2017-18308. Order Making Fiscal Year 2018 Annual Adjustments to Registration Fee Rates  

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    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 specified proxy solicitations and statements in corporate control transactions.[3] These provisions require the Commission to make annual adjustments to the applicable fee rates.

    II. Fiscal Year 2018 Annual Adjustment to Fee Rates

    Section 6(b)(2) of the Securities Act requires the Commission to make an annual adjustment to the fee rate applicable under Section 6(b).[4] 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.[5]

    Section 6(b)(2) sets forth the method for determining the annual adjustment to the fee rate under Section 6(b) for fiscal year 2018. 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 2018], is reasonably likely to produce aggregate fee collections under [Section 6(b)] that are equal to the target fee collection amount for [fiscal year 2018].” That is, the adjusted rate is determined by dividing the “target fee collection amount” for fiscal year 2018 by the “baseline estimate of the aggregate maximum offering prices” for fiscal year 2018.

    Section 6(b)(6)(A) specifies that the “target fee collection amount” for fiscal year 2018 is $620,000,000. Section 6(b)(6)(B) defines the “baseline estimate of the aggregate maximum offering prices” for fiscal year 2018 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 2018] 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 2018, the Commission is using a methodology that has been used in prior fiscal years and that was developed in consultation with the Congressional Budget Office (“CBO”) and Office of Management and Budget (“OMB”).[6] Using this methodology, the Commission determines the “baseline estimate of the aggregate maximum offering price” for fiscal year 2018 to be $4,981,648,951,511. Based on this estimate, the Commission calculates the fee rate for fiscal 2018 to be $124.50 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. Effective Dates of the Annual Adjustments

    The fiscal year 2018 annual adjustments to the fee rates applicable under Section 6(b) of the Securities Act and Sections 13(e) and 14(g) of the Exchange Act will be effective on October 1, 2017.[7]

    IV. Conclusion

    Accordingly, pursuant to Section 6(b) of the Securities Act and Sections 13(e) and 14(g) of the Exchange Act,[8]

    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 $124.50 per million effective on October 1, 2017.

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    By the Commission.

    Brent J. Fields,

    Secretary.

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    Appendix A

    Congress has 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 2018, 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 July 2017, 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 2018

    First, calculate the aggregate maximum offering prices (AMOP) for each month in the sample (July 2007-July 2017). 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 July 2007 to July 2017.

    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 Δt = log (AAMOPt) − log(AAMOPt−1). This approximates the percentage change.

    5. Estimate the first order moving average model Δt = α + βet −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 Δt. The forecast error is expressed as et = Δt−α−βet−1. The model can be estimated using standard commercially available software. Using least squares, the estimated parameter values are α = 0.0014909132 and β = 0.8922530731.

    6. For the month of August 2017 forecast Δt = 8/2017 = α + βet = 7/2017. For all subsequent months, forecast Δt = α.

    7. Calculate forecasts of log(AAMOP). For example, the forecast of log(AAMOP) for October 2017 is given by FLAAMOPt = 10/2017 = log(AAMOPt = 7/2017) + Δt = 8/2017 + Δt = 9/2017 + Δt = 10/2017.

    8. Under the assumption that et is normally distributed, the n-step ahead forecast of AAMOP is given by exp(FLAAMOPt + σn2/2), where σn denotes the standard error of the n-step ahead forecast.

    9. For October 2017, this gives a forecast AAMOP of $19.617 billion (Column I), and a forecast AMOP of $431.6 billion (Column J).

    10. Iterate this process through September 2018 to obtain a baseline estimate of the aggregate maximum offering prices for fiscal year 2018 of $4,981,648,951,511.

    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 10/01/17 and 9/30/18 to be $4,981,648,951,511.

    2. The rate necessary to collect the target $620,000,000 in fee revenues set by Congress is then calculated as: $620,000,000 ÷ $4,981,648,951,511 = 0.000124457.

    3. Round the result to the seventh decimal point, yielding a rate of 0.0001245 (or $124.50 per million).

    Table A—Estimation of Baseline of Aggregate Maximum Offering Prices

    Fee rate calculation
    a. Baseline estimate of the aggregate maximum offering prices, 10/1/17 to 9/30/18 ($Millions)4,981,649
    b. Implied fee rate ($620 Million/a)$124.50
    MonthNumber of trading days in monthAggregate maximum offering prices, in $millionsAverage daily aggregate max. offering prices (AAMOP) in $millionsLog (AAMOP)Log (change in AAMOP)Forecast log (AAMOP)Standard errorForecast AAMOP, in $millionsForecast aggregate maximum offering prices, in $millions
    (A)(B)(C)(D)(E)(F)(G)(H)(I)(J)
    Data
    Jul-0721326,61215,55323.468
    Aug-0723369,17216,05123.4990.032
    Sep-0719241,05912,68723.264−0.235
    Oct-0723239,65210,42023.067−0.197
    Nov-0721458,65421,84123.8070.740
    Dec-0720410,20020,51023.744−0.063
    Jan-0821354,43316,87823.549−0.195
    Feb-0820263,41013,17123.301−0.248
    Mar-0820596,92329,84624.1190.818
    Apr-0822292,53413,29723.311−0.809
    May-0821456,07721,71823.8010.491
    Jun-0821461,08721,95723.8120.011
    Jul-0822232,89610,58623.083−0.730
    Aug-0821395,44018,83023.6590.576
    Sep-0821177,6368,45922.858−0.800
    Oct-0823360,49415,67423.4750.617
    Nov-0819288,91115,20623.445−0.030
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    Dec-0822319,58414,52723.399−0.046
    Jan-0920375,06518,75323.6550.255
    Feb-0919249,66613,14023.299−0.356
    Mar-0922739,93133,63324.2390.940
    Apr-0921235,91411,23423.142−1.097
    May-0920329,52216,47623.5250.383
    Jun-0922357,52416,25123.511−0.014
    Jul-0922185,1878,41822.854−0.658
    Aug-0921192,7269,17722.9400.086
    Sep-0921189,2249,01122.922−0.018
    Oct-0922215,7209,80523.0060.085
    Nov-0920248,35312,41823.2420.236
    Dec-0922340,46415,47623.4630.220
    Jan-1019173,2359,11822.933−0.529
    Feb-1019209,96311,05123.1260.192
    Mar-1023432,93418,82323.6580.533
    Apr-1021280,18813,34223.314−0.344
    May-1020278,61113,93123.3570.043
    Jun-1022364,25116,55723.5300.173
    Jul-1021171,1918,15222.822−0.709
    Aug-1022240,79310,94523.1160.295
    Sep-1021260,78312,41823.2420.126
    Oct-1021214,98810,23823.049−0.193
    Nov-1021340,11216,19623.5080.459
    Dec-1022297,99213,54523.329−0.179
    Jan-1120233,66811,68323.181−0.148
    Feb-1119252,78513,30423.3110.130
    Mar-1123595,19825,87823.9770.665
    Apr-1120236,35511,81823.193−0.784
    May-1121319,05315,19323.4440.251
    Jun-1122359,72716,35123.5180.073
    Jul-1120215,39110,77023.100−0.418
    Aug-1123179,8707,82022.780−0.320
    Sep-1121168,0058,00022.8030.023
    Oct-1121181,4528,64122.8800.077
    Nov-1121256,41812,21023.2260.346
    Dec-1121237,65211,31723.150−0.076
    Jan-1220276,96513,84823.3510.202
    Feb-1220228,41911,42123.159−0.193
    Mar-1222430,80619,58223.6980.539
    Apr-1220173,6268,68122.884−0.813
    May-1222414,12218,82423.6580.774
    Jun-1221272,21812,96323.285−0.373
    Jul-1221170,4628,11722.817−0.468
    Aug-1223295,47212,84723.2760.459
    Sep-1219331,29517,43723.5820.305
    Oct-1221137,5626,55122.603−0.979
    Nov-1221221,52110,54923.0790.476
    Dec-1220321,60216,08023.5010.422
    Jan-1321368,48817,54723.5880.087
    Feb-1319252,14813,27123.309−0.279
    Mar-1320533,44026,67224.0070.698
    Apr-1322235,77910,71723.095−0.912
    May-1322382,95017,40723.5800.485
    Jun-1320480,62424,03123.9030.322
    Jul-1322263,86911,99423.208−0.695
    Aug-1322253,30511,51423.167−0.041
    Sep-1320267,92313,39623.3180.151
    Oct-1323293,84712,77623.271−0.047
    Nov-1320326,25716,31323.5150.244
    Dec-1321358,16917,05623.5600.045
    Jan-1421369,06717,57523.5900.030
    Feb-1419298,37615,70423.477−0.113
    Mar-1421564,84026,89724.0150.538
    Apr-1421263,40112,54323.252−0.763
    May-1421403,70019,22423.6790.427
    Jun-1421423,07520,14623.7260.047
    Jul-1422373,81116,99123.556−0.170
    Aug-1421405,01719,28723.6830.127
    Sep-1421409,34919,49323.6930.011
    Oct-1423338,83214,73223.413−0.280
    Nov-1419386,89820,36323.7370.324
    Dec-1422370,76016,85323.548−0.189
    Jan-1520394,12719,70623.7040.156
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    Feb-1519466,13824,53423.9230.219
    Mar-1522753,74734,26124.2570.334
    Apr-1521356,56016,97923.555−0.702
    May-1520478,59123,93023.8980.343
    Jun-1522446,10220,27723.733−0.166
    Jul-1522402,06218,27623.629−0.104
    Aug-1521334,74615,94023.492−0.137
    Sep-1521289,87213,80323.348−0.144
    Oct-1522300,27613,64923.337−0.011
    Nov-1520409,69020,48523.7430.406
    Dec-1522308,56914,02623.364−0.379
    Jan-1619457,41124,07423.9040.540
    Feb-1620554,34327,71724.0450.141
    Mar-1622900,30140,92324.4350.390
    Apr-1621250,71611,93923.203−1.232
    May-1621409,99219,52323.6950.492
    Jun-1622321,21914,60123.404−0.291
    Jul-1620289,67114,48423.396−0.008
    Aug-1623352,06815,30723.4520.055
    Sep-1621326,11615,52923.4660.014
    Oct-1621266,11512,67223.263−0.203
    Nov-1621443,03421,09723.7720.510
    Dec-1621310,61414,79123.417−0.355
    Jan-1720503,03025,15223.9480.531
    Feb-1719255,81513,46423.323−0.625
    Mar-1723723,87031,47324.1720.849
    Apr-1719255,27513,43623.321−0.851
    May-1722569,96525,90823.9780.657
    Jun-1722445,08120,23123.730−0.247
    Jul-1720291,16714,55823.401−0.329
    Aug-172323.6418960.32719,535449,296
    Sep-172023.6433870.32919,576391,518
    Oct-172223.6448780.33119,617431,581
    Nov-172123.6463690.33319,659412,835
    Dec-172023.6478600.33519,700394,008
    Jan-182123.6493510.33719,742414,583
    Feb-181923.6508410.33819,784375,892
    Mar-182123.6523320.34019,826416,338
    Apr-182123.6538230.34219,868417,219
    May-182223.6553140.34419,910438,011
    Jun-182123.6568050.34619,952418,986
    Jul-182123.6582960.34819,994419,872
    Aug-182323.6597870.34920,036460,832
    Sep-181923.6612780.35120,079381,492
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    Footnotes

    4.  15 U.S.C. 77f(b)(2). 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 fee collection amount” specified in Section 6(b)(6)(A) for that fiscal year.

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    6.  Appendix A explains how we determined the “baseline estimate of the aggregate maximum offering price” for fiscal year 2018 using our methodology, and then shows the arithmetical process of calculating the fiscal year 2018 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 2018.

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    [FR Doc. 2017-18308 Filed 8-28-17; 8:45 am]

    BILLING CODE 8011-01-P

Document Information

Published:
08/29/2017
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
2017-18308
Pages:
41080-41085 (6 pages)
Docket Numbers:
Release Nos. 33-10407, 34-81476/August 24, 2017
PDF File:
2017-18308.pdf