Order Making Fiscal 2005 Mid-Year Adjustment to the Fee Rates Applicable Under Sections 31(b) and (c) of the Securities Exchange Act of 1934, 10695-10700 [05-4214]
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Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices
NUCLEAR REGULATORY
COMMISSION
RAILROAD RETIREMENT BOARD
Agency Forms Submitted for OMB
Review
[Docket No. 72–2]
Notice of Issuance of Renewed
Materials License SNM–2501; Virginia
Electric and Power Company, Surry
Independent Spent Fuel Storage
Installation
The U.S. Nuclear Regulatory
Commission (NRC or the Commission)
has issued renewed Materials License
SNM–2501 to Virginia Electric and
Power Company (Dominion) for the
receipt, possession, transfer, and storage
of spent fuel at the Surry Independent
Spent Fuel Storage Installation (ISFSI),
located in Surry County, Virginia. The
renewed license authorizes operation of
the Surry ISFSI in accordance with the
provisions of the renewed license and
its Technical Specifications.
The application for the renewed
license complies with the standards and
requirements of the Atomic Energy Act
of 1954 (the Act), as amended, and the
Commission’s regulations. The
Commission has made appropriate
findings as required by the Act and the
Commission’s rules and regulations in
10 CFR Chapter 1, which are set forth
in the license. Public notice of the
proposed action and opportunity for
hearing regarding the proposed issuance
of the renewed license was published in
the Federal Register on January 14,
2003 (69 FR 1871).
Supporting documentation is
available for inspection at NRC’s Public
Electronic Reading Room at: https://
www.nrc.gov/reading-rm/ADAMS.html.
A copy of the license application, dated
April 29, 2002 as supplemented October
6, 2003, and the staff’s EA, dated
February 2005, can be found at this site
using the ADAMS accession numbers
ML021290068, ML032900118, and
ML040560156. Any questions should be
referred to Mary Jane Ross-Lee, Spent
Fuel Project Office, U.S. Nuclear
Regulatory Commission, Washington,
DC 20555, Mailstop O13D13, telephone
(301) 415–3781; fax number (301) 415–
8555.
Dated in Rockville, Maryland, this 25th
day of February, 2005.
For the Nuclear Regulatory Commission.
Mary Jane Ross-Lee,
Senior Project Manager, Licensing Section,
Spent Fuel Project Office, Office of Nuclear
Material Safety and Safeguards.
[FR Doc. 05–4175 Filed 3–3–05; 8:45 am]
BILLING CODE 7590–01–P
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10695
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51277/February 28, 2005]
SUMMARY: In accordance with the
Paperwork Reduction Act of 1995 (44
U.S.C. chapter 35), the Railroad
Retirement Board (RRB) has submitted
the following proposal(s) for the
collection of information to the Office of
Management and Budget for review and
approval.
Summary of Proposal(s)
(1) Collection Title: Statement
Regarding Contributions and Support of
Children.
(2) Form(s) Submitted: G–139.
(3) OMB Number: 3220–0195.
(4) Expiration Date of Current OMB
Clearance: 05/31/2005.
(5) Type of Request: Extension of a
currently approved collection.
(6) Respondents: Individuals or
households.
(7) Estimated Annual Number of
Respondents: 500.
(8) Total Annual Responses: 500.
(9) Total Annual Reporting Hours:
500.
(10) Collection Description:
Dependency on the employee for at least
one-half support is a condition affecting
eligibility for increasing an employee or
spouse annuity under the social security
overall minimum provisions on the
basis of the presence of a dependent
child, the employee’s natural child in
limited situations, adopted children,
stepchildren, grandchildren and stepgrandchildren. The information
collected solicits financial information
needed to determine entitlement to a
child’s annuity based on actual
dependency.
Additional Information or Comments:
Copies of the forms and supporting
documents can be obtained from
Charles Mierzwa, the agency clearance
officer (312–751–3363) or
Charles.Mierzwa@rrb.gov.
Comments regarding the information
collection should be addressed to
Ronald J. Hodapp, Railroad Retirement
Board, 844 North Rush Street, Chicago,
Illinois, 60611–2092 or
Ronald.Hodapp@rrb.gov and to the
OMB Desk Officer for the RRB, at the
Office of Management and Budget,
Room 10230, New Executive Office
Building, Washington, DC 20503.
Charles Mierzwa,
Clearance Officer.
[FR Doc. 05–4168 Filed 3–3–05; 8:45 am]
Order Making Fiscal 2005 Mid-Year
Adjustment to the Fee Rates
Applicable Under Sections 31(b) and
(c) of the Securities Exchange Act of
1934
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 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 sales of
certain securities transacted by or
through any member of the association
other than on an exchange.3
Sections 31(j)(1) and (3) require the
Commission to make annual
adjustments to the fee rates applicable
under Sections 31(b) and (c) for each of
the fiscal years 2003 through 2011, and
one final adjustment to fix the fee rates
for fiscal year 2012 and beyond.4
Section 31(j)(2) requires the
Commission, in certain circumstances,
to make a mid-year adjustment to the fee
rates in fiscal 2002 through fiscal 2011.5
The annual and mid-year adjustments
are designed to adjust the fee rates in a
given fiscal year so that, when applied
to the aggregate dollar volume of sales
for the fiscal year, they are reasonably
likely to produce total fee collections
under Section 31 equal to the ‘‘target
offsetting collection amount’’ specified
in Section 31(l)(1) for that fiscal year.6
For fiscal 2005, the target offsetting
collection amount is $1,220,000,000.7
Congress established the target
offsetting collection amounts in the
Investor and Capital Markets Fee Relief
Act (‘‘Fee Relief Act’’) by applying
reduced fee rates to the Congressional
Budget Office’s (‘‘CBO’’) January 2001
projections of dollar volume for fiscal
years 2002 through 2011.8 In any fiscal
1 15
U.S.C. 78ee.
U.S.C. 78ee(b).
3 15 U.S.C. 78ee(c).
4 15 U.S.C. 78ee(j)(1) and (j)(3).
5 15 U.S.C. 78ee(j)(2).
6 15 U.S.C. 78ee(l)(1).
7 Id.
8 The target offsetting collection amounts for
fiscal 2002 through 2006 were determined by
2 15
Continued
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Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices
year through fiscal 2011, the annual,
and in certain circumstances, mid-year
adjustment mechanisms will result in
additional fee rate reductions if the
CBO’s January 2001 projection of dollar
volume for the fiscal year proves to be
too low, and fee rate increases if the
CBO’s January 2001 projection of dollar
volume for the fiscal year proves to be
too high.
II. Determination of the Need for a MidYear Adjustment in Fiscal 2005
Under Section 31(j)(2) of the
Exchange Act, the Commission must
make a mid-year adjustment to the fee
rates under Sections 31(b) and (c) in
fiscal year 2005 if it determines, based
on the actual aggregate dollar volume of
sales during the first five months of the
fiscal year, that the baseline estimate
($37,902,443,515,254) is reasonably
likely to be 10% (or more) greater or less
than the actual aggregate dollar volume
of sales for fiscal 2005.9 To make this
determination, the Commission must
estimate the actual aggregate dollar
volume of sales for fiscal 2005.
Based on data provided by the
national securities exchanges and the
national securities association that are
subject to Section 31,10 the actual
aggregate dollar volume of sales during
the first four months of fiscal 2005 was
$10,211,172,018,628.11 Using these data
and a methodology for estimating the
applying a rate of $15 per million to the CBO’s
January 2001 projections of dollar volume for those
fiscal years. The target offsetting collection amounts
for fiscal 2007 through 2011 were determined by
applying a rate of $7 per million to the CBO’s
January 2001 projections of dollar volume for those
fiscal years. For example, CBO’s January 2001
projection of dollar volume for fiscal 2005 was
$81,300,000,000,000. Applying the initial rate
under the Fee Relief Act of $15 per million to that
projection produces the target offsetting collection
amount for fiscal 2005 of $1,220,000,000.
9 The amount $37,902,443,515,254 is the baseline
estimate of the aggregate dollar amount of sales for
fiscal year 2005 calculated by the Commission in
its Order Making Fiscal 2005 Annual Adjustments
to the Fee Rates Applicable Under Section 6(b) of
the Securities Act of 1933 and Sections 13(e), 14(g),
31(b) and 31(c) of the Securities Exchange Act of
1934, Rel. No. 33–8418 (April 30, 2004), 69 FR
25632 (May 7, 2004).
10 The NASD, Inc. (‘‘NASD’’) and each exchange
is required to file a monthly report on Form R31
containing dollar volume data on sales of securities
subject to Section 31. The report is due on the 10th
business day following the month for which the
exchange or association provides dollar volume
data.
11 Although Section 31(j)(2) indicates that the
Commission should determine the actual aggregate
dollar volume of sales for fiscal 2005 ‘‘based on the
actual aggregate dollar volume of sales during the
first 5 months of such fiscal year,’’ data are only
available for the first four months of the fiscal year
as of the date the Commission is required to issue
this order, i.e., March 1, 2005. Dollar volume data
on sales of securities subject to Section 31 for
February 2005 will not be available from the
exchanges and the NASD for several weeks.
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aggregate dollar amount of sales for the
remainder of fiscal 2005 (developed
after consultation with the CBO and the
OMB),12 the Commission estimates that
the aggregate dollar amount of sales for
the remainder of fiscal 2005 to be
$24,166,536,269,237. Thus, the
Commission estimates that the actual
aggregate dollar volume of sales for all
of fiscal 2005 will be
$34,377,708,287,865.
Because the baseline estimate of
$37,902,443,515,254 is more than 10%
greater than the $34,377,708,287,865
estimated actual aggregate dollar
volume of sales for fiscal 2005, Section
31(j)(2) of the Exchange Act requires the
Commission to issue an order adjusting
the fee rates under Sections 31(b) and
(c).
III. Calculation of the Uniform Adjusted
Rate
Section 31(j)(2) specifies the method
for determining the mid-year adjustment
for fiscal 2005. Specifically, the
Commission must adjust the rates under
Sections 31(b) and (c) to a ‘‘uniform
adjusted rate that, when applied to the
revised estimate of the aggregate dollar
amount of sales for the remainder of
[fiscal 2005], is reasonably likely to
produce aggregate fee collections under
Section 31 (including fees collected
during such 5-month period and
assessments collected under [Section
31(d)]) that are equal to
[$1,220,000,000].’’ 13 In other words, the
uniform adjusted rate is determined by
subtracting fees collected prior to the
effective date of the new rate and
assessments collected under Section
31(d) during all of fiscal 2005 from
$1,220,000,000, which is the target
offsetting collection amount for fiscal
2005. That difference is then divided by
the revised estimate of the aggregate
dollar volume of sales for the remainder
of the fiscal year following the effective
date of the new rate.
The Commission estimates that it will
collect $438,149,779 in fees for the
period prior to the effective date of the
Appendix A.
U.S.C. 78ee(j)(2). The term ‘‘fees collected’’
is not defined in Section 31. Because national
securities exchanges and national securities
associations are not required to pay the first
installment of Section 31 fees for fiscal 2005 until
March 15, the Commission will not ‘‘collect’’ any
fees in the first five months of fiscal 2005. See 15
U.S.C. 78ee(e). However, the Commission believes
that, for purposes of calculating the mid-year
adjustment, Congress, by stating in Section 31(j)(2)
that the ‘‘uniform adjusted rate * * * is reasonably
likely to produce aggregate fee collections under
Section 31 * * * that are equal to
[$1,220,000,000],’’ intended the Commission to
include the fees that the Commission will collect
based on transactions in the six months before the
effective date of the mid-year adjustment.
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12 See
13 15
Frm 00106
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mid-year adjustment 14 and $20,973 in
assessments on round turn transactions
in security futures products during all of
fiscal 2005. Using the methodology
referenced in Part II above, the
Commission estimates that the aggregate
dollar volume of sales for the remainder
of fiscal 2005 following the effective
date of the new rate will be
$18,708,485,344,202. Based on these
estimates, the uniform adjusted rate is
$41.80 per million of the aggregate
dollar amount of sales of securities.15
The Commission recognizes that this
fee rate is higher than the current fee
rate of $32.90 per million. However, the
new fee rate is established by the
statutory mid-year adjustment
mechanism and is a direct consequence
of more recent information on the dollar
amount of sales of securities. The
aggregate dollar amount of sales of
securities subject to Section 31 fees is
illustrated in Appendix A.
IV. Effective Date of the Uniform
Adjusted Rate
Section 31(j)(4)(B) of the Exchange
Act provides that a mid-year adjustment
shall take effect on April 1 of the fiscal
year in which such rate applies.
Therefore, the exchanges and the
national securities association that are
subject to Section 31 fees must pay fees
under Sections 31(b) and (c) at the
uniform adjusted rate of $41.80 per
million for sales of securities transacted
on April 1, 2005, and thereafter until the
annual adjustment for fiscal 2005 is
effective.16
14 This calculation is based on applying a fee rate
of $23.40 per million to the aggregate dollar volume
of sales of securities subject to Section 31 through
January 6, 2005, and a rate of $32.90 for the period
from January 7, 2005 to March 31, 2005. Because
the Commission’s regular appropriation for fiscal
year 2005 was not enacted prior to the end of fiscal
year 2004, Exchange Act Section 31(k), the ‘‘Lapse
of Appropriation’’ provision, required that the fee
rate in use at the end of fiscal year 2004, $23.40 per
million, remain in effect until 30 days after the
appropriation was enacted. See also Order Making
Fiscal 2005 Annual Adjustments to the Fee Rates
Applicable Under Section 6(b) of the Securities Act
of 1933 and Sections 13(e), 14(g), 31(b) and 31(c)
of the Securities Exchange Act of 1934, Rel. No. 33–
8418 (April 30, 2004), 69 FR 25632 (May 7, 2004).
The Commission’s regular appropriation for fiscal
year 2005 was enacted on December 8, 2004, and
the $32.90 per million rate went into effect 30 days
later, by operation of the statute. See Exchange Act
Section 31(j)(4)(A)(ii).
15 The calculation is as follows: ($1,220,000,000–
$438,149,779¥$20,973)/$18,708,485,344,202 =
$0.0000417901. Consistent with the system
requirements of the exchanges and the NASD, the
Commission rounds this result to the seventh
decimal point, yielding a rate of $41.80 per million.
16 Section 31(j)(1) and Section 31(g) of the
Exchange Act require the Commission to issue an
order no later than April 30, 2005, adjusting the fee
rates applicable under Sections 31(b) and (c) for
fiscal 2006. These fee rates for fiscal 2006 will be
effective on the later of October 1, 2005 or thirty
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V. Conclusion
Accordingly, pursuant to Section 31
of the Exchange Act,17
It is hereby ordered that each of the
fee rates under Sections 31(b) and (c) of
the Exchange Act shall be $41.80 per
$1,000,000 of the aggregate dollar
amount of sales of securities subject to
these sections effective April 1, 2005.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
BILLING CODE 8010–01–P
Appendix A
A. Baseline Estimate of the Aggregate Dollar
Amount of Sales
First, calculate the average daily dollar
amount of sales (ADS) for each month in the
sample (January 1995–January 2005). The
data obtained from the exchanges and NASD
are presented in Table A. The monthly
aggregate dollar amount of sales from all
exchanges and the NASD is contained in
column C.
Next, calculate the change in the natural
logarithm of ADS from month-to-month. The
average monthly change in the logarithm of
ADS over the entire sample is 0.016 and the
standard deviation 0.118. Assume the
monthly percentage change in ADS follows a
random walk. The expected monthly
percentage growth rate of ADS is 2.4 percent.
Now, use the expected monthly percentage
growth rate to forecast total dollar volume.
For example, one can use the ADS for
days after the enactment of the Commission’s
regular appropriation for fiscal 2006.
17 15 U.S.C. 78ee.
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January 2005 ($128,432,971,367) to forecast
ADS for February 2005 ($131,460,417,421 =
$128,432,971,367 × 1.024).18 Multiply by the
number of trading days in February 2005 (19)
to obtain a forecast of the total dollar volume
for the month ($2,497,747,931,005). Repeat
the method to generate forecasts for
subsequent months.
The forecasts for total dollar volume 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 Dt = log
(ADSt / ADSt–1), where log (x) denotes the
natural logarithm of x.
3. Calculate the mean and standard
deviation of the series {D1, D2, * * *, D120}.
These are given by µ = 0.016 and s = 0.118,
respectively.
4. Assume that the natural logarithm of
ADS follows a random walk, so that Ds and
Dt are statistically independent for any two
months s and t.
5. Under the assumption that Dt is normally
distributed, the expected value of ADSt/
ADSt–1 is given by exp (µ + s2/2), or on
average ADSt = 1.024 × ADSt–1.
6. For February 2005, this gives a forecast
ADS of 1.024 × $128,432,971,367 =
$131,460,417,421. Multiply this figure by the
19 trading days in February 2005 to obtain
a total dollar volume forecast of
$2,497,747,931,005.
7. For March 2005, multiply the February
2005 ADS forecast by 1.024 to obtain a
18 The value 1.024 has been rounded. All
computations are done with the unrounded value.
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10697
forecast ADS of $134,559,227,001. Multiply
this figure by the 22 trading days in March
2005 to obtain a total dollar volume forecast
of $2,960,302,994,030.
8. Repeat this procedure for subsequent
months.
B. Using the Forecasts From A To Calculate
the New Fee Rate
1. Determine the aggregate dollar volume of
sales between 10/1/04 and 1/6/05 to be
$8,143,963,787,852. Multiply this amount by
the fee rate of $23.40 per million dollars in
sales during this period and get $190,568,753
in actual fees collected during 10/1/04 and 1/
6/05. Determine the actual and projected
aggregate dollar volume of sales between
1/7/05 and 3/31/05 to be $7,525,259,155,811.
Multiply this amount by the fee rate of
$32.90 per million dollars in sales during this
period and get an estimate of $247,581,026 in
actual and projected fees collected during
1/7/05 and 3/31/05.
2. Estimate the amount of assessments on
security futures products collected during
10/1/04 and 9/30/05 to be $20,973 by
summing the amounts collected through
January of $5,845 with projections of a 2.4%
monthly increase in subsequent months.
3. Determine the projected aggregate dollar
volume of sales between 4/1/05 and 9/30/05
to be $18,708,485,344,202.
4. The rate necessary to collect the target
$1,220,000,000 in fee revenues is then
calculated as: ($1,220,000,000¥$190,568,753
¥$247,581,026¥$20,973) ÷
$18,708,485,344,202 = .000041790.
5. Consistent with the system requirements
of the exchanges and the NASD, round the
rate to the seventh decimal point, yielding a
rate of .0000418 (or $41.80 per million).
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10700
the Act 4 in connection with indexlinked securities (‘‘Index Securities’’).
The text of the proposed rule change,
as amended, is set forth below.
Proposed new language is in italics;
proposed deletions are in brackets.
*
*
*
*
*
[FR Doc. 05–4214 Filed 3–3–05; 8:45 am]
BILLING CODE 8010–01–C
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51258; File No. SR–Amex–
2005–001]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change and
Amendment No. 1 Thereto by the
American Stock Exchange LLC
Relating to the Adoption of Generic
Listing Standards for Index-Linked
Securities
February 25, 2005.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 6,
2005, the American Stock Exchange LLC
(‘‘Amex’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. On February 25,
2005, Amex amended its proposal.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add section
107D to the Amex Company Guide for
the purpose of adopting generic listing
standards pursuant to Rule 19b–4(e) of
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Amendment No. 1, dated February 25, 2005
(‘‘Amendment No. 1’’). In Amendment No. 1, the
Exchange revised the proposed rule text and
corresponding description. Amendment No. 1
replaced Amex’s original filing in its entirety.
2 17
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Amex Company Guide
Section 107 Other Securities
The Exchange will consider listing
any security not otherwise covered by
the criteria of sections 101 through 106,
provided the issue is otherwise suited
for auction market trading. Such issues
will be evaluated for listing against the
following criteria:
A–C. No Change
D. [Reserved] Index-Linked Securities
Index-linked securities are securities
that provide for the payment at maturity
of a cash amount based on the
performance of an underlying index or
indexes. Such securities may or may not
provide for the repayment of the original
principal investment amount. The
Exchange may submit a rule filing
pursuant to section 19(b)(2) of the
Securities Exchange Act of 1934 to
permit the listing and trading of indexlinked securities that do not otherwise
meet the standards set forth below in
paragraphs (a) through (k). The
Exchange will consider for listing and
trading pursuant to Rule 19b–4(e) under
the Securities Exchange Act of 1934,
index-linked securities provided:
(a) Both the issue and the issuer of
such security meet the criteria set forth
above in ‘‘General Criteria,’’ except that
the minimum public distribution shall
be 1,000,000 units with a minimum of
400 public holders, except, if traded in
thousand dollar denominations, then no
minimum number of holders.
(b) The issue has a minimum term of
one (1) year but not greater than ten (10)
years.
PO 00000
4 17
CFR 240.19b–4(e).
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(c) The issue must be the nonconvertible debt of the issuer.
(d) The payment at maturity may or
may not provide for a multiple of the
positive performance of an underlying
index or indexes; however, in no event
will payment at maturity be based on a
multiple of the negative performance of
an underlying index or indexes.
(e) The issuer will be expected to have
a minimum tangible net worth in excess
of $250,000,000, and to otherwise
substantially exceed the earnings
requirements set forth in section 101(a)
of the Company Guide. In the
alternative, the issuer will be expected:
(i) to have a minimum tangible net
worth of $150,000,000 and to otherwise
substantially exceed the earnings
requirement set forth in section 101(a)
of the Company Guide, and (ii) not to
have issued securities where the original
issue price of all the issuer’s other
index-linked note offerings (combined
with index-linked note offerings of the
issuer’s affiliates) listed on a national
securities exchange or traded through
the facilities of Nasdaq exceeds 25% of
the issuer’s net worth.
(f) The issuer is in compliance with
Rule 10A–3 under the Securities
Exchange Act of 1934.
(g) Initial Listing Criteria—Each
underlying index is required to have at
least ten (10) component securities. In
addition, the index or indexes to which
the security is linked shall either (1)
have been reviewed and approved for
the trading of options or other
derivatives by the Commission under
section 19(b)(2) of the 1934 Act and
rules thereunder and the conditions set
forth in the Commission’s approval
order, including comprehensive
surveillance sharing agreements for
non-U.S. stocks, continue to be satisfied,
or (2) the index or indexes meet the
following criteria:
(i) Each component security has a
minimum market value of at least $75
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]]>Agencies
[Federal Register Volume 70, Number 42 (Friday, March 4, 2005)]
[Notices]
[Pages 10695-10700]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-4214]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51277/February 28, 2005]
Order Making Fiscal 2005 Mid-Year Adjustment to the Fee Rates
Applicable Under Sections 31(b) and (c) of the Securities Exchange Act
of 1934
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 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 sales of
certain securities 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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Sections 31(j)(1) and (3) require the Commission to make annual
adjustments to the fee rates applicable under Sections 31(b) and (c)
for each of the fiscal years 2003 through 2011, and one final
adjustment to fix the fee rates for fiscal year 2012 and beyond.\4\
Section 31(j)(2) requires the Commission, in certain circumstances, to
make a mid-year adjustment to the fee rates in fiscal 2002 through
fiscal 2011.\5\ The annual and mid-year adjustments are designed to
adjust the fee rates in a given fiscal year so that, when applied to
the aggregate dollar volume of sales for the fiscal year, they are
reasonably likely to produce total fee collections under Section 31
equal to the ``target offsetting collection amount'' specified in
Section 31(l)(1) for that fiscal year.\6\ For fiscal 2005, the target
offsetting collection amount is $1,220,000,000.\7\
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\4\ 15 U.S.C. 78ee(j)(1) and (j)(3).
\5\ 15 U.S.C. 78ee(j)(2).
\6\ 15 U.S.C. 78ee(l)(1).
\7\ Id.
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Congress established the target offsetting collection amounts in
the Investor and Capital Markets Fee Relief Act (``Fee Relief Act'') by
applying reduced fee rates to the Congressional Budget Office's
(``CBO'') January 2001 projections of dollar volume for fiscal years
2002 through 2011.\8\ In any fiscal
[[Page 10696]]
year through fiscal 2011, the annual, and in certain circumstances,
mid-year adjustment mechanisms will result in additional fee rate
reductions if the CBO's January 2001 projection of dollar volume for
the fiscal year proves to be too low, and fee rate increases if the
CBO's January 2001 projection of dollar volume for the fiscal year
proves to be too high.
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\8\ The target offsetting collection amounts for fiscal 2002
through 2006 were determined by applying a rate of $15 per million
to the CBO's January 2001 projections of dollar volume for those
fiscal years. The target offsetting collection amounts for fiscal
2007 through 2011 were determined by applying a rate of $7 per
million to the CBO's January 2001 projections of dollar volume for
those fiscal years. For example, CBO's January 2001 projection of
dollar volume for fiscal 2005 was $81,300,000,000,000. Applying the
initial rate under the Fee Relief Act of $15 per million to that
projection produces the target offsetting collection amount for
fiscal 2005 of $1,220,000,000.
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II. Determination of the Need for a Mid-Year Adjustment in Fiscal 2005
Under Section 31(j)(2) of the Exchange Act, the Commission must
make a mid-year adjustment to the fee rates under Sections 31(b) and
(c) in fiscal year 2005 if it determines, based on the actual aggregate
dollar volume of sales during the first five months of the fiscal year,
that the baseline estimate ($37,902,443,515,254) is reasonably likely
to be 10% (or more) greater or less than the actual aggregate dollar
volume of sales for fiscal 2005.\9\ To make this determination, the
Commission must estimate the actual aggregate dollar volume of sales
for fiscal 2005.
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\9\ The amount $37,902,443,515,254 is the baseline estimate of
the aggregate dollar amount of sales for fiscal year 2005 calculated
by the Commission in its Order Making Fiscal 2005 Annual Adjustments
to the Fee Rates Applicable Under Section 6(b) of the Securities Act
of 1933 and Sections 13(e), 14(g), 31(b) and 31(c) of the Securities
Exchange Act of 1934, Rel. No. 33-8418 (April 30, 2004), 69 FR 25632
(May 7, 2004).
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Based on data provided by the national securities exchanges and the
national securities association that are subject to Section 31,\10\ the
actual aggregate dollar volume of sales during the first four months of
fiscal 2005 was $10,211,172,018,628.\11\ Using these data and a
methodology for estimating the aggregate dollar amount of sales for the
remainder of fiscal 2005 (developed after consultation with the CBO and
the OMB),\12\ the Commission estimates that the aggregate dollar amount
of sales for the remainder of fiscal 2005 to be $24,166,536,269,237.
Thus, the Commission estimates that the actual aggregate dollar volume
of sales for all of fiscal 2005 will be $34,377,708,287,865.
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\10\ The NASD, Inc. (``NASD'') and each exchange is required to
file a monthly report on Form R31 containing dollar volume data on
sales of securities subject to Section 31. The report is due on the
10th business day following the month for which the exchange or
association provides dollar volume data.
\11\ Although Section 31(j)(2) indicates that the Commission
should determine the actual aggregate dollar volume of sales for
fiscal 2005 ``based on the actual aggregate dollar volume of sales
during the first 5 months of such fiscal year,'' data are only
available for the first four months of the fiscal year as of the
date the Commission is required to issue this order, i.e., March 1,
2005. Dollar volume data on sales of securities subject to Section
31 for February 2005 will not be available from the exchanges and
the NASD for several weeks.
\12\ See Appendix A.
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Because the baseline estimate of $37,902,443,515,254 is more than
10% greater than the $34,377,708,287,865 estimated actual aggregate
dollar volume of sales for fiscal 2005, Section 31(j)(2) of the
Exchange Act requires the Commission to issue an order adjusting the
fee rates under Sections 31(b) and (c).
III. Calculation of the Uniform Adjusted Rate
Section 31(j)(2) specifies the method for determining the mid-year
adjustment for fiscal 2005. Specifically, the Commission must adjust
the rates under Sections 31(b) and (c) to a ``uniform adjusted rate
that, when applied to the revised estimate of the aggregate dollar
amount of sales for the remainder of [fiscal 2005], is reasonably
likely to produce aggregate fee collections under Section 31 (including
fees collected during such 5-month period and assessments collected
under [Section 31(d)]) that are equal to [$1,220,000,000].'' \13\ In
other words, the uniform adjusted rate is determined by subtracting
fees collected prior to the effective date of the new rate and
assessments collected under Section 31(d) during all of fiscal 2005
from $1,220,000,000, which is the target offsetting collection amount
for fiscal 2005. That difference is then divided by the revised
estimate of the aggregate dollar volume of sales for the remainder of
the fiscal year following the effective date of the new rate.
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\13\ 15 U.S.C. 78ee(j)(2). The term ``fees collected'' is not
defined in Section 31. Because national securities exchanges and
national securities associations are not required to pay the first
installment of Section 31 fees for fiscal 2005 until March 15, the
Commission will not ``collect'' any fees in the first five months of
fiscal 2005. See 15 U.S.C. 78ee(e). However, the Commission believes
that, for purposes of calculating the mid-year adjustment, Congress,
by stating in Section 31(j)(2) that the ``uniform adjusted rate * *
* is reasonably likely to produce aggregate fee collections under
Section 31 * * * that are equal to [$1,220,000,000],'' intended the
Commission to include the fees that the Commission will collect
based on transactions in the six months before the effective date of
the mid-year adjustment.
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The Commission estimates that it will collect $438,149,779 in fees
for the period prior to the effective date of the mid-year adjustment
\14\ and $20,973 in assessments on round turn transactions in security
futures products during all of fiscal 2005. Using the methodology
referenced in Part II above, the Commission estimates that the
aggregate dollar volume of sales for the remainder of fiscal 2005
following the effective date of the new rate will be
$18,708,485,344,202. Based on these estimates, the uniform adjusted
rate is $41.80 per million of the aggregate dollar amount of sales of
securities.\15\
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\14\ This calculation is based on applying a fee rate of $23.40
per million to the aggregate dollar volume of sales of securities
subject to Section 31 through January 6, 2005, and a rate of $32.90
for the period from January 7, 2005 to March 31, 2005. Because the
Commission's regular appropriation for fiscal year 2005 was not
enacted prior to the end of fiscal year 2004, Exchange Act Section
31(k), the ``Lapse of Appropriation'' provision, required that the
fee rate in use at the end of fiscal year 2004, $23.40 per million,
remain in effect until 30 days after the appropriation was enacted.
See also Order Making Fiscal 2005 Annual Adjustments to the Fee
Rates Applicable Under Section 6(b) of the Securities Act of 1933
and Sections 13(e), 14(g), 31(b) and 31(c) of the Securities
Exchange Act of 1934, Rel. No. 33-8418 (April 30, 2004), 69 FR 25632
(May 7, 2004). The Commission's regular appropriation for fiscal
year 2005 was enacted on December 8, 2004, and the $32.90 per
million rate went into effect 30 days later, by operation of the
statute. See Exchange Act Section 31(j)(4)(A)(ii).
\15\ The calculation is as follows: ($1,220,000,000-
$438,149,779-$20,973)/$18,708,485,344,202 = $0.0000417901.
Consistent with the system requirements of the exchanges and the
NASD, the Commission rounds this result to the seventh decimal
point, yielding a rate of $41.80 per million.
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The Commission recognizes that this fee rate is higher than the
current fee rate of $32.90 per million. However, the new fee rate is
established by the statutory mid-year adjustment mechanism and is a
direct consequence of more recent information on the dollar amount of
sales of securities. The aggregate dollar amount of sales of securities
subject to Section 31 fees is illustrated in Appendix A.
IV. Effective Date of the Uniform Adjusted Rate
Section 31(j)(4)(B) of the Exchange Act provides that a mid-year
adjustment shall take effect on April 1 of the fiscal year in which
such rate applies. Therefore, the exchanges and the national securities
association that are subject to Section 31 fees must pay fees under
Sections 31(b) and (c) at the uniform adjusted rate of $41.80 per
million for sales of securities transacted on April 1, 2005, and
thereafter until the annual adjustment for fiscal 2005 is
effective.\16\
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\16\ Section 31(j)(1) and Section 31(g) of the Exchange Act
require the Commission to issue an order no later than April 30,
2005, adjusting the fee rates applicable under Sections 31(b) and
(c) for fiscal 2006. These fee rates for fiscal 2006 will be
effective on the later of October 1, 2005 or thirty days after the
enactment of the Commission's regular appropriation for fiscal 2006.
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[[Page 10697]]
V. Conclusion
Accordingly, pursuant to Section 31 of the Exchange Act,\17\
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\17\ 15 U.S.C. 78ee.
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It is hereby ordered that each of the fee rates under Sections
31(b) and (c) of the Exchange Act shall be $41.80 per $1,000,000 of the
aggregate dollar amount of sales of securities subject to these
sections effective April 1, 2005.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
BILLING CODE 8010-01-P
Appendix A
A. Baseline Estimate of the Aggregate Dollar Amount of Sales
First, calculate the average daily dollar amount of sales (ADS)
for each month in the sample (January 1995-January 2005). The data
obtained from the exchanges and NASD are presented in Table A. The
monthly aggregate dollar amount of sales from all exchanges and the
NASD is contained in column C.
Next, calculate the change in the natural logarithm of ADS from
month-to-month. The average monthly change in the logarithm of ADS
over the entire sample is 0.016 and the standard deviation 0.118.
Assume the monthly percentage change in ADS follows a random walk.
The expected monthly percentage growth rate of ADS is 2.4 percent.
Now, use the expected monthly percentage growth rate to forecast
total dollar volume. For example, one can use the ADS for January
2005 ($128,432,971,367) to forecast ADS for February 2005
($131,460,417,421 = $128,432,971,367 x 1.024).\18\ Multiply by the
number of trading days in February 2005 (19) to obtain a forecast of
the total dollar volume for the month ($2,497,747,931,005). Repeat
the method to generate forecasts for subsequent months.
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\18\ The value 1.024 has been rounded. All computations are done
with the unrounded value.
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The forecasts for total dollar volume 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, * * *,
[Delta]120{time} . These are given by [mu] = 0.016 and
[sigma] = 0.118, 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 = 1.024 x ADSt-1.
6. For February 2005, this gives a forecast ADS of 1.024 x
$128,432,971,367 = $131,460,417,421. Multiply this figure by the 19
trading days in February 2005 to obtain a total dollar volume
forecast of $2,497,747,931,005.
7. For March 2005, multiply the February 2005 ADS forecast by
1.024 to obtain a forecast ADS of $134,559,227,001. Multiply this
figure by the 22 trading days in March 2005 to obtain a total dollar
volume forecast of $2,960,302,994,030.
8. Repeat this procedure for subsequent months.
B. Using the Forecasts From A To Calculate the New Fee Rate
1. Determine the aggregate dollar volume of sales between 10/1/
04 and 1/6/05 to be $8,143,963,787,852. Multiply this amount by the
fee rate of $23.40 per million dollars in sales during this period
and get $190,568,753 in actual fees collected during 10/1/04 and 1/
6/05. Determine the actual and projected aggregate dollar volume of
sales between 1/7/05 and 3/31/05 to be $7,525,259,155,811. Multiply
this amount by the fee rate of $32.90 per million dollars in sales
during this period and get an estimate of $247,581,026 in actual and
projected fees collected during 1/7/05 and 3/31/05.
2. Estimate the amount of assessments on security futures
products collected during 10/1/04 and 9/30/05 to be $20,973 by
summing the amounts collected through January of $5,845 with
projections of a 2.4% monthly increase in subsequent months.
3. Determine the projected aggregate dollar volume of sales
between 4/1/05 and 9/30/05 to be $18,708,485,344,202.
4. The rate necessary to collect the target $1,220,000,000 in
fee revenues is then calculated as: ($1,220,000,000 - $190,568,753 -
$247,581,026 - $20,973) / $18,708,485,344,202 = .000041790.
5. Consistent with the system requirements of the exchanges and
the NASD, round the rate to the seventh decimal point, yielding a
rate of .0000418 (or $41.80 per million).
[[Page 10698]]
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[FR Doc. 05-4214 Filed 3-3-05; 8:45 am]
BILLING CODE 8010-01-C
