

[Federal Register: November 7, 2005 (Volume 70, Number 214)]
[Notices]               
[Page 67501-67502]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no05-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52714; File No. SR-OPRA-2005-04]

 
Options Price Reporting Authority; Notice of Filing of Proposed 
Amendment to the Best Bid and Offer Guidelines Adopted Pursuant to the 
Plan for Reporting of Consolidated Options Last Sale Reports and 
Quotation Information

November 1, 2005.
    Pursuant to Section 11A of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 608 thereunder,\2\ notice is hereby given that 
on October 31, 2005, the Options Price Reporting Authority (``OPRA'') 
submitted to the Securities and Exchange Commission (``Commission'') a 
proposal to amend Guideline No. 1 of the Best Bid and Offer Guidelines 
(``BBO Guidelines'') previously adopted by OPRA under Section II(o) of 
the Plan for Reporting of Consolidated Options Last Sale Reports and 
Quotation Information (``OPRA Plan'').\3\ The proposed amendment

[[Page 67502]]

would reduce from five cents to one cent the minimum price differential 
by which a bid or offer must improve a current quote in order to 
displace the current quote in the consolidated BBO. OPRA also proposes 
to make a minor editorial correction to the introductory paragraph of 
the BBO Guidelines. The Commission is publishing this notice to solicit 
comments from interested persons on the proposed amendment.
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ The OPRA Plan is a national market system plan approved by 
the Commission pursuant to Section 11A of the Act and Rule 608 
thereunder (formerly Rule 11Aa3-2). See Securities Exchange Act 
Release No. 17638 (March 18, 1981), 22 S.E.C. Docket 484 (March 31, 
1981). The full text of the OPRA Plan is available at http://www.opradata.com
.

    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 six participants to the OPRA Plan are 
the American Stock Exchange LLC, the Boston Stock Exchange, Inc., 
the Chicago Board Options Exchange, Inc., the International 
Securities Exchange, Inc., the Pacific Exchange, Inc., and the 
Philadelphia Stock Exchange, Inc.
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I. Description and Purpose of the Amendment

    According to OPRA, the purpose of the proposed amendment is to 
amend Guideline No. 1 of OPRA's BBO Guidelines to reduce from five 
cents to one cent the minimum price differential by which a bid or 
offer must improve a current quote in order to displace the current 
quote in the consolidated BBO. In addition, the proposed amendment will 
revise the introductory paragraph of the BBO Guidelines to correctly 
refer to the section of the OPRA Plan where the definition of ``BBO'' 
is set forth.
    Under the current rules of the exchanges that are parties to the 
OPRA Plan, the minimum quoting increment for options is five cents (ten 
cents for options quoted at $3 or higher), and no exchange currently 
quotes options in penny increments. Before any exchange could quote 
options in penny increments, it would first have to file a proposed 
rule change to that effect with the Commission, and the Commission 
would have to approve that filing. In the absence of this amendment, if 
penny quoting were to be introduced on one or more exchange and if an 
exchange were to improve the current best quote on another exchange by 
less than five cents, the original quote and not the improved quote 
would continue to be disseminated over OPRA's BBO service as the 
``best'' even though a better quote would in fact be available. This 
amendment would assure that, in the event penny quoting is introduced 
in the options markets, OPRA's BBO service would disseminate the actual 
best-priced bids and offers at any given point in time.
    OPRA believes it is important to note that unless and until at 
least one exchange begins to quote options in pennies, the proposed 
amendment to the BBO Guidelines will have no practical effect. However, 
amending the BBO Guidelines at this time assures that if the Commission 
approves exchange rules providing for quoting options in pennies, the 
BBO Guidelines will already have been amended to take penny quoting 
into account.
    The text of the proposed amendment to the BBO Guidelines is set 
forth below. Text additions are in italics; deletions are in 
[brackets].
* * * * *
    Section V(c)(i) of the OPRA Plan provides for the dissemination by 
OPRA of, among other things, a consolidated BBO. Section II(o) [III(s)] 
of the OPRA Plan defines the BBO as the highest bid and lowest offer 
for a series of options available in one or more of the options markets 
maintained by the parties, as determined in accordance with ``BBO 
Guidelines'' adopted by the parties to the Plan. The BBO Guidelines as 
currently in effect are as follows:
    1. Price/Time Priority. The BBO is determined on the basis of the 
best price (highest bid and lowest offer) quoted in time by a market, 
provided that in order to displace the current best bid or offer, a 
quote must improve the current quote by no less than one [five] 
cent[s].
    Example 1. Assume the disseminated BBO is $2.00 bid and $2.25 
offered (50 x 50) on Exchange A, which was the first to quote at those 
prices. If Exchange B improves the bid to $2.01[5] while also offering 
at $2.25 (50 x 50), the best bid will become Exchange B's while the 
best offer will continue to be Exchange A's, since Exchange B will have 
improved the bid by one [five] cent[s] while Exchange A remains first 
at the offered price.
    2.-5. [No Change]
* * * * *

II. Implementation of the OPRA Plan Amendment

    The proposed amendment to the BBO Guidelines will be effective upon 
its approval by the Commission pursuant to Section 11A of the Act \4\ 
and Rule 608 thereunder.\5\
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    \4\ 15 U.S.C. 78k-1.
    \5\ 17 CFR 242.608.
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed 
amendment is consistent with the Act. Comments may be submitted by any 
of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File No. SR-OPRA-2005-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-OPRA-2005-04. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, 

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 that may be 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, 100 F Street, 
NE., Washington, DC 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of OPRA. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-OPRA-2005-04 and should be 
submitted on or before November 28, 2005.

    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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Jonathan G. Katz,
Secretary.
[FR Doc. 05-22177 Filed 11-4-05; 8:45 am]

BILLING CODE 8010-01-P
