Cboe pushes rule change to make way for proprietary Opra alternatives

Cboe says the solution to the Options Price Reporting Authority’s growing cost and size is to change a provision in the Opra Plan, the governing document for the US options’ public datafeed. The provision currently requires firms buying an exchange’s proprietary feed to subscribe in full to Opra. Cboe’s goal is to funnel customers to the Cboe One Options Feed, the exchange’s proprietary options feed, which was released last year.

Last November, Cboe filed with the US Securities and Exchange Commission (SEC) to change the interpretation of a part of the Opra Plan known as “equivalent access” that requires anyone buying an exchange’s private or proprietary options data to also buy and stream the full Opra feed. Cboe holds that equivalent access should be satisfied without subscribing to the whole feed, and instead querying Opra on demand as necessary—for instance, before a trade is made to satisfy the NBBO. Prior to a March 2023 decision by the Opra Plan, Cboe holds that this was in line with the accepted definition of equivalent access.

Comment letters from Nasdaq and law firm Davis Wright Tremaine (acting on behalf of the Opra Plan) told the SEC to disapprove the proposal, saying it did not comply with how Opra Plan amendments are supposed to be put forward—with agreement from all members. The law firm said the proposal, if approved, would have “deleterious effects” on the management of the public feed by setting a precedent for other exchanges to suggest changes to the Plan without widespread approval of members. Nasdaq noted the proposal could direct funds away from Opra, making it more difficult for the public feed to carry out its work. Opra could not be reached for comment.

Room for competition

According to a source at an industry body, there is appetite for more competition to Opra. Were the amendment to be approved, it would allow participants to buy alternatives to the Opra feed without the extra cost of streaming Opra.

Retail brokers Robinhood, SoFi Securities, Tastytrade, Questrade, and Interactive Brokers, which Cboe says are the target audience of the plan, have written comment letters to the SEC in favor of the proposal. Market data provider Polygon.io also wrote in support.

In its letter, Robinhood wrote that following the March 2023 equivalent access interpretation, firms like Robinhood must decide between using proprietary feeds while handling Opra, or query Opra but forego prop feeds. “This interpretation, given the financial and technology demands of subscribing to the full streaming Opra feed, is a barrier to the use of proprietary feeds. It essentially creates a two-tiered market for options market data and limits access to proprietary data feeds only to those who can meet the obligations of the full streaming Opra feed.”

In a letter obtained by WatersTechnology, Cboe reached out to retail brokers several months ago, after Catherine Clay and Adam Inzirillo assumed roles last October overseeing the exchanges’ derivatives business and data and access solutions, respectively. The letter encouraged recipients to support the proposal and share it within their “network”.

By offering data from its four options markets, the feed would provide traders an indication of the market without having to take in the full market’s data

Some in the industry note that Cboe’s option would be similar to Nasdaq’s TotalView feed in the equities markets. Like Nasdaq in equities, Cboe enjoys a high market share in US options. By offering data from its four options markets, the feed would provide traders an indication of the market without streaming the full market’s data.

Despite these similarities, Nasdaq opposed Cboe’s initial filing for the Cboe One Options feed in February 2023 and again in 2024. “Nasdaq notes that other exchanges may file similar proposals, which may proliferate market data feeds likely resulting in fragmentation,” Greg Ferrari, vice president of exchange business management at Nasdaq, wrote in the February 2023 comment letter. The exchange also said the proposal could cut into the operating budget for Opra by diverting funds away from the public feed, harming its ability to provide market data.

Cboe’s Inzirillo notes, though, that like retail outlets offering zero commissions, this is a way to “democratize” the capital markets. Clay and Inzirillo say increasing participation in the US options market abroad, particularly in the Asia-Pacific region, is a big part of this proposal.

Clay says the proposal could grow US options markets at large. “Not just for Cboe’s [options markets], but I want to stress that we’re talking about the growth for US options markets [for] all exchange operators. The Opra feed in its streaming format and its huge capacity—you’re unable to deliver that streaming feed currently through cloud environments. … When you think about taking options market data from the US and exposing it to retail broker-dealers in different parts of Asia-Pacific, it’s a difficult task to do that,” Clay says. Proprietary datafeeds, she notes, are much easier to take in, as providers can normalize the feed, which reduces the size of the feed and thus makes it possible to receive a more manageable offering via the cloud.

In Europe, where a consolidated tape has yet to be realized, Cboe is also campaigning against “mandatory consumption” or requirements to buy and stream the eventual consolidated feeds.

The SEC has extended the comment period on the rule filing until July 20, with room for extension until September 18, and then November 17.