (ii) Notwithstanding paragraph (i) of this Section V(c), a party 
may disseminate information pertaining to quotations and transactions 
in its market (``Proprietary Information'') through a network separate 
from the OPRA System provided that such dissemination meets the 
requirements of paragraphs (iii) and (iv) of this Section V(c).
    (iii) A party may disseminate its Proprietary Information pursuant 
to paragraph (ii) of this Section V(c) provided that:
    (A) such dissemination is limited to (1) such party's members only 
for display on terminals or workstations used by persons associated 
with the member who are authorized to enter or transmit orders or 
quotations in or to the options market maintained by such party, and 
(2) other parties to the Plan;
    (B) each member to which a party disseminates its Proprietary 
Information also has equivalent access to consolidated Options 
Information disseminated by OPRA for the same classes or series of 
options that are included in the Proprietary Information. For purposes 
of this subparagraph (B), access to consolidated Options Information 
and access to Proprietary Information are deemed ``equivalent'' if both 
kinds of information are equally accessible on the same terminal or 
work station; and
    (C) a party may not disseminate its Proprietary Information on any 
more timely basis than the same information is furnished to the OPRA 
System for inclusion in OPRA's consolidated dissemination of Options 
Information. For purposes of this subparagraph (C), Proprietary 
Information shall not be deemed to be disseminated more timely than 
information is furnished to the OPRA System simply because the 
Proprietary Information includes additional or more frequently updated 
information (but not additional or more frequently updated price 
information in respect of the best bid or offer for any series of 
options included in OPRA's consolidated dissemination) than is required 
to be furnished to the OPRA System.
    (iv) Any one or more parties may utilize the OPRA System for the 
purpose of disseminating information in addition to last sale reports 
and quotation information, but only if the following conditions are 
met:
    (1)-(4) No change.
    (d) Indemnification   No change.
* * * * *

III. Discussion

    After careful review, the Commission finds that it is appropriate 
to partially approve the proposed amendment. Specifically, the 
Commission is approving all proposed changes to Section V of the OPRA 
Plan, except the last sentence of paragraph (c)(ii)(C).
    Although the Commission continues to strongly support the 
dissemination of consolidated market data to all market participants, 
there is no clear policy reason to justify limiting the market 
information made available to the members of a particular market, so 
long as consolidated information is readily available either on the 
same terminal or on a separate terminal or device at the same 
workstation. The Commission believes that the restrictions on the 
dissemination of unconsolidated market data, coupled with the 
conditions that each member to which an OPRA participant disseminates 
its proprietary information has equivalent access to consolidated 
options market information disseminated by OPRA for the same classes or 
series of options that are included in the proprietary information and 
that all market data provided to the OPRA system be as timely as the 
market data provided directly to participant members, should provide 
adequate safeguards to ensure that the use of unconsolidated market 
information is appropriately limited. The Commission notes that the 
proposed conditions on the dissemination of unconsolidated data are the 
same conditions imposed on the CBOE and ISE as conditions of the grant 
of exemptive relief from the exclusivity clause of the OPRA Plan.
    Further, the Commission believes that by modifying the OPRA Plan to 
incorporate the exemptions previously granted to the CBOE and ISE from 
the OPRA Plan's exclusivity clause, the proposed amendment will place 
all of the parties to the OPRA Plan on equal footing with respect to 
the right to disseminate market data to their members, thereby 
fostering fair and equal competition among all of the parties. The 
Commission believes that this will allow any of the parties to the OPRA 
Plan to make market information available to members who enter or 
transmit orders or quotes in or to its market, while at the same time 
assuring that all persons who have access to market information also 
have equal access to consolidated market information disseminated by 
OPRA.
    The Commission is not approving the portion of the amendment that 
would permit the dissemination of proprietary information through means 
other than the OPRA System that is additional or updated more 
frequently than the information disseminated through OPRA, such as 
information relating to the size associated with an exchange's 
quotes.\10\ The Commission cannot find that this portion of the 
amendment is necessary or appropriate in the public interest, for the 
protection of investors and the maintenance of fair and orderly 
markets, to remove impediments to, and to perfect the mechanisms of, a 
national market system, or otherwise in furtherance of the purposes of 
the Act because, as discussed below, the Commission finds that this 
provision is inconsistent with the Commission's Quote Rule.\11\
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    \10\ The proposed text of the amendment that the Commission is 
not approving reads:
    For purposes of this subparagraph (C), Proprietary Information 
shall not be deemed to be disseminated more timely than information 
is furnished to the OPRA System simply because the Proprietary 
Information includes additional or more frequently updated 
information (but not additional or more frequently updated price 
information in respect of the best bid or offer for any series of 
options included in OPRA's consolidated dissemination) than is 
required to be furnished to the OPRA System.
    \11\ Exchange Act Rule 11Ac1-1, 17 CFR 240.11Ac1-1.
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    The Commission's Quote Rule requires that if an exchange collects 
from responsible brokers or dealers quotation sizes and aggregate 
quotation sizes in listed options, such exchange must make available 
the aggregate quotation sizes associated with the best bid and offer to 
quotation vendors. The Commission believes, and OPRA acknowledges, 
that, absent an exemption from the Quote Rule, an exchange may not make 
available aggregate quote size through a network separate from the OPRA 
System (i.e., make available to a quotation vendor) without also making 
such information available to other quotation vendors

[[Page 39220]]

through the OPRA System. Because the proposed amendment would permit an 
OPRA participant to provide market information through a network 
separate from the OPRA System that is in addition to or different from 
the information furnished to the OPRA System, the Commission finds that 
this provision is inconsistent with the Quote Rule, promulgated under 
Section 11A of the Act.\12\
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    \12\ 15 U.S.C. 787k-1.
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IV. Conclusion

    It is therefore ordered, pursuant to Rule 11Aa3-2 of the Act,\13\ 
that the proposed OPRA Plan amendment is approved in part.
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    \13\ 17 CFR 11Aa3-2.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(29).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-18764 Filed 7-26-01; 8:45 am]
BILLING CODE 8010-01-M