Options Price Reporting Authority; Notice of Filing and Order Granting Accelerated Effectiveness of Amendment to OPRA Plan Adopting a Participation Fee Payable by Each New Party to the Plan

On August 16, 1999, pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 (“Act”), the Options Price Reporting Authority (“OPRA”) 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”). The proposed amendment would add provisions applicable to a participation fee payable by each new party to the OPRA Plan and codifies procedures applicable to the admission of new parties to the OPRA Plan. Notice of the proposed OPRA Plan amendment was published in the Federal Register on October 20, 1999. The Commission received three comment letters on the proposed OPRA Plan amendment. On January 3, 2000, April 28, 2000, and May 18, 2000, OPRA submitted Amendments Nos. 1, 2, and 3, respectively. The Commission is publishing this notice and order to grant accelerated approval to the proposed OPRA Plan amendment, as revised by Amendment No. 3, and to solicit comments from interested persons on Amendment No. 3.

I. Background

Currently, the OPRA Plan 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. However, the OPRA Plan does not provide procedures for the application process or for a participation fee to be paid by an exchange at the time it becomes a party to the OPRA Plan.

In response to the application recently received from the International Securities Exchange (“ISE”) to become a party to the OPRA Plan and in anticipation of the receipt of additional applications from other new options exchanges, OPRA's initial filing proposed to incorporate into the OPRA Plan certain application forms and procedures to be used to apply to become a party to the OPRA Plan and to obtain interim access to the OPRA system and to the OPRA Processor for planning and testing purposes. The initial filing also proposed to add to the OPRA Plan provisions for a one-time participation fee payable by each new party to the OPRA Plan.

The Commission received three comment letters on the proposed OPRA Plan amendment. None of the commenters oppose the proposed establishment of an OPRA participation fee. However, the commenters raise concerns regarding the factors OPRA proposed to consider in determining the amount of the participation fee, asserting that the proposed OPRA Plan amendment could create a barrier to entry into the options industry that could harm competition. In response to the commenters, OPRA proposes to modify the proposal.

II. Description and Purpose of Amendment No. 3 to the Plan Amendment

The purpose of Amendment No. 3 to the proposed OPRA Plan amendment, as described above, is to further modify that part of the proposed OPRA Plan amendment concerning the participation fee, and to make conforming changes to the Application Agreement filed as part of the original filing. Because the OPRA Plan participants and the Commission have not yet reached agreement on the precise standards to be applied in determining the amount of the participation fee, OPRA proposes, in Amendment No. 3 to the OPRA Plan amendment, to eliminate the proposed factors to be considered in determining the participation fee and the requirement that the fee be paid as a condition to becoming a party to the OPRA Plan. Instead, Amendment No. 3 would incorporate into the OPRA Plan only the concept of a participation fee, with the specific standards applicable to the determination of the amount of the fee to be added by a future OPRA Plan amendment that would be subject to a separate filing and Commission approval. Although any new party to the OPRA Plan would be subject to the new participation fee, the fee would not be payable until after the applicable standards have been approved by the Commission and a specific fee based on those standards has been agreed upon by OPRA and the new participant.

A new exchange would not have a vote on the adoption of the specific standards applicable to the determination of the fee to be paid by that party or on the determination of the amount of the fee based on those standards, although it may participate with the other parties in the discussion of the specific standards to be adopted. As was provided in the proposed OPRA Plan amendment as originally filed, in the event OPRA and the new participant do not agree on the amount of the participation fee, the amount of the fee will be subject to review by the Commission pursuant to Section 11A(b)(5) of the Act.

III. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 3 to the proposed OPRA Plan amendment, including whether it 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 Amendment No. 3 to the proposed OPRA Plan amendment that are filed with the Commission, and all written communications relating to the Amendment No. 3 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 number SR-OPRA-99-01 and should be submitted by June 22, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval of Amendment No. 3 to the Proposed OPRA Plan Amendment

After careful review, the Commission finds that the proposed OPRA Plan amendment as revised by Amendment No. 3, is consistent with the requirements of the Act and the rules and regulations thereunder. Specifically, the Commission believes that Amendment No. 3 to the proposed OPRA Plan amendment 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 any new party to the OPRA Plan would be subject to a participation fee. The fee, however, would not be payable until after specific standards for determining the fee have been approved by the Commission and a specific fee based on those standards has been agreed upon by OPRA and the new participant.

The Commission believes that is reasonable for the OPRA Plan to provide for an initial participation fee to be paid by new parties to the OPRA Plan. Until specific standards can be agreed upon by the OPRA participants and approved by the Commission, however, the Commission believes it is appropriate for new exchanges to be admitted as parties to the OPRA Plan without requiring such new parties to pay a participation fee immediately.

In addition, Amendment No. 3 to the OPRA Plan amendment would allow new parties to the OPRA Plan to participate in discussions regarding the specific standards on which the participation fee is to be based, but would prohibit new parties from voting on the adoption of such standards. The Commission believes that because specific standards would be the subject of a separate filing and published by the Commission for notice and comment, new parties would have a voice, if not a vote, regarding the propriety of such standards. Further, the Commission notes that such standards will ultimately be subject to Commission approval, which will ensure further review of this issue.

The Commission finds good cause to accelerate the approval of Amendment No. 3 to the proposed OPRA Plan amendment prior to the thirtieth day after the date of publication in the Federal Register. The Commission notes that Amendment No. 3 to the proposed OPRA Plan amendment is responsive to concerns expressed by commenters and Commission staff regarding the propriety of the proposed factors to be considered in the determination of a participation fee. In addition, approving Amendment No. 3 to the proposed OPRA Plan amendment on an accelerated basis will permit the OPRA Plan to provide for a fee as ISE becomes a party to the OPRA Plan. The Commission believes that approving the amended proposal on an accelerated basis will provide the OPRA Plan participants additional time to develop appropriate standards upon which a participation fee should be based, without unnecessarily delaying ISE's bid to become a party to the OPRA Plan. The Commission finds, therefore, that granting accelerated approval of Amendment No. 3 to the proposed OPRA Plan amendment is consistent with Section 11A of the Act.

V. Conclusion

It is therefore ordered, pursuant to Rule 11Aa3-2 of the Act, that the proposed OPRA Plan amendment, as amended by Amendment No. 3, (SR-OPRA-99-01) is approved on an accelerated basis.