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Order Making Fiscal Year 2017 Annual Adjustments to Registration Fee Rates

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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 specified Start Printed Page 61284proxy solicitations and statements in corporate control transactions.[3] These provisions require the Commission to make annual adjustments to the applicable fee rates.

II. Fiscal Year 2017 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]

Section 6(b)(2) sets forth the method for determining the annual adjustment to the fee rate under Section 6(b) for fiscal year 2017. 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 2017], is reasonably likely to produce aggregate fee collections under [Section 6(b)] that are equal to the target fee collection amount for [fiscal year 2017].” That is, the adjusted rate is determined by dividing the “target fee collection amount” for fiscal year 2017 by the “baseline estimate of the aggregate maximum offering prices” for fiscal year 2017.

Section 6(b)(6)(A) specifies that the “target fee collection amount” for fiscal year 2017 is $585,000,000. Section 6(b)(6)(B) defines the “baseline estimate of the aggregate maximum offering prices” for fiscal year 2017 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 2017] as determined by the Commission, after consultation with the Congressional Budget Office and the Office of Management and Budget. . . .”

To make the baseline estimate of the aggregate maximum offering price for fiscal year 2017, the Commission is using a methodology that has been used in prior fiscal years and that was developed in consultation with the Congressional Budget Office (“CBO”) and Office of Management and Budget (“OMB”).[6] Using this methodology, the Commission determines the “baseline estimate of the aggregate maximum offering price” for fiscal year 2017 to be $5,047,682,013,502. Based on this estimate, the Commission calculates the fee rate for fiscal 2017 to be $115.90 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.

III. Effective Dates of the Annual Adjustments

The fiscal year 2017 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, 2016.[7]

IV. Conclusion

Accordingly, pursuant to Section 6(b) of the Securities Act and Sections 13(e) and 14(g) of the Exchange Act,[8]

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 $115.90 per million effective on October 1, 2016.

Start Signature

By the Commission.

Brent J. Fields,

Secretary.

End Signature

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 2017, 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 2016, 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 2017

First, calculate the aggregate maximum offering prices (AMOP) for each month in the sample (July 2006-July 2016). 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 2006 to July 2016.

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 Δt = log (AAMOPt)−log(AAMOPt-1). This approximates the percentage change.

5. Estimate the first order moving average model Δt = α + βet-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 Δt. The forecast error is expressed as et = Δt−α−βet-1. The model can be estimated using standard commercially available software. Using least squares, the estimated parameter values are α = 0.002807020 and β = −0.82994.

6. For the month of August 2016 forecast Δt = 8/16 = α + βet = 7/16. For all subsequent months, forecast Δt = α.

7. Calculate forecasts of log(AAMOP). For example, the forecast of log(AAMOP) for October 2016 is given by FLAAMOPt = 10/16 = log(AAMOPt = 7/16) + Δt = 8/16t = 9/16 + Δt = 10/16.

8. Under the assumption that et is normally distributed, the n-step ahead forecast of AAMOP is given by exp(FLAAMOPt + σn2/2), where σn denotes the standard error of the n-step ahead forecast.

9. For October 2016, this gives a forecast AAMOP of $19.614 billion (Column I), and a forecast AMOP of $411.9 billion (Column J).

10. Iterate this process through September 2017 to obtain a baseline estimate of the aggregate maximum offering prices for fiscal year 2017 of $5,047,682,013,502.Start Printed Page 61285

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 10/01/16 and 9/30/17 to be $5,047,682,013,502.

2. The rate necessary to collect the target $585,000,000 in fee revenues set by Congress is then calculated as: $585,000,000 ÷ $5,047,682,013,502 = 0.000115895.

3. Round the result to the seventh decimal point, yielding a rate of 0.0001159 (or $115.90 per million).

Table A—Estimation of Baseline of Aggregate Maximum Offering Prices

Fee rate calculation
a. Baseline estimate of the aggregate maximum offering prices, 10/1/16 to 9/30/17 ($Millions)5,047,682
b. Implied fee rate ($585 Million/a)$115.90
Month# of trading days in monthAggregate maximum offering prices, in $millionsAverage daily aggregate max. offering prices (AAMOP) in $millionslog(AAMOP)Log (change in AAMOP)Forecast log(AAMOP)Standard errorForecast AAMOP, in $millionsForecast aggregate maximum offering prices, in $millions
(A)(B)(C)(D)(E)(F)(G)(H)(I)(J)
Data
Jul-0620232,65411,63323.177
Aug-0623310,05013,48023.3250.147
Sep-0620236,78211,83923.195-0.130
Oct-0622213,3429,69722.995-0.200
Nov-0621292,45613,92623.3570.362
Dec-0620349,51217,47623.5840.227
Jan-0720372,74018,63723.6480.064
Feb-0719278,75314,67123.409−0.239
Mar-0722862,78639,21824.3920.983
Apr-0720562,10328,10524.059−0.333
May-0722470,84321,40223.787−0.272
Jun-0721586,82227,94424.0530.267
Jul-0721326,61215,55323.468−0.586
Aug-0723369,17216,05123.4990.032
Sep-0719241,05912,68723.264−0.235
Oct-0723239,65210,42023.067−0.197
Nov-0721458,65421,84123.8070.740
Dec-0720410,20020,51023.744−0.063
Jan-0821354,43316,87823.549−0.195
Feb-0820263,41013,17123.301−0.248
Mar-0820596,92329,84624.1190.818
Apr-0822292,53413,29723.311−0.809
May-0821456,07721,71823.8010.491
Jun-0821461,08721,95723.8120.011
Jul-0822232,89610,58623.083−0.730
Aug-0821395,44018,83023.6590.576
Sep-0821177,6368,45922.858−0.800
Oct-0823360,49415,67423.4750.617
Nov-0819288,91115,20623.445−0.030
Dec-0822319,58414,52723.399−0.046
Jan-0920375,06518,75323.6550.255
Feb-0919249,66613,14023.299−0.356
Mar-0922739,93133,63324.2390.940
Apr-0921235,91411,23423.142−1.097
May-0920329,52216,47623.5250.383
Jun-0922357,52416,25123.511−0.014
Jul-0922185,1878,41822.854-0.658
Aug-0921192,7269,17722.9400.086
Sep-0921189,2249,01122.922−0.018
Oct-0922215,7209,80523.0060.085
Nov-0920248,35312,41823.2420.236
Dec-0922340,46415,47623.4630.220
Jan-1019173,2359,11822.933−0.529
Feb-1019209,96311,05123.1260.192
Mar-1023432,93418,82323.6580.533
Apr-1021280,18813,34223.3140.344
May-1020278,61113,93123.3570.043
Jun-1022364,25116,55723.5300.173
Jul-1021171,1918,15222.822−0.709
Aug-1022240,79310,94523.1160.295
Sep-1021260,78312,41823.2420.126
Oct-1021214,98810,23823.049−0.193
Nov-1021340,11216,19623.5080.459
Dec-1022297,99213,54523.329−0.179
Jan-1120233,66811,68323.181−0.148
Feb-1119252,78513,30423.3110.130
Mar-1123595,19825,87823.9770.665
Apr-1120236,35511,81823.193−0.784
May-1121319,05315,19323.4440.251
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Jun-1122359,72716,35123.5180.073
Jul-1120215,39110,77023.100−0.418
Aug-1123179,8707,82022.780−0.320
Sep-1121168,0058,00022.8030.023
Oct-1121181,4528,64122.8800.077
Nov-1121256,41812,21023.2260.346
Dec-1121237,65211,31723.150−0.076
Jan-1220276,96513,84823.3510.202
Feb-1220228,41911,42123.159−0.193
Mar-1222430,80619,58223.6980.539
Apr-1220173,6268,68122.884−0.813
May-1222414,12218,82423.6580.774
Jun-1221272,21812,96323.285−0.373
Jul-1221170,4628,11722.817-0.468
Aug-1223295,47212,84723.2760.459
Sep-1219331,29517,43723.5820.305
Oct-1221137,5626,55122.603−0.979
Nov-1221221,52110,54923.0790.476
Dec-1220321,60216,08023.5010.422
Jan-1321368,48817,54723.5880.087
Feb-1319252,14813,27123.309−0.279
Mar-1320533,44026,67224.0070.698
Apr-1322235,77910,71723.095−0.912
May-1322382,95017,40723.5800.485
Jun-1320480,62424,03123.9030.322
Jul-1322263,86911,99423.208−0.695
Aug-1322253,30511,51423.167-0.041
Sep-1320267,92313,39623.3180.151
Oct-1323293,84712,77623.271−0.047
Nov-1320326,25716,31323.5150.244
Dec-1321358,16917,05623.5600.045
Jan-1421369,06717,57523.5900.030
Feb-1419298,37615,70423.477−0.113
Mar-1421564,84026,89724.0150.538
Apr-1421263,40112,54323.252−0.763
May-1421403,70019,22423.6790.427
Jun-1421423,07520,14623.7260.047
Jul-1422373,81116,99123.556−0.170
Aug-1421405,01719,28723.6830.127
Sep-1421409,34919,49323.6930.011
Oct-1423338,83214,73223.413−0.280
Nov-1419386,89820,36323.7370.324
Dec-1422370,76016,85323.548−0.189
Jan-1520394,12719,70623.7040.156
Feb-1519466,13824,53423.9230.219
Mar-1522753,74734,26124.2570.334
Apr-1521356,56016,97923.555−0.702
May-1520478,59123,93023.8980.343
Jun-1522446,10220,27723.733−0.166
Jul-1522402,06218,27623.629−0.104
Aug-1521334,74615,94023.492−0.137
Sep-1521289,87213,80323.348−0.144
Oct-1522300,27613,64923.337−0.011
Nov-1520409,69020,48523.7430.406
Dec-1522308,56914,02623.364−0.379
Jan-1619457,41124,07423.9040.540
Feb-1620554,34327,71724.0450.141
Mar-1622900,30140,92324.4350.390
Apr-1621250,71611,93923.203−1.232
May-1621409,99219,52323.6950.492
Jun-1622321,21914,60123.404−0.291
Jul-1620289,67114,48423.396−0.008
Aug-162323.6321670.34219,439447,089
Sep-162123.6349740.34719,526410,051
Oct-162123.6377810.35119,614411,898
Nov-162123.6405880.35619,703413,754
Dec-162123.6433950.36119,791415,618
Jan-172023.6462020.36619,880397,610
Feb-171923.6490090.37019,970379,431
Mar-172323.6518160.37520,060461,381
Apr-171923.6546230.37920,150382,858
May-172223.6574300.38420,241445,306
Jun-172223.6602370.38820,332447,312
Jul-172023.6630440.39220,424408,479
Aug-172323.6658510.39720,516471,867
Sep-172023.6686580.40120,608412,168
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Footnotes

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.

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6.  Appendix A explains how we determined the “baseline estimate of the aggregate maximum offering price” for fiscal year 2017 using our methodology, and then shows the arithmetical process of calculating the fiscal year 2017 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 2017.

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7.  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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8.  15 U.S.C. 77f(b), 78m(e) and 78n(g).

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[FR Doc. 2016-21268 Filed 9-2-16; 8:45 am]

BILLING CODE 8011-01-C