83 FR 44101 - Order Making Fiscal Year 2019 Annual Adjustments to Registration Fee Rates

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 168 (August 29, 2018)

Page Range		44101-44108
FR Document		2018-18762
Federal Register, Volume 83 Issue 168 (Wednesday, August 29, 2018)
[Federal Register Volume 83, Number 168 (Wednesday, August 29, 2018)]
[Notices]
[Pages 44101-44108]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-18762]


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SECURITIES AND EXCHANGE COMMISSION

[Release Nos. 33-10538; 34-83935/August 24, 2018]


Order Making Fiscal Year 2019 Annual Adjustments to Registration 
Fee Rates

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.
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    \1\ 15 U.S.C. 77f(b).
    \2\ 15 U.S.C. 78m(e).
    \3\ 15 U.S.C. 78n(g).
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II. Fiscal Year 2019 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\
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    \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.
    \5\ 15 U.S.C. 78m(e)(4) and 15 U.S.C. 78n(g)(4).
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    Section 6(b)(2) sets forth the method for determining the annual 
adjustment to the fee rate under Section 6(b) for fiscal year 2019. 
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 2019], is reasonably 
likely to produce aggregate fee collections under [Section 6(b)] that 
are equal to the target fee collection amount for [fiscal year 2019].'' 
That is, the adjusted rate is determined by dividing the ``target fee 
collection amount'' for fiscal year 2019 by the ``baseline estimate of 
the aggregate maximum offering prices'' for fiscal year 2019.
    Section 6(b)(6)(A) specifies that the ``target fee collection 
amount'' for fiscal year 2019 is $660,000,000. Section 6(b)(6)(B) 
defines the ``baseline estimate of the aggregate maximum offering 
prices'' for fiscal year 2019 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 2019] 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 2019, 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 and Office of 
Management and Budget.\6\ Using this methodology, the Commission 
determines the ``baseline estimate of the aggregate maximum offering 
price'' for fiscal year 2019 to be $5,447,649,888,566. Based on this 
estimate, the Commission calculates the fee rate for fiscal 2019 to be 
$121.20 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.
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    \6\ Appendix A explains how we determined the ``baseline 
estimate of the aggregate maximum offering price'' for fiscal year 
2019 using our methodology, and then shows the arithmetical process 
of calculating the fiscal year 2019 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 2019.
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III. Effective Dates of the Annual Adjustments

    The fiscal year 2019 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, 2018.\7\
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    \7\ 15 U.S.C. 77f(b)(4), 15 U.S.C. 78m(e)(6) and 15 U.S.C. 
78n(g)(6).
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IV. Conclusion

    Accordingly, pursuant to Section 6(b) of the Securities Act and 
Sections 13(e) and 14(g) of the Exchange Act,\8\
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    \8\ 15 U.S.C. 77f(b), 78m(e) and 78n(g).
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    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 $121.20 per million effective on October 1, 2018.

    By the Commission.
Brent J. Fields,
Secretary.

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 2019, 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 2018, 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 2019.

    First, calculate the aggregate maximum offering prices (AMOP) 
for each month in the sample (July 2008-July 2018). 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 2008 to July 2018.
    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

[[Page 44102]]

(AAMOPt)-log(AAMOPt-1). This approximates the 
percentage change.
    5. Estimate the first order moving average model 
[Delta]t = [alpha] + [beta]et-1 + 
et, where et denotes the forecast error for 
month t. The forecast error is simply the difference between the 
one-month ahead forecast and the actual realization of 
[Delta]t. The forecast error is expressed as 
et = [Delta]t-[alpha]-[beta]et-1. 
The model can be estimated using standard commercially available 
software. Using least squares, the estimated parameter values are 
[alpha] = 0.00446718 and [beta] = 0.94291195.
    6. For the month of August 2018 forecast 
[Delta]t = 8/2017 = [alpha] + 
[beta]et = 7/2017. For all subsequent months, forecast 
[Delta]t = [alpha].
    7. Calculate forecasts of log(AAMOP). For example, the forecast 
of log(AAMOP) for October 2018 is given by FLAAMOP 
t = 10/2018 = log(AAMOP t = 7/2018) + [Delta] 
t = 8/2018 +[Delta] t = 9/2018 + [Delta] 
t = 10/2018.
    8. Under the assumption that et is normally 
distributed, the n-step ahead forecast of AAMOP is given by 
exp(FLAAMOPt + [sigma]n\2\/2), where 
[sigma]n denotes the standard error of the n-step ahead 
forecast.
    9. For October 2018, this gives a forecast AAMOP of $21.070 
billion (Column I), and a forecast AMOP of $484.618 billion (Column 
J).
    10. Iterate this process through September 2019 to obtain a 
baseline estimate of the aggregate maximum offering prices for 
fiscal year 2019 of $5,447,649,888,566.

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 10/01/18 and 9/30/19 to be 
$5,447,649,888,566.
    2. The rate necessary to collect the target $660,000,000 in fee 
revenues set by Congress is then calculated as: $660,000,000 / 
$5,447,649,888,566 = 0.000121153.
    3. Round the result to the seventh decimal point, yielding a 
rate of 0.0001212 (or $121.20 per million).
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[FR Doc. 2018-18762 Filed 8-28-18; 8:45 am]
 BILLING CODE 8011-01-C
Federal Register / Vol. 83, No. 168 / Wednesday, August 29, 2018 / Notices 44101

For the Commission, by the Division of [Section 6(b)] that are equal to the target It is hereby ordered that the fee rates
Trading and Markets, pursuant to delegated fee collection amount for [fiscal year applicable under Section 6(b) of the
authority.18 2019].’’ That is, the adjusted rate is Securities Act and Sections 13(e) and
Eduardo A. Aleman, determined by dividing the ‘‘target fee 14(g) of the Exchange Act shall be
Assistant Secretary. collection amount’’ for fiscal year 2019 $121.20 per million effective on October
[FR Doc. 2018–18675 Filed 8–28–18; 8:45 am] by the ‘‘baseline estimate of the 1, 2018.
BILLING CODE 8011–01–P aggregate maximum offering prices’’ for By the Commission.
fiscal year 2019. Brent J. Fields,
Section 6(b)(6)(A) specifies that the Secretary.
SECURITIES AND EXCHANGE ‘‘target fee collection amount’’ for fiscal
COMMISSION year 2019 is $660,000,000. Section Appendix A
[Release Nos. 33–10538; 34–83935/August 6(b)(6)(B) defines the ‘‘baseline estimate Congress has established a target amount of
24, 2018] of the aggregate maximum offering monies to be collected from fees charged to
prices’’ for fiscal year 2019 as ‘‘the issuers based on the value of their
Order Making Fiscal Year 2019 Annual baseline estimate of the aggregate registrations. This appendix provides the
Adjustments to Registration Fee Rates maximum offering price at which formula for determining such fees, which the
securities are proposed to be offered Commission adjusts annually. Congress has
I. Background mandated that the Commission determine
pursuant to registration statements filed these fees based on the ‘‘aggregate maximum
The Commission collects fees under with the Commission during [fiscal year offering prices,’’ which measures the
various provisions of the securities 2019] as determined by the aggregate dollar amount of securities
laws. Section 6(b) of the Securities Act Commission, after consultation with the registered with the Commission over the
of 1933 (‘‘Securities Act’’) requires the Congressional Budget Office and the course of the year. In order to maximize the
Commission to collect fees from issuers Office of Management and Budget likelihood that the amount of monies targeted
on the registration of securities.1 Section . . . .’’ by Congress will be collected, the fee rate
13(e) of the Securities Exchange Act of To make the baseline estimate of the
must be set to reflect projected aggregate
1934 (‘‘Exchange Act’’) requires the maximum offering prices. As a percentage,
aggregate maximum offering price for the fee rate equals the ratio of the target
Commission to collect fees on specified fiscal year 2019, the Commission is
repurchases of securities.2 Section 14(g) amounts of monies to the projected aggregate
using a methodology that has been used maximum offering prices.
of the Exchange Act requires the
in prior fiscal years and that was For 2019, the Commission has estimated
Commission to collect fees on specified the aggregate maximum offering prices by
developed in consultation with the
proxy solicitations and statements in projecting forward the trend established in
Congressional Budget Office and Office
corporate control transactions.3 These the previous decade. More specifically, an
of Management and Budget.6 Using this
provisions require the Commission to ARIMA model was used to forecast the value
methodology, the Commission of the aggregate maximum offering prices for
make annual adjustments to the
determines the ‘‘baseline estimate of the months subsequent to July 2018, the last
applicable fee rates.
aggregate maximum offering price’’ for month for which the Commission has data on
II. Fiscal Year 2019 Annual Adjustment fiscal year 2019 to be the aggregate maximum offering prices.
to Fee Rates $5,447,649,888,566. Based on this The following sections describe this
estimate, the Commission calculates the process in detail.
Section 6(b)(2) of the Securities Act
requires the Commission to make an fee rate for fiscal 2019 to be $121.20 per A. Baseline estimate of the aggregate
annual adjustment to the fee rate million. This adjusted fee rate applies to maximum offering prices for fiscal year
applicable under Section 6(b).4 The Section 6(b) of the Securities Act, as 2019.
annual adjustment to the fee rate under well as to Sections 13(e) and 14(g) of the First, calculate the aggregate maximum
Section 6(b) of the Securities Act also Exchange Act. offering prices (AMOP) for each month in the
sets the annual adjustment to the fee sample (July 2008–July 2018). Next, calculate
III. Effective Dates of the Annual the percentage change in the AMOP from
rates under Sections 13(e) and 14(g) of Adjustments
the Exchange Act.5 month to month.
The fiscal year 2019 annual Model the monthly percentage change in
Section 6(b)(2) sets forth the method
AMOP as a first order moving average
for determining the annual adjustment adjustments to the fee rates applicable
process. The moving average approach
to the fee rate under Section 6(b) for under Section 6(b) of the Securities Act allows one to model the effect that an
fiscal year 2019. Specifically, the and Sections 13(e) and 14(g) of the exceptionally high (or low) observation of
Commission must adjust the fee rate Exchange Act will be effective on AMOP tends to be followed by a more
under Section 6(b) to a ‘‘rate that, when October 1, 2018.7 ‘‘typical’’ value of AMOP.
applied to the baseline estimate of the Use the estimated moving average model to
IV. Conclusion forecast the monthly percent change in
aggregate maximum offering prices for
[fiscal year 2019], is reasonably likely to Accordingly, pursuant to Section 6(b) AMOP. These percent changes can then be
of the Securities Act and Sections 13(e) applied to obtain forecasts of the total dollar
produce aggregate fee collections under value of registrations. The following is a
and 14(g) of the Exchange Act,8 more formal (mathematical) description of
18 17 CFR 200.30–3(a)(12). the procedure:
1 15 U.S.C. 77f(b). 6 Appendix A explains how we determined the
1. Begin with the monthly data for AMOP.
2 15 U.S.C. 78m(e).
‘‘baseline estimate of the aggregate maximum The sample spans ten years, from July 2008
3 15 U.S.C. 78n(g). offering price’’ for fiscal year 2019 using our to July 2018.
sradovich on DSK3GMQ082PROD with NOTICES

4 15 U.S.C. 77f(b)(2). The annual adjustments are methodology, and then shows the arithmetical
2. Divide each month’s AMOP (column C)
designed to adjust the fee rate in a given fiscal year process of calculating the fiscal year 2019 annual
adjustment based on that estimate. The appendix by the number of trading days in that month
so that, when applied to the aggregate maximum
offering price at which securities are proposed to includes the data used by the Commission in (column B) to obtain the average daily AMOP
be offered for the fiscal year, it is reasonably likely making its ‘‘baseline estimate of the aggregate (AAMOP, column D).
to produce total fee collections under Section 6(b) maximum offering price’’ for fiscal year 2019. 3. For each month t, the natural logarithm
equal to the ‘‘target fee collection amount’’ specified 7 15 U.S.C. 77f(b)(4), 15 U.S.C. 78m(e)(6) and 15 of AAMOP is reported in column E.
in Section 6(b)(6)(A) for that fiscal year. U.S.C. 78n(g)(6). 4. Calculate the change in log(AAMOP)
5 15 U.S.C. 78m(e)(4) and 15 U.S.C. 78n(g)(4). 8 15 U.S.C. 77f(b), 78m(e) and 78n(g). from the previous month as Dt = log

VerDate Sep<11>2014 17:04 Aug 28, 2018 Jkt 244001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\29AUN1.SGM 29AUN1
Document Created: 2018-08-29 00:13:19
Document Modified: 2018-08-29 00:13:19
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		83 FR 44101