Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 (“Act”), notice is hereby given that on January 7, 2000, the Options Price Reporting Authority (“OPRA”) 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 (“Plan”). The amendment proposes to allocate the message handling capacity of OPRA's processor among the participant exchanges for a temporary period ending January 30, 2000, to minimize the likelihood that during this period the total number of messages generated by the participants will exceed the processor's (i.e., Securities Industry Automation Corporation) aggregate message handling capacity. The Commission is publishing this notice and order to solicit comments from interested persons on the proposed Plan amendment, and to grant accelerated approval to the proposed Plan amendment through January 30, 2000.
17 CFR 240.11Aa3-2.
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 Plan provides for the collection and dissemination of last sale and quotation information on options that are traded on the member exchanges. The five exchanges which agreed to the OPRA Plan are the American Stock Exchange (“AMEX”); the Chicago Board Options Exchange (“CBOE”); the New York Stock Exchange (“NYSE”); the Pacific Exchange (“PCX”); and the Philadelphia Stock Exchange (“PHLX”).
OPRA has determined to treat this proposed capacity allocation as an amendment to its national market system plan and, accordingly, to file the proposed capacity allocation for Commission review and approval pursuant to paragraph (b) of Rule 11Aa3-2. Any determination made by OPRA to continue the effectiveness of the proposed capacity allocations or any revised capacity allocations beyond January 30, 2000 will be the subject of a separate filing under the same Rule.
I. Description and Purpose of the Amendment
As discussed above, OPRA proposes to allocate the message handling capacity of its processor among the participant exchanges for a temporary period ending January 30, 2000, to minimize the likelihood that during this period the total number of messages generated by the participants will exceed the processor's aggregate message handling capacity. During this period, the processor's aggregate message-handling capacity, which is estimated by the processor to be 3,000 messages per second, will be allocated among the participants by automatically limiting the number of messages that each participant may input to the processor as follows:
American Stock Exchange: 870 messages per second
Chicago Board Options Exchange: 1,200 messages per second
Pacific Exchange: 525 messages per second
Philadelphia Stock Exchange: 405 messages per second
Due to its cut-over to a TCP/IP system, which is scheduled to occur in the coming days, the PHLX anticipates requiring additional messages per second. To evaluate whether there should be any future adjustments to the proposed allocations, on January 24 and 25, 2000, PHLX will be permitted to input up to 500 messages per second.
OPRA proposes to allocate the message handling capacity of its processor in response to significant increases in the number of options quotations that have recently been experienced by all of the participant exchanges as a result of the greater number of options series being traded on the exchanges and the heightened volatility in the underlying securities. Although the aggregate amount of options market information messages is generally still within the capacity of the OPRA processor, the aggregate options message traffic is now so close to reaching the processor's maximum message-handling capacity that some short-term solution to the problem is necessary to avoid risking unacceptable delays and queuing in the dissemination of real-time options market information. Although some long-term solutions have been proposed in the course of the Options Capacity Planning and Quote Mitigation Program that has been taking place over the past several months, these may not be in place soon enough to deal with the current expansion of message traffic. Accordingly, as part of that Program, OPRA's participant exchanges, in the presence of Commission staff pursuant to the September 1999 Order, have agreed upon the capacity allocation that is proposed in this filing. Because this allocation is based upon an assumed maximum processor capacity of 3,000 messages per second, which the processor advises is a realistic number, OPRA believes that it should serve the intended purpose of avoiding delays and queues in OPRA's real-time stream of market information. To retain sufficient flexibility to deal with changed circumstances within and among the options markets, including the planned commencement of options trading by the International Securities Exchange, the proposed allocations will remain in effect only until January 30, 2000, unless OPRA decides that the proposed allocation or some revised allocation should be continued beyond that date.
See Exchange Act Release No. 41843 (September 8, 1999) in which the Commission issued an order authorizing the options exchanges, OPRA, OPRA's processor and other parties to act jointly in planning, developing and discussing approaches and strategies with respect to options quote message traffic and related matters (“September 1999 Order”).
Any such continued allocation of OPRA capacity that might be approved by OPRA would be the subject of a separate filing under Rule 11Aa3-2. 17 CFR 240.11Aa3-2. See note 3, supra.
II. Implementation of the Plan Amendment
OPRA believes the temporary implementation of the proposed capacity allocation program is essential to avoid delays and queues in the dissemination of options market information, which in turn is necessary to achieve the objective of Section 11A(a)(1)(C)(iii), including to assure the availability to brokers, dealers and investors of information with respect to quotations for and transactions in securities. Accordingly, OPRA requests the Commission to permit the proposed allocation program to be put into effect summarily upon publication of notice of this filing, on a temporary basis, pursuant to paragraph (c)(4) of Rule 11Aa3-2, 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.
17 CFR 240.11Aa3-2(c)(4).
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed 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 rule change that are filed with the Commission, and all written communications relating to the proposed rule change 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-00-01 and should be submitted by February 9, 2000.
IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Plan Amendment
After careful review, the Commission finds that the proposed amendment is consistent with the requirements of the Act and the rules and regulations thereunder. Specifically, the Commission believes that the proposed amendment, which allocates the limited capacity of the OPRA system among the options markets, 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 the aggregate message traffic generated by the options exchanges is rapidly approaching the outside limit of OPRA's systems capacity. OPRA's processor has informed the Commission that current plans to enhance OPRA's systems are not expected to be completed before the end of the first quarter of this year, at the earliest. Consequently, the Commission is concerned that, absent an agreed-to program to allocate systems capacity among the options markets that is put in place immediately, 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 proposal is a reasonable means for addressing potential strains on capacity that may occur between now and January 30, 2000.
In approving this proposed Plan amendment, the Commission has considered the proposal's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
The Commission finds good cause to accelerate the proposed Plan amendment prior to the thirtieth day after the day of publication in the Federal Register. The Commission notes that the proposed Plan amendment is intended to allocate OPRA system capacity for a short period of time 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 proposed capacity allocation 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 the applicability of the capacity allocation program should provide 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, the granting accelerated approval of the proposed Plan amendment is appropriate and consistent with Section 11A of the Act.
V. Conclusion
It is therefore ordered, pursuant to Rule 11Aa3-2 of the Act, that the proposed Plan amendment (SR-OPRA-00-010 is approved on an accelerated basis through January 30, 2000.
17 CFR 240.11Aa3-2.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-1170 File 1-18-00; 8:45 am]
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