[Federal Register Volume 69, Number 148 (Tuesday, August 3, 2004)]
[Notices]
[Pages 46601-46603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17652]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50110; File No. SR-OPRA-2004-04]


Options Price Reporting Authority; Notice of Filing and Immediate 
Effectiveness of Amendment to OPRA Plan Regarding the Temporary Waiver 
of Charges by OPRA Relating to the Dynamic Throttle

July 28, 2004.
    Pursuant to section 11A of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 11Aa3-2 thereunder,\2\ notice is hereby given 
that on July 9, 2004, the Options Price Reporting Authority (``OPRA'') 
\3\ submitted to the Securities and Exchange Commission 
(``Commission'') an amendment to the Plan for Reporting of Consolidated 
Options Last Sale Reports and Quotation Information (``OPRA Plan''). On 
July 27, 2004, OPRA submitted Amendment No. 1 to the proposal.\4\ The 
proposed OPRA Plan amendment would waive temporarily the imposition of 
the charge that would otherwise be imposed upon a participant exchange 
that utilizes the ``dynamic throttle'' pursuant to Section III(g)(iii) 
of the OPRA Plan and Guideline 6(h) of the Capacity Guidelines that 
constitute part of the OPRA Plan. OPRA proposes to apply the waiver 
during a temporary period ending on September 10, 2004. The Commission 
is publishing this notice to solicit comments from interested persons 
on the proposed OPRA Plan amendment.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 240.11Aa3-2.
    \3\ 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), 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 six participants to the OPRA Plan are 
the American Stock Exchange LLC, the Boston Stock Exchange, Inc. 
(``BSE''), the Chicago Board Options Exchange, Inc., the 
International Securities Exchange, Inc., the Pacific Exchange, Inc., 
and the Philadelphia Stock Exchange, Inc.
    \4\ See letter from Michael L. Meyer, Counsel to OPRA, Schiff 
Hardin LLP, to Deborah L. Flynn, Assistant Director, Division of 
Market Regulation, Commission, dated July 26, 2004. Amendment No. 1 
added specific language to Section III(g) and Capacity Guideline 
6(h) of the OPRA Plan describing the temporary waiver.
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I. Description and Purpose of the Amendment

    The purpose of the proposed amendment to the OPRA Plan is to 
temporarily waive the charge imposed upon a participant exchange that 
utilizes the dynamic throttle feature of the OPRA System, which permits 
a participant to gain automatic access to unused, excess System 
capacity on a short-term, interruptible basis. Section III(g) of the 
OPRA Plan and Guideline 6(h) of the Capacity Guidelines require any 
participant exchange using the dynamic throttle to access additional 
capacity to pay for that capacity at a rate that is 150% of the fully 
allocated cost of that capacity, as determined by OPRA's Independent 
System Capacity Advisor (``ISCA'').
    The proposed waiver of this charge would apply during the period 
ending on September 10, 2004, which is the date when OPRA anticipates 
full implementation of an enhancement to its communications network 
that was recently developed by the Securities Industry Automation 
Corporation (``SIAC''), and designated by SIAC as the Secure Financial 
Transaction Infrastructure (``SFTI''). Once SFTI is fully implemented, 
all recipients of OPRA data would need to be able to access the data 
over a high bandwidth network, which certain data recipients are not 
yet able to do. OPRA believes that, among other things, full 
implementation of SFTI would permit SIAC to provide additional capacity 
to OPRA's participant exchanges who request it pursuant to procedures 
provided for in the OPRA Plan.
    OPRA had originally intended to implement SFTI on June 30, 2004, 
after which it would cease to support lower bandwidth ``legacy'' 
connections currently relied upon by some data recipients. However, 
because several vendors and one OPRA participant would not be able to 
access the new higher bandwidth connection on June 30th, OPRA recently 
determined to delay the cutover to SFTI until September 10, 2004, by 
which time all persons who access the OPRA network would be expected to 
be able to connect to SFTI.
    According to OPRA, as a consequence of delaying the cutover to 
SFTI, the date when participant exchanges would be able to increase 
their current allocation of System capacity by receiving an allocation 
of the increase through SFTI would likewise be delayed. OPRA believes 
that this delay could be especially problematic for a new options 
exchange, such as the BSE, which may need additional capacity to 
support its expanding options market.
    Since there is unused, excess capacity presently available in the 
System, OPRA believes that an obvious response to this problem would be 
to utilize OPRA's dynamic throttle to provide temporary, additional 
capacity to any exchange that might need it until the System's capacity 
is increased on a permanent basis during the cutover to SFTI on 
September 10, 2004.\5\ However, as described above, the OPRA Plan and 
the Capacity Guidelines currently require the imposition of a charge on 
any participant exchange that obtains additional, temporary capacity by 
means of the dynamic throttle. OPRA states that the purpose of this 
charge is to discourage any participant exchange from submitting an 
unrealistically low request for permanent capacity in order to lower 
its costs, and then relying on the operation of the dynamic throttle to 
make up for any shortfall in its allocation of System capacity.
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    \5\ OPRA states that it has been advised by the Options Clearing 
Corporation, acting in its capacity as the ISCA, that it concurs 
with OPRA's decision to delay the implementation of SFTI until 
September 10, 2004, and expects the dynamic throttle to provide 
whatever additional capacity may be needed by any of the exchanges 
prior to the anticipated cutover to SFTI on that date.
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    Although OPRA continues to believe that it is justified in imposing 
a charge on a participant exchange that makes use of the dynamic 
throttle under ordinary circumstances, it does not believe it would be 
fair to impose this charge under the present circumstances where a 
participant exchange could be prevented from obtaining a greater 
permanent allocation of capacity simply

[[Page 46602]]

because OPRA has delayed the implementation of SFTI as an accommodation 
to data recipients who are not yet able to connect to the upgraded 
network. For this reason, OPRA proposes to waive the imposition of the 
special charge on exchanges that utilize the dynamic throttle until 
September 10, 2004, when SFTI is expected to be fully implemented.
    OPRA does not anticipate any further delay in the implementation of 
SFTI beyond September 10, 2004, based on assurances that all data 
recipients would be able to connect to SFTI by that date. In the 
unlikely event that a further delay in the implementation of SFTI may 
be necessary, and if, as a result, OPRA should determine to waive the 
imposition of the dynamic throttle charge beyond that date, OPRA states 
that such a determination would be treated as a separate OPRA Plan 
amendment and would be the subject of a separate filing under Rule 
11Aa3-2 of the Act.\6\
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    \6\ 17 CFR 240.11Aa3-2.
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    The text of the proposed revised Section III(g) of the Plan and 
Capacity Guideline 6(h) is set forth below. Proposed new language is in 
italic.
* * * * *
III. Administration of the Plan

    (a)-(f) [No change]
    (g) Capacity Planning; Allocation of System Capacity.
    (i)-(ii) [No change]
    (iii) To the extent and subject to the conditions and limitations 
set forth in the Capacity Guidelines, under circumstances when the 
capacity of the System is unable to meet the aggregate requests for 
capacity that have been submitted to and approved by the ISCA, the ISCA 
shall be authorized to allocate available System capacity among the 
parties. In addition, the Capacity Guidelines shall provide for the 
utilization of a ``dynamic throttle'' that is capable of automatically 
and instantaneously making available to a party with an immediate need 
for additional capacity, on a short-term interruptible basis, any 
unused capacity, subject to the conditions that the party receiving 
such unused capacity must pay for it at a rate that is determined by 
the ISCA to be greater than the fully allocated cost of such additional 
capacity to the extent provided in the Capacity Guidelines (except that 
during a temporary period ending September 10, 2004, no such payment 
shall be required to be made by a party receiving unused capacity by 
operation of the dynamic throttle), and must relinquish such capacity 
to the party or parties to which it had originally been allocated 
whenever such party or parties need it. Amounts paid by a party for the 
use of excess capacity made available to it by operation of the dynamic 
throttle shall be added to OPRA's general revenues.
* * * * *
6. Capacity Allocation.
    (a)-(g) [No change]
    (h) The authority of the ISCA to allocate excess capacity in 
accordance with paragraphs (a)-(g) of this Guideline 6 is in addition 
to the automatic, short-term, interruptible allocation of unused 
capacity that may be made by the ``dynamic throttle'' that is 
incorporated within the OPRA System. Section III(g) of the OPRA Plan 
provides that any party receiving an allocation of unused capacity 
pursuant to the operation of the dynamic throttle must pay for it at a 
rate determined by the ISCA, which is to exceed the fully allocated 
cost of such additional capacity to the extent provided in these 
guidelines. Section III(g) also provides that the requirement to pay 
for unused capacity made available by operation of the dynamic throttle 
does not apply during a temporary period ending September 10, 2004. 
Accordingly, except during the period when the payment requirement does 
not apply as aforesaid, the ISCA is directed to apply a multiple of 
150% to the fully allocated cost of capacity for purposes of arriving 
at the rate at which a party shall be charged for capacity made 
available to it pursuant to the operation of the dynamic throttle.
* * * * *

II. Implementation of the OPRA Plan Amendment

    Pursuant to paragraph (c)(3)(i) of Rule 11Aa3-2 under the Act,\7\ 
OPRA designates this amendment as changing the way in which costs are 
distributed to OPRA's participant exchanges, thereby qualifying for 
effectiveness upon filing. The Commission may summarily abrogate the 
amendment within sixty days of its filing and require refiling and 
approval of the amendment by Commission order pursuant to Rule 11Aa3-
2(c)(2) under the Act,\8\ if it appears to the Commission that such 
action 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 perfect the mechanisms of, a 
national market system; or otherwise in furtherance of the purposes of 
the Act.
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    \7\ 17 CFR 240.11Aa3-2(c)(3)(i).
    \8\ 17 CFR 240.11Aa3-2(c)(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. Comments may be submitted by 
any of the following methods:

Electronic Comment

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-OPRA-2004-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-OPRA-2004-04. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
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 that may be 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal office of OPRA. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-OPRA-2004-04 
and should be submitted on or before August 24, 2004.


[[Page 46603]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(29).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-17652 Filed 8-2-04; 8:45 am]
BILLING CODE 8010-01-P