FR 2021-01341

The document published by the Securities and Exchange Commission (SEC) in the Federal Register outlines the annual adjustments for transaction fee rates for the fiscal year 2021. This adjustment is required under sections 31(b) and (c) of the Securities Exchange Act of 1934. These fees are levied on national securities exchanges and associations based on the total dollar amount of securities sales. For fiscal year 2021, the SEC has set the transaction fee rate at $5.10 per million dollars of sales, effective February 25, 2021. This adjustment ensures that the fees collected align with their annual budget of $1,926,162,000 as provided in the Consolidated Appropriations Act, 2021.

Significant Issues and Concerns

One of the key concerns regarding the document is the complex methodology used for determining the new fee rates. The SEC employs statistical modeling to forecast sales and adjust rates accordingly, which might be difficult for stakeholders, such as exchanges and investors, to understand or verify independently. This raises issues about transparency and the ability of stakeholders to evaluate or challenge the calculations.

Another concern is the reliance on historical data for forecasting future sales. The assumption that sales trends from the past will continue into the future might not accurately predict periods of unexpected market volatility or shifts in trading behavior. Such unpredictable changes could potentially lead to inaccurate forecasting and discrepancies between the projected and actual fee collections.

Additionally, the document does not elaborate on the oversight mechanisms or remedial measures in place to address potential mismatches between anticipated and real-world fee collections. This lack of detail could lead to uncertainty regarding the SEC's strategy to tackle discrepancies or underperformance in fee revenue collection.

Impact on the Public and Specific Stakeholders

The impact of this document on the general public is indirect but significant. These fees, paid by securities exchanges and associations, could potentially be passed down to investors, including the average person saving for retirement or personal investment. Thus, changes in fee rates could alter transaction costs for the general public, albeit in very marginal amounts per individual transaction.

For specific stakeholders, such as securities exchanges and national securities associations, this adjustment represents an operational change. These organizations need to accommodate the altered fee structure in their financial planning and accounting systems. While the fee increase is slight, exchanges and associations must ensure compliance with the new rates and might need to adjust their cost structures accordingly.

In summary, while the fee rate adjustment is a routine action, the underlying complexities may obscure understanding and scrutiny for those outside of financial and statistical expertise. This creates an environment where stakeholders must rely on the SEC's assurance of accuracy and fairness in their methods, even amid concerns of transparency and potential inaccuracies.

Commentary

The Federal Register document outlines the adjustments to transaction fee rates for fiscal year 2021 as mandated by the Securities and Exchange Commission (SEC) under Section 31 of the Securities Exchange Act of 1934. This commentary explores the financial aspects mentioned in the document and examines their context, implications, and associated issues.

Financial Allocations and Adjustments

The central financial reference in the document is the $1,926,162,000 appropriation to the SEC for fiscal year 2021. This amount stems from the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020. The document elaborates on how this appropriation influences the fee rate adjustments under Sections 31(b) and 31(c) of the Exchange Act.

To achieve the required fee collections equaling the SEC's appropriation, the Commission calculated a new uniform adjusted fee rate of $5.10 per $1,000,000. This is determined by projecting the aggregate dollar amount of covered sales transactions that are expected to occur after February 25, 2021, when the new rate becomes effective. The Commission estimates the dollar volume of sales for the remaining fiscal year to be approximately $81,081,356,203,186, and the fee collections before the effective date are estimated at $1,514,646,590, with an additional $494 expected from assessments on security futures products.

Relationship to Identified Issues

The methodology for setting the new fee rate involves complex statistical modeling based on historical data to forecast future sales. This reliance on past trends could lead to potential discrepancies between projected and actual fee collections if market conditions deviate unexpectedly. The document anticipates receiving a total of $411,514,917 in additional fees on the projected sales volume, suggesting that the accuracy of these projections is crucial.

The complexity and inherent assumptions involved in the calculation process pose transparency issues. Stakeholders may find it challenging to understand or evaluate the validity of these projections independently, potentially undermining confidence in the fee rate adjustments.

Additionally, the document does not elaborate on specific oversight or procedures for managing any discrepancies that might arise from these projections, which highlights another gap in the financial management detailed within the text.

In summary, while the document provides a clear financial blueprint for generating the required SEC revenue in fiscal year 2021, the complex statistical basis for the fee rate adjustment raises questions about transparency and adaptability to unexpected market changes.