[Federal Register Volume 78, Number 84 (Wednesday, May 1, 2013)]
[Notices]
[Pages 25515-25521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10194]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69449/April 25, 2013]
Order Making Fiscal Year 2013 Annual Adjustments to Transaction
Fee Rates
I. Background
Section 31 of the Securities Exchange Act of 1934 (``Exchange
Act'') requires each national securities exchange and national
securities association to pay transaction fees to the Commission.\1\
Specifically, Section 31(b) requires each national securities exchange
to pay to the Commission fees based on the aggregate dollar amount of
sales of certain securities (``covered sales'') transacted on the
exchange.\2\ Section 31(c) requires each national securities
association to pay to the Commission fees based on the aggregate dollar
amount of covered sales transacted by or through any member of the
association other than on an exchange.\3\
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\1\ 15 U.S.C. 78ee.
\2\ 15 U.S.C. 78ee(b).
\3\ 15 U.S.C. 78ee(c).
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Section 31 of the Exchange Act requires the Commission to annually
adjust the fee rates applicable under Sections 31(b) and (c) to a
uniform adjusted rate.\4\ Specifically, the Commission must adjust the
fee rates to a uniform adjusted rate that is reasonably likely to
produce aggregate fee collections (including assessments on security
futures transactions) equal to the regular appropriation to the
Commission for the applicable fiscal year.\5\
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\4\ In some circumstances, the SEC also must make a mid-year
adjustment to the fee rates applicable under Sections 31(b) and (c).
\5\ 15 U.S.C. 78ee(j)(1) (the Commission must adjust the rates
under Sections 31(b) and (c) to a ``uniform adjusted rate that, when
applied to the baseline estimate of the aggregate dollar amount of
sales for such fiscal year, is reasonably likely to produce
aggregate fee collections under [Section 31] (including assessments
collected under [Section 31(d)]) that are equal to the regular
appropriation to the Commission by Congress for such fiscal
year.'').
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The Commission is required to publish notice of the new fee rates
under Section 31 not later than 30 days after the date on which an Act
making a regular appropriation for the applicable fiscal year is
enacted.\6\ On March 26, 2013, the President signed a continuing
resolution that funds the SEC at FY 2012 levels through the remainder
of FY 2013. Consistent with past practice [and guidance from OMB], the
SEC is treating this continuing resolution, which lasts through the
remainder of the fiscal year, as a regular appropriation for FY 2013
for purposes of Section 31 of the Exchange Act.
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\6\ 15 U.S.C. 78ee(g).
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II. Fiscal Year 2013 Annual Adjustment to the Fee Rate
The new fee rate is determined by (1) subtracting the sum of fees
estimated to be collected prior to the effective date of the new fee
rate \7\ and estimated assessments on securities futures transactions
to be collected under Section 31(d) of the Exchange Act for all of
fiscal year 2013 \8\ from an amount equal to the regular appropriation
to the Commission for fiscal year 2013, and (2) dividing the difference
by the estimated aggregate dollar amount of sales for the remainder of
the fiscal year following the effective date of the new fee rate.
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\7\ The sum of fees to be collected prior to the effective date
of the new fee rate is determined by applying the current fee rate
to the dollar amount of covered sales prior to the effective date of
the new fee rate. The exchanges and FINRA have provided data on the
dollar amount of covered sales through February 28, 2013. To
calculate the dollar amount of covered sales from that date to the
effective date of the new fee rate, the Division is using the same
methodology it developed in consultation with the CBO and OMB to
estimate the dollar amount of covered sales in prior fiscal years.
An explanation of the methodology appears in Appendix A.
\8\ The Division is using the same methodology it has used
previously to estimate assessments on securities future transactions
to be collected in fiscal year 2013. An explanation of the
methodology appears in Appendix A.
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The regular appropriation to the Commission for fiscal year 2013 is
$1,321,000,000. The Commission estimates that it will collect
$895,226,704 in fees for the period prior to the effective date of the
new fee rate and $37,356 in assessments on round turn transactions in
securities futures products during all of fiscal year 2013.\9\ Using a
methodology for estimating the aggregate dollar amount of sales for the
remainder of fiscal year 2013 (developed after consultation with the
Congressional Budget Office and the Office of Management and Budget),
the Commission estimates that the aggregate dollar amount of covered
sales for the remainder of fiscal year 2013 to be $24,458,583,925,062.
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\9\ The estimate of fees to be collected prior to the effective
date of the new fee rate is determined by applying the current fee
rate to the dollar amount of covered sales prior to the effective
date of the new fee rate.
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As described above, the uniform adjusted rate is computed by
dividing the residual fees to be collected of $425,735,940 by the
estimate of the aggregate dollar amount of covered sales for the
remainder of fiscal year 2013 of $24,458,583,925,062. This results in a
uniform adjusted rate for fiscal year 2013 of $17.40 per million.\10\
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\10\ Appendix A shows the purely arithmetical process of
calculating the fiscal year 2013 annual adjustment. The appendix
also includes the data used by the Commission in making this
adjustment.
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III. Effective Date of the Uniform Adjusted Rate
Under Section 31(j)(4)(A) of the Exchange Act, the fiscal year 2013
annual adjustments to the fee rates applicable under Sections 31(b) and
(c) of the Exchange Act shall take effect on the later of October 1,
2012, or 60 days after the date on which a regular appropriation to the
Commission for fiscal year 2012 is enacted.\11\ The regular
appropriation to the Commission for fiscal year 2013 was enacted on
March 26, 2013, and accordingly, the new fee rates applicable under
Sections 31(b) and (c) of the Exchange Act will take effect on May 25,
2013.\12\
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\11\ 15 U.S.C. 78ee(j)(4)(A).
\12\ As noted above, consistent with past practice [and guidance
from OMB], the SEC is treating the continuing resolution enacted on
March 26, 2013 as a regular appropriation for FY 2013.
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IV. Conclusion
Accordingly, pursuant to Section 31 of the Exchange Act,
It is hereby ordered that the fee rates applicable under Sections
31(b) and (c) of the Exchange Act shall be $17.40 per $1,000,000
effective on May 25, 2013.
By the Commission.
Elizabeth M. Murphy,
Secretary.
Appendix A
This appendix provides the formula for determining the annual
adjustment to the fee rates applicable under Sections 31(b) and (c)
of the Exchange Act for fiscal year 2013. Section 31 of the Exchange
Act requires the fee rates to be adjusted so that it is reasonably
likely that the Commission will collect aggregate fees equal to its
regular appropriation for fiscal year 2013.
To make the adjustment, the Commission must project the
aggregate dollar amount of covered sales of securities on the
securities exchanges and certain over-the-counter markets over the
course of the year. The fee rate equals the ratio of the
Commission's regular appropriation for fiscal year 2013 (less the
sum of fees to be collected during fiscal year 2013 prior to the
effective date of the new fee rate and aggregate assessments on
security futures transactions during fiscal year 2013) to the
projected aggregate dollar amount of covered sales for fiscal year
2013 (less the aggregate dollar amount of covered sales prior to the
effective date of the new fee rate).
For 2013, the Commission has estimated the aggregate dollar
amount of covered sales by projecting forward the trend established
in the previous decade. More specifically, the dollar amount of
covered sales was forecasted for months subsequent to February 2013,
the last month for which the
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Commission has data on the dollar volume of covered sales.\13\
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\13\ To determine the availability of data, the Commission
compares the date of the appropriation with the date the transaction
data are due from the exchanges (10 business days after the end of
the month). If the business day following the date of the
appropriation is equal to or subsequent to the date the data are due
from the exchanges, the Commission uses these data. The
appropriation was signed on March 26, 2013. The first business day
after this date was March 27, 2013. Data for February were due from
the exchanges on March 14. So the Commission used February 2013 and
earlier data to forecast volume for March 2013 and later months.
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The following sections describe this process in detail.
A. Baseline Estimate of the Aggregate Dollar Amount of Covered Sales
for Fiscal Year 2013
First, calculate the average daily dollar amount of covered
sales (ADS) for each month in the sample (February 2003-February
2013). The monthly aggregate dollar amount of covered sales
(exchange plus certain over-the-counter markets) is presented in
column C of Table A.
Next, calculate the change in the natural logarithm of ADS from
month to month. The average monthly percentage growth of ADS over
the entire sample is 0.0102 and the standard deviation is 0.122.
Assuming the monthly percentage change in ADS follows a random walk,
calculating the expected monthly percentage growth rate for the full
sample is straightforward. The expected monthly percentage growth
rate of ADS is 1.78%.
Now, use the expected monthly percentage growth rate to forecast
total dollar volume. For example, one can use the ADS for February
2013 ($252,666,501,426) to forecast ADS for March 2013
($257,167,513,594 = $252,666,501,426 x 1.0178).\14\ Multiply by the
number of trading days in March 2013 (20) to obtain a forecast of
the total dollar volume for the month ($5,143,350,271,889). Repeat
the method to generate forecasts for subsequent months.
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\14\ The value 1.0178 has been rounded. All computations are
done with the unrounded value.
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The forecasts for total dollar volume of covered sales are in
column G of Table A. The following is a more formal (mathematical)
description of the procedure:
1. Divide each month's total dollar volume (column C) by the
number of trading days in that month (column B) to obtain the
average daily dollar volume (ADS, column D).
2. For each month t, calculate the change in ADS from the
previous month as [Delta]t = log (ADSt/
ADSt-1), where log (x) denotes the natural logarithm of
x.
3. Calculate the mean and standard deviation of the series
{[Delta]1, [Delta]2, [hellip],
[Delta]120{time} . These are given by [mu] = 0.0102 and
[sigma] = 0.122, respectively.
4. Assume that the natural logarithm of ADS follows a random
walk, so that [Delta]s and [Delta]t are
statistically independent for any two months s and t.
5. Under the assumption that [Delta]t is normally
distributed, the expected value of ADSt/ADSt-1
is given by exp ([mu] + [sigma]\2\/2), or on average ADSt
= 1.0178 x ADSt-1.
6. For March 2013, this gives a forecast ADS of 1.0178 x
$252,666,501,426 = $257,167,513,594. Multiply this figure by the 20
trading days in March 2013 to obtain a total dollar volume forecast
of $5,143,350,271,889.
7. For April 2013, multiply the March 2013 ADS forecast by
1.0178 to obtain a forecast ADS of $261,748,706,992. Multiply this
figure by the 22 trading days in April 2013 to obtain a total dollar
volume forecast of $5,758,471,553,822.
8. Repeat this procedure for subsequent months.
B. Using the Forecasts From A To Calculate the New Fee Rate
1. Use Table A to estimate fees collected for the period 10/1/12
through 5/24/13. The projected aggregate dollar amount of covered
sales for this period is $39,965,477,866,718. Actual and projected
fee collections at the current fee rate of 0.0000224 are
$895,226,704.
2. Estimate the amount of assessments on securities futures
products collected during 10/1/12 and 9/30/13 to be $37,356 by
projecting a 1.78% monthly increase from a base of $3,038 in
February 2013.
3. Subtract the amounts $895,226,704 and $37,356 from the target
offsetting collection amount set by Congress of $1,321,000,000
leaving $425,735,940 to be collected on dollar volume for the period
5/25/13 through 9/30/13.
4. Use Table A to estimate dollar volume for the period 5/25/13
through 9/30/13. The estimate is $24,458,583,925,062. Finally,
compute the fee rate required to produce the additional $425,735,940
in revenue. This rate is $425,735,940 divided by $24,458,583,925,062
or 0.0000174064.
5. Round the result to the seventh decimal point, yielding a
rate of .0000174 (or $17.40 per million).
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[FR Doc. 2013-10194 Filed 4-30-13; 8:45 am]
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