Order Making Fiscal Year 2006 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, 23271-23285 [05-8916]
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Federal Register / Vol. 70, No. 85 / Wednesday, May 4, 2005 / Notices
I. EWG and FUCO Subsidiaries and
Reinvestment of Proceeds From the
Divestiture of Nonutility Businesses
SECURITIES AND EXCHANGE
COMMISSION
E.ON requests the Commission
authorize continued investment in an
aggregate amount of up to USD 65
billion in EWGs and FUCOs, the
Aggregate EWG/FUCO Financing
Limitation.26 Applicants state that they
also seek authority to issue and sell up
to USD 35 billion of securities to finance
EWG and FUCO investments pending
the receipt of divestiture proceeds
(‘‘Bridge Loans’’), for the flexibility of
E.ON, so that attractive investment
opportunities may be pursued, because
the timing of the receipt of divestiture
proceeds will not always coincide with
the opportunity to invest in additional
EWG or FUCO assets.27 Applicants state
that any issuance of Bridge Loans would
count against the E.ON External Limit or
the E.ON Short-term Limit, depending
on the maturity of the Bridge Loans.
J. Energy-Related Subsidiaries
E.ON also seeks authorization to
acquire and to invest up to USD 10
billion, the Energy-Related Subsidiary
Investment Limit, of the divestiture
proceeds during the Authorization
Period in certain permitted nonutility
businesses located primarily outside of
the U.S.
For the Commission by the Division of
Investment Management, pursuant to
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2148 Filed 5–3–05; 8:45 am]
BILLING CODE 8010–01–P
[Release Nos. 33–8572; 34–51631/April 28,
2005]
Order Making Fiscal Year 2006 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
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 Finally, sections
31(b) and (c) of the Exchange Act
require national securities exchanges
and national securities associations,
respectively, to pay fees on transactions
in specified securities to the
Commission.4
The Investor and Capital Markets Fee
Relief Act (‘‘Fee Relief Act’’) 5 amended
section 6(b) of the Securities Act and
sections 13(e), 14(g), and 31 of the
Exchange Act to require the
Commission to make annual
adjustments to the fee rates applicable
under these sections for each of the
fiscal years 2003 through 2011, and one
final adjustment to fix the fee rates
under these sections for fiscal year 2012
and beyond.6
II. Fiscal Year 2006 Annual Adjustment
to the Fee Rates Applicable under
Section 6(b) of the Securities Act and
Sections 13(e) and 14(g) of the Exchange
Act
Section 6(b)(5) of the Securities Act
requires the Commission to make an
1 15
26 See
the 2002 Order, note 1 above. Applicants
propose that the investments consist of: (i) an initial
combined E.ON, Powergen and LG&E Energy
aggregate investment in EWGs and FUCOs of USD
4.886 billion, as of December 31, 2001; (ii) the
proposed reinvestment of the sale proceeds of the
TBD Subsidiary divestitures in an amount up to
USD 35 billion; and (iii) an additional amount of
EWG/FUCO proposed investment of up to USD 25
billion.
27 Applicants state that, upon the receipt of the
divestiture proceeds, the Bridge Loans or debt
securities with an equivalent principal amount
would be retired, redeemed or otherwise paid
down.
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U.S.C. 77f(b).
U.S.C. 78m(e).
3 15 U.S.C. 78n(g).
4 15 U.S.C. 78ee(b) and (c). In addition, Section
31(d) of the Exchange Act requires the Commission
to collect assessments from national securities
exchanges and national securities associations for
round turn transactions on security futures. 15
U.S.C. 78ee(d).
5 Pub. L. No. 107–123, 115 Stat. 2390 (2002).
6 See 15 U.S.C. 77f(b)(5), 77f(b)(6), 78m(e)(5),
78m(e)(6), 78n(g)(5), 78n(g)(6), 78ee(j)(1), and
78ee(j)(3). Section 31(j)(2) of the Exchange Act, 15
U.S.C. 78ee(j)(2), also requires the Commission, in
specified circumstances, to make a mid-year
adjustment to the fee rates under sections 31(b) and
(c) of the Exchange Act in fiscal years 2002 through
2011.
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23271
annual adjustment to the fee rate
applicable under section 6(b) of the
Securities Act in each of the fiscal years
2003 through 2011.7 In those same fiscal
years, sections 13(e)(5) and 14(g)(5) of
the Exchange Act require the
Commission to adjust the fee rates
under sections 13(e) and 14(g) to a rate
that is equal to the rate that is applicable
under section 6(b). In other words, 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.
Section 6(b)(5) sets forth the method
for determining the annual adjustment
to the fee rate under section 6(b) for
fiscal year 2006. 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 2006], is reasonably likely to
produce aggregate fee collections under
[Section 6(b)] that are equal to the target
offsetting collection amount for [fiscal
year 2006].’’ That is, the adjusted rate is
determined by dividing the ‘‘target
offsetting collection amount’’ for fiscal
year 2006 by the ‘‘baseline estimate of
the aggregate maximum offering prices’’
for fiscal year 2006.
Section 6(b)(11)(A) specifies that the
‘‘target offsetting collection amount’’ for
fiscal year 2006 is $689,000,000.8
Section 6(b)(11)(B) defines the ‘‘baseline
estimate of the aggregate maximum
offering price’’ for fiscal year 2006 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
2006] 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
7 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 offsetting collection amount’’ specified in
section 6(b)(11)(A) for that fiscal year.
8 Congress determined the target offsetting
collection amounts by applying reduced fee rates to
the CBO’s January 2001 projections of the aggregate
maximum offering prices for fiscal years 2002
through 2011. In any fiscal year through fiscal year
2011, the annual adjustment mechanism will result
in additional fee rate reductions if the CBO’s
January 2001 projection of the aggregate maximum
offering prices for the fiscal year proves to be too
low, and fee rate increases if the CBO’s January
2001 projection of the aggregate maximum offering
prices for the fiscal year proves to be too high.
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Federal Register / Vol. 70, No. 85 / Wednesday, May 4, 2005 / Notices
fiscal year 2006, 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 2005
annual adjustment. Using this
methodology, the Commission
determines the ‘‘baseline estimate of the
aggregate maximum offering price’’ for
fiscal year 2006 to be
$6,437,675,847,178.9 Based on this
estimate, the Commission calculates the
annual adjustment for fiscal 2006 to be
$107.00 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. Fiscal Year 2006 Annual
Adjustment to the Fee Rates Applicable
Under Sections 31(b) and (c) of the
Exchange Act
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), which
currently is $41.80 per million of the
aggregate dollar amount of sales of
specified securities transacted on the
exchange.10 Similarly, section 31(c)
requires each national securities
association to pay the Commission a fee
at the same adjusted rate on the
aggregate dollar amount of sales of
specified securities transacted by or
through any member of the association
otherwise than on an exchange. Section
31(j)(1) requires 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
2011.11
Section 31(j)(1) specifies the method
for determining the annual adjustment
9 Appendix
A explains how we determined the
‘‘baseline estimate of the aggregate maximum
offering price’’ for fiscal year 2006 using our
methodology, and then shows the purely
arithmetical process of calculating the fiscal year
2006 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
2006.
10 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, Rel. No. 34–51277 (February 28, 2005),
70 FR 10695 (March 4, 2005).
11 The annual adjustments, as well as the midyear adjustments required in specified
circumstances under section 31(j)(2) in fiscal years
2002 through 2011, 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.
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for fiscal year 2006. 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 2006], 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 2006].’’
Section 31(l)(1) specifies that the
‘‘target offsetting collection amount’’ for
fiscal year 2006 is $1,435,000,000.12
Section 31(l)(2) defines the ‘‘baseline
estimate of the aggregate dollar amount
of sales’’ as ‘‘the baseline estimate of the
aggregate dollar amount of sales of
securities * * * to be transacted on
each national securities exchange and
by or through any member of each
national securities association
(otherwise than on a national securities
exchange) during [fiscal year 2006] 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 dollar amount of sales for
fiscal year 2006, 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.13
Using this methodology, the
Commission calculates the baseline
estimate of the aggregate dollar amount
of sales for fiscal year 2006 to be
$45,554,892,611,953. Based on this
estimate, and an estimated collection of
$110,180 in assessments on securities
futures transactions under Section 31(d)
in fiscal year 2006, the uniform adjusted
rate is $30.70 per million.14
12 Congress determined the target offsetting
collection amounts by applying reduced fee rates to
the CBO’s January 2001 projections of dollar
volume for fiscal years 2002 through 2011. In any
fiscal year through fiscal year 2011, the annual and,
in specified 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.
13 Appendix B explains how we determined the
‘‘baseline estimate of the aggregate dollar amount of
sales’’ for fiscal year 2006 using our methodology,
and then shows the purely arithmetical process of
calculating the fiscal year 2006 annual adjustment
based on that estimate. The appendix also includes
the data used by the Commission in making its
‘‘baseline estimate of the aggregate dollar amount of
sales’’ for fiscal year 2006.
14 The calculation of the adjusted fee rate assumes
that the current fee rate of $41.80 per million will
apply through October 31st due to the operation of
the effective date provision contained in section
31(j)(4)(A) of the Exchange Act.
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IV. Effective Dates of the Annual
Adjustments
Section 6(b)(8)(A) of the Securities
Act provides that the fiscal year 2006
annual adjustment to the fee rate
applicable under section 6(b) of the
Securities Act shall take effect on the
later of October 1, 2005, or five days
after the date on which a regular
appropriation to the Commission for
fiscal year 2006 is enacted.15 Section
13(e)(8)(A) and 14(g)(8)(A) of the
Exchange Act provide for the same
effective date for the annual adjustments
to the fee rates applicable under
sections 13(e) and 14(g) of the Exchange
Act.16
Section 31(j)(4)(A) of the Exchange
Act provides that the fiscal year 2006
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, 2005, or thirty
days after the date on which a regular
appropriation to the Commission for
fiscal year 2006 is enacted.
V. Conclusion
Accordingly, pursuant to section 6(b)
of the Securities Act and sections 13(e),
14(g) and 31 of the Exchange Act,17
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
$107.00 per million effective on the
later of October 1, 2005, or five days
after the date on which a regular
appropriation to the Commission for
fiscal year 2006 is enacted; and
It is further ordered that the fee rates
applicable under sections 31(b) and (c)
of the Exchange Act shall be $30.70 per
million effective on the later of October
1, 2005, or thirty days after the date on
which a regular appropriation to the
Commission for fiscal year 2006 is
enacted.
By the Commission.
J. Lynn Taylor,
Assistant Secretary.
APPENDIX A
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
15 15
U.S.C. 77f(b)(8)(A).
U.S.C. 78m(e)(8)(A) and 78n(g)(8)(A).
17 15 U.S.C. 77f(b), 78m(e), 78n(g), and 78ee(j).
16 15
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registered with the SEC 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 2006, 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 2005, 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
2006.
First, calculate the aggregate maximum
offering prices (AMOP) for each month in the
sample (March 1995—March 2005). 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
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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 March
1995 to March 2005. There are 3 months in
the sample for which the data are omitted
because of the impact of extraordinary events
(e.g., the 1995 government shutdown).
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 Dt = log
(AAMOPt) ¥ log (AAMOPt-1). This
approximates the percentage change.
5. Estimate the first order moving average
model Dt=a + bet-1 + et, where et denotes the
forecast error for month t. The forecast error
is simply the difference between the onemonth ahead forecast and the actual
realization of Dt. The forecast error is
expressed as et=Dt ¥ a ¥ bet-1. The model
can be estimated using standard
commercially available software such as SAS
or Eviews. Using least squares, the estimated
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parameter values are a=0.01275 and b =
¥0.74504.
6. For the month of April 2005, forecast Dt
= 4/05 = a + bet=3/05. For all subsequent
months, forecast Dt=a.
7. Calculate forecasts of log (AAMOP). For
example, the forecast of log (AAMOP) for
June 2005 is given by FLAAMOPt=6/05=log
(AAMOPt=3/05) + Dt=4/05+Dt=5/05 + Dt=6/05.
8. Under the assumption that et is normally
distributed, the n-step ahead forecast of
AAMOP is given by exp (FLAAMOPt+sn2/2),
where sn denotes the standard error of the nstep ahead forecast.
9. For June 2005, this gives a forecast
AAMOP of $22.0 Billion (Column I), and a
forecast AMOP of $484.0 Billion (Column J).
10. Iterate this process through September
2006 to obtain a baseline estimate of the
aggregate maximum offering prices for fiscal
year 2006 of $6,437,675,847,178.
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 10/1/05 and 9/30/06 to be
$6,437,675,847,178.
2. The rate necessary to collect the target
$689,000,000 in fee revenues set by Congress
is then calculated as: $689,000,000 ÷
$6,437,675,847,178 = 0.00010703 (or $107.00
per million.).
BILLING CODE 8010–01–P
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Appendix B
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.18 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 dollar
transaction volume on the securities
exchanges and certain over-the-counter
markets over the course of the year. As a
percentage, the fee rate equals the ratio of the
target amounts of monies to the projected
dollar transaction volume.
For 2006, 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 2005, the last month for
which the Commission has data on
transaction volume.
The following sections describe this
process in detail.
A. Baseline Estimate of the Aggregate Dollar
Amount of Sales for Fiscal Year 2006
First, calculate the average daily dollar
amount of sales (ADS) for each month in the
sample (March 1995–March 2005). 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
18 Congress requires that the Commission make a
mid-year adjustment to the fee rate if 4 months into
the fiscal year it determines that its forecasts of
aggregate dollar volume are reasonably likely to be
off by 10% or more.
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average monthly percentage growth of ADS
over the entire sample is 0.015 and the
standard deviation 0.117. 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 2.3
percent.
Now, use the expected monthly percentage
growth rate to forecast total dollar volume.
For example, one can use the ADS for March
2005 ($136,873,904,911) to forecast ADS for
April 2005 ($139,958,043,570 =
$136,873,904,911 × 1.023). 19 Multiply by the
number of trading days in April 2005 (21) to
obtain a forecast of the total dollar volume for
the month ($2,939,118,914,973). Repeat the
method to generate forecasts for subsequent
months.
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 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 = 0.015 and s = 0.117,
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 = 1.023 × ADSt¥1.
19 The value 1.023 has been rounded. All
computations are done with the unrounded value.
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6. For April 2005, this gives a forecast ADS
of 1.023 × $136,873,904,911 =
$139,958,043,570. Multiply this figure by the
21 trading days in April 2005 to obtain a total
dollar volume forecast of $2,939,118,914,973.
7. For May 2005, multiply the April 2005
ADS forecast by 1.023 to obtain a forecast
ADS of $143,111,676,201. Multiply this
figure by the 21 trading days in May 2005 to
obtain a total dollar volume forecast of
$3,005,345,200,226.
8. Repeat this procedure for subsequent
months.
B. Using the Forecasts From A to Calculate
the New Fee Rate
1. Use Table B to estimate fees collected for
the period 10/1/05 through 10/31/05. The
projected aggregate dollar amount of sales for
this period is $3,359,544,441,122. Projected
fee collections at the current fee rate of
0.0000418 are $140,428,958.
2. Estimate the amount of assessments on
securities futures products collected during
10/1/05 and 9/30/06 to be $110,180 by
projecting a 2.3% monthly increase from a
base of $6,889 in March 2005.
3. Subtract the amounts $140,428,958 and
$110,180 from the target offsetting collection
amount set by Congress of $1,435,000,000
leaving $1,294,460,862 to be collected on
dollar volume for the period 11/1/05 through
9/30/06.
4. Use Table B to estimate dollar volume
for the period 11/1/05 through 9/30/06. The
estimate is $42,195,348,170,831. Finally,
compute the fee rate required to produce the
additional $1,294,460,862 in revenue. This
rate is $1,294,460,862 divided by
$42,195,348,170,831 or 0.0000306778.
5. Consistent with the system requirements
of the exchanges and the NASD, round the
result to the seventh decimal point, yielding
a rate of .0000307 (or $30.70 per million).
BILLING CODE 8010–01–P
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23284
Federal Register / Vol. 70, No. 85 / Wednesday, May 4, 2005 / Notices
[FR Doc. 05–8916 Filed 5–3–05; 8:45 am]
BILLING CODE 8010–01–C
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51623; File No. SR–FICC–
2004–17]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Granting Approval of a Proposed Rule
Change To Modify the Assessment
Process for Late Submissions of
Collateral Made Through the GCF Repo
Service and To Increase the Types of
Securities Available To Satisfy
Collateral Allocation Obligations
April 28, 2005.
I. Introduction
On August 13, 2004, the Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) and on
March 14, 2005, amended proposed rule
change File No. SR–FICC–2004–17
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’).1 Notice of the proposed rule
change was published in the Federal
Register on March 29, 2005.2 No
comment letters were received. For the
reasons discussed below, the
Commission is now granting approval of
the proposed rule change.
II. Description
FICC is amending the rules of the
Government Securities Division
(‘‘GSD’’) of FICC to modify the
assessment process for late submissions
of collateral allocations made through
its GCF Repo service and to increase the
types of securities that can be used by
a member in satisfaction of collateral
obligations.3
1. Assessment Process for Late
Submissions of Collateral Allocations
Made Through the GCF Repo Service
On October 30, 1998, the Commission
granted approval to FICC’s predecessor,
the Government Securities Clearing
Corporation, to implement its GCF Repo
service, which is a significant
alternative financing vehicle to the
1 15
U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 51413
(March 23, 2005), 70 FR 15960.
3 The proposed rule change also amends GSD’s
rules to clarify that where a collateral allocation
obligation is satisfied by the posting of U.S.
Treasury Bills, notes, or bonds, such securities must
mature in a time frame no greater than that of the
securities that have been traded except if such
traded securities are U.S. Treasury Bills, such
obligations must be satisfied with the posting of
‘‘comparable securities’’ and/or cash only.
VerDate jul<14>2003
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delivery versus payment and tri-party
repo markets.4 That approval included a
fine schedule for failure to adhere to
relevant timeframes. The fine schedule
was not implemented because of certain
events.5 More recently, FICC has shifted
the service from an interbank service to
an intrabank service in order to address
certain payment system risk issues that
have arisen and that have resulted in
decreased volumes.6 FICC believes,
given the lower volumes and likely
forthcoming changes to the service to
address the payment system risk issues,
that the original fine schedule should be
replaced.
Specifically, FICC is implementing a
late fee schedule to replace the late fine
schedule. FICC believes that late fee
schedules are appropriate in situations
where the member’s lateness causes an
operational burden on FICC but does
not result in risk to FICC or its
members.7 In addition, in order to
encourage members to make their
collateral allocations on a timely basis,
there will now be one late fee targeted
to the most significant time frame
surrounding the service. Specifically, if
a dealer does not make the required
collateral allocation by the later of 4:30
p.m. (New York time) or 1 hour after the
actual close of Fedwire GCF repo
reversals, the dealer will be subject to a
late fee of $500.00. Finally, in order to
alleviate the potential operational and
administrative burdens caused by late
collateral allocations, FICC is amending
the GCF Repo rules to provide that FICC
will process collateral allocation
obligations that are received after 6 p.m.
on a good faith basis only. This 6 p.m.
deadline will replace the 7 p.m. final
cutoff for dealer allocations of collateral
to satisfy obligations.
2. Types of Collateral Used To Satisfy
Collateral Allocation Obligations
Currently, GSD Rule 20 provides that
a collateral allocation obligation may be
satisfied with ‘‘comparable securities,’’
Treasury securities, and/or cash.
‘‘Comparable securities’’ are defined to
include any securities that are
represented by the same generic CUSIP
4 Securities Exchange Act Release No. 40623
(October 30, 1998), 63 FR 59831 (November 5, 1998)
[File No. SR–GSCC–98–02].
5 As a new and complex service, members had
difficulty adhering to the time frames. In addition,
the initial rate of participation was very low, and
there was a need to encourage growth in the service.
6 Securities Exchange Act Release No. 48006
(June 10, 2003), 68 FR 35745 (June 16, 2003) [SR–
FICC–2003–04].
7 In a GCF Repo transaction, a borrower does not
receive the funds borrowed until it makes the
required collateral allocation. The lender maintains
control of the funds until the allocation is made.
The transaction does not produce a risk of loss to
FICC, the lender, or other members.
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23285
number as the securities in question.
Therefore, in the event that a member
does not have enough of the collateral
securities or the ‘‘comparable
securities,’’ the only collateral that can
be used is Treasury securities and/or
cash.
GSD members have approached FICC
and have asked that it amend rules to
add certain additional collateral
options. In response, FICC is amending
its rules as set forth below:
(a) Ginnie Mae adjustable-rate
mortgage obligations can be satisfied
with Ginnie Mae fixed-rate mortgage
backed securities and
(b) Fannie Mae and Freddie Mac
adjustable-rate mortgage obligations can
be satisfied with: (i) Fannie Mae and
Freddie Mac fixed-rate mortgage-backed
securities, (ii) Ginnie Mae fixed-rate
mortgage-backed securities, and (iii)
Ginnie Mae adjustable-rate mortgage
obligations.
III. Discussion
Section 17A(b)(3)(F) of the Act
requires among other things that the
rules of a clearing agency be designed to
promote the prompt and accurate
clearance and settlement of securities
transactions.8 The Commission finds
that by allowing FICC’s members
additional collateral options with which
to meet GCF collateral allocation
obligations and by implementing a fee
schedule that should incentivize
members to allocate collateral on a
timely basis, FICC’s proposed rule
change should promote the prompt and
accurate clearance and settlement of
GCF Repo transactions. As such, FICC’s
proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular Section 17A of the Act and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,9 that the
proposed rule change (File No. SR–
FICC–2004–17) be and hereby is
approved.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.10
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2165 Filed 5–3–05; 8:45 am]
BILLING CODE 8010–01–P
8 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78s(b)(2).
10 17 CFR 200.30–3(a)(12).
9 15
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]]>Agencies
[Federal Register Volume 70, Number 85 (Wednesday, May 4, 2005)]
[Notices]
[Pages 23271-23285]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-8916]
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SECURITIES AND EXCHANGE COMMISSION
[Release Nos. 33-8572; 34-51631/April 28, 2005]
Order Making Fiscal Year 2006 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
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\ Finally, sections 31(b) and (c) of the Exchange Act
require national securities exchanges and national securities
associations, respectively, to pay fees on transactions in specified
securities to the Commission.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 77f(b).
\2\ 15 U.S.C. 78m(e).
\3\ 15 U.S.C. 78n(g).
\4\ 15 U.S.C. 78ee(b) and (c). In addition, Section 31(d) of the
Exchange Act requires the Commission to collect assessments from
national securities exchanges and national securities associations
for round turn transactions on security futures. 15 U.S.C. 78ee(d).
---------------------------------------------------------------------------
The Investor and Capital Markets Fee Relief Act (``Fee Relief
Act'') \5\ amended section 6(b) of the Securities Act and sections
13(e), 14(g), and 31 of the Exchange Act to require the Commission to
make annual adjustments to the fee rates applicable under these
sections for each of the fiscal years 2003 through 2011, and one final
adjustment to fix the fee rates under these sections for fiscal year
2012 and beyond.\6\
---------------------------------------------------------------------------
\5\ Pub. L. No. 107-123, 115 Stat. 2390 (2002).
\6\ See 15 U.S.C. 77f(b)(5), 77f(b)(6), 78m(e)(5), 78m(e)(6),
78n(g)(5), 78n(g)(6), 78ee(j)(1), and 78ee(j)(3). Section 31(j)(2)
of the Exchange Act, 15 U.S.C. 78ee(j)(2), also requires the
Commission, in specified circumstances, to make a mid-year
adjustment to the fee rates under sections 31(b) and (c) of the
Exchange Act in fiscal years 2002 through 2011.
---------------------------------------------------------------------------
II. Fiscal Year 2006 Annual Adjustment to the Fee Rates Applicable
under Section 6(b) of the Securities Act and Sections 13(e) and 14(g)
of the Exchange 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.\7\
In those same fiscal years, sections 13(e)(5) and 14(g)(5) of the
Exchange Act require the Commission to adjust the fee rates under
sections 13(e) and 14(g) to a rate that is equal to the rate that is
applicable under section 6(b). In other words, 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.
---------------------------------------------------------------------------
\7\ 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
offsetting collection amount'' specified in section 6(b)(11)(A) for
that fiscal year.
---------------------------------------------------------------------------
Section 6(b)(5) sets forth the method for determining the annual
adjustment to the fee rate under section 6(b) for fiscal year 2006.
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 2006], is reasonably
likely to produce aggregate fee collections under [Section 6(b)] that
are equal to the target offsetting collection amount for [fiscal year
2006].'' That is, the adjusted rate is determined by dividing the
``target offsetting collection amount'' for fiscal year 2006 by the
``baseline estimate of the aggregate maximum offering prices'' for
fiscal year 2006.
Section 6(b)(11)(A) specifies that the ``target offsetting
collection amount'' for fiscal year 2006 is $689,000,000.\8\ Section
6(b)(11)(B) defines the ``baseline estimate of the aggregate maximum
offering price'' for fiscal year 2006 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 2006] as determined by the Commission, after
consultation with the Congressional Budget Office and the Office of
Management and Budget. * * *''
---------------------------------------------------------------------------
\8\ Congress determined the target offsetting collection amounts
by applying reduced fee rates to the CBO's January 2001 projections
of the aggregate maximum offering prices for fiscal years 2002
through 2011. In any fiscal year through fiscal year 2011, the
annual adjustment mechanism will result in additional fee rate
reductions if the CBO's January 2001 projection of the aggregate
maximum offering prices for the fiscal year proves to be too low,
and fee rate increases if the CBO's January 2001 projection of the
aggregate maximum offering prices for the fiscal year proves to be
too high.
---------------------------------------------------------------------------
To make the baseline estimate of the aggregate maximum offering
price for
[[Page 23272]]
fiscal year 2006, 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 2005 annual
adjustment. Using this methodology, the Commission determines the
``baseline estimate of the aggregate maximum offering price'' for
fiscal year 2006 to be $6,437,675,847,178.\9\ Based on this estimate,
the Commission calculates the annual adjustment for fiscal 2006 to be
$107.00 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.
---------------------------------------------------------------------------
\9\ Appendix A explains how we determined the ``baseline
estimate of the aggregate maximum offering price'' for fiscal year
2006 using our methodology, and then shows the purely arithmetical
process of calculating the fiscal year 2006 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 2006.
---------------------------------------------------------------------------
III. Fiscal Year 2006 Annual Adjustment to the Fee Rates Applicable
Under Sections 31(b) and (c) of the Exchange Act
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), which currently is $41.80 per
million of the aggregate dollar amount of sales of specified securities
transacted on the exchange.\10\ Similarly, section 31(c) requires each
national securities association to pay the Commission a fee at the same
adjusted rate on the aggregate dollar amount of sales of specified
securities transacted by or through any member of the association
otherwise than on an exchange. Section 31(j)(1) requires 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.\11\
---------------------------------------------------------------------------
\10\ 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, Rel. No. 34-51277 (February 28, 2005), 70 FR
10695 (March 4, 2005).
\11\ The annual adjustments, as well as the mid-year adjustments
required in specified circumstances under section 31(j)(2) in fiscal
years 2002 through 2011, 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.
---------------------------------------------------------------------------
Section 31(j)(1) specifies the method for determining the annual
adjustment for fiscal year 2006. 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 2006], 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 2006].''
Section 31(l)(1) specifies that the ``target offsetting collection
amount'' for fiscal year 2006 is $1,435,000,000.\12\ Section 31(l)(2)
defines the ``baseline estimate of the aggregate dollar amount of
sales'' as ``the baseline estimate of the aggregate dollar amount of
sales of securities * * * to be transacted on each national securities
exchange and by or through any member of each national securities
association (otherwise than on a national securities exchange) during
[fiscal year 2006] as determined by the Commission, after consultation
with the Congressional Budget Office and the Office of Management and
Budget. * * *''
---------------------------------------------------------------------------
\12\ Congress determined the target offsetting collection
amounts by applying reduced fee rates to the CBO's January 2001
projections of dollar volume for fiscal years 2002 through 2011. In
any fiscal year through fiscal year 2011, the annual and, in
specified 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.
---------------------------------------------------------------------------
To make the baseline estimate of the aggregate dollar amount of
sales for fiscal year 2006, 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.\13\ Using
this methodology, the Commission calculates the baseline estimate of
the aggregate dollar amount of sales for fiscal year 2006 to be
$45,554,892,611,953. Based on this estimate, and an estimated
collection of $110,180 in assessments on securities futures
transactions under Section 31(d) in fiscal year 2006, the uniform
adjusted rate is $30.70 per million.\14\
---------------------------------------------------------------------------
\13\ Appendix B explains how we determined the ``baseline
estimate of the aggregate dollar amount of sales'' for fiscal year
2006 using our methodology, and then shows the purely arithmetical
process of calculating the fiscal year 2006 annual adjustment based
on that estimate. The appendix also includes the data used by the
Commission in making its ``baseline estimate of the aggregate dollar
amount of sales'' for fiscal year 2006.
\14\ The calculation of the adjusted fee rate assumes that the
current fee rate of $41.80 per million will apply through October
31st due to the operation of the effective date provision contained
in section 31(j)(4)(A) of the Exchange Act.
---------------------------------------------------------------------------
IV. Effective Dates of the Annual Adjustments
Section 6(b)(8)(A) of the Securities Act provides that the fiscal
year 2006 annual adjustment to the fee rate applicable under section
6(b) of the Securities Act shall take effect on the later of October 1,
2005, or five days after the date on which a regular appropriation to
the Commission for fiscal year 2006 is enacted.\15\ Section 13(e)(8)(A)
and 14(g)(8)(A) of the Exchange Act provide for the same effective date
for the annual adjustments to the fee rates applicable under sections
13(e) and 14(g) of the Exchange Act.\16\
---------------------------------------------------------------------------
\15\ 15 U.S.C. 77f(b)(8)(A).
\16\ 15 U.S.C. 78m(e)(8)(A) and 78n(g)(8)(A).
---------------------------------------------------------------------------
Section 31(j)(4)(A) of the Exchange Act provides that the fiscal
year 2006 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, 2005, or thirty days after the date on which a regular
appropriation to the Commission for fiscal year 2006 is enacted.
V. Conclusion
Accordingly, pursuant to section 6(b) of the Securities Act and
sections 13(e), 14(g) and 31 of the Exchange Act,\17\
---------------------------------------------------------------------------
\17\ 15 U.S.C. 77f(b), 78m(e), 78n(g), and 78ee(j).
---------------------------------------------------------------------------
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 $107.00 per million effective on the later of October 1,
2005, or five days after the date on which a regular appropriation to
the Commission for fiscal year 2006 is enacted; and
It is further ordered that the fee rates applicable under sections
31(b) and (c) of the Exchange Act shall be $30.70 per million effective
on the later of October 1, 2005, or thirty days after the date on which
a regular appropriation to the Commission for fiscal year 2006 is
enacted.
By the Commission.
J. Lynn Taylor,
Assistant Secretary.
APPENDIX A
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
[[Page 23273]]
registered with the SEC 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 2006, 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 2005, 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 2006.
First, calculate the aggregate maximum offering prices (AMOP)
for each month in the sample (March 1995--March 2005). 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 March 1995 to March 2005. There are 3 months in the
sample for which the data are omitted because of the impact of
extraordinary events (e.g., the 1995 government shutdown).
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 such as SAS or Eviews.
Using least squares, the estimated parameter values are
[alpha]=0.01275 and [beta] = -0.74504.
6. For the month of April 2005, forecast
[Delta]t = 4/05 = [alpha] + [beta]et=3/05. For
all subsequent months, forecast [Delta]t=[alpha].
7. Calculate forecasts of log (AAMOP). For example, the forecast
of log (AAMOP) for June 2005 is given by
FLAAMOPt=6/05=log (AAMOPt=3/05) + [Delta]t=4/
05+[Delta]t=5/05 + [Delta]t=6/05.
8. Under the assumption that et is normally
distributed, the n-step ahead forecast of AAMOP is given by exp
(FLAAMOPt+[sigma]n2/2), where
[sigma]n denotes the standard error of the n-step ahead
forecast.
9. For June 2005, this gives a forecast AAMOP of $22.0 Billion
(Column I), and a forecast AMOP of $484.0 Billion (Column J).
10. Iterate this process through September 2006 to obtain a
baseline estimate of the aggregate maximum offering prices for
fiscal year 2006 of $6,437,675,847,178.
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 10/1/05 and 9/30/06 to be
$6,437,675,847,178.
2. The rate necessary to collect the target $689,000,000 in fee
revenues set by Congress is then calculated as: $689,000,000 /
$6,437,675,847,178 = 0.00010703 (or $107.00 per million.).
BILLING CODE 8010-01-P
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[GRAPHIC] [TIFF OMITTED] TN04MY05.150
[[Page 23277]]
[GRAPHIC] [TIFF OMITTED] TN04MY05.151
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[[Page 23279]]
[GRAPHIC] [TIFF OMITTED] TN04MY05.153
[[Page 23280]]
Appendix B
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.\18\ 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 dollar transaction
volume on the securities exchanges and certain over-the-counter
markets over the course of the year. As a percentage, the fee rate
equals the ratio of the target amounts of monies to the projected
dollar transaction volume.
---------------------------------------------------------------------------
\18\ Congress requires that the Commission make a mid-year
adjustment to the fee rate if 4 months into the fiscal year it
determines that its forecasts of aggregate dollar volume are
reasonably likely to be off by 10% or more.
---------------------------------------------------------------------------
For 2006, 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 2005, the last month for which the
Commission has data on transaction volume.
The following sections describe this process in detail.
A. Baseline Estimate of the Aggregate Dollar Amount of Sales for Fiscal
Year 2006
First, calculate the average daily dollar amount of sales (ADS)
for each month in the sample (March 1995-March 2005). 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 0.015 and the standard deviation 0.117.
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 2.3 percent.
Now, use the expected monthly percentage growth rate to forecast
total dollar volume. For example, one can use the ADS for March 2005
($136,873,904,911) to forecast ADS for April 2005 ($139,958,043,570
= $136,873,904,911 x 1.023). \19\ Multiply by the number of trading
days in April 2005 (21) to obtain a forecast of the total dollar
volume for the month ($2,939,118,914,973). Repeat the method to
generate forecasts for subsequent months.
---------------------------------------------------------------------------
\19\ The value 1.023 has been rounded. All computations are done
with the unrounded value.
---------------------------------------------------------------------------
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 [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] = 0.015 and
[sigma] = 0.117, 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
= 1.023 x ADSt-1.
6. For April 2005, this gives a forecast ADS of 1.023 x
$136,873,904,911 = $139,958,043,570. Multiply this figure by the 21
trading days in April 2005 to obtain a total dollar volume forecast
of $2,939,118,914,973.
7. For May 2005, multiply the April 2005 ADS forecast by 1.023
to obtain a forecast ADS of $143,111,676,201. Multiply this figure
by the 21 trading days in May 2005 to obtain a total dollar volume
forecast of $3,005,345,200,226.
8. Repeat this procedure for subsequent months.
B. Using the Forecasts From A to Calculate the New Fee Rate
1. Use Table B to estimate fees collected for the period 10/1/05
through 10/31/05. The projected aggregate dollar amount of sales for
this period is $3,359,544,441,122. Projected fee collections at the
current fee rate of 0.0000418 are $140,428,958.
2. Estimate the amount of assessments on securities futures
products collected during 10/1/05 and 9/30/06 to be $110,180 by
projecting a 2.3% monthly increase from a base of $6,889 in March
2005.
3. Subtract the amounts $140,428,958 and $110,180 from the
target offsetting collection amount set by Congress of
$1,435,000,000 leaving $1,294,460,862 to be collected on dollar
volume for the period 11/1/05 through 9/30/06.
4. Use Table B to estimate dollar volume for the period 11/1/05
through 9/30/06. The estimate is $42,195,348,170,831. Finally,
compute the fee rate required to produce the additional
$1,294,460,862 in revenue. This rate is $1,294,460,862 divided by
$42,195,348,170,831 or 0.0000306778.
5. Consistent with the system requirements of the exchanges and
the NASD, round the result to the seventh decimal point, yielding a
rate of .0000307 (or $30.70 per million).
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[FR Doc. 05-8916 Filed 5-3-05; 8:45 am]
BILLING CODE 8010-01-C
