Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 (“Act”), notice is hereby given that on May 18, 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 (“OPRA Plan”). The proposed OPRA Plan amendment would modify the current temporary capacity allocation plan for peak usage periods, which minimize the likelihood that during this period the total number of messages generated by the OPRA participant exchanges will exceed the processor's (i.e., Securities Industry Automation Corporation (“SIAC”)) aggregate message handling capacity. The Commission is publishing this notice and order to solicit comments from interested persons on the proposed OPRA Plan amendment and to grant accelerated approval to the proposed OPRA Plan amendment.
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 OPRA Plan provides for the collection and dissemination of last sale and quotation information on options that are traded on the member exchanges. The six exchanges that are participants to the OPRA Plan are the American Stock Exchange (“AMEX”); the Chicago Board Options Exchange (“CBOE”); the International Securities Exchange (“ISE”); the New York Stock Exchange (“NYSE”); the Pacific Exchange (“PCX”); and the Philadelphia Stock Exchange (“PHLX”).
I. Description and Purpose of the Amendment
OPRA proposes to modify the most recent amendment allocating the message handling capacity of its processor among the participant exchanges. This modification will commence on May 26, 2000, which is the day when ISE is scheduled to commence trading, and will continue until the earlier of the date when OPRA implements a system upgrade that will increase its maximum message handling capacity from the current 3,540 messages per second (“mps”) to 8,000 mps or August 24, 2000. During the modification provided for in this amendment, the current allocation will continue in effect: from May 26, 2000, through June 22, 2000, ISE will be allocated 55 mps; from June 23, 2000, through July 27, 2000, ISE will be allocated 110 mps; and from July 28, 2000, through August 24, 2000, ISE will be allocated 165 mps. Each of the foregoing allocations to ISE is subject to being reduced if, on or before the third day preceding the first day preceding the first day of an allocation period, ISE notifies OPRA that it does not need its full share of capacity for the ensuing allocation period and agrees to accept a specified reduced capacity share. Any reduction in capacity share that may be agreed to by ISE will be reallocated proportionately to the other exchanges, and will not affect the capacity share to which ISE is entitled during the next allocation period.
The current temporary allocation program is embodied in an amendment to the OPRA Plan proposed by OPRA and approved by the Commission. Securities Exchange Act Release No. 42779 (May 12, 2000), 65 FR 31950 (May 19, 2000) (order approving File No. SR-OPRA-00-04). As proposed by OPRA, that program was to expire by its terms on May 25, 2000. However, in its approval order the Commission modified the OPRA Plan amendment as filed by OPRA by extending the duration of the temporary allocation program for an additional 120 days from the date of the order, and further modified the program by providing an allocation of OPRA's capacity to ISE during this extended period. In its order, the Commission stated that any OPRA Plan amendment subsequently proposed by OPRA and found to be consistent with the Act would supersede the Commission's order. OPRA questions the authority of the Commission to impose such modifications to the OPRA Plan by order, as opposed to acting by rule, which is the procedure established in Rule 11Aa3-2(c)(2) for national market system plan amendments initiated by the Commission. Because the OPRA Plan amendment proposed in this filing would extend the temporary allocation program until the earlier of August 24, 2000, or the expansion of OPRA's capacity to the point where the allocation program is no longer needed, and because it would also provide an appropriate allocation of capacity to ISE during this period, OPRA believes that the approval of this amendment will obviate the need to resolve the issue of the Commission's authority to impose modifications to the OPRA Plan in its May 12 order.
OPRA expects this upgrade to go into production on July 17, 2000.
OPRA has filed this proposed modification of its temporary capacity allocation program as an amendment to its national market system plan, and accordingly, is filing the proposed amendment for Commission review and approval pursuant to paragraph (b) of Rule 11Aa3-2 under the Act. ISE has represented to OPRA that it finds the capacity share proposed to be allocated to it in the proposed amendment to be acceptable.
17 CFR 240.11Aa3-2.
II. Implementation of the Plan Amendment
OPRA believes the proposed modification of the temporary capacity allocation program is necessary and appropriate to avoid delays and queues in the dissemination of options market information, which in tern helps to achieve the objectives of Section 11A(a)(1)(C)(iii), including assuring the availability to brokers, dealers and investors of information with respect to quotations for and transactions in securities. Accordingly, OPRA requests the Commission permit the modification of the proposed allocation program be put into effect summarily upon publication of notice of this filing, pursuant to paragraph (c)(4) of Rule 11Aa3-2 of the Act, 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.
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. 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 OPRA Plan amendment that are filed with the Commission, and all written communications relating 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 No. SR-OPRA-00-05 and should be submitted by June 28, 2000.
IV. Commission's Findings and Order Granting Accelerated Approval of Prosed Plan Amendment
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. Specifically, the Commission believes that the proposed amendment, which allocates the limited capacity of the OPRA system among the options markets during peak usage periods, is consistent with Rule 11Aa3-2 under the Act 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, and at times surpasses, OPRA's systems capacity. OPRA estimates that its current plans to expand OPRA systems capacity will not be completed until July 17, 2000. Consequently, the Commission is concerned that, absent a program to allocate systems capacity among the options markets, 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 plan is a reasonable means for addressing potential strains on capacity.
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).
17 CFR 240.11Aa3-2.
The Commission notes that the anticipated enhancements to the OPRA system should increase systems capacity from 3,540 mps to 8,000 mps. The Commission does not, however, believe that the enhancement will end the need for a capacity allocation as the imminent move to decimalization and the dissemination of quotations with size will continue to strain OPRA systems capacity. For the above reasons, among others, the Commission modified the temporary allocation proposed by OPRA to extend its capacity allocation.
Consequently, the Commission recently solicited comment on a proposed amendment to the OPRA Plan to adopt an objective capacity allocation formula. See Securities Exchange Act Release No. 42755 (May 4, 2000), 65 FR 30148 (May 10, 2000) (File No. 4-434). The comment period on this proposal expires on June 9, 2000.
See Securities Exchange Act Release No. 42779 (May 12, 2000), 65 FR 31950 (May 19, 2000) (“May 12 order”). The Commission has authority to modify by order an amendment to a national market system plan submitted by plan participants as it did in the May 12 order. Rule 11a3-2(c)(2).
The Commission believes that the proposed amendment to the OPRA Plan is consistent with the Act and has determined to substitute the provisions of this proposal for the modifications made by the Commission to OPRA's previous capacity allocation amendment. Therefore, OPRA capacity should be allocated according to the terms of the capacity allocation set forth in this amendment.
See note 11 supra.
The Commission finds good cause to accelerate the proposed OPRA Plan amendment prior to the date of publication in the Federal Register. The Commission notes that the proposed OPRA Plan amendment is intended 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 amendment 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 this capacity allocation program provides 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, that granting accelerated approval of the proposed OPRA 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 OPRA Plan amendment (SR-OPRA-00-05) is approved on an accelerated basis until the earlier of the date when OPRA implements a system upgrade that will increase its maximum message handling capacity to 8,000 mps or August 24, 2000.
17 CFR 240.11Aa3-2.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-14262 Filed 6-6-00; 8:45 am]
BILLING CODE 8010-01-M