Order Making Fiscal Year 2012 Mid-Year Adjustments to Transaction Fee Rates, 13663-13668 [2012-5453]
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srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 45 / Wednesday, March 7, 2012 / Notices
Act and will enhance the interests of the
Company’s stockholders while retaining
for them the important protections
afforded by the Act. In addition, because
the joint participants will conduct their
operations as though they comprise one
company, the participation of one will
not be on a basis different from or less
advantageous than the others.
Accordingly, applicants submit that the
standard for relief under section 57(i)
and rule 17d–1 is satisfied.
17. Section 54 of the Act provides that
a closed-end company may elect BDC
treatment under the Act if the company
has either a class of equity securities
registered under section 12 of the
Exchange Act or has filed a registration
statement pursuant to section 12 of the
Exchange Act for a class of its equity
securities. Section 12(g) of the Exchange
Act requires issuers with specified
assets and a specified number of
security holders to register under the
Exchange Act. As a BDC, the Company
has registered its common stock under
section 12(b) of the Exchange Act. In
order to elect BDC treatment under the
Act, Fidus SBIC voluntarily registered
its securities under the Exchange Act
even though it is not required to do so
by section 12(g) of the Exchange Act.
18. By filing a registration statement
under section 12 of the Exchange Act,
absent an exemption, Fidus SBIC would
be required to make periodic filings
with the Commission, even though
Fidus SBIC will have only one equity
holder. Section 13 of the Exchange Act
is the primary section requiring such
filings. Accordingly, applicants request
an order under section 12(h) of the
Exchange Act exempting Fidus SBIC
from the reporting requirements of
section 13(a) of the Exchange Act.
19. Section 12(h) of the Exchange Act
provides that the Commission may
exempt an issuer from section 13 of the
Exchange Act if the Commission finds
that by reason of the number of public
investors, amount of trading interest in
the securities, the nature and extent of
the activities of the issuer, income or
assets of the issuer, or otherwise, that
such action is not inconsistent with the
public interest or the protection of
investors. Fidus SBIC has only one
investor, which is itself a reporting
company, and no public investors.
There will be no trading in Fidus SBIC
securities, so no public interest or
investor protective purpose will be
served by separate Fidus SBIC reporting.
Further, applicants state that the nature
and extent of Fidus SBIC’s activities are
such that its activities will be fully
reported through consolidated reporting
in accordance with normal accounting
rules. Accordingly, applicants believe
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that the requested exemption meets the
standards of section 12(h) of the
Exchange Act.
Applicants’ Conditions
Applicants agree that the requested
order will be subject to the following
conditions:
1. The Company will at all times own
and hold, beneficially and of record, all
of the outstanding limited partnership
interests in Fidus SBIC and all of the
outstanding membership interests in the
New General Partner, or otherwise own
and hold beneficially all of the
outstanding voting securities and equity
interests of Fidus SBIC.
2. Fidus SBIC will have investment
policies not inconsistent with those of
the Company, as set forth in the
Company’s registration statement.
3. No person shall serve as a member
of the Fidus SBIC Board unless such
person shall also be a member of the
Company’s Board. The Fidus SBIC
Board will be appointed by the equity
owners of Fidus SBIC.
4. The Company will not itself issue
or sell any senior security and the
Company will not cause or permit Fidus
SBIC to issue or sell any senior security
of which the Company or Fidus SBIC is
the issuer except to the extent permitted
by section 18 (as modified for BDCs by
section 61); provided that immediately
after the issuance or sale of any such
senior security by either the Company
or Fidus SBIC, the Company and Fidus
SBIC on a consolidated basis, and the
Company individually, shall have the
asset coverage required by section 18(a)
(as modified by section 61(a)). In
determining whether the Company and
Fidus SBIC on a consolidated basis have
the asset coverage required by section
18, as modified by section 61(a), any
senior securities representing
indebtedness of Fidus SBIC shall not be
considered senior securities, and for
purposes of the definition of ‘‘asset
coverage’’ in section 18(h), shall be
treated as indebtedness not represented
by senior securities.
5. The Company will acquire
securities of Fidus SBIC representing
indebtedness only if, in each case, the
prior approval of the SBA has been
obtained. In addition, the Company and
Fidus SBIC will purchase and sell
portfolio securities between themselves
only if, in each case, the prior approval
of the SBA has been obtained.
6. No person shall serve or act as
investment adviser to Fidus SBIC unless
the Board and the stockholders of the
Company shall have taken such action
with respect thereto that is required to
be taken pursuant to the Act by the
functional equivalent of the Fidus SBIC
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13663
Board and the equity holders of Fidus
SBIC.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–5515 Filed 3–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66495/March 1, 2012]
Order Making Fiscal Year 2012 MidYear Adjustments to Transaction Fee
Rates
I. Background
Section 31 of the Securities Exchange
Act of 1934 (‘‘Exchange Act’’) requires
each national securities exchange and
national securities association to pay
transaction fees to the Commission.1
Specifically, Section 31(b) requires each
national securities exchange to pay to
the Commission fees based on the
aggregate dollar amount of sales of
certain securities transacted on the
exchange.2 Section 31(c) requires each
national securities association to pay to
the Commission fees based on the
aggregate dollar amount of sales of
certain securities transacted by or
through any member of the association
other than on an exchange.3
Section 31 of the Exchange Act
requires the Commission to annually
adjust the fee rates applicable under
Sections 31(b) and (c) to a uniform
adjusted rate, and in some
circumstances, to also make a mid-year
adjustment. The Dodd-Frank Act
amendments to Section 31 of the
Exchange Act establish a new method
for annually adjusting the fee rates
applicable under Sections 31(b) and (c)
of the Exchange Act. Specifically, the
Commission must now adjust the fee
rates to a uniform adjusted rate that is
reasonably likely to produce aggregate
fee collections (including assessments
on security futures transactions) equal
to the regular appropriation to the
Commission for the applicable fiscal
year.4 For fiscal year 2012, the regular
1 15
U.S.C. 78ee.
U.S.C. 78ee(b).
3 15 U.S.C. 78ee(c).
4 See 15 U.S.C. 78ee(j)(1) (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 such fiscal year, is reasonably likely to
produce aggregate fee collections under [Section 31]
(including assessments collected under [Section
31(d)]) that are equal to the regular appropriation
2 15
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Federal Register / Vol. 77, No. 45 / Wednesday, March 7, 2012 / Notices
appropriation to the Commission is
$1,321,000,000.5 On January 20, 2012
the Commission issued an order under
Section 31(j)(1) of the Exchange Act
setting the fee rates applicable under
Sections 31(b) and (c) for fiscal year
2012.6
srobinson on DSK4SPTVN1PROD with NOTICES
II. Determination of the Need for a MidYear Adjustment in Fiscal 2012
Under Section 31(j)(2) of the
Exchange Act, the Commission must
make a mid-year adjustment to the fee
rates under Sections 31(b) and (c) in
fiscal year 2012 if it determines, based
on the actual aggregate dollar volume of
sales during the first five months of the
fiscal year, that the baseline estimate
$71,646,369,036,088 is reasonably likely
to be 10% (or more) greater or less than
the actual aggregate dollar volume of
sales for fiscal year 2012.7 To make this
determination, the Commission must
estimate the actual aggregate dollar
volume of sales for fiscal year 2012.
Based on data provided by the
national securities exchanges and the
national securities association that are
subject to Section 31,8 the actual
aggregate dollar volume of sales during
the first four months of fiscal year 2012
was $21,401,568,899,359.9 Using these
data and a methodology for estimating
the aggregate dollar amount of sales for
the remainder of fiscal year 2012
(developed after consultation with the
Congressional Budget Office and the
OMB),10 the Commission estimates that
the aggregate dollar amount of sales for
the remainder of fiscal year 2012 to be
$42,485,082,013,879. Thus, the
Commission estimates that the actual
to the Commission by Congress for such fiscal
year.’’).
5 Id.
6 Order Making Fiscal Year 2012 Annual
Adjustments to Transaction Fee Rates, Rel. No. 34–
66202 (January 20, 2012).
7 The amount $71,646,369,036,088 is the baseline
estimate of the aggregate dollar amount of sales for
fiscal year 2012 calculated by the Commission in
its Order Making Fiscal Year 2012 Annual
Adjustments to Transaction Fee Rates, Rel. No. 34–
66202 (January 20, 2012).
8 The Financial Industry Regulatory Authority,
Inc. (‘‘FINRA’’) and each exchange is required to
file a monthly report on Form R31 containing dollar
volume data on sales of securities subject to Section
31. The report is due on the 10th business day
following the month for which the exchange or
association provides dollar volume data.
9 Although Section 31(j)(2) indicates that the
Commission should determine the actual aggregate
dollar volume of sales for fiscal 2012 ‘‘based on the
actual aggregate dollar volume of sales during the
first 5 months of such fiscal year,’’ data are only
available for the first four months of the fiscal year
as of the date the Commission is required to issue
this order, i.e., March 1, 2012. Dollar volume data
on sales of securities subject to Section 31 for
February 2012 will not be available from the
exchanges and FINRA for several weeks.
10 See Appendix A.
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aggregate dollar volume of sales for all
of fiscal year 2012 will be
$63,886,650,913,238.
Because the baseline estimate of
$71,646,369,036,088 is more than 10%
greater than the $63,886,650,913,238
estimated actual aggregate dollar
volume of sales for fiscal year 2012,
Section 31(j)(2) of the Exchange Act
requires the Commission to issue an
order adjusting the fee rates under
Sections 31(b) and (c).
III. Calculation of the Uniform Adjusted
Rate
Section 31(j)(2) specifies the method
for determining the mid-year adjustment
for fiscal 2012. Specifically, the
Commission must adjust the rates under
Sections 31(b) and (c) to a ‘‘uniform
adjusted rate that, when applied to the
revised estimate of the aggregate dollar
amount of sales for the remainder of
fiscal year 2012, is reasonably likely to
produce aggregate fee collections under
Section 31 (including fees collected
during such 5-month period and
assessments collected under Section
31(d)) that are equal to
$1,321,000,000.’’ 11 In other words, the
uniform adjusted rate is determined by
subtracting fees collected prior to the
effective date of the new rate and
assessments collected under Section
31(d) during all of fiscal year 2012 from
$1,321,000,000, which is the amount to
be collected for fiscal year 2012. That
difference is then divided by the revised
estimate of the aggregate dollar volume
of sales for the remainder of the fiscal
year following the effective date of the
new rate.
The Commission estimates that it will
collect $597,429,581 in fees for the
period prior to the effective date of the
mid-year adjustment and $16,425 in
assessments on round turn transactions
in security futures products during all of
fiscal year 2012. Using the methodology
referenced in Part II above, the
Commission estimates that the aggregate
dollar volume of sales for the remainder
of fiscal year 2012 following the
effective date of the new rate will be
11 15 U.S.C. 78ee(j)(2). The term ‘‘fees collected’’
is not defined in Section 31. Because national
securities exchanges and national securities
associations are not required to pay the first
installment of Section 31 fees for fiscal 2012 until
March 15, the Commission will not ‘‘collect’’ any
fees in the first five months of fiscal 2012. See 15
U.S.C. 78ee(e). However, the Commission believes
that, for purposes of calculating the mid-year
adjustment, Congress, by stating in Section 31(j)(2)
that the ‘‘uniform adjusted rate * * * is reasonably
likely to produce aggregate fee collections under
Section 31 * * * that are equal to
[$1,321,000,000],’’ intended the Commission to
include the fees that the Commission will collect
based on transactions in the six months before the
effective date of the mid-year adjustment.
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$32,330,785,567,489. This amount
reflects more recent information on the
dollar amount of sales of securities than
was available at the time of the setting
of the initial fee rate for fiscal year 2012,
and indicates a significant reduction in
sales. Based on these estimates, and
employing the mid-year adjustment
mechanism established by statute, the
uniform adjusted rate must be adjusted
to $22.40 per million of the aggregate
dollar amount of sales of securities.12
The aggregate dollar amount of sales of
securities subject to Section 31 fees is
illustrated in Appendix A.
IV. Effective Date of the Uniform
Adjusted Rate
Section 31(j)(4)(B) of the Exchange
Act provides that a mid-year adjustment
shall take effect on April 1 of the fiscal
year in which such rate applies.
Therefore, the exchanges and the
national securities association that are
subject to Section 31 fees must pay fees
under Sections 31(b) and (c) at the
uniform adjusted rate of $22.40 per
million for sales of securities transacted
on April 1, 2012, and thereafter until the
annual adjustment for fiscal 2013 is
effective.
V. Conclusion
Accordingly, pursuant to Section 31
of the Exchange Act,13
It is hereby ordered that each of the
fee rates under Sections 31(b) and (c) of
the Exchange Act shall be $22.40 per
$1,000,000 of the aggregate dollar
amount of sales of securities subject to
these sections effective April 1, 2012.
By the Commission.
Elizabeth M. Murphy,
Secretary.
Appendix A
A. Baseline Estimate of the Aggregate Dollar
Amount of Sales
First, calculate the average daily dollar
amount of sales (ADS) for each month in the
sample (January 2002–January 2012). The
data obtained from the exchanges and FINRA
are presented in Table A. The monthly
aggregate dollar amount of sales from all
exchanges and FINRA is contained in
column C.
Next, calculate the change in the natural
logarithm of ADS from month-to-month. The
average monthly change in the logarithm of
ADS over the entire sample is 0.007 and the
standard deviation 0.126. Assume the
monthly percentage change in ADS follows a
random walk. The expected monthly
percentage growth rate of ADS is 1.5 percent.
12 The calculation is as follows: ($1,321,000,000
¥ $597,429,581 ¥ $16,425)/$32,330,785,567,489 =
0.0000223797. Round this result to the seventh
decimal point, yielding a rate of $22.40 per million.
13 15 U.S.C. 78ee.
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Now, use the expected monthly percentage
growth rate to forecast total dollar volume.
For example, one can use the ADS for
January 2012 ($236,326,110,324) to forecast
ADS for February 2012 ($239,879,615,120 =
$236,326,110,324 × 1.015).14 Multiply by the
number of trading days in February 2012 (20)
to obtain a forecast of the total dollar volume
for the month ($4,797,592,302,406). Repeat
the method to generate forecasts for
subsequent months.
The forecasts for total dollar volume are in
column G of Table A. The following is a more
formal (mathematical) description of the
procedure:
1. Divide each month’s total dollar volume
(column C) by the number of trading days in
that month (column B) to obtain the average
daily dollar volume (ADS, column D).
2. For each month t, calculate the change
in ADS from the previous month as Dt = log
(ADSt/ADSt¥1), where log (x) denotes the
natural logarithm of x.
3. Calculate the mean and standard
deviation of the series {D1, D2, * * *, D120}.
These are given by m = 0.007 and s = 0.126,
respectively.
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14 The value 1.015 has been rounded. All
computations are done with the unrounded value.
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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 (m + s2/2), or on
average ADSt = 1.015 × ADSt¥1.
6. For February 2012, this gives a forecast
ADS of 1.015 × $236,326,110,324 =
$239,879,615,120. Multiply this figure by the
20 trading days in February 2012 to obtain
a total dollar volume forecast of
$4,797,592,302,406.
7. For March 2012, multiply the February
2012 ADS forecast by 1.015 to obtain a
forecast ADS of $243,486,551,999. Multiply
this figure by the 22 trading days in March
2012 to obtain a total dollar volume forecast
of $5,356,704,143,984.
8. Repeat this procedure for subsequent
months.
B. Using the Forecasts From A To Calculate
the New Fee Rate
1. Determine the aggregate dollar volume of
sales between 10/1/11 and 2/20/12 to be
$24,520,003,895,923. Multiply this amount
by the fee rate of $19.20 per million dollars
in sales during this period and get
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13665
$470,784,075 in actual and projected fees
collected during 10/1/11 and 2/20/12.
Determine the projected aggregate dollar
volume of sales between 2/21/12 and 3/31/
12 to be $7,035,861,449,826. Multiply this
amount by the fee rate of $18.00 per million
dollars in sales during this period and get an
estimate of $126,645,506 in projected fees
collected during 2/21/12 and 3/31/12.
2. Estimate the amount of assessments on
security futures products collected during
10/1/11 and 9/30/12 to be $16,425 by
summing the amounts collected through
January 2012 of $5,716 with projections of a
1.5% monthly increase in subsequent
months.
3. Determine the projected aggregate dollar
volume of sales between 4/1/12 and 9/30/12
to be $32,330,785,567,489.
4. The rate necessary to collect
$1,321,000,000 in fee revenues is then
calculated as: ($1,321,000,000 ¥
$470,784,075 ¥ $126,645,506 ¥ $16,425) ÷
$32,330,785,567,489 = 0.0000223797.
5. Round the result to the seventh decimal
point, yielding a rate of 0.0000224000 (or
$22.40 per million).
BILLING CODE 8011–01–P
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srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 45 / Wednesday, March 7, 2012 / Notices
13668
Federal Register / Vol. 77, No. 45 / Wednesday, March 7, 2012 / Notices
[FR Doc. 2012–5453 Filed 3–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66506; File No. SR–CME–
2012–01]
Self-Regulatory Organizations;
Chicago Mercantile Exchange, Inc.;
Order Approving Proposed Rule
Change To Amend Rules Relating to
Credit Default Swap Guaranty Fund
March 2, 2012
I. Introduction
On January 23, 2012, Chicago
Mercantile Exchange Inc. (‘‘CME’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–CME–2012–01
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder.2
The proposed rule change was
published for comment in the Federal
Register on February 1, 2012.3 The
Commission received no comment
letters regarding the proposal. For the
reasons discussed below, the
Commission is granting approval of the
proposed rule change.
srobinson on DSK4SPTVN1PROD with NOTICES
II. Description
The rule change would replace CME’s
‘‘aggregate performance bond
requirement’’ standard, which
determines how CME calculates each
CDS Clearing Member’s allocation to the
CDS Guaranty Fund, with a new
standard that CME believes better
allocates tail risk. Currently CME rules
provide that each CDS Clearing
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–66250
(January 26, 2012), 77 FR 5070 (February 1, 2012).
In its filing with the Commission, CME included
statements concerning the purpose of and basis for
the proposed rule change. The text of these
statements is incorporated into the discussion of the
proposed rule change in Section II below.
2 17
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18:40 Mar 06, 2012
Jkt 226001
Member’s allocation to the CDS
Guaranty Fund will be the greater of (i)
$50,000,000 and (ii) its proportionate
share of the 90-day trailing average of its
aggregate performance bond
requirements and average gross notional
open interest outstanding at the Clearing
House. The proposal would change the
CDS Guaranty Fund so that the
allocation will be made on the basis of
each CDS Clearing Member’s potential
residual loss (‘‘PRL’’). PRL is a stress
test of the tail risk CDS Clearing
Member portfolios bring to the market.
CME is also proposing to make
conforming changes to its CDS Manual
of Operations.
III. Discussion
Section 19(b)(2)(B) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.4 In
particular, Section 17A(b)(3)(F) 5 of the
Act requires, among other things, that
the rules of a clearing agency be
designed to assure the safeguarding of
securities and funds which are in the
custody or control of the clearing agency
or for which it is responsible.
The proposed rule change would
allow CME to change the method used
for calculating individual CDS Clearing
Member contributions to the CDS
Guaranty Fund and is designed to more
accurately align the allocation of its CDS
Guaranty Fund requirement to CDS
Clearing Members based on the risk
presented by each such member. Thus,
the proposed rule change to change
CME’s CDS Guaranty Fund allocation is
consistent with the requirement in
Section 17A(b)(3)(F) that CME safeguard
the securities and funds which are in
the custody or control of CME or for
which it is responsible.
4 15
5 15
PO 00000
U.S.C. 78s(b)(2)(B).
U.S.C. 78q–1(b)(3)(F).
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IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the Act
and the rules and regulations
thereunder.
It Is Therefore Ordered, pursuant to
Section 19(b)(2) 6 of the Act, that the
proposed rule change (File No. SR–
CME–2012–01) be, and hereby is,
approved.7
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–5513 Filed 3–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66497; File No. SR–Phlx–
2012–23]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing of Proposed Rule Change To
Amend Registration and Qualification
Requirements
March 1, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1, and Rule 19b–4 2 thereunder,
notice is hereby given that on February
16, 2012, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. The
6 15
U.S.C. 78s(b)(2).
approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
8 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
7 In
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BILLING CODE 8011–01–C
]]>Agencies
[Federal Register Volume 77, Number 45 (Wednesday, March 7, 2012)]
[Notices]
[Pages 13663-13668]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-5453]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66495/March 1, 2012]
Order Making Fiscal Year 2012 Mid-Year Adjustments to Transaction
Fee Rates
I. Background
Section 31 of the Securities Exchange Act of 1934 (``Exchange
Act'') requires each national securities exchange and national
securities association to pay transaction fees to the Commission.\1\
Specifically, Section 31(b) requires each national securities exchange
to pay to the Commission fees based on the aggregate dollar amount of
sales of certain securities transacted on the exchange.\2\ Section
31(c) requires each national securities association to pay to the
Commission fees based on the aggregate dollar amount of sales of
certain securities transacted by or through any member of the
association other than on an exchange.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78ee.
\2\ 15 U.S.C. 78ee(b).
\3\ 15 U.S.C. 78ee(c).
---------------------------------------------------------------------------
Section 31 of the Exchange Act requires the Commission to annually
adjust the fee rates applicable under Sections 31(b) and (c) to a
uniform adjusted rate, and in some circumstances, to also make a mid-
year adjustment. The Dodd-Frank Act amendments to Section 31 of the
Exchange Act establish a new method for annually adjusting the fee
rates applicable under Sections 31(b) and (c) of the Exchange Act.
Specifically, the Commission must now adjust the fee rates to a uniform
adjusted rate that is reasonably likely to produce aggregate fee
collections (including assessments on security futures transactions)
equal to the regular appropriation to the Commission for the applicable
fiscal year.\4\ For fiscal year 2012, the regular
[[Page 13664]]
appropriation to the Commission is $1,321,000,000.\5\ On January 20,
2012 the Commission issued an order under Section 31(j)(1) of the
Exchange Act setting the fee rates applicable under Sections 31(b) and
(c) for fiscal year 2012.\6\
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\4\ See 15 U.S.C. 78ee(j)(1) (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 such fiscal year, is reasonably likely to
produce aggregate fee collections under [Section 31] (including
assessments collected under [Section 31(d)]) that are equal to the
regular appropriation to the Commission by Congress for such fiscal
year.'').
\5\ Id.
\6\ Order Making Fiscal Year 2012 Annual Adjustments to
Transaction Fee Rates, Rel. No. 34-66202 (January 20, 2012).
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II. Determination of the Need for a Mid-Year Adjustment in Fiscal 2012
Under Section 31(j)(2) of the Exchange Act, the Commission must
make a mid-year adjustment to the fee rates under Sections 31(b) and
(c) in fiscal year 2012 if it determines, based on the actual aggregate
dollar volume of sales during the first five months of the fiscal year,
that the baseline estimate $71,646,369,036,088 is reasonably likely to
be 10% (or more) greater or less than the actual aggregate dollar
volume of sales for fiscal year 2012.\7\ To make this determination,
the Commission must estimate the actual aggregate dollar volume of
sales for fiscal year 2012.
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\7\ The amount $71,646,369,036,088 is the baseline estimate of
the aggregate dollar amount of sales for fiscal year 2012 calculated
by the Commission in its Order Making Fiscal Year 2012 Annual
Adjustments to Transaction Fee Rates, Rel. No. 34-66202 (January 20,
2012).
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Based on data provided by the national securities exchanges and the
national securities association that are subject to Section 31,\8\ the
actual aggregate dollar volume of sales during the first four months of
fiscal year 2012 was $21,401,568,899,359.\9\ Using these data and a
methodology for estimating the aggregate dollar amount of sales for the
remainder of fiscal year 2012 (developed after consultation with the
Congressional Budget Office and the OMB),\10\ the Commission estimates
that the aggregate dollar amount of sales for the remainder of fiscal
year 2012 to be $42,485,082,013,879. Thus, the Commission estimates
that the actual aggregate dollar volume of sales for all of fiscal year
2012 will be $63,886,650,913,238.
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\8\ The Financial Industry Regulatory Authority, Inc.
(``FINRA'') and each exchange is required to file a monthly report
on Form R31 containing dollar volume data on sales of securities
subject to Section 31. The report is due on the 10th business day
following the month for which the exchange or association provides
dollar volume data.
\9\ Although Section 31(j)(2) indicates that the Commission
should determine the actual aggregate dollar volume of sales for
fiscal 2012 ``based on the actual aggregate dollar volume of sales
during the first 5 months of such fiscal year,'' data are only
available for the first four months of the fiscal year as of the
date the Commission is required to issue this order, i.e., March 1,
2012. Dollar volume data on sales of securities subject to Section
31 for February 2012 will not be available from the exchanges and
FINRA for several weeks.
\10\ See Appendix A.
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Because the baseline estimate of $71,646,369,036,088 is more than
10% greater than the $63,886,650,913,238 estimated actual aggregate
dollar volume of sales for fiscal year 2012, Section 31(j)(2) of the
Exchange Act requires the Commission to issue an order adjusting the
fee rates under Sections 31(b) and (c).
III. Calculation of the Uniform Adjusted Rate
Section 31(j)(2) specifies the method for determining the mid-year
adjustment for fiscal 2012. Specifically, the Commission must adjust
the rates under Sections 31(b) and (c) to a ``uniform adjusted rate
that, when applied to the revised estimate of the aggregate dollar
amount of sales for the remainder of fiscal year 2012, is reasonably
likely to produce aggregate fee collections under Section 31 (including
fees collected during such 5-month period and assessments collected
under Section 31(d)) that are equal to $1,321,000,000.'' \11\ In other
words, the uniform adjusted rate is determined by subtracting fees
collected prior to the effective date of the new rate and assessments
collected under Section 31(d) during all of fiscal year 2012 from
$1,321,000,000, which is the amount to be collected for fiscal year
2012. That difference is then divided by the revised estimate of the
aggregate dollar volume of sales for the remainder of the fiscal year
following the effective date of the new rate.
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\11\ 15 U.S.C. 78ee(j)(2). The term ``fees collected'' is not
defined in Section 31. Because national securities exchanges and
national securities associations are not required to pay the first
installment of Section 31 fees for fiscal 2012 until March 15, the
Commission will not ``collect'' any fees in the first five months of
fiscal 2012. See 15 U.S.C. 78ee(e). However, the Commission believes
that, for purposes of calculating the mid-year adjustment, Congress,
by stating in Section 31(j)(2) that the ``uniform adjusted rate * *
* is reasonably likely to produce aggregate fee collections under
Section 31 * * * that are equal to [$1,321,000,000],'' intended the
Commission to include the fees that the Commission will collect
based on transactions in the six months before the effective date of
the mid-year adjustment.
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The Commission estimates that it will collect $597,429,581 in fees
for the period prior to the effective date of the mid-year adjustment
and $16,425 in assessments on round turn transactions in security
futures products during all of fiscal year 2012. Using the methodology
referenced in Part II above, the Commission estimates that the
aggregate dollar volume of sales for the remainder of fiscal year 2012
following the effective date of the new rate will be
$32,330,785,567,489. This amount reflects more recent information on
the dollar amount of sales of securities than was available at the time
of the setting of the initial fee rate for fiscal year 2012, and
indicates a significant reduction in sales. Based on these estimates,
and employing the mid-year adjustment mechanism established by statute,
the uniform adjusted rate must be adjusted to $22.40 per million of the
aggregate dollar amount of sales of securities.\12\ The aggregate
dollar amount of sales of securities subject to Section 31 fees is
illustrated in Appendix A.
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\12\ The calculation is as follows: ($1,321,000,000 -
$597,429,581 - $16,425)/$32,330,785,567,489 = 0.0000223797. Round
this result to the seventh decimal point, yielding a rate of $22.40
per million.
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IV. Effective Date of the Uniform Adjusted Rate
Section 31(j)(4)(B) of the Exchange Act provides that a mid-year
adjustment shall take effect on April 1 of the fiscal year in which
such rate applies. Therefore, the exchanges and the national securities
association that are subject to Section 31 fees must pay fees under
Sections 31(b) and (c) at the uniform adjusted rate of $22.40 per
million for sales of securities transacted on April 1, 2012, and
thereafter until the annual adjustment for fiscal 2013 is effective.
V. Conclusion
Accordingly, pursuant to Section 31 of the Exchange Act,\13\
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\13\ 15 U.S.C. 78ee.
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It is hereby ordered that each of the fee rates under Sections
31(b) and (c) of the Exchange Act shall be $22.40 per $1,000,000 of the
aggregate dollar amount of sales of securities subject to these
sections effective April 1, 2012.
By the Commission.
Elizabeth M. Murphy,
Secretary.
Appendix A
A. Baseline Estimate of the Aggregate Dollar Amount of Sales
First, calculate the average daily dollar amount of sales (ADS)
for each month in the sample (January 2002-January 2012). The data
obtained from the exchanges and FINRA are presented in Table A. The
monthly aggregate dollar amount of sales from all exchanges and
FINRA is contained in column C.
Next, calculate the change in the natural logarithm of ADS from
month-to-month. The average monthly change in the logarithm of ADS
over the entire sample is 0.007 and the standard deviation 0.126.
Assume the monthly percentage change in ADS follows a random walk.
The expected monthly percentage growth rate of ADS is 1.5 percent.
[[Page 13665]]
Now, use the expected monthly percentage growth rate to forecast
total dollar volume. For example, one can use the ADS for January
2012 ($236,326,110,324) to forecast ADS for February 2012
($239,879,615,120 = $236,326,110,324 x 1.015).\14\ Multiply by the
number of trading days in February 2012 (20) to obtain a forecast of
the total dollar volume for the month ($4,797,592,302,406). Repeat
the method to generate forecasts for subsequent months.
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\14\ The value 1.015 has been rounded. All computations are done
with the unrounded value.
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The forecasts for total dollar volume are in column G of Table
A. The following is a more formal (mathematical) description of the
procedure:
1. Divide each month's total dollar volume (column C) by the
number of trading days in that month (column B) to obtain the
average daily dollar volume (ADS, column D).
2. For each month t, calculate the change in ADS from the
previous month as [Delta]t = log (ADSt/
ADSt-1), where log (x) denotes the natural logarithm of
x.
3. Calculate the mean and standard deviation of the series
{[Delta]1, [Delta]2, * * *,
[Delta]120{time} . These are given by [mu] = 0.007 and
[sigma] = 0.126, 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
= 1.015 x ADSt-1.
6. For February 2012, this gives a forecast ADS of 1.015 x
$236,326,110,324 = $239,879,615,120. Multiply this figure by the 20
trading days in February 2012 to obtain a total dollar volume
forecast of $4,797,592,302,406.
7. For March 2012, multiply the February 2012 ADS forecast by
1.015 to obtain a forecast ADS of $243,486,551,999. Multiply this
figure by the 22 trading days in March 2012 to obtain a total dollar
volume forecast of $5,356,704,143,984.
8. Repeat this procedure for subsequent months.
B. Using the Forecasts From A To Calculate the New Fee Rate
1. Determine the aggregate dollar volume of sales between 10/1/
11 and 2/20/12 to be $24,520,003,895,923. Multiply this amount by
the fee rate of $19.20 per million dollars in sales during this
period and get $470,784,075 in actual and projected fees collected
during 10/1/11 and 2/20/12. Determine the projected aggregate dollar
volume of sales between 2/21/12 and 3/31/12 to be
$7,035,861,449,826. Multiply this amount by the fee rate of $18.00
per million dollars in sales during this period and get an estimate
of $126,645,506 in projected fees collected during 2/21/12 and 3/31/
12.
2. Estimate the amount of assessments on security futures
products collected during 10/1/11 and 9/30/12 to be $16,425 by
summing the amounts collected through January 2012 of $5,716 with
projections of a 1.5% monthly increase in subsequent months.
3. Determine the projected aggregate dollar volume of sales
between 4/1/12 and 9/30/12 to be $32,330,785,567,489.
4. The rate necessary to collect $1,321,000,000 in fee revenues
is then calculated as: ($1,321,000,000 - $470,784,075 - $126,645,506
- $16,425) / $32,330,785,567,489 = 0.0000223797.
5. Round the result to the seventh decimal point, yielding a
rate of 0.0000224000 (or $22.40 per million).
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[FR Doc. 2012-5453 Filed 3-6-12; 8:45 am]
BILLING CODE 8011-01-P
