80 FR 13 pgs. 2978-2983 - Order Making Fiscal Year 2015 Annual Adjustments to Transaction Fee Rates

Type: NOTICEVolume: 80Number: 13Pages: 2978 - 2983
Docket number: [Release No. 34-74057/January 15, 2015]
FR document: [FR Doc. 2015-00858 Filed 1-20-15; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version:  PDF Version
Pages: 2978, 2979, 2980, 2981, 2982, 2983

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74057/January 15, 2015]

Order Making Fiscal Year 2015 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.1Specifically, 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.2Section 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

Footnotes:

1 15 U.S.C. 78ee.

2 15 U.S.C. 78ee(b).

3 15 U.S.C. 78ee(c).

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.4Specifically, 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

Footnotes:

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.").

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.6On December 16, 2014, the President signed the Consolidated and Further Continuing Appropriations Act, 2015, providing $1,500,000,000 in funds to the SEC for fiscal year 2015.

Footnotes:

6 15 U.S.C. 78ee(g).

II. Fiscal Year 2015 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 rate7and estimated assessments on security futures transactions to be collected under Section 31(d) of the Exchange Act for all of fiscal year 20158from an amount equal to the regular appropriation to the Commission for fiscal year 2015, 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.

Footnotes:

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 November 30, 2014. 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 Congressional Budget Office ("CBO") and the Office of Management and Budget ("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 security futures transactions to be collected in fiscal year 2015. An explanation of the methodology appears in Appendix A.

The regular appropriation to the Commission for fiscal year 2015 is $1,500,000,000. The Commission estimates that it will collect $614,005,586 in fees for the period prior to the effective date of the new fee rate and $58,863 in assessments on round turn transactions in security futures products during all of fiscal year 2015.9Using a methodology for estimating the aggregate dollar amount of sales for the remainder of fiscal year 2015 (developed after consultation with the CBO and OMB), the Commission estimates that the aggregate dollar amount of covered sales for the remainder of fiscal year 2015 to be $48,121,838,283,138.

Footnotes:

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.

As described above, the uniform adjusted rate is computed by dividing the residual fees to be collected of $885,935,551 by the estimate of the aggregate dollar amount of covered sales for the remainder of fiscal year 2015 of $48,121,838,283,138. This results in a uniform adjusted rate for fiscal year 2015 of $18.40 per million.10

Footnotes:

10 Appendix A shows the purely arithmetic process of calculating the fiscal year 2015 annual adjustment. The appendix also includes the data used by the Commission in making this adjustment.

III. Effective Date of the Uniform Adjusted Rate

Under Section 31(j)(4)(A) of the Exchange Act, the fiscal year 2015 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, 2014, or 60 days after the date on which a regular appropriation to the Commission for fiscal year 2015 is enacted.11The regular appropriation to the Commission for fiscal year 2015 was enacted on December 16, 2014, and accordingly, the new fee rates applicable under Sections 31(b) and (c) of the Exchange Act will take effect on February 14, 2015.

Footnotes:

11 15 U.S.C. 78ee(j)(4)(A).


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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 $18.40 per $1,000,000 effective on February 14, 2015.

By the Commission.

Brent J. Fields,

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 2015. 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 2015.

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 2015 (less the sum of fees to be collected during fiscal year 2015 prior to the effective date of the new fee rate and aggregate assessments on security futures transactions during all of fiscal year 2015) to the estimated aggregate dollar amount of covered sales for the remainder of the fiscal year following the effective date of the new fee rate.

For 2015, 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 November 2014, the last month for which the Commission has data on the dollar volume of covered sales.12

Footnotes:

12 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 December 16, 2014. The first business day after this date was December 17, 2014. Data for November were due from the exchanges on December 12. So the Commission used November 2014 and earlier data to forecast volume for December 2014 and later months.

The following sections describe this process in detail.

A. Baseline Estimate of the Aggregate Dollar Amount of Covered Sales for Fiscal Year 2015.

First, calculate the average daily dollar amount of covered sales (ADS) for each month in the sample (November 2004-November 2014). The monthly total 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 0.0068 and the standard deviation is 0.123. 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 1.44%.

Now, use the expected monthly percentage growth rate to forecast total dollar volume. For example, one can use the ADS for November 2014 ($276,290,217,978) to forecast ADS for December 2014 ($280,278,562,848 = $276,290,217,978 × 1.0144).13Multiply by the number of trading days in December 2014 (22) to obtain a forecast of the total dollar volume for the month ($6,166,128,382,663). Repeat the method to generate forecasts for subsequent months.

Footnotes:

13 The value 1.0144 has been rounded. All computations are done with the unrounded value.

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 ? t = log (ADS t /ADS t-1 ), where log (x) denotes the natural logarithm of x.

3. Calculate the mean and standard deviation of the series {? 1 , ? 2 , . . . , ? 120 }. These are given by µ = 0.0068 and s = 0.123, respectively.

4. Assume that the natural logarithm of ADS follows a random walk, so that ? s and ? t are statistically independent for any two months s and t.

5. Under the assumption that ? t is normally distributed, the expected value of ADS t /ADS t-1 is given by exp (µ + s2 /2), or on average ADS t = 1.0144 × ADS t-1 .

6. For December 2014, this gives a forecast ADS of 1.0144 × $276,290,217,978 = $280,278,562,848. Multiply this figure by the 22 trading days in December 2014 to obtain a total dollar volume forecast of $6,166,128,382,663.

7. For January 2015, multiply the December 2014 ADS forecast by 1.0144 to obtain a forecast ADS of $284,324,480,857. Multiply this figure by the 20 trading days in January 2015 to obtain a total dollar volume forecast of $5,686,489,617,137.

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 10/1/14 through 2/13/15. The projected aggregate dollar amount of covered sales for this period is $27,783,058,208,169. Actual and projected fee collections at the current fee rate of 0.0000221 are $614,005,586.

2. Estimate the amount of assessments on security futures products collected from 10/1/14 through 9/30/15 to be $58,863 by projecting a 1.44% monthly increase from a base of $4,707 in November 2014.

3. Subtract the amounts $614,005,586 and $58,863 from the target offsetting collection amount set by Congress of $1,500,000,000 leaving $885,935,551 to be collected on dollar volume for the period 2/14/15 through 9/30/15.

4. Use Table A to estimate dollar volume for the period 2/14/15 through 9/30/15. The estimate is $48,121,838,283,138. Finally, compute the fee rate required to produce the additional $885,935,551 in revenue. This rate is $885,935,551 divided by $48,121,838,283,138 or 0.00001841026.

5. Round the result to the seventh decimal point, yielding a rate of .0000184 (or $18.40 per million).

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Month Number of trading days in month Total dollar amount of sales Average daily dollar amount of sales (ADS) Change in natural logarithm of ADS Forecast ADS Forecast total dollar amount of sales
(A) (B) (C) (D) (E) (F) (G)
Nov-04 21 2,577,513,374,160 122,738,732,103 -
Dec-04 22 2,673,532,981,863 121,524,226,448 -0.010
Jan-05 20 2,581,847,200,448 129,092,360,022 0.060
Feb-05 19 2,532,202,408,589 133,273,810,978 0.032
Mar-05 22 3,030,474,897,226 137,748,858,965 0.033
Apr-05 21 2,906,386,944,434 138,399,378,306 0.005
May-05 21 2,697,414,503,460 128,448,309,689 -0.075
Jun-05 22 2,825,962,273,624 128,452,830,619 0.000
Jul-05 20 2,604,021,263,875 130,201,063,194 0.014
Aug-05 23 2,846,115,585,965 123,744,155,912 -0.051
Sep-05 21 3,009,640,645,370 143,316,221,208 0.147
Oct-05 21 3,279,847,331,057 156,183,206,241 0.086
Nov-05 21 3,163,453,821,548 150,640,658,169 -0.036
Dec-05 21 3,090,212,715,561 147,152,986,455 -0.023
Jan-06 20 3,573,372,724,766 178,668,636,238 0.194
Feb-06 19 3,314,259,849,456 174,434,728,919 -0.024
Mar-06 23 3,807,974,821,564 165,564,122,677 -0.052
Apr-06 19 3,257,478,138,851 171,446,217,834 0.035
May-06 22 4,206,447,844,451 191,202,174,748 0.109
Jun-06 22 3,995,113,357,316 181,596,061,696 -0.052
Jul-06 20 3,339,658,009,357 166,982,900,468 -0.084
Aug-06 23 3,410,187,280,845 148,269,012,211 -0.119
Sep-06 20 3,407,409,863,673 170,370,493,184 0.139
Oct-06 22 3,980,070,216,912 180,912,282,587 0.060
Nov-06 21 3,933,474,986,969 187,308,332,713 0.035
Dec-06 20 3,715,146,848,695 185,757,342,435 -0.008
Jan-07 20 4,263,986,570,973 213,199,328,549 0.138
Feb-07 19 3,946,799,860,532 207,726,308,449 -0.026
Mar-07 22 5,245,051,744,090 238,411,442,913 0.138
Apr-07 20 4,274,665,072,437 213,733,253,622 -0.109
May-07 22 5,172,568,357,522 235,116,743,524 0.095
Jun-07 21 5,586,337,010,802 266,016,048,133 0.123
Jul-07 21 5,938,330,480,139 282,777,641,911 0.061
Aug-07 23 7,713,644,229,032 335,375,836,045 0.171
Sep-07 19 4,805,676,596,099 252,930,347,163 -0.282
Oct-07 23 6,499,651,716,225 282,593,552,879 0.111
Nov-07 21 7,176,290,763,989 341,728,131,619 0.190
Dec-07 20 5,512,903,594,564 275,645,179,728 -0.215
Jan-08 21 7,997,242,071,529 380,821,051,025 0.323
Feb-08 20 6,139,080,448,887 306,954,022,444 -0.216
Mar-08 20 6,767,852,332,381 338,392,616,619 0.098
Apr-08 22 6,150,017,772,735 279,546,262,397 -0.191
May-08 21 6,080,169,766,807 289,531,893,657 0.035
Jun-08 21 6,962,199,302,412 331,533,300,115 0.135
Jul-08 22 8,104,256,787,805 368,375,308,537 0.105
Aug-08 21 6,106,057,711,009 290,764,652,905 -0.237
Sep-08 21 8,156,991,919,103 388,428,186,624 0.290
Oct-08 23 8,644,538,213,244 375,849,487,532 -0.033
Nov-08 19 5,727,998,341,833 301,473,596,939 -0.221
Dec-08 22 5,176,041,317,640 235,274,605,347 -0.248
Jan-09 20 4,670,249,433,806 233,512,471,690 -0.008
Feb-09 19 4,771,470,184,048 251,130,009,687 0.073
Mar-09 22 5,885,594,284,780 267,527,012,945 0.063
Apr-09 21 5,123,665,205,517 243,984,057,406 -0.092
May-09 20 5,086,717,129,965 254,335,856,498 0.042
Jun-09 22 5,271,742,782,609 239,624,671,937 -0.060
Jul-09 22 4,659,599,245,583 211,799,965,708 -0.123
Aug-09 21 4,582,102,295,783 218,195,347,418 0.030
Sep-09 21 4,929,155,364,888 234,721,684,042 0.073
Oct-09 22 5,410,025,301,030 245,910,240,956 0.047
Nov-09 20 4,770,928,103,032 238,546,405,152 -0.030
Dec-09 22 4,688,555,303,171 213,116,150,144 -0.113
Jan-10 19 4,661,793,708,648 245,357,563,613 0.141
Feb-10 19 4,969,848,578,023 261,570,977,791 0.064
Mar-10 23 5,563,529,823,621 241,892,601,027 -0.078
Apr-10 21 5,546,445,874,917 264,116,470,234 0.088
May-10 20 7,260,430,376,294 363,021,518,815 0.318
Jun-10 22 6,124,776,349,285 278,398,924,967 -0.265
Jul-10 21 5,058,242,097,334 240,868,671,302 -0.145
Aug-10 22 4,765,828,263,463 216,628,557,430 -0.106
Sep-10 21 4,640,722,344,586 220,986,778,314 0.020
Oct-10 21 5,138,411,712,272 244,686,272,013 0.102
Nov-10 21 5,279,700,881,901 251,414,327,710 0.027
Dec-10 22 4,998,574,681,208 227,207,940,055 -0.101
Jan-11 20 5,043,391,121,345 252,169,556,067 0.104
Feb-11 19 5,114,631,590,581 269,191,136,346 0.065
Mar-11 23 6,499,355,385,307 282,580,668,926 0.049
Apr-11 20 4,975,954,868,765 248,797,743,438 -0.127
May-11 21 5,717,905,621,053 272,281,220,050 0.090
Jun-11 22 5,820,079,494,414 264,549,067,928 -0.029
Jul-11 20 5,189,681,899,635 259,484,094,982 -0.019
Aug-11 23 8,720,566,877,109 379,155,081,613 0.379
Sep-11 21 6,343,578,147,811 302,075,149,896 -0.227
Oct-11 21 6,163,272,963,688 293,489,188,747 -0.029
Nov-11 21 5,493,906,473,584 261,614,593,980 -0.115
Dec-11 21 5,017,867,255,600 238,946,059,790 -0.091
Jan-12 20 4,726,522,206,487 236,326,110,324 -0.011
Feb-12 20 5,011,862,514,132 250,593,125,707 0.059
Mar-12 22 5,638,847,967,025 256,311,271,228 0.023
Apr-12 20 5,084,239,396,560 254,211,969,828 -0.008
May-12 22 5,611,638,053,374 255,074,456,972 0.003
Jun-12 21 5,121,896,896,362 243,899,852,208 -0.045
Jul-12 21 4,567,519,314,374 217,500,919,732 -0.115
Aug-12 23 4,621,597,884,730 200,939,038,467 -0.079
Sep-12 19 4,598,499,962,682 242,026,313,825 0.186
Oct-12 21 5,095,175,588,310 242,627,408,967 0.002
Nov-12 21 4,547,882,974,292 216,565,855,919 -0.114
Dec-12 20 4,744,922,754,360 237,246,137,718 0.091
Jan-13 21 5,079,603,817,496 241,885,896,071 0.019
Feb-13 19 4,800,663,527,089 252,666,501,426 0.044 - -
Mar-13 20 4,917,701,839,870 245,885,091,993 -0.027
Apr-13 22 5,451,358,637,079 247,789,028,958 0.008
May-13 22 5,681,788,831,869 258,263,128,721 0.041
Jun-13 20 5,623,545,462,226 281,177,273,111 0.085
Jul-13 22 5,083,861,509,754 231,084,614,080 -0.196
Aug-13 22 4,925,611,193,095 223,891,417,868 -0.032
Sep-13 20 4,959,197,626,713 247,959,881,336 0.102
Oct-13 23 5,928,804,028,970 257,774,088,216 0.039
Nov-13 20 5,182,024,612,049 259,101,230,602 0.005
Dec-13 21 5,265,282,994,173 250,727,761,627 -0.033
Jan-14 21 5,808,700,114,288 276,604,767,347 0.098
Feb-14 19 6,018,926,931,054 316,785,627,950 0.136
Mar-14 21 6,068,617,342,988 288,981,778,238 -0.092
Apr-14 21 6,013,948,953,528 286,378,521,597 -0.009
May-14 21 5,265,594,447,318 250,742,592,729 -0.133
Jun-14 21 5,159,506,989,669 245,690,809,032 -0.020
Jul-14 22 5,364,099,567,460 243,822,707,612 -0.008
Aug-14 21 5,075,332,147,677 241,682,483,223 -0.009
Sep-14 21 5,507,943,363,243 262,283,017,297 0.082
Oct-14 23 7,796,638,035,879 338,984,262,430 0.257
Nov-14 19 5,249,514,141,576 276,290,217,978 -0.205
Dec-14 22 280,278,562,848 6,166,128,382,663
Jan-15 20 284,324,480,857 5,686,489,617,137
Feb-15 19 288,428,803,091 5,480,147,258,736
Mar-15 22 292,592,372,637 6,437,032,198,017
Apr-15 21 296,816,044,750 6,233,136,939,740
May-15 20 301,100,687,030 6,022,013,740,599
Jun-15 22 305,447,179,604 6,719,837,951,283
Jul-15 22 309,856,415,301 6,816,841,136,632
Aug-15 21 314,329,299,842 6,600,915,296,676
Sep-15 21 318,866,752,018 6,696,201,792,368


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[FR Doc. 2015-00858 Filed 1-20-15; 8:45 am]

BILLING CODE 8011-01-C