
[Federal Register Volume 79, Number 171 (Thursday, September 4, 2014)]
[Notices]
[Pages 52771-52778]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21071]


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SECURITIES AND EXCHANGE COMMISSION

[Release Nos. 33-9635; 34-72948/August 29, 2014]


Order Making Fiscal Year 2015 Annual Adjustments to Registration 
Fee Rates

I. Background

    The Commission collects fees under various provisions of the 
securities laws. Section 6(b) of the Securities Act of 1933 
(``Securities Act'') requires the Commission to collect fees from 
issuers on the registration of securities.\1\ Section 13(e) of the 
Securities Exchange Act of 1934 (``Exchange Act'') requires the 
Commission to collect fees on specified repurchases of securities.\2\ 
Section 14(g) of the Exchange Act requires the Commission to collect 
fees on proxy solicitations and statements in corporate control 
transactions.\3\ These provisions require the Commission to make annual 
adjustments to the fee rates applicable under these provisions.
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    \1\ 15 U.S.C. 77f(b).
    \2\ 15 U.S.C. 78m(e).
    \3\ 15 U.S.C. 78n(g).
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II. Fiscal Year 2015 Annual Adjustment to Fee Rates

    Section 6(b)(2) of the Securities Act requires the Commission to 
make an annual adjustment to the fee rate applicable under Section 
6(b).\4\ The annual adjustment to the fee rate under Section 6(b) of 
the Securities Act also sets the annual adjustment to the fee rates 
under Sections 13(e) and 14(g) of the Exchange Act.\5\
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    \4\ 15 U.S.C. 77f(b)(2). The annual adjustments are designed to 
adjust the fee rate in a given fiscal year so that, when applied to 
the aggregate maximum offering price at which securities are 
proposed to be offered for the fiscal year, it is reasonably likely 
to produce total fee collections under Section 6(b) equal to the 
``target fee collection amount'' specified in Section 6(b)(6)(A) for 
that fiscal year.
    \5\ 15 U.S.C. 78m(e)(4) and 15 U.S.C. 78n(g)(4).
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    Section 6(b)(2) sets forth the method for determining the annual 
adjustment to the fee rate under Section 6(b) for fiscal year 2015. 
Specifically, the Commission must adjust the fee rate under Section 
6(b) to a ``rate that, when applied to the baseline estimate of the 
aggregate maximum offering prices for [fiscal year 2015], is reasonably 
likely to produce aggregate fee collections under [Section 6(b)] that 
are equal to the target fee collection amount for [fiscal year 2015].'' 
That is, the adjusted rate is determined by dividing the ``target fee 
collection amount'' for fiscal year 2015 by the ``baseline estimate of 
the aggregate maximum offering prices'' for fiscal year 2015.
    Section 6(b)(6)(A) specifies that the ``target fee collection 
amount'' for fiscal year 2015 is $515,000,000. Section 6(b)(6)(B) 
defines the ``baseline estimate of the aggregate maximum offering 
price'' for fiscal year 2015 as ``the baseline estimate of the 
aggregate maximum offering price at which securities are proposed to be 
offered pursuant to registration statements filed with the Commission 
during [fiscal year 2015] as determined by the Commission, after 
consultation with the Congressional Budget Office and the Office of 
Management and Budget. . . .''

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    To make the baseline estimate of the aggregate maximum offering 
price for fiscal year 2015, the Commission used a methodology similar 
to that developed in consultation with the Congressional Budget Office 
(``CBO'') and Office of Management and Budget (``OMB'') to project the 
aggregate offering price for purposes of the fiscal years 2011 through 
2014 annual adjustments.\6\ Using this methodology, the Commission 
determines the ``baseline estimate of the aggregate maximum offering 
price'' for fiscal year 2015 to be $4,433,900,707,058.\7\ Based on this 
estimate, the Commission calculates the fee rate for fiscal 2015 to be 
$116.20 per million. This adjusted fee rate applies to Section 6(b) of 
the Securities Act, as well as to Sections 13(e) and 14(g) of the 
Exchange Act.
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    \6\ For the fiscal year 2011 estimate, the Commission used a 
ten-year series of monthly observations ending in March 2011. For 
fiscal years 2012-2015, the Commission used a ten-year series ending 
in July of the applicable year.
    \7\ Appendix A explains how we determined the ``baseline 
estimate of the aggregate maximum offering price'' for fiscal year 
2015 using our methodology, and then shows the arithmetical process 
of calculating the fiscal year 2015 annual adjustment based on that 
estimate. The appendix includes the data used by the Commission in 
making its ``baseline estimate of the aggregate maximum offering 
price'' for fiscal year 2015.
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III. Effective Dates of the Annual Adjustments

    The fiscal year 2015 annual adjustments to the fee rates applicable 
under Section 6(b) of the Securities Act and Sections 13(e) and 14(g) 
of the Exchange Act will be effective on October 1, 2014.\8\
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    \8\ 15 U.S.C. 77f(b)(4), 15 U.S.C. 78m(e)(6) and 15 U.S.C. 
78n(g)(6).
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IV. Conclusion

    Accordingly, pursuant to Section 6(b) of the Securities Act and 
Sections 13(e) and 14(g) of the Exchange Act,\9\
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    \9\ 15 U.S.C. 77f(b), 78m(e) and 78n(g).
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    It is hereby ordered that the fee rates applicable under Section 
6(b) of the Securities Act and Sections 13(e) and 14(g) of the Exchange 
Act shall be $116.20 per million effective on October 1, 2014.

    By the Commission.
Kevin M. O'Neill,
Deputy Secretary.

Appendix A

    Congress has established a target amount of monies to be 
collected from fees charged to issuers based on the value of their 
registrations. This appendix provides the formula for determining 
such fees, which the Commission adjusts annually. Congress has 
mandated that the Commission determine these fees based on the 
``aggregate maximum offering prices,'' which measures the aggregate 
dollar amount of securities registered with the Commission over the 
course of the year. In order to maximize the likelihood that the 
amount of monies targeted by Congress will be collected, the fee 
rate must be set to reflect projected aggregate maximum offering 
prices. As a percentage, the fee rate equals the ratio of the target 
amounts of monies to the projected aggregate maximum offering 
prices.
    For 2015, the Commission has estimated the aggregate maximum 
offering prices by projecting forward the trend established in the 
previous decade. More specifically, an ARIMA model was used to 
forecast the value of the aggregate maximum offering prices for 
months subsequent to July 2014, the last month for which the 
Commission has data on the aggregate maximum offering prices.
    The following sections describe this process in detail.

A. Baseline Estimate of the Aggregate Maximum Offering Prices for 
Fiscal Year 2015.

    First, calculate the aggregate maximum offering prices (AMOP) 
for each month in the sample (July 2004-July 2014). Next, calculate 
the percentage change in the AMOP from month to month.
    Model the monthly percentage change in AMOP as a first order 
moving average process. The moving average approach allows one to 
model the effect that an exceptionally high (or low) observation of 
AMOP tends to be followed by a more ``typical'' value of AMOP.
    Use the estimated moving average model to forecast the monthly 
percent change in AMOP. These percent changes can then be applied to 
obtain forecasts of the total dollar value of registrations. The 
following is a more formal (mathematical) description of the 
procedure:
    1. Begin with the monthly data for AMOP. The sample spans ten 
years, from July 2004 to July 2014.
    2. Divide each month's AMOP (column C) by the number of trading 
days in that month (column B) to obtain the average daily AMOP 
(AAMOP, column D).
    3. For each month t, the natural logarithm of AAMOP is reported 
in column E.
    4. Calculate the change in log(AAMOP) from the previous month as 
[Delta]t = log (AAMOPt)-
log(AAMOPt-1). This approximates the percentage change.
    5. Estimate the first order moving average model 
[Delta]t = [alpha] + [beta]et-1 + 
et, where et denotes the forecast error for 
month t. The forecast error is simply the difference between the 
one-month ahead forecast and the actual realization of 
[Delta]t. The forecast error is expressed as 
et = [Delta]t-[alpha]-[beta]et-1. 
The model can be estimated using standard commercially available 
software. Using least squares, the estimated parameter values are 
[alpha] = 0.0005277 and [beta] = -0.89215.
    6. For the month of August 2014 forecast 
[Delta]t = 8/12 = [alpha] + [beta]e t = 7/12. 
For all subsequent months, forecast [Delta]t = [alpha].
    7. Calculate forecasts of log(AAMOP). For example, the forecast 
of log(AAMOP) for October 2014 is given by FLAAMOP 
t = 10/12 = log(AAMOP t = 7/12) + [Delta] 
t = 8/12 + [Delta] t = 9/12 + [Delta] 
t = 10/12.
    8. Under the assumption that et is normally 
distributed, the n-step ahead forecast of AAMOP is given by 
exp(FLAAMOPt + [sigma]n\2\/2), where 
[sigma]n denotes the standard error of the n-step ahead 
forecast.
    9. For October 2014, this gives a forecast AAMOP of $17.470 
billion (Column I), and a forecast AMOP of $401.8 billion (Column 
J).
    10. Iterate this process through September 2015 to obtain a 
baseline estimate of the aggregate maximum offering prices for 
fiscal year 2015 of $4,433,900,707,058.

B. Using the Forecasts From A To Calculate the New Fee Rate.

    1. Using the data from Table A, estimate the aggregate maximum 
offering prices between 10/01/14 and 9/30/15 to be 
$4,433,900,707,058.
    2. The rate necessary to collect the target $515,000,000 in fee 
revenues set by Congress is then calculated as: $515,000,000 / 
$4,433,900,707,058 = 0.00011615.
    3. Round the result to the seventh decimal point, yielding a 
rate of 0.0001162 (or $116.20 per million).

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BILLING CODE 8011-01-P
[FR Doc. 2014-21071 Filed 9-3-14; 8:45 am]
BILLING CODE 8011-01-C


