00-19229. Options Price Reporting Authority; Notice of Filing and Order Granting Temporary Effectiveness of Amendment to OPRA Plan Adopting a Capacity Allocation Plan

July 21, 2000.

Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 (“Act”),^[1] notice is hereby given that on July 20, 2000, 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 (“OPRA Plan”). The proposed OPRA Plan amendment would modify the current temporary capacity allocation plan for peak usage periods, which minimizes 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 proposed amendment would revise the current temporary capacity allocation to account for the recent expansion of the message handling capacity of OPRA's processor. The Commission is publishing this notice and order to solicit comments from interested persons on the proposed OPRA Plan amendment and to grant temporary effectiveness to the proposed OPRA Plan amendment not to exceed 120 days.

I. Description and Purpose of the Amendment

OPRA proposes to revise and extend the temporary allocation of the message handling capacity of its processor among the participant exchanges, which currently provides for the allocation of 3,540 messages per second (“mps”) and is scheduled to end on August 24, 2000. The revised capacity allocation now being proposed takes into account the recent expansion of the maximum message handling capacity of OPRA's processor to 5,000 mps. During the extension of the temporary allocation provided for in this amendment, the processor's maximum aggregate message-handling capacity 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:—1,320 mps

Chicago Board Options Exchange—1,715 mps

International Securities Exchange—355 mps

Pacific Exchange—875 mps

Philadelphia Stock Exchange—735 mps

The above capacity allocation would commence on July 21, 2000, or as soon thereafter as this amendment can be implemented by OPRA's processor. It would continue in effect until the earlier of (i) the time when OPRA's processor implements the next planned capacity upgrade by converting from the current T1 output network to the exclusive use of a new T3 output network (currently scheduled to take place on or about September 18, 2000), or (ii) the close of business on October 12, 2000.

OPRA has determined to treat this proposed revision and extension 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.

The purpose of the proposed amendment is to revise and extend the current temporary allocation of OPRA's message handling capacity to take into account the recent expansion of the maximum message handling capacity of OPRA's processor, and to provide an allocation that will remain in effect until the next planned capacity upgrade or until the close of business on October 12, 2000, whichever is first to occur.

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 turn helps to achieve the objectives of Section 11A(a)(1)(C)(iii),^[3] 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 to permit the modification of the proposed allocation program to be put into effect summarily upon publication of notice of this filing, pursuant to paragraph (c)(4) of Rule 11Aa3-2 of the Act,^[4] 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.

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. In particular, the Commission is soliciting comment on whether permanent approval of the amendment is appropriate and whether, in permanently approving such amendment, the Commission should modify the proposed amendment to remain effective until a later date than that set forth in the proposed amendment ^[5] or such time as the Commission may adopt an allocation formula.^[6] 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-00-07 and should be submitted by August 21, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval of Proposed 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.^[7] 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 ^[8] 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 September, 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 to account for the recent increase in message handling capacity of OPRA's processor and to address potential strains on capacity.

The Commission notes that the anticipated enhancements to the OPRA system should increase systems capacity to 8,000 mps. The Commission does not, however, believe that the enhancement will end the need for a capacity allocation ^[9] as the imminent move to decimalization and the dissemination of quotations with size will continue to strain OPRA systems capacity.

The Commission finds good cause to accelerate effectiveness of 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 temporary effectiveness of the proposed OPRA Plan amendment is appropriate and consistent with Section 11A of the Act.^[10]

V. Conclusion

It is therefore ordered, pursuant to Section 11A of the Act ^[11] and Rule 11Aa3-2 ^[12] thereunder, that the proposed OPRA Plan amendment (SR-OPRA-00-07) is effective on a temporary basis not to exceed 120 days.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority. ^[13]

Jonathan G. Katz,

Secretary.

Footnotes

1.  17 CFR 240.11Aa3-2.

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, the Chicago Board Options Exchange, the International Securities Exchange, the New York Stock Exchange, the Pacific Exchange, and the Philadelphia Stock Exchange.

3.  15 U.S.C. 78k-1(a)(1)(C)(iii).

4.  17 CFR 240.11Aa3-2.

5.  See Rule 11Aa3-2(c)(2), 17 CFR 240.11Aa3-2(c)(2).

6.  The Commission has 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 Commission notes that this temporary plan could be superseded prior to its expiration date. If the OPRA participant exchanges file with the Commission a capacity allocation plan for peak usage periods that is consistent with the Act, the Commission will act to substitute that proposal for this plan.

7.  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).

8.  17 CFR 240.11Aa3-2.

9.  See supra note 6.

10.  15 U.S.C. 78k-1.

11.  15 U.S.C. 78k-1.

12.  17 CFR 240.11 Aa3-2.

13.  17 CFR 200.30-3(a)(29).