Notice2024-26959
Options Price Reporting Authority; Order Disapproving a Proposed Amendment To Modify the OPRA Plan Relating to Dissemination of Exchange Proprietary Market Data Information
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 223 (Tuesday, November 19, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 223 (Tuesday, November 19, 2024)]
[Notices]
[Pages 91451-91455]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-26959]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101625; File No. 4-820]
Options Price Reporting Authority; Order Disapproving a Proposed
Amendment To Modify the OPRA Plan Relating to Dissemination of Exchange
Proprietary Market Data Information
November 14, 2024.
I. Introduction
On November 8, 2023, the Cboe Exchange, Inc. (``Cboe Options''),
Cboe C2 Exchange, Inc. (``C2''), Cboe BZX Exchange, Inc. (``BZX''), and
Cboe EDGX Exchange, Inc. (``EDGX'') (collectively, ``Cboe'') \1\ filed
with the Securities and Exchange Commission (``Commission'') a proposal
(the ``Proposed Amendment'') to amend the plan of the Options Price
Reporting Authority
[[Page 91452]]
(``OPRA'') for reporting of consolidated options last sale reports and
quotation information (``OPRA Plan'' or ``Plan'').\2\ The Proposed
Amendment was published for comment in the Federal Register on January
22, 2024.\3\ The Commission has received comment letters on the
Proposed Amendment.\4\
---------------------------------------------------------------------------
\1\ Cboe Global Markets, Inc. operates Cboe Options, C2, BZX,
and EDGX. See <a href="https://www.cboe.com/us/options/overview">https://www.cboe.com/us/options/overview</a>.
\2\ The terms under which exchanges participate in OPRA are set
forth in the Limited Liability Company Agreement of Options Price
Reporting Authority, LLC. See <a href="https://cdn.opraplan.com/documents/OPRA_Plan.pdf">https://cdn.opraplan.com/documents/OPRA_Plan.pdf</a>.
\3\ See Securities Exchange Act Release No. 99345 (Jan. 16,
2024), 89 FR 3963 (Jan. 22, 2024) (``Notice'').
\4\ Comments received in response to the Notice are available on
the Commission's website at <a href="https://www.sec.gov/comments/4-820/4-820.htm">https://www.sec.gov/comments/4-820/4-820.htm</a>.
---------------------------------------------------------------------------
On April 19, 2024, the Commission instituted proceedings under Rule
608(b)(2)(i) of Regulation NMS,\5\ to determine whether to approve or
disapprove the Proposed Amendment or to approve the Proposed Amendment
with any changes or subject to any conditions the Commission deems
necessary or appropriate after considering public comment.\6\ On July
11, 2024, pursuant to Rule 608(b)(2)(i) of Regulation NMS, the
Commission extended the period within which to conclude proceedings
regarding the Proposed Amendment to September 18, 2024.\7\ On September
18, 2024, pursuant to Rule 608(b)(2)(ii) of Regulation NMS, the
Commission extended the period within which to conclude proceedings
regarding the Proposed Amendment to November 15, 2024.\8\
---------------------------------------------------------------------------
\5\ 17 CFR 242.608(b)(2)(i).
\6\ See Securities Exchange Act Release No. 99994 (Apr. 19,
2024), 89 FR 31785 (Apr. 25, 2024) (``Order Instituting
Proceedings''). Comments received in response to the Order
Instituting Proceedings are available on the Commission's website at
<a href="https://www.sec.gov/comments/4-820/4-820.htm">https://www.sec.gov/comments/4-820/4-820.htm</a>.
\7\ See Securities Exchange Act Release No. 100495 (July 11,
2024), 89 FR 58212 (July 17, 2024).
\8\ See Securities Exchange Act Release No. 101091 (Sept. 18,
2024), 89 FR 77951 (Sept. 24, 2024).
---------------------------------------------------------------------------
This order disapproves the Proposed Amendment.
II. Summary of the Proposed Amendment
A. Background
There are eighteen registered national securities exchanges that
list and trade standardized listed options (``options''),\9\ which are
issued and cleared by The Options Clearing Corporation. While the
market structure for options resembles that of equities in certain
respects, there are important differences. For example, while stocks
can be traded on any of the sixteen national securities exchanges that
trade them, as well as on off-exchange venues, options can be traded
only on an options exchange,\10\ and certain index options are
exclusively listed only on one exchange (or affiliated exchanges)
pursuant to a licensing agreement with the index provider (e.g., Cboe's
index options on the S&P 500 Index and Nasdaq's index options on the
Nasdaq-100 Index) or based on an index the exchange creates and
calculates (e.g., Cboe's VIX volatility index).\11\ On Cboe Options,
its highest volume options are typically its proprietary index
options.\12\
---------------------------------------------------------------------------
\9\ Those exchanges are: (1) Cboe Options, (2) C2, (3) BZX, and
(4) EDGX (all under the common control of Cboe Global Markets,
Inc.); (5) Miami International Securities Exchange LLC, (6) MIAX
Emerald, LLC, (7) MIAX PEARL, LLC, and (8) MIAX Sapphire, LLC (all
under the common control of Miami International Holdings, Inc.); (9)
Nasdaq BX, Inc., (10) Nasdaq GEMX, LLC, (11) Nasdaq ISE, LLC, (12)
Nasdaq MRX, LLC, (13) Nasdaq PHLX LLC (``Nasdaq Phlx''), and (14)
The Nasdaq Stock Market LLC (all under the common control of Nasdaq,
Inc.); (15) NYSE Arca, Inc. and (16) NYSE American LLC (both under
the common control of Intercontinental Exchange, Inc.); (17) BOX
Exchange LLC; and (18) MEMX, LLC.
\10\ See By-Laws of The Options Clearing Corporation, Article I,
Section 1(C)(27) (defining ``confirmed trade'') and Article VI,
Section 1.
\11\ See, e.g., Standard & Poor's Corp. v. Commodity Exchange,
Inc., 538 F. Supp. 1063 (S.D.N.Y. 1982), aff'd, Standard & Poor's
Corp. v. Commodity Exchange, Inc., 683 F.2d 704 (2d Cir. 1982). See
also Dow Jones & Company, Inc. v. International Securities Exchange,
Inc., and Options Clearing Corporation, 451 F.3d 295 (2d Cir. 2006).
Cboe, which has the largest number of proprietary index options, has
expanded its proprietary product offerings through a licensing
agreement to develop and list options based on FTSE and Russell
indices, an agreement that has been extended to 2030. See Rick
Rosenthal, What to Know about the Cboe and FTSE Russell Combination
(Apr. 29, 2020), available at <a href="https://www.cboe.com/insights/posts/what-to-know-about-the-cboe-and-ftse-russell-combination/">https://www.cboe.com/insights/posts/what-to-know-about-the-cboe-and-ftse-russell-combination/</a>.
\12\ See Cboe Options Exchange Symbol Data, available at <a href="https://www.cboe.com/us/options/market_statistics/symbol_data/?mkt=cone">https://www.cboe.com/us/options/market_statistics/symbol_data/?mkt=cone</a>.
---------------------------------------------------------------------------
B. OPRA
Congress directed the Commission to facilitate the establishment of
a national market system for securities in accordance with the findings
and objectives set forth in Section 11A(a)(1) of the Securities
Exchange Act of 1934 (``Act'').\13\ Among other things, Congress found
that it is in the public interest and appropriate for the protection of
investors and the maintenance of fair and orderly markets to assure
``the availability to brokers, dealers, and investors of information
with respect to quotations for and transactions in securities.'' \14\
In furtherance of this objective for the options market, the Commission
directed the exchanges, through a national market system plan (``NMS
Plan''), to create a centralized system for options market data
pursuant to which the exchanges created, and the Commission approved,
OPRA.\15\
---------------------------------------------------------------------------
\13\ See 15 U.S.C. 78k-1(a)(1).
\14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\15\ See Securities Exchange Act Release No. 17638 (Mar. 18,
1981), 22 SEC. Docket 484 (Mar. 31, 1981). New NMS Plans, and
amendments to an effective NMS Plan, are published by the Commission
after which the Commission may approve with such changes or subject
to such conditions as the Commission may deem necessary or
appropriate, disapprove the plan or amendment, or institute
proceedings to consider whether to disapprove the plan or amendment.
See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------
The purpose of OPRA is to collect from each exchange information on
the quotes displayed on, and transactions that occur on, each exchange,
process and consolidate that information into a single ``consolidated
tape,'' and then distribute the information to subscribers, including
the exchanges and market participants, who pay subscription fees to
OPRA.\16\ OPRA performs these functions through a contract with the
Securities Information Automation Corporation, which acts as the
securities information processor (``SIP'') for OPRA.\17\
---------------------------------------------------------------------------
\16\ See OPRA Plan, Article II, Section 2.4 (Purpose) and 15
U.S.C. 78c (a)(22). See also Securities Exchange Act Release No.
43621 (Nov. 27, 2000), 65 FR 75564, 75565 (Dec. 1, 2000) (File No.
4-434) (``The OPRA Plan governs the process by which options market
data are collected from participant exchanges, consolidated, and
disseminated. Consolidated data, when it is disseminated in a timely
manner, enable broker-dealers and investors to know the best price
that is currently available for a particular product. It assists
customers in setting the terms of their orders and in monitoring how
well their brokers execute their orders. Consolidated data also
assist investors' brokers to obtain, as well as exchange market
makers and specialists to provide, the best execution possible for
an order.'').
\17\ See 15 U.S.C. 78c (a)(22)(A) (defining ``securities
information processor''). See also 15 U.S.C. 78k-1(b) (concerning
registration of SIPs). See also Securities Exchange Act Release No.
43621 (Nov. 27, 2000), 65 FR 75564, 75565 (Dec. 1, 2000) (File No.
4-434) (``The OPRA committee selected the Securities Industry
Automation Corporation (`SIAC') as the facility for gathering the
last sale and quote information from each of the participant
exchanges and consolidating and disseminating such data to approved
vendors. All of the transactions executed on, and price quotations
for options generated by, each options exchange are communicated to
the public by OPRA through the facilities of its exclusive
processor, SIAC. The messages are sent to OPRA and distributed to
market data vendors on a consolidated basis for use by options
market participants, including retail investors, broker-dealers, and
the exchanges themselves.'').
---------------------------------------------------------------------------
As parties to OPRA, all options exchanges are responsible for
``act[ing] jointly with respect to matters to which they share
authority . . . in planning, developing, operating, or regulating''
OPRA.\18\ To carry out this responsibility, each exchange appoints one
member to the OPRA Management Committee, which is responsible for ``all
policy decisions on behalf of OPRA in furtherance of the functions and
[[Page 91453]]
objectives of OPRA under the [Act] and under [the OPRA Plan]''
including determining the products that OPRA offers and the level of
fees for subscribers.\19\
---------------------------------------------------------------------------
\18\ See OPRA Plan, Article II, Section 2.4 (Purpose).
\19\ See OPRA Plan, Article IV, Section 4.1 (OPRA Management
Committee).
---------------------------------------------------------------------------
As the Commission has previously stated, the transparency provided
by the consolidated OPRA data feed is a central feature of the U.S.
securities markets that, ``in turn, contributes to efficient price
discovery, offsets the fragmentation of buying and selling interest on
multiple exchanges, and facilitates the best execution of customers'
orders by broker-dealers.'' \20\
---------------------------------------------------------------------------
\20\ Securities Exchange Act Release No. 43621 (Nov. 27, 2000),
65 FR 75564 (Dec. 1, 2000) (File No. 4-434). See also Securities
Exchange Act Release No. 90610 (Dec. 9, 2020), 86 FR 18596, 18598
(Apr. 9, 2021) (File No. S7-03-20) (``Market Data Infrastructure
Final Rule'') (stating that the widespread availability of
consolidated market data is ``critical to the ability of market
participants to participate effectively in the U.S. securities
markets.'').
---------------------------------------------------------------------------
In addition to their responsibility to govern and administer the
dissemination of consolidated options data through OPRA, today some
exchanges separately sell their own ``proprietary market data.'' \21\
Unlike the consolidated SIP data that aggregates all quotes and
transactions across all options exchanges, an exchange's or an
affiliated exchange group's proprietary market data contains only those
quotes and transactions that occur on its market alone or together with
its affiliated exchanges.
---------------------------------------------------------------------------
\21\ See, e.g., Securities Exchange Act Release No. 88827 (May
6, 2020), 85 FR 28702, 28704 (May 13, 2020) (File No. 4-757) (``CT
Plan Order'') (explaining in the equities context that ``the
proliferation of proprietary exchange data products have heightened
the conflicts between the [exchanges'] business interests in
proprietary data offerings and their obligations as [self-regulatory
organizations] under the national market system to ensure prompt,
accurate, reliable, and fair dissemination of core data through the
jointly administered [equities plans].'').
---------------------------------------------------------------------------
Exchange proprietary market data might be of interest, for example,
to registered options market makers or non-market maker liquidity
providers who might want to get exchange data directly and consolidate
it themselves rather than wait for the OPRA SIP to consolidate and
disseminate the data, which might help liquidity providers better
manage their risk and thereby facilitate their ability to provide
better-priced displayed quotes to investors.\22\
---------------------------------------------------------------------------
\22\ See, e.g., Market Data Infrastructure Final Rule, supra
note 20, at 86 FR 18599 (discussing why market participants might
purchase exchange proprietary data from equities exchanges).
---------------------------------------------------------------------------
C. Equivalent Access
Options exchanges have not always been able to offer proprietary
market data products. When the Commission approved the OPRA Plan in
1981, the Plan as filed by the options exchanges (including Cboe
Options as one of the founding members) made OPRA the exclusive means
for the dissemination of last sale reports and quotation information
for options and did not allow the options exchanges to offer their own
proprietary market data separately.\23\
---------------------------------------------------------------------------
\23\ See Securities Exchange Act Release No. 44580 (July 20,
2001), 66 FR 39218 (July 27, 2001) (SR-OPRA-2001-02) (``2001
Order'') (discussing the OPRA Plan's exclusivity clause).
---------------------------------------------------------------------------
In 2001, the Commission approved an amendment to the OPRA Plan
proposed by the Plan participants to allow exchanges to offer
proprietary market data to their members under certain conditions,
provided that those members have ``equivalent access'' to the
consolidated options market data disseminated by OPRA for the same
classes or series of options that are included in the exchange
proprietary market data.\24\ In that approval order the Commission
cited the language used in the proposed amendment to the Plan when it
stated that ``[a]ccess would be deemed to be `equivalent' if the
information were equally accessible on the same terminal or
workstation.'' \25\
---------------------------------------------------------------------------
\24\ See id. at 39219.
\25\ Id. at 39218 (emphasis added). In addition, in 2003, the
Commission approved an amendment to the OPRA Plan proposed by the
Plan participants to allow an exchange to offer proprietary market
data to any person, not just to members of the exchange. See
Securities Exchange Act Release No. 48822 (Nov. 21, 2003), 68 FR
66892 (Nov. 28, 2003) (SR-OPRA-2003-01).
---------------------------------------------------------------------------
The provisions in the OPRA Plan that govern the ability of an
exchange to offer its own proprietary market data are contained in
Section 5.2(c)(ii) and (iii), including the ``equivalent access''
provision in Section 5.2(c)(iii)(A) (``Equivalent Access Provision''),
which states:
(ii) A Member may disseminate information pertaining to
quotations and transactions in its market (``Proprietary
Information'') through a network separate from the OPRA System only
if such dissemination meets the requirements of subparagraph (iii)
of this paragraph (c).
(iii) A Member may disseminate its Proprietary Information
pursuant to subparagraph (ii) of this paragraph (c) provided that:
(A) such dissemination is limited to other Members and to
persons who also have equivalent access to consolidated Options
Information disseminated by OPRA for the same classes or series of
options that are included in the Proprietary Information. For
purposes of this clause (A), ``consolidated Options Information''
means consolidated Last Sale Reports combined with either
consolidated Quotation Information or the BBO furnished by OPRA, and
access to consolidated Options Information and access to Proprietary
Information are deemed ``equivalent'' if both kinds of information
are equally accessible on the same terminal or work station; and
(B) a Member may not disseminate its Proprietary Information on
any more timely basis than the same information is furnished to the
OPRA System for inclusion in OPRA's consolidated dissemination of
Options Information.
D. Cboe One Options Feed and the Equivalent Access Provision
The Cboe exchanges offer a proprietary market data product called
the ``Cboe One Options Feed.'' \26\ Cboe describes it as offering ``a
comprehensive view of the U.S. options market through a single
connection,'' though it contains data on quotes and trades that take
place only on the four Cboe exchanges (Cboe Options, C2, BZX, and
EDGX).\27\
---------------------------------------------------------------------------
\26\ See, e.g., Securities Exchange Act Release No. 97996 (July
26, 2023), 88 FR 50249 (Aug. 1, 2023) (SR-CBOE-2023-034) (notice of
filing and immediate effectiveness of a proposed rule change to
amend the market data section of Cboe Option's fee schedule
including, among other things, to establish fees for the Cboe One
Options Feed).
\27\ See Cboe One Options Feed, available at <a href="https://www.cboe.com/market_data_services/us/options/cboe_one/">https://www.cboe.com/market_data_services/us/options/cboe_one/</a>. The Cboe One
Options Feed consolidates such data from Cboe Options, C2, BZX, and
EDGX into a single data product, which allows a subscriber to
purchase one product rather than four separate proprietary products
that the user would then need to consolidate itself. See id.
---------------------------------------------------------------------------
Cboe has stated that the Equivalent Access Provision can be
satisfied if a subscriber to an exchange's proprietary market data,
such as the Cboe One Options Feed, subscribes to a ``usage-based'' plan
from OPRA, which requires users to request information on a quote or
trade and pay based on the amount of data consumed, instead of
subscribing to the full streaming OPRA feed.\28\ Doing so would allow a
subscriber of the Cboe One Options Feed to subscribe to OPRA's less
expensive usage-based product instead of OPRA's more expensive
nonprofessional subscriber product. In turn, a person that wants to
purchase a Cboe One Options Feed subscription while minimizing the fees
it would pay for the OPRA subscription that it also would be required
to purchase because of OPRA's Equivalent Access Provision, would have
an incentive to minimize use of consolidated OPRA data under a usage-
based OPRA subscription to greatly reduce or eliminate the fees it
would otherwise pay to OPRA.\29\
---------------------------------------------------------------------------
\28\ See Notice, supra note 3, 89 FR 3965.
\29\ The OPRA ``Usage-based Vendor Fee'' is $0.0075 per quote
packet or $0.03 per options chain, subject to a $1.25 maximum per
month, whereas the ``Nonprofessional Subscriber'' fee is $1.25 for
each nonprofessional subscriber per month for up to 75,000 such
subscribers with lower tiered fees (down to $0.60) for more
subscribers. See OPRA Fee Schedule, available at <a href="https://cdn.opraplan.com/documents/OPRA_Fee_Schedule.pdf">https://cdn.opraplan.com/documents/OPRA_Fee_Schedule.pdf</a>. For comparison,
Cboe offers the Cboe One Options Feed for a $0.25 non-pro user fee
for the Summary feed. See Cboe One Feed Pricing, available at
<a href="https://www.cboe.com/market_data_services/us/equities/cboe_one/">https://www.cboe.com/market_data_services/us/equities/cboe_one/</a>.
---------------------------------------------------------------------------
[[Page 91454]]
E. Cboe's Proposed OPRA Plan Amendment
Cboe filed the proposed OPRA Plan amendment without obtaining the
unanimous vote of the Plan participants. Cboe sought to amend the
Equivalent Access Provision of the OPRA Plan by filing with the
Commission the Proposed Amendment, stating that it was filing it
pursuant to Rule 608(a)(1) of Regulation NMS.\30\ The Proposed
Amendment would change the OPRA Plan to, among other things, allow a
per usage OPRA subscription to satisfy the Equivalent Access Provision.
Specifically, the Proposed Amendment would ``clarify that access to
consolidated Options Information and access to Proprietary Information
are deemed `equivalent' if `Proprietary Information' and `consolidated
Options Information' (as those terms are defined in the OPRA Plan), are
equally accessible on the same terminal or work station, regardless of
whether the OPRA data is disseminated on a streaming or per usage-
basis.'' \31\ Cboe states that ``[t]he new language would clarify that
the Equivalent Access Provision is satisfied if a recipient of an
exchange proprietary data product also is simultaneously authorized and
entitled to receive OPRA data in one of the ways that OPRA makes its
data available; that is, by maintaining a streaming subscription to the
OPRA feed or having the ability to query OPRA data on a usage-basis.''
\32\
---------------------------------------------------------------------------
\30\ Rule 608(a)(1) provides that, ``Any two or more self-
regulatory organizations, acting jointly, . . . may propose an
amendment to an effective national market system plan . . . by
submitting the text of the . . . amendment to the Commission by
email, together with a statement of the purpose of such . . .
amendment and, to the extent applicable, the documents and
information required by paragraphs (a)(4) and (5) of this section.''
17 CFR 242.608(a)(1).
\31\ Notice, supra note 3, 89 FR 3965.
\32\ Id. (emphasis in original). In addition, Cboe proposes to
amend the Equivalent Access Provision by adding a new subparagraph
(C) under Section 5.2(c)(iii) of the OPRA Plan that would address
the display of ``consolidated Options Information'' by specifying
two requirements. See proposed Section 5.2(c)(iii)(C) of the OPRA
Plan. First, Cboe proposes to require that dissemination of
``consolidated Options Information'' for the same classes or series
of options that are included in the ``Proprietary Information'' must
be displayed in a context in which a trading or order-routing
decision can be implemented (i.e., the point of order entry or
modification). Cboe states that its proposal would not require the
display of consolidated data when ``market data is being provided on
a purely informational website that does not offer any trading or
order-routing capability.'' Notice, supra note 3, 89 FR 3966.
Second, Cboe proposes to require that ``consolidated Options
Information'' must also be provided if a registered representative
of a broker-dealer provides a quotation to a customer that can be
used to assess the current market or the quality of trade execution.
Specifically, proposed Section 5.2(c)(iii)(C) of the OPRA Plan would
state the following requirement: ``dissemination of consolidated
Options Information for the same classes or series of options that
are included in the Proprietary Information must be displayed in a
context in which a trading or order-routing decision can be
implemented (i.e., the point of order entry or modification).
Consolidated Options Information must also be provided if a
registered representative of a broker-dealer provides a quotation to
a customer that can be used to assess the current market or the
quality of trade execution.''
---------------------------------------------------------------------------
III. Discussion
Under the terms of the OPRA Plan, the plan ``may be amended from
time to time when authorized by the affirmative vote of all of the
[Plan participants], subject to the approval of the [Commission].''
\33\ Cboe did not obtain such authorization for the Proposed
Amendment.\34\
---------------------------------------------------------------------------
\33\ See OPRA Plan, Article X, Section 10.3 (Amendments).
\34\ See Notice, supra note 3, 89 FR 3963.
---------------------------------------------------------------------------
Though the Proposed Amendment did not receive the affirmative vote
of all of the members of the OPRA Plan in accordance with Section 10.3
of the OPRA Plan,\35\ Cboe nevertheless states that the Proposed
Amendment was appropriately filed with the Commission pursuant to Rule
608(a)(1) of Regulation NMS, which provides that ``[a]ny two or more
self-regulatory organizations, acting jointly, may file a national
market system plan or may propose an amendment to an effective national
market system plan. . . .'' \36\ Cboe states that more than two self-
regulatory organizations (``SROs'')--Cboe Options, C2, BZX, and EDGX--
jointly filed the Proposed Amendment with the Commission.\37\
---------------------------------------------------------------------------
\35\ See id. at 3965.
\36\ See Letter from Corinne Klott, Assistant General Counsel,
Cboe Global Markets, dated Feb. 23, 2024 (``Cboe Letter''), at 2.
See also 17 CFR 242.608(a)(1).
\37\ See Cboe Letter, supra note 36, at 2 (emphasis in
original).
---------------------------------------------------------------------------
Cboe states that under Rule 608(a)(1) of Regulation NMS ``there is
no requirement to separately satisfy the voting requirements of the
OPRA Plan'' for plan amendments and the OPRA Plan ``nowhere directs
that its amendment avenue is the only path to propose an amendment. . .
.'' \38\ Under Cboe's view, Section 10.3 of the OPRA Plan provides
``one method for seeking to amend the OPRA Plan'' where Rule 608(a)(1)
provides an ``additional method[ ]'' to do so.\39\ Cboe states that
Section 10.3 of the OPRA Plan ``does not foreclose any other route'' to
amend the Plan, ``let alone one authorized by Commission regulation.''
\40\ Rather, Cboe states that Section 10.3 of the OPRA Plan provides an
avenue for ``OPRA as an entity to offer an amendment, unanimously''
and, in contrast, Rule 608(a)(1) of Regulation NMS ``offers an
amendment path where exchanges, without unanimous consent of OPRA
members, wish to bring a proposed amendment to the Commission's and
public's attention.'' \41\ Accordingly, Cboe states that it has
complied with both the OPRA Plan and Regulation NMS.\42\
---------------------------------------------------------------------------
\38\ Id. at 2.
\39\ Id. at 1 (emphasis in original).
\40\ Id. at 3.
\41\ Id.
\42\ See id.
---------------------------------------------------------------------------
The OPRA Operating Committee disagrees with Cboe and states that
the Commission should disapprove the Proposed Amendment ``as improperly
filed, violating the explicit terms of the OPRA Plan.'' \43\ OPRA
states that the Proposed Amendment ``did not receive unanimous approval
from all of the [Plan participants] as required by the OPRA Plan.''
\44\ Stating that ``Rule 608(c) provides that, `[e]ach self-regulatory
organization shall comply with the terms of any effective national
market system plan of which it is a sponsor or a participant,' '' OPRA
states that ``[t]he general requirements of Rule 608(a)(1) cannot
override the more specific requirements set forth in the OPRA Plan.''
\45\
---------------------------------------------------------------------------
\43\ See Letter from James P. Dombach, Davis Wright Tremaine
LLP, dated Feb. 12, 2024 (``OPRA Letter''), at 1.
\44\ Id. at 2.
\45\ Id.
---------------------------------------------------------------------------
OPRA further states that ``Cboe is attempting to circumvent the
requirements of the OPRA Plan through its incorrect interpretation of
Rule 608'' and states that ``[n]ever has an NMS Plan amendment been
submitted in the manner Cboe utilized rather than in accordance with
the explicit requirements of the relevant NMS Plan.'' \46\ OPRA states
that ``by requiring heightened approval requirements, the market can be
assured that any proposal has broad support among entities that have
competing interests, thereby ensuring that only those proposals that
are viewed as truly beneficial to the national market system are
proposed.'' \47\ OPRA states that Cboe's view would render Section 10.3
of the OPRA Plan as ``superfluous'' and states that ``Rule 608(a)(1)
must be interpreted as a floor to the requirements of submitting an NMS
plan or amendment,
[[Page 91455]]
and the [Plan participants] have agreed to the heightened requirements
set forth in the OPRA Plan (which have been approved by the
Commission).'' \48\
---------------------------------------------------------------------------
\46\ Id.
\47\ Id.
\48\ Id.
---------------------------------------------------------------------------
A group of affiliated OPRA Plan participants similarly requested
that the Commission disapprove the Proposed Amendment.\49\ Stating that
``Rule 608(c) under Regulation NMS provides that, `Each self-regulatory
organization shall comply with the terms of any effective national
market system plan of which it is a sponsor or a participant,' '' and
that ``the [Proposed] Amendment did not receive the affirmative vote of
all of the members of the OPRA Plan pursuant to Section 10.3 of the
OPRA Plan,'' the commenter states that ``Cboe's submission of the
[Proposed] Amendment violated Rule 608(c).'' \50\ The commenter further
states that
---------------------------------------------------------------------------
\49\ See Letter from Greg Ferrari, Vice President, U.S. Options,
Nasdaq, dated Feb. 12, 2024 (``Nasdaq Letter''), at 2.
\50\ Id. at 2.
Cboe's reading of Rule 608(a)(1)--that it alone can move to
amend the OPRA Plan without regard to the views of other OPRA
members--is nonsensical, contrary to Rule 608 as a whole, and, if
accepted by the Commission, would undermine the ability of all
national market system plans to govern themselves. Cboe is
contending, in effect, that any two SROs disappointed in the outcome
in any NMS plan deliberations should be able to file their proposal
with the Commission and rehash the same debate in a different forum.
This will inject uncertainty in all NMS plan operations, and
unnecessarily complicate the plan amendment process.\51\
---------------------------------------------------------------------------
\51\ Id.
Cboe cannot use Rule 608(a)(1) to bypass the requirements of the
OPRA Plan. The Plan participants have included a clear and specific
amendment clause in the OPRA Plan (Article X, Section 10.3) to govern
the process of amending the Plan by the Plan participants. This
amendment clause provides the specific requirements for amendments of
the Plan and is more stringent than the requirements of Rule 608(a)(1).
That is, the Plan requires unanimous participant approval for plan
amendments, and the Commission approved the OPRA Plan with that
unanimous consent amendment requirement.\52\ Such provisions are not
uncommon, as other NMS Plans contain requirements to amend that are
more restrictive than Rule 608 \53\ though some contain no general
amendment provision.\54\ Rule 608(a)(1) provides the minimum for plan
amendments, but the Commission has approved many NMS Plans that include
additional criteria that must be met for plan amendments to be filed
with the Commission.\55\
---------------------------------------------------------------------------
\52\ See Securities Exchange Act Release No. 17638 (Mar. 18,
1981), 22 SEC. Docket 484 (Mar. 31, 1981). See also OPRA Plan,
Article X, Section 10.3 (Amendments).
\53\ See, e.g., Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of
Quotation and Transaction Information for Nasdaq-Listed Securities
Traded on Exchanges on an Unlisted Trading Privilege Basis, Article
XVI (Modifications to the Plan), available at <a href="https://www.utpplan.com/utp_plan">https://www.utpplan.com/utp_plan</a>.
\54\ See, e.g., Plan for the Purpose of Developing and
Implementing Procedures to Facilitate the Listing and Trading of
Standardized Options, available at <a href="https://www.theocc.com/getmedia/198bfc93-5d51-443c-9e5b-fd575a0a7d0f/options_listing_procedures_plan.pdf">https://www.theocc.com/getmedia/198bfc93-5d51-443c-9e5b-fd575a0a7d0f/options_listing_procedures_plan.pdf</a>.
\55\ Rule 608 would, however, apply where an NMS Plan is silent
on the topic and does not provide a specific voting clause to govern
amendments.
---------------------------------------------------------------------------
Rule 608 permits the inclusion in NMS Plans of more stringent
requirements for plan amendments that go beyond the ``any two or more
SROs acting jointly'' minimum requirement in Rule 608. Specifically,
the Rule states that any NMS Plan or amendment filed with the
Commission must be accompanied by certain statements and
representations, including ``[i]n the case of a proposed amendment, a
statement that such amendment has been approved by the sponsors in
accordance with the terms of the plan.'' \56\ In Cboe's Proposed
Amendment, it stated ``Not Applicable'' in response to that
requirement,\57\ though an applicable provision does exist and was not
satisfied. As stated by OPRA, Cboe has not complied with the terms of
Section 10.3 of the OPRA Plan in that it failed to obtain the
affirmative vote of all Plan participants to amend the OPRA Plan as
required by the OPRA Plan.\58\
---------------------------------------------------------------------------
\56\ See 17 CFR 242.608(a)(4)(ii)(E).
\57\ Notice, supra note 3, 89 FR 3967.
\58\ See 17 CFR 242.608(c) (``Each [SRO] shall comply with the
terms of any effective national market system plan of which it is a
sponsor or a participant.'').
---------------------------------------------------------------------------
When reviewing amendments to an NMS Plan pursuant to Rule 608(b),
the Commission evaluates whether a proposed amendment ``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 Act.'' \59\
---------------------------------------------------------------------------
\59\ 15 U.S.C. 78k-1(b)(2).
---------------------------------------------------------------------------
The terms of the OPRA Plan are applicable to Cboe as Plan
participants, and therefore unanimous agreement was needed for the
amendment. Accordingly, the Commission cannot make a finding that the
Proposed Amendment 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 Act.\60\
---------------------------------------------------------------------------
\60\ In light of Cboe's failure to obtain the required
affirmative vote for the Proposed Amendment, the Commission need not
make a determination on the merits of the proposal.
---------------------------------------------------------------------------
IV. Conclusion
For the reasons set forth above, the Commission does not find,
pursuant to Section 11A of the Act, and Rule 608 thereunder, that the
Proposed Amendment 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 Act.
It is therefore ordered, pursuant to Section 11A of the Act, and
Rule 608(b)(2) thereunder, that the Proposed Amendment (File No. 8-420)
be, and hereby is, disapproved.
By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-26959 Filed 11-18-24; 8:45 am]
BILLING CODE 8011-01-P
</pre></body>
</html>Indexed from Federal Register on November 19, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.