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Options Price Reporting Authority; Notice of Filing of a Proposal To Revise the Required Form of Vendor Agreement Under Section VII(b) of the OPRA Plan

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Start Preamble November 14, 2002.

Pursuant to Section 11A of the Securities Exchange Act of 1934 (“Act”) and Rule 11Aa3-2 under,[1] notice is hereby given that on July 12, 2002, the Options Price Reporting Authority (“OPRA”),[2] submitted to the Securities and Exchange Commission (“Commission”) an amendment to the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information (“OPRA Plan”). The amendment would revise the form of Vendor Agreement that is required to be entered into between OPRA and vendors of options information under Section VII(b) of the OPRA Plan. The Commission is publishing this notice to solicit comments on the proposed amendment to the OPRA Plan from interested persons.

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I. Description and Purpose of the Amendment

The purpose of the proposed amendment is to revise the form of Vendor Agreement that is required to be entered into between OPRA and vendors of options information under Section VII(b) of the Plan. The Vendor Agreement governs the terms and conditions under which vendors are permitted to redistribute options market data to subscribers and other end users of the information. The proposed revisions are intended to update the Vendor Agreement (and attachments to the Vendor Agreement) in light of changes in technology and other developments that have occurred since that agreement was last revised. These changes have previously been reflected in a series of riders to the Vendor Agreement, consisting of the “Voice-Synthesized Market Data Service Rider”, the “Radio-Paging Market Data Service Rider”, the “Dial-up Market Data Service Rider” and the “Electronic Contract Rider.” As technology has continued to develop, these riders have themselves become either irrelevant or outdated. The proposed amendment to the Vendor Agreement reflects the elimination of the Radio-Paging Rider, which is no longer in use, and the integration and updating of the other three riders in the body of the Vendor Agreement and in a new Attachment C to the Vendor Agreement.

The proposed amendment also responds to the fact that, pursuant to procedures described in the existing Dial-up Market Data Service Rider as well as in provisions of the current Vendor Agreement applicable to nonprofessional subscribers, an increasing number of OPRA Subscribers enter into contracts directly, and in some cases electronically, with vendors for the receipt of options information, rather than entering into Professional Subscriber Agreements with OPRA. All nonprofessional subscribers contract directly with vendors, as do “dial-up” customers, whether professional or nonprofessional.[3] Under the current Vendor Agreement and its riders, OPRA provides a form of Nonprofessional Subscriber Agreement and a form of electronic customer dial-up agreement for use by vendors in contracting with those of their customers to which these forms of agreement apply, and permits vendors to enter into other forms of agreements with their dial-up customers subject to OPRA's prior approval. The proposed revised Vendor Agreement consolidates these different forms of agreements between vendors and their customers into a single standard form “Subscriber Agreement,” without making any significant substantive changes to the current forms. Attachments B-1 and B-2 to the Vendor Agreement represent electronic and hard-copy versions of the Subscriber Agreement, respectively. OPRA proposes that these new standard versions of the Subscriber Agreement could be used by vendors to contract with professional or nonprofessional subscribers without any further approval by OPRA. Vendors would still be permitted to use their own customized agreements to contract with subscribers, which would continue to be subject to prior approval by OPRA. Those vendors who choose to use their own agreements would nevertheless benefit from the new preapproved standard versions, which may serve as models for drafting customized agreements that will satisfy OPRA's requirements.

The proposed revised Vendor Agreement also updates certain terminology to reflect developments in technology. Specifically, the concept of a “dial-up” customer, which was an accurate description of the way many nonprofessional subscribers accessed options market data several years ago, has been eliminated in recognition of the transformation of the electronic distribution of information resulting from the availability of the Internet and other information networks. Although in practice OPRA has recognized this development by expanding its view of what constitutes “dial-up” access, the proposed amendment to the Vendor Agreement now codifies this practice in the language of the Agreement.

The proposed revised Vendor Agreement continues to describe two categories of Subscribers: “Professional Subscribers” and “Nonprofessional Subscribers.” As is currently the case, any Professional Subscriber who pays either OPRA's traditional device-based information fees or its flat “enterprise rate” fee in order to access options market data would enter into a Professional Subscriber Agreement directly with OPRA. As an alternative to these arrangements, such persons may enter into Subscriber Agreements with vendors, in which case the vendors would pay usage-based fees to OPRA. Also as is currently the case, Nonprofessional Subscribers would be required to enter into Subscriber Agreements with vendors pursuant to which vendors pay to OPRA either a reduced, flat-rate nonprofessional subscriber fee or a usage-based fee that is capped at the reduced flat-rate fee. Commonly, vendors pass through to their customers any access fees paid to OPRA by the vendors on their customers' behalf, although they are not required to do so. The proposed revised Vendor Agreement does not change the substance of these arrangements and does not propose to change the amount of OPRA's access fees, but it does provide a single, all-purpose form of Subscriber Agreement (in both electronic and hard-copy versions) that may be used by vendors to contract directly with their customers.

The proposed revised Vendor Agreement also includes new provisions to implement various aspects of OPRA's proposed new BBO (best bid and offer) Service, which is currently the subject of a separate proposed Plan amendment currently pending before the Commission.[4] In this regard, the proposed revised Vendor Agreement provides that a vendor satisfies its obligation to include consolidated options market data in its market information service if, at a minimum, the service includes options last sale information and the consolidated BBO provided by OPRA. This would permit a vendor to include additional unconsolidated information in its service so long as this required minimum consolidated information is included. The proposed revised Vendor Agreement permits a vendor to exclude from its BBO service either the quote size or the market identifier associated with a BBO or both, so long as in excluding information the vendor does not discriminate on the basis of the market in which quotations are entered. Additionally, if a vendor excludes the market identifier associated with the BBO from a dynamically updated service, it would be required to make that information available to recipients of the dynamically updated service through an inquiry-only service provided without additional cost. Quote size and market identifier information included in a vendor's service would be required to be on as current a basis as the information is reported by OPRA. Because the proposed Plan amendment pertaining to OPRA's proposed BBO Service provides for the inclusion of an approximation of the size associated with the BBO rather than the actual size (in order to reduce the message-handling capacity needed to carry the BBO Service), the proposed revised Vendor Agreement requires any vendor that includes size in its BBO service to Start Printed Page 70271disclose to its customers that the included size is an approximation of the actual size, and that the actual size is available on OPRA's full quotation service.

Finally, Attachment A to the proposed revised Vendor Agreement is OPRA's current fee schedule, revised only to reflect changes in terminology without any changes in the nature or amount of the fees themselves.

The text of the proposed new Vendor Agreement, Fee Schedule, Form of Electronic subscriber Agreement, Form of Hardcopy Subscriber Agreement, and Conditions for Use of Electronic Subscriber Agreement, is available at the principal offices of OPRA, Commission's Public Reference Room, and on the Commission's Internet website (​rules/​sro/​shtml).

II. Implementation of Plan Amendment

OPRA proposes to begin to use the revised Vendor Agreement as soon as it has been approved by the Commission. Existing vendors would be expected to sign the revised Vendor Agreement to replace their existing Agreements with OPRA, but would continue to be able to act as vendors under their existing Vendor Agreements. Existing vendors that wish to take advantage of the provision of the revised Agreement that allows them to satisfy their obligation to provide consolidated options market information by furnishing only last sale information and the BBO would be required to sign the revised Agreement. All new vendors would be required to sign the revised Agreement. Existing customers of vendors that have previously entered into nonprofessional subscriber agreements or dial-up customer agreements with their vendors would not be required to re-sign the new form of subscriber agreement.

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 plan amendment that are filed with the Commission, and all written communications relating to the proposed 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 will also be available at the principal offices of OPRA. All submissions should refer to File No. SR-OPRA-2002-03 and should be submitted by December 12, 2002.

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For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[5]

Jill M. Peterson,

Assistant Secretary.

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2.  OPRA is a national market system plan approved by the Commission pursuant to Section 11A of the Exchange Act, 15 U.S.C. 78k-1, and Rule 11Aa3-2 thereunder, 17 CFR 240.11Aa3-2. See Securities Exchange Act Release No. 17638 (March 18, 1981), 22 S.E.C. Docket 484 (March 31, 1981). The OPRA Plan provides for the collection and dissemination of last sale and quotation information on options that are traded on the participant exchanges. The five signatories to the OPRA Plan that currently operate an options market are the American Stock Exchange, the Chicago Board Options Exchange, the International Securities Exchange, the Pacific Exchange, and the Philadelphia Stock Exchange. The New York Stock Exchange is a signatory to the OPRA Plan, but sold its options business to the Chicago Board Options Exchange in 1997. See Securities Exchange Act Release No. 38542 (April 23, 1997), 62 FR 23521 (April 30, 1997).

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3.  The term “dial-up” customer is explained in the text below.

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4.  See Securities Exchange Act Release No. 45532 (March 11, 2002), 67 FR 11727 (March 15, 2002) (File No. SR-OPRA-2002-01).

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[FR Doc. 02-29593 Filed 11-20-02; 8:45 am]