[Federal Register Volume 62, Number 69 (Thursday, April 10, 1997)]
[Notices]
[Pages 17652-17653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9174]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38467; International Series No. 1069; File No. SR-OPRA-
97-2]
Options Price Reporting Authority; Notice of Filing and Immediate
Effectiveness of Amendment to OPRA Plan Revising the Allocation of
Expenses Between the Basic, Index Option and Foreign Currency Option
Accounting Centers
April 2, 1997.
Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934
(``Exchange Act''), notice is hereby given that on March 27, 1997,\1\
the Options Price Reporting Authority (``OPRA'') \2\ 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 revises the
allocation of expenses between the basic, index option, and foreign
currency option (``FCO'') accounting centers. Moreover, OPRA is
proposing to eliminate a few out-of-date provisions from the Plan. OPRA
has designated this proposal as concerned solely with the
administration of the Plan, permitting the proposal to become effective
upon filing pursuant to Rule 11Aa3-2(c)(3) (ii) and (iii) under the
Exchange Act. The Commission is publishing this notice to solicit
comments from interested persons on the amendment.
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\1\ The amendment was originally submitted on March 4, 1997, but
was subsequently amended on March 27, 1997.
\2\ OPRA is a National Market System Plan approved by the
Commission pursuant to Section 11A of the Exchange Act and Rule
11Aa3-2 thereunder. 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
five 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 Stock Exchange (``PSE''); and the Philadelphia Stock
Exchange (``PHLX'').
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I. Description and Purpose of the Amendment
The purpose of the amendment is to revise the Plan to provide
greater flexibility in the allocation of various costs and expenses
among OPRA's three internal accounting centers: the basic accounting
center, the index option accounting center, and the FCO accounting
center. OPRA's accounting centers were created when the Plan was
amended effective January 1, 1996, to provide for the unbundling of
OPRA's FCO service and to provide a framework for the then contemplated
unbundling of its index option service.
The Plan currently provides for the allocation of operating costs
applicable to more than one accounting center in proportion to each
accounting center's share of OPRA's total output capacity. However,
because OPRA has not yet unbundled the index option service and has no
current plans to do so, there is no specific portion of the system's
output capacity dedicated to the index option service. As a result,
output capacity is not a meaningful measure for the allocation of costs
to the index accounting center. Therefore, in order to provide a fair
and workable method of allocation, the amendment provides for the
allocation of operating costs and expenses to the index option
accounting center in the same proportion as revenues are allocated to
that center.\3\
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\3\ The Plan provides that so long as the basic service and the
index service are not unbundled, revenues are allocated between
these two accounting centers on the basis of a 75% allocation to the
basic accounting center and 25% to the index option accounting
center.
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The proposed amendment also addresses the allocation of
administrative and general overhead costs and expenses between OPRA's
bundled basic and index accounting centers on the one hand, and its
unbundled FCO accounting center on the other hand. Currently, a share
of these expenses is allocated to the FCO accounting center in
proportion to the relative number of accounts maintained by OPRA in
respect of these two categories. However, since revenues from the FCO
accounting center have remained relatively small compared to revenues
from the bundled index and basic accounting centers, OPRA has concluded
that this does not provide for a fair allocation of costs to the FCO
accounting center. OPRA believes that a more flexible approach to the
allocation of this category of costs and expenses to the FCO accounting
center is appropriate. Therefore, the amendment eliminates any fixed
formula for the allocation of administrative and general overhead costs
and expenses to the FCO accounting center, and instead provides for the
allocation of these costs and expenses to the FCO accounting center in
a fair and reasonable manner as determined by OPRA. This flexible
approach will enable OPRA to adjust the allocation of such costs and
expenses to the FCO accounting center in a manner that fairly reflects
circumstances from time to time.\4\
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\4\ Pursuant to a resolution adopted at a meeting held in
November 1996, OPRA determined that effective retroactively as of
July 1, 1996 and continuing through December 31, 1996,
administrative and general overhead costs and expenses will be
allocated 88% to the basic/index accounting centers and 12% to the
FCO accounting center. It also was determined that the 88% allocated
to the basic/index accounting center will be further allocated (75%
to the basic accounting center and 25% to the index accounting
center).
This same allocation was adopted as the tentative allocation for
these costs and expenses during 1997, subject to adjustment in the
fourth quarter to reflect the final allocation agreed upon by OPRA
for that year. The final allocation then will be used as the
tentative allocation for 1998, and this same pattern of tentative
and final allocations will apply in succeeding years.
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OPRA also proposes to amend the Plan to add comparable flexibility
to the allocation among accounting centers of costs and expenses
associated with
[[Page 17653]]
facilities development. Currently, this category of costs is allocated
equally among OPRA's accounting centers. Based on experience to date,
OPRA determined that, depending on the nature of the facility in
question, this allocation may result in too large a share of
development costs being allocated to the relatively small FCO
accounting center. OPRA believes that greater flexibility is called for
so that the allocation of facilities development costs may bear a
closer relationship to the nature and functionality of the particular
facility being developed. Accordingly, the amendment provides that
facilities development expenses shall be allocated among the accounting
centers as OPRA may determine for the particular facility in question,
and only if no specific allocation is determined for a particular
facility will the allocation be made equally among the accounting
centers that are expected to make use of the facility. OPRA will
determine the allocation of facilities development costs and expenses
prior to the commencement of each facilities development project.\5\
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\5\ At its November 1996 meeting, OPRA determined that the
development costs associated with the implementation of the Common
Software and Internet Protocol projects, which are the only pending
facilities development projects applicable to the FCO accounting
center, will be allocated between the basic/index and the FCO
accounting centers on the basis of the output line capacity
availability to those accounting centers. This results in \6/7\ of
such costs being allocated to the basic/index accounting centers and
\1/7\ to the FCO accounting center. OPRA also determined that the
share of these costs allocated to the basic/index accounting centers
shall be further allocated (75% to the basic accounting center and
25% to the index accounting center).
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Moreover, OPRA proposes to simplify and make more flexible the
provision of the Plan governing the allocation of facilities
development costs to an accounting center based on that center's use of
a facility that was not contemplated at the time the facility's
development costs were first allocated. Therefore, OPRA proposes to
eliminate the fixed allocation formula that depends upon whether the
use of the facility commences in the first or second year after the
facility becomes operational. Instead, OPRA will provide that the
allocation of a share of facilities development costs to such an
accounting center will be as determined by OPRA where such use
commences within 24 months of the time the facility first became
operational. Further, OPRA believes that all categories of cost
allocations will be specifically provided for and, therefore, proposes
to eliminate the ``catch-all'' provision in the Plan.
Finally, OPRA proposes to make several non-substantive amendments.
OPRA intends to remove the references to January 1, 1996, as such date
no longer has any relevance in the Plan.
II. Solicitation of Comments
Pursuant to Rule 11Aa3-2(c)(3), the amendment is effective upon
filing with the Commission. The Commission may summarily abrogate the
amendment within 60 days of its filing and require refiling and
approval of the amendment by Commission order pursuant to Rule 11Aa3-
2(c)(2), 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 Exchange Act.
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. 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-97-2 and should be submitted by April 30, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(29).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-9174 Filed 4-9-97; 8:45 am]
BILLING CODE 8010-01-M
