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.
The Investor and Capital Markets Fee Relief Act (“Fee Relief Act”)
Section 6(b)(5) of the Securities Act requires the Commission to make an annual adjustment to the fee rate applicable under Section 6(b) of the Securities Act in each of the fiscal years 2003 through 2011.
Section 6(b)(5) sets forth the method for determining the annual adjustment to the fee rate under Section 6(b) for fiscal year 2010. 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 2010], is reasonably likely to produce aggregate fee collections under [Section 6(b)] that are equal to the target offsetting collection amount for [fiscal year 2010].” That is, the adjusted rate is determined by dividing the “target offsetting collection amount” for fiscal year 2010 by the “baseline estimate of the aggregate maximum offering prices” for fiscal year 2010.
Section 6(b)(11)(A) specifies that the “target offsetting collection amount” for fiscal year 2010 is $334,000,000. Section 6(b)(11)(B) defines the “baseline estimate of the aggregate maximum offering price” for fiscal year 2010 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 2010] 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 2010, the Commission is using the same methodology it developed in consultation with the Congressional Budget Office (“CBO”) and Office of Management and Budget (“OMB”) to project aggregate offering price for purposes of the fiscal year 2009 annual adjustment. Using this methodology, the Commission determines the “baseline estimate of the aggregate maximum offering price” for fiscal year 2010 to be $4,683,504,368,794.
Section 31(b) of the Exchange Act requires each national securities exchange to pay the Commission a fee at a rate, as adjusted by our order pursuant to Section 31(j)(2),
Section 31(j)(1) specifies the method for determining the annual adjustment for fiscal year 2010. Specifically, 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 [fiscal year 2010], is reasonably likely to produce aggregate fee collections under [Section 31] (including assessments collected under [Section 31(d)]) that are equal to the target offsetting collection amount for [fiscal year 2010].”
Section 31(
To make the baseline estimate of the aggregate dollar amount of sales for fiscal year 2010, the Commission is using the same methodology it developed in consultation with the CBO and OMB to project dollar volume for purposes of prior fee adjustments.
Section 6(b)(8)(A) of the Securities Act provides that the fiscal year 2010 annual adjustment to the fee rate applicable under Section 6(b) of the Securities Act shall take effect on the later of October 1, 2009, or five days after the date on which a regular appropriation to the Commission for fiscal year 2010 is enacted.
Section 31(j)(4)(A) of the Exchange Act provides that the fiscal year 2010 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, 2009, or 30 days after the date on which a regular appropriation to the Commission for fiscal year 2010 is enacted.
Accordingly, pursuant to Section 6(b) of the Securities Act and Sections 13(e), 14(g), and 31 of the Exchange Act,
By the Commission.
With the passage of the Investor and Capital Markets Relief Act, Congress has, among other things, 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 2010, 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 March 2009, the last month for which the Commission has data on the aggregate maximum offering prices.
The following sections describe this process in detail.
First, calculate the aggregate maximum offering prices (AMOP) for each month in the sample (March 1999–March 2009). 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
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 March 1999 to March 2009.
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 Δ
5. Estimate the first order moving average model Δ
6. For the month of April 2009 forecast Δ
7. Calculate forecasts of log(AAMOP). For example, the forecast of log(AAMOP) for June 2009 is given by FLAAMOP
8. Under the assumption that e
9. For June 2009, this gives a forecast AAMOP of $18.4 Billion (Column I), and a forecast AMOP of $404.4 Billion (Column J).
10. Iterate this process through September 2010 to obtain a baseline estimate of the aggregate maximum offering prices for fiscal year 2010 of $4,683,504,368,794.
1. Using the data from Table A, estimate the aggregate maximum offering prices between 10/1/09 and 9/30/10 to be $4,683,504,368,794.
2. The rate necessary to collect the target $334,000,000 in fee revenues set by Congress is then calculated as: $334,000,000 ÷ $4,683,504,368,794 = 0.00007131.
3. Round the result to the seventh decimal point, yielding a rate of .0000713 (or $71.30 per million).
With the passage of the Investor and Capital Markets Relief Act, Congress has, among other things, established a target amount of monies to be collected from fees charged to investors based on the value of their transactions. This appendix provides the formula for determining such fees, which the Commission adjusts annually, and may adjust semi-annually.
For 2010, the Commission has estimated dollar transaction volume by projecting forward the trend established in the previous decade. More specifically, dollar transaction volume was forecasted for months subsequent to March 2009, the last month for which the Commission has data on transaction volume.
The following sections describe this process in detail.
First, calculate the average daily dollar amount of sales (ADS) for each month in the sample (March 1999–March 2009). The monthly aggregate dollar amount of sales (exchange plus certain over-the-counter markets) is presented in column C of Table B.
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 0.010 and the standard deviation is 0.130. 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 1.8%.
Now, use the expected monthly percentage growth rate to forecast total dollar volume. For example, one can use the ADS for March 2009 ($267,521,624,488) to forecast ADS for April 2009 ($272,427,017,936 = $267,521,624,488 × 1.018).
The forecasts for total dollar volume are in column G of Table B. 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 Δ
3. Calculate the mean and standard deviation of the series {Δ
4. Assume that the natural logarithm of ADS follows a random walk, so that Δ
5. Under the assumption that Δ
6. For April 2009, this gives a forecast ADS of 1.018 × $267,521,624,488 = $272,427,017,936. Multiply this figure by the 21 trading days in April 2009 to obtain a total dollar volume forecast of $5,720,967,376,649.
7. For May 2009, multiply the April 2009 ADS forecast by 1.018 to obtain a forecast ADS of $277,422,358,822. Multiply this figure by the 20 trading days in May 2009 to obtain a total dollar volume forecast of $5,548,447,176,435.
8. Repeat this procedure for subsequent months.
1. Use Table B to estimate fees collected for the period 10/1/09 through 10/31/09. The projected aggregate dollar amount of sales for this period is $6,683,755,563,790. Projected fee collections at the current fee rate of 0.0000257 are $171,772,518.
2. Estimate the amount of assessments on securities futures products collected during 10/1/09 and 9/30/10 to be $9,966 by projecting a 1.8% monthly increase from a base of $663 in March 2009.
3. Subtract the amounts $171,772,518 and $9,966 from the target offsetting collection amount set by Congress of $1,161,000,000 leaving $989,217,516 to be collected on dollar volume for the period 11/1/09 through 9/30/10.
4. Use Table B to estimate dollar volume for the period 11/1/09 through 9/30/10. The estimate is $78,139,121,873,813. Finally, compute the fee rate required to produce the additional $989,217,516 in revenue. This rate is $989,217,516 divided by $78,139,121,873,813 or 0.0000126597.
5. Round the result to the seventh decimal point, yielding a rate of .0000127 (or $12.70 per million).