Order Making Fiscal Year 2008 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, 25809-25823 [07-2194]
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Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices
least 80% of its total assets in
component securities and investments
that have economic characteristics that
are substantially identical to the
economic characteristics of the
component securities of its Underlying
Index. Applicants expect that each New
Fund will have a tracking error relative
to the performance of its respective
Underlying Index of less than 5 percent.
5. Applicants state that a New Fund
will comply with the federal securities
laws in accepting a deposit of a portfolio
of securities designated by the Adviser
to correspond generally to the price and
yield of the New Fund’s Underlying
Index (‘‘Deposit Securities’’) 2 and
satisfying redemptions with portfolio
securities of the New Fund (‘‘Fund
Securities’’), including that the Deposit
Securities and Fund Securities are sold
in transactions that would be exempt
from registration under the Securities
Act.3
6. Applicants state that the New
Funds will operate in a manner
identical to the operation of the existing
series of the Trusts in the Prior Order,
except as specifically noted by
applicants (and summarized in this
notice), and will comply with all of the
terms, provisions and conditions of the
Prior Order, as amended by the present
application. Applicants believe that the
requested relief continues to meet the
necessary exemptive standards.
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Future Relief
7. Applicants also seek to amend the
Prior Order to modify the terms under
which the Trusts may offer additional
series in the future based on other
securities indices (‘‘Future Funds’’). The
Prior Order is currently subject to a
condition that does not permit
applicants to register the shares of any
Future Fund by means of filing a posteffective amendment to a Trust’s
2 Applicants state that a cash-in-lieu amount will
replace any ‘‘to-be-announced’’ (‘‘TBA’’) transaction
that is listed as a Deposit Security of any New Fund.
A TBA transaction is a method of trading mortgagebacked securities where the buyer and seller agree
upon general trade parameters such as agency,
settlement date, par amount and price. The actual
pools delivered generally are determined two days
prior to the settlement date. The amount of
substituted cash in the case of TBA transactions
will be equivalent to the value of the TBA
transaction listed as a Deposit Security.
3 In accepting Deposit Securities and satisfying
redemptions with Fund Securities that are
restricted securities eligible for resale pursuant to
rule 144A under the Securities Act, New Funds will
comply with the conditions of rule 144A, including
in satisfying redemptions with such rule 144A
eligible restricted Fund Securities. The prospectus
for a New Fund will also state that an authorized
participant that is not a ‘‘Qualified Institutional
Buyer,’’ as defined in rule 144A under the
Securities Act, will not be able to receive, as part
of a redemption, restricted securities eligible for
resale under rule 144A.
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registration statement or by any other
means, unless applicants have requested
and received with respect to such
Future Fund, either exemptive relief
from the Commission or a no-action
letter from the Division of Investment
Management of the Commission, or if
the Future Fund could be listed on a
national securities exchange
(‘‘Exchange’’) without the need for a
filing pursuant to rule 19b–4 under the
Exchange Act.
8. The order would amend the Prior
Order to delete this condition. Any
Future Funds will (a) be advised by the
Adviser or an entity controlled by or
under common control with the
Adviser; (b) track Underlying Indices
that are created, compiled, sponsored or
maintained by an entity that is not an
affiliated person, as defined in section
2(a)(3) of the Act, or an affiliated person
of an affiliated person, of the Adviser,
the Distributor, the Trusts or any SubAdviser or promoter of a Future Fund,
and (c) comply with the respective
terms and conditions of the Prior Order,
as amended by the present application.
9. Applicants believe that the
modification of the future relief
available under the Prior Order would
be consistent with sections 6(c) and
17(b) of the Act and that granting the
requested relief will facilitate the timely
creation of Future Funds and the
commencement of secondary market
trading of such Future Funds by
removing the need to seek additional
exemptive relief. Applicants submit that
the terms and conditions of the Prior
Order have been appropriate for the
existing series of the Trusts and would
remain appropriate for Future Funds.
Applicants also submit that tying
exemptive relief under the Act to the
ability of a Future Fund to be listed on
an Exchange without the need for a rule
19b–4 filing under the Exchange Act is
not necessary to meet the standards
under sections 6(c) and 17(b) of the Act.
Applicants’ Condition
Applicants agree that any amended
order granting the requested relief will
be subject to the same conditions as
those imposed by the Prior Order,
except for condition 1 to the Prior
Order, which will be deleted.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–8598 Filed 5–4–07; 8:45 am]
BILLING CODE 8010–01–P
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25809
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: [To be Published].
Closed meeting.
100 F Street, NE., Washington,
STATUS:
PLACE:
DC.
DATE AND TIME OF PREVIOUSLY ANNOUNCED
MEETING: Tuesday, May 8, 2007 at 2 p.m.
Time change.
The closed meeting scheduled for
Tuesday, May 8, 2007 at 2 p.m. has been
changed to Tuesday, May 8, 2007 at
12:30 p.m.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items. For further
information and to ascertain what, if
any, matters have been added, deleted
or postponed, please contact the Office
of the Secretary at (202) 551–5400.
CHANGE IN THE MEETING:
Dated: May 2, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–8649 Filed 5–4–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release Nos. 33–8794; 34–55682]
Order Making Fiscal Year 2008 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
April 30, 2007.
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 to the
1 15
U.S.C. 77f(b).
U.S.C. 78m(e).
3 15 U.S.C. 78n(g).
2 15
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Commission on transactions in specified
securities.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
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II. Fiscal Year 2008 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.
Section 6(b)(5) sets forth the method
for determining the annual adjustment
to the fee rate under Section 6(b) for
fiscal year 2008. 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 2008], is reasonably likely to
produce aggregate fee collections under
[Section 6(b)] that are equal to the target
offsetting collection amount for [fiscal
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.
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.
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year 2008].’’ That is, the adjusted rate is
determined by dividing the ‘‘target
offsetting collection amount’’ for fiscal
year 2008 by the ‘‘baseline estimate of
the aggregate maximum offering prices’’
for fiscal year 2008.
Section 6(b)(11)(A) specifies that the
‘‘target offsetting collection amount’’ for
fiscal year 2008 is $234,000,000.8
Section 6(b)(11)(B) defines the ‘‘baseline
estimate of the aggregate maximum
offering price’’ for fiscal year 2008 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
2008] as determined by the
Commission, after consultation with the
Congressional Budget Office and the
Office of Management and Budget
* * *.’’
To make the baseline estimate of the
aggregate maximum offering price for
fiscal year 2008, 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 2007
annual adjustment. Using this
methodology, the Commission
determines the ‘‘baseline estimate of the
aggregate maximum offering price’’ for
fiscal year 2008 to be
$5,959,775,433,491.9 Based on this
estimate, the Commission calculates the
fee rate for fiscal 2008 to be $39.30 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 2008 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
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.
9 Appendix A explains how we determined the
‘‘baseline estimate of the aggregate maximum
offering price’’ for fiscal year 2008 using our
methodology, and then shows the purely
arithmetical process of calculating the fiscal year
2008 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
2008.
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exchange to pay the Commission a fee
at a rate, as adjusted by our order
pursuant to Section 31(j)(2),10 which
currently is $15.30 per million of the
aggregate dollar amount of sales of
specified securities transacted on the
exchange. 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
for fiscal year 2008. 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 2008], 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 2008].’’
Section 31(l)(1) specifies that the
‘‘target offsetting collection amount’’ for
fiscal year 2008 is $892,000,000.12
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
10 Order Making Fiscal Year 2007 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. 33–8681
(April 28, 2006), 71 FR 26132 (May 3, 2006).
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.
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.
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Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices
exchange) during [fiscal year 2008] 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 2008, 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 2008 to be
$78,732,152,559,457. Based on this
estimate, and an estimated collection of
$18,017 in assessments on security
futures transactions under Section 31(d)
in fiscal year 2008, the uniform adjusted
rate for fiscal year 2008 is 11.00 per
million.14
IV. Effective Dates of the Annual
Adjustments
Section 6(b)(8)(A) of the Securities
Act provides that the fiscal year 2008
annual adjustment to the fee rate
applicable under Section 6(b) of the
Securities Act shall take effect on the
later of October 1, 2007, or five days
after the date on which a regular
appropriation to the Commission for
fiscal year 2008 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 2008
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, 2007, or 30 days
after the date on which a regular
appropriation to the Commission for
fiscal year 2008 is enacted.
of October 1, 2007, or five days after the
date on which a regular appropriation to
the Commission for fiscal year 2008 is
enacted; and
It is further ordered that the fee rates
applicable under Sections 31(b) and (c)
of the Exchange Act shall be $11.00 per
million effective on the later of October
1, 2007, or 30 days after the date on
which a regular appropriation to the
Commission for fiscal year 2008 is
enacted.
By the Commission.
Nancy M. Morris,
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
registered with the Commission over the
course of the year. In order to maximize the
likelihood that the amount of monies targeted
by Congress will be collected, the fee rate
must be set to reflect projected aggregate
maximum offering prices. As a percentage,
the fee rate equals the ratio of the target
amounts of monies to the projected aggregate
maximum offering prices.
For 2008, 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 2007, the last
month for which the Commission has data on
the aggregate maximum offering prices.
The following sections describe this
process in detail.
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
$39.30 per million effective on the later
A. Baseline Estimate of the Aggregate
Maximum Offering Prices for Fiscal Year
2008
First, calculate the aggregate maximum
offering prices (AMOP) for each month in the
sample (March 1997–March 2007). 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.
13 Appendix B explains how we determined the
‘‘baseline estimate of the aggregate dollar amount of
sales’’ for fiscal year 2007 using our methodology,
and then shows the purely arithmetical process of
calculating the fiscal year 2007 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 2007.
14 The calculation of the adjusted fee rate assumes
that the current fee rate of $15.30 per million will
apply through October 31, 2007, due to the
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V. Conclusion
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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
1997 to March 2007.
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
one-month ahead forecast and the actual
realization of Dt. The forecast error is
expressed as et = Dt ¥ a ¥ bt–1. The model
can be estimated using standard
commercially available software such as SAS
or Eviews. Using least squares, the estimated
parameter values are a = 0.00781 and b =
¥0.76766.
6. For the month of April 2007 forecast Dt
= 4/07 = a + bet = 3/07. For all subsequent
months, forecast Dt = a.
7. Calculate forecasts of log(AAMOP). For
example, the forecast of log(AAMOP) for June
2007 is given by FLAAMOP t = 6/07 =
log(AAMOP t = 3/07) + D t = 4/07 + Dt = 5/07 +
Dt = 6/07.
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 2007, this gives a forecast
AAMOP of $21.2 Billion (Column I), and a
forecast AMOP of $444.9 Billion (Column J).
10. Iterate this process through September
2008 to obtain a baseline estimate of the
aggregate maximum offering prices for fiscal
year 2008 of $5,959,775,433,491.
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 10/1/07 and 9/30/08 to be
$5,959,775,433,491.
2. The rate necessary to collect the target
$234,000,000 in fee revenues set by Congress
is then calculated as: $234,000,000 ÷
$5,959,775,433,491 = 0.00003926 (or $39.30
per million.).
BILLING CODE 8010–01–P
operation of the effective date provision contained
in Section 31(j)(4)(A) of the Exchange Act.
15 15 U.S.C. 77f(b)(8)(A).
16 15 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).
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BILLING CODE 8010–01–C
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 2008, 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 2007, 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 2008
First, calculate the average daily dollar
amount of sales (ADS) for each month in the
sample (March 1997–March 2007). The
monthly aggregate dollar amount of sales
(exchange plus certain over-the-counter
markets) is presented in column C of Table
B.
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18 Congress requires that the Commission make a
mid-year adjustment to the fee rate if four 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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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 0.014 and the
standard deviation 0.115. 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
2.1%.
Now, use the expected monthly percentage
growth rate to forecast total dollar volume.
For example, one can use the ADS for March
2007 ($238,343,650,750) to forecast ADS for
April 2007 ($243,433,544,609 =
$238,343,650,750 × 1.021).19 Multiply by the
number of trading days in April 2007 (20) to
obtain a forecast of the total dollar volume for
the month ($4,868,670,892,189). 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 = 0.014 and s = 0.115,
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/
19 The value 1.021 has been rounded. All
computations are done with the unrounded value.
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ADSt-1 is given by exp (µ + s2/2), or on
average ADSt = 1.021 × ADSt–1.
6. For April 2007, this gives a forecast ADS
of 1.021 × $238,343,650,750 =
$243,433,544,609. Multiply this figure by the
20 trading days in April 2007 to obtain a total
dollar volume forecast of $4,868,670,892,189.
7. For May 2007, multiply the April 2007
ADS forecast by 1.021 to obtain a forecast
ADS of $248,632,134,545. Multiply this
figure by the 22 trading days in May 2007 to
obtain a total dollar volume forecast of
$5,469,906,959,979.
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 10/1/07 through 10/31/07. The
projected aggregate dollar amount of sales for
this period is $6,355,786,096,164. Projected
fee collections at the current fee rate of
0.0000153 are $97,243,527.
2. Estimate the amount of assessments on
securities futures products collected during
10/1/07 and 9/30/08 to be $18,017 by
projecting a 2.1% monthly increase from a
base of $1,150 in March 2007.
3. Subtract the amounts $97,243,527 and
$18,017 from the target offsetting collection
amount set by Congress of $892,000,000
leaving $794,738,456 to be collected on
dollar volume for the period 11/1/07 through
9/30/08.
4. Use Table B to estimate dollar volume
for the period 11/1/07 through 9/30/08. The
estimate is $72,376,366,463,293. Finally,
compute the fee rate required to produce the
additional $794,738,456 in revenue. This rate
is $794,738,456 divided by
$72,376,366,463,293 or 0.0000109806.
5. Round the result to the seventh decimal
point, yielding a rate of .0000110 (or $11.00
per million).
BILLING CODE 8010–01–P
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25822
Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices
and executed in penny increments.
Such orders would no longer be
permitted to be executed at split prices.
[FR Doc. 07–2194 Filed 5–4–07; 8:45 am]
BILLING CODE 8010–01–C
III. Discussion
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55683; File No. SR–ISE–
2006–77]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Granting Approval to
Proposed Rule Change, as Modified by
Amendment No. 1, Relating to Penny
Increments for Block Mechanism
Orders
April 30, 2007.
I. Introduction
On December 13, 2006, the
International Securities Exchange, LLC
(‘‘ISE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change to
allow orders to be entered into the Block
Mechanism in penny increments and to
receive executions in penny increments.
On March 19, 2007, the Exchange filed
Amendment No. 1 to the proposed rule
change. The proposed rule change was
published for comment in the Federal
Register on March 27, 2007.3 The
Commission received no comment
letters on the proposal. This order
approves the proposed rule change as
modified by Amendment No. 1.
II. Description of the Proposal
The Exchange currently offers a Block
Mechanism for the execution of singlesided, block-sized orders.4 The Block
Mechanism exposes orders of at least 50
contracts to all ISE members for three
seconds, giving members an opportunity
to respond with contra-side trading
interest for their own account or on
behalf of their customers.5 Currently,
orders may be entered and executed
using the Block Mechanism at the
standard 5 and 10 cent increments and
at ‘‘split prices’’ (2.5 cents for options
trading in 5 cent standard increments
and 5 cents for options trading in 10
cent standard increments). The
Exchange proposes to amend ISE Rule
716 to allow these orders to be entered
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 55493
(March 20, 2007), 72 FR 14315.
4 See ISE Rule 716(c).
5 Supplementary Material .03 to ISE Rule 716
prohibits members from entering Responses for the
account of an options market maker from another
options exchange. This is the only limitation
regarding who may enter Responses.
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2 17
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After careful review of the proposal,
the Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.6 In
particular, the Commission finds that
the proposal is consistent with Section
6(b)(5) of the Act,7 which requires,
among other things, that the rules of an
exchange be designed to prevent
fraudulent and manipulative acts, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Specifically, the Commission believes
that the proposed rule change is
consistent with the Act because it will
provide greater flexibility in the pricing
of block-size orders and enhanced
opportunities for block-size orders to
receive price improvement.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,8 that the
proposed rule change (SR–ISE–2006–
77), as modified by Amendment No. 1,
be, and hereby is, approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–8597 Filed 5–4–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55678; File No. SR–
NASDAQ–2007–044]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change to Increase the
Nasdaq Trading Rights Fee
April 27, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
6 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
7 15 U.S.C. 78f(b)(5).
8 15 U.S.C. 78s(b)(2).
9 17 CFR 200.30–3(a)(12).
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25823
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 25,
2007, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared substantially by
Nasdaq. Nasdaq filed the proposal
pursuant to Section 19(b)(3)(A)(ii) of the
Act 3 and Rule 19b–4(f)(2) 4 thereunder,
as establishing or changing a member
due, fee, or other charge, which renders
the proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to increase the
monthly trading rights fee paid by
Nasdaq members. Nasdaq will
implement this proposed rule change on
May 1, 2007. The text of the proposed
rule change is available at
Nasdaq, https://www.nasdaq.com, and
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. Nasdaq has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq is increasing its monthly
trading rights fee, which is assessed on
all Nasdaq members, from $200 to $500
per month. The fee had initially been set
at a level to ease the transition of the
Nasdaq Market Center’s status as a
facility of the NASD to a facility of a
new self-regulatory organization
(‘‘SRO’’). Now that Nasdaq has an
established membership base, Nasdaq
believes that the fee increase is
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
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]]>Agencies
[Federal Register Volume 72, Number 87 (Monday, May 7, 2007)]
[Notices]
[Pages 25809-25823]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-2194]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release Nos. 33-8794; 34-55682]
Order Making Fiscal Year 2008 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
April 30, 2007.
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 to the
[[Page 25810]]
Commission on transactions in specified securities.\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 2008 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 2008.
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 2008], is reasonably
likely to produce aggregate fee collections under [Section 6(b)] that
are equal to the target offsetting collection amount for [fiscal year
2008].'' That is, the adjusted rate is determined by dividing the
``target offsetting collection amount'' for fiscal year 2008 by the
``baseline estimate of the aggregate maximum offering prices'' for
fiscal year 2008.
Section 6(b)(11)(A) specifies that the ``target offsetting
collection amount'' for fiscal year 2008 is $234,000,000.\8\ Section
6(b)(11)(B) defines the ``baseline estimate of the aggregate maximum
offering price'' for fiscal year 2008 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 2008] 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 fiscal year 2008, 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 2007
annual adjustment. Using this methodology, the Commission determines
the ``baseline estimate of the aggregate maximum offering price'' for
fiscal year 2008 to be $5,959,775,433,491.\9\ Based on this estimate,
the Commission calculates the fee rate for fiscal 2008 to be $39.30 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
2008 using our methodology, and then shows the purely arithmetical
process of calculating the fiscal year 2008 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 2008.
---------------------------------------------------------------------------
III. Fiscal Year 2008 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),\10\ which currently is $15.30 per
million of the aggregate dollar amount of sales of specified securities
transacted on the exchange. 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 Year 2007 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. 33-8681 (April 28, 2006), 71 FR 26132
(May 3, 2006).
\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 2008. 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 2008], 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 2008].''
Section 31(l)(1) specifies that the ``target offsetting collection
amount'' for fiscal year 2008 is $892,000,000.\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
[[Page 25811]]
exchange) during [fiscal year 2008] 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 2008, 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 2008 to be
$78,732,152,559,457. Based on this estimate, and an estimated
collection of $18,017 in assessments on security futures transactions
under Section 31(d) in fiscal year 2008, the uniform adjusted rate for
fiscal year 2008 is 11.00 per million.\14\
---------------------------------------------------------------------------
\13\ Appendix B explains how we determined the ``baseline
estimate of the aggregate dollar amount of sales'' for fiscal year
2007 using our methodology, and then shows the purely arithmetical
process of calculating the fiscal year 2007 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 2007.
\14\ The calculation of the adjusted fee rate assumes that the
current fee rate of $15.30 per million will apply through October
31, 2007, 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 2008 annual adjustment to the fee rate applicable under Section
6(b) of the Securities Act shall take effect on the later of October 1,
2007, or five days after the date on which a regular appropriation to
the Commission for fiscal year 2008 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 2008 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, 2007, or 30 days after the date on which a regular
appropriation to the Commission for fiscal year 2008 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 $39.30 per million effective on the later of October 1,
2007, or five days after the date on which a regular appropriation to
the Commission for fiscal year 2008 is enacted; and
It is further ordered that the fee rates applicable under Sections
31(b) and (c) of the Exchange Act shall be $11.00 per million effective
on the later of October 1, 2007, or 30 days after the date on which a
regular appropriation to the Commission for fiscal year 2008 is
enacted.
By the Commission.
Nancy M. Morris,
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 registered with the Commission
over the course of the year. In order to maximize the likelihood
that the amount of monies targeted by Congress will be collected,
the fee rate must be set to reflect projected aggregate maximum
offering prices. As a percentage, the fee rate equals the ratio of
the target amounts of monies to the projected aggregate maximum
offering prices.
For 2008, 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 2007, 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 2008
First, calculate the aggregate maximum offering prices (AMOP)
for each month in the sample (March 1997-March 2007). 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 1997 to March 2007.
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]t-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] = 0.00781 and
[beta] = -0.76766.
6. For the month of April 2007 forecast
[Delta]t = 4/07 = [alpha] + [beta]et = 3/07.
For all subsequent months, forecast [Delta]t = [alpha].
7. Calculate forecasts of log(AAMOP). For example, the forecast
of log(AAMOP) for June 2007 is given by FLAAMOP t = 6/07
= log(AAMOP t = 3/07) + [Delta] t = 4/07 +
[Delta]t = 5/07 + [Delta]t = 6/07.
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 2007, this gives a forecast AAMOP of $21.2 Billion
(Column I), and a forecast AMOP of $444.9 Billion (Column J).
10. Iterate this process through September 2008 to obtain a
baseline estimate of the aggregate maximum offering prices for
fiscal year 2008 of $5,959,775,433,491.
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 10/1/07 and 9/30/08 to be
$5,959,775,433,491.
2. The rate necessary to collect the target $234,000,000 in fee
revenues set by Congress is then calculated as: $234,000,000 /
$5,959,775,433,491 = 0.00003926 (or $39.30 per million.).
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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.
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\18\ Congress requires that the Commission make a mid-year
adjustment to the fee rate if four 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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For 2008, 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 2007, 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 2008
First, calculate the average daily dollar amount of sales (ADS)
for each month in the sample (March 1997-March 2007). 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 0.014 and the standard deviation 0.115.
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 2.1%.
Now, use the expected monthly percentage growth rate to forecast
total dollar volume. For example, one can use the ADS for March 2007
($238,343,650,750) to forecast ADS for April 2007 ($243,433,544,609
= $238,343,650,750 x 1.021).\19\ Multiply by the number of trading
days in April 2007 (20) to obtain a forecast of the total dollar
volume for the month ($4,868,670,892,189). Repeat the method to
generate forecasts for subsequent months.
---------------------------------------------------------------------------
\19\ The value 1.021 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] = 0.014 and
[sigma] = 0.115, 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
= 1.021 x ADSt-1.
6. For April 2007, this gives a forecast ADS of 1.021 x
$238,343,650,750 = $243,433,544,609. Multiply this figure by the 20
trading days in April 2007 to obtain a total dollar volume forecast
of $4,868,670,892,189.
7. For May 2007, multiply the April 2007 ADS forecast by 1.021
to obtain a forecast ADS of $248,632,134,545. Multiply this figure
by the 22 trading days in May 2007 to obtain a total dollar volume
forecast of $5,469,906,959,979.
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 10/1/07
through 10/31/07. The projected aggregate dollar amount of sales for
this period is $6,355,786,096,164. Projected fee collections at the
current fee rate of 0.0000153 are $97,243,527.
2. Estimate the amount of assessments on securities futures
products collected during 10/1/07 and 9/30/08 to be $18,017 by
projecting a 2.1% monthly increase from a base of $1,150 in March
2007.
3. Subtract the amounts $97,243,527 and $18,017 from the target
offsetting collection amount set by Congress of $892,000,000 leaving
$794,738,456 to be collected on dollar volume for the period 11/1/07
through 9/30/08.
4. Use Table B to estimate dollar volume for the period 11/1/07
through 9/30/08. The estimate is $72,376,366,463,293. Finally,
compute the fee rate required to produce the additional $794,738,456
in revenue. This rate is $794,738,456 divided by $72,376,366,463,293
or 0.0000109806.
5. Round the result to the seventh decimal point, yielding a
rate of .0000110 (or $11.00 per million).
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[FR Doc. 07-2194 Filed 5-4-07; 8:45 am]
BILLING CODE 8010-01-C
