
[Federal Register Volume 78, Number 84 (Wednesday, May 1, 2013)]
[Notices]
[Pages 25515-25521]
From the Federal Register Online via the Government Printing 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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