Options Price Reporting Authority; Order Granting Permanent Approval to an Amendment To Establish a Best Bid and Offer Market Data Service

On February 26, 2002, the Options Price Reporting Authority (“OPRA”) submitted to the Securities and Exchange Commission (“Commission”), pursuant to section 11A of the Securities Exchange Act of 1934 (“Act”) and rule 11Aa3-2 thereunder, an amendment to the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information (“OPRA Plan” or “Plan”). The proposed amendment would add to the Plan terms governing the provision by OPRA of a best bid and offer (“BBO”) for each of the options series included in OPRA's market data service, and governing the use of the BBO by vendors.

Notice of the proposal was published in the Federal Register on March 15, 2002. The Commission received two comment letters on the proposed OPRA Plan amendment. On May 30, 2002, OPRA submitted Amendment No. 1 to the proposal. On June 13, 2002, OPRA submitted a letter in response to the comments. On October 4, 2002, OPRA submitted Amendment No. 2 to the proposal. On December 13, 2002, the Commission approved the proposal as modified by Amendment Nos. 1 and 2 on a temporary basis for 120 days, and solicited comment on Amendment Nos. 1 and 2. The Commission received no comments on Amendment Nos. 1 and 2. This order approves the OPRA Plan amendment, as modified by Amendment Nos. 1 and 2, on a permanent basis.

Under the proposed Plan amendment, OPRA proposes to add a consolidated BBO service that would disseminate the best bid and offer for each options series, and OPRA would prioritize the BBO on the basis of price, size, and time. In addition, OPRA's BBO service could reflect an approximation of the quotation size associated with the best bid or offer actually available.

Under the proposal, OPRA vendors would have the option to disseminate to customers the consolidated BBO together with last sale reports for any series of options in place of OPRA's full market data service. In addition to the BBO service, OPRA would be obligated to continue to offer to vendors its full market data service, which includes the disseminated best bid and offer from each of OPRA's participant exchanges. The proposed amendment also would permit OPRA to contract with vendors separately for: (i) The last sale reports and the BBO; or (ii) for the last sale reports, the BBO, and quotation information from each market. OPRA also could contract separately with vendors for the full market data service that it currently offers.

After careful review, the Commission finds that the proposed OPRA Plan amendment, as amended by Amendment Nos. 1 and 2, is consistent with the requirements of the Act and the rules and regulations thereunder. Specifically, the Commission believes that the proposed OPRA Plan amendment, as amended, which would permit OPRA to provide a best bid and offer market data service to vendors, is consistent with section 11A of the Act and rule 11Aa3-2 thereunder in that it is 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.

Specifically, the Commission believes that OPRA's proposal to permit vendors to disseminate last sale information and a BBO is consistent with section 11A of the Act because the combination of the consolidated BBO and the last sale reports would include the minimum essential pricing information market participants need to make informed investment decisions. Furthermore, the Commission notes that all markets would have an equal opportunity to be represented in the BBO. OPRA's proposed BBO service should make it easier for vendors to disseminate this minimum essential market information as an alternative to the full quotation information or in addition to such information.

Finally, the Commission notes that it is simultaneously approving OPRA's proposal to change its vendor agreement, which will affect the manner in which vendors may disseminate information to end users. Specifically, under OPRA's vendor agreement proposal, vendors could choose to disseminate only the BBO and last sale information and exclude from the BBO the quotation size, or the market identifier associated with a BBO, or both, so long as in excluding this information the vendor did not discriminate on the basis of the market in which quotations are entered.

It is therefore ordered, pursuant to section 11A of the Act, and rule 11Aa3-2 thereunder, that the proposed OPRA Plan amendment, as modified by Amendment Nos. 1 and 2 (SR-OPRA-2002-01) be, and it hereby is, approved on a permanent basis.