FR 2025-06214

The Securities and Exchange Commission (SEC) has issued a notice detailing the fiscal year 2025 annual adjustments to transaction fee rates under sections 31(b) and (c) of the Securities Exchange Act. These adjustments typically align the fee rates to cover the SEC's operating costs as appropriated by Congress. However, due to the collection of fees exceeding the planned budget of $2,188,658,000, the SEC has set the fee rate at $0.00 per million dollars, effective May 14, 2025.

General Summary

The document outlines how the SEC adjusts transaction fee rates annually to ensure it collects enough fees to match its Congressional appropriations for the fiscal year. This year, due to substantial fee collections well before the implementation of the new rate, the calculated fee rate for the remainder of the fiscal year results in $0.00 per million in transactions. The document includes a detailed methodology, found in Appendix A, that describes how the SEC forecasts sales and computes the fee adjustments.

Significant Issues or Concerns

Several issues emerge from the detailed process described in the document:

• Complex Calculations and Forecasting: The adjustment methodology relies on sophisticated forecasting models and an extensive analysis of historical sales data. This level of complexity may pose challenges for stakeholders attempting to comprehend the process or validate the outcomes.

• Negative Fee Rate Calculation: The calculations initially suggested a negative fee rate of -$23.40 per million, which is neither practicable nor permissible. This situation raises questions about the accuracy of the forecasts and the efficiency of the SEC's predictive measures.

• Excessive Collection Without Adjustments: Since security futures are not actively traded and generate no fees, any systems or infrastructure previously in place for these assessments might reflect inefficiencies.

Impact on the Public

For the general public, these fee adjustments may seem distant due to their highly technical nature. However, fees collected under sections 31(b) and (c) indirectly impact investors and could influence transaction costs on security exchanges. A $0.00 fee rate may prevent potential fee increases from being passed down to investors or traders.

Impact on Specific Stakeholders

• Investors and Traders: With the fee rate set at $0.00, there is no additional cost burden on individual or institutional investors during the fiscal period following the adjustment. This can potentially foster more active trading by reducing cost barriers.

• Exchanges and Securities Associations: For operators of national securities exchanges and associations, the flat fee rate results in simplified fee reporting and reduced financial obligations to the SEC for the applicable period. However, they may need to remain vigilant as any future adjustments could quickly alter these benefits.

• Regulators and Analysts: The substantial reliance on complex statistical models for determining fee rates implies that regulators must maintain high proficiency in data analytics. Lack of transparency and comprehensibility could hinder external audit and verification efforts by independent analysts or watchdog organizations.

In conclusion, while the zero-fee adjustment alleviates immediate costs on covered sales, the underlying implications of the forecasting methods and potential inefficiencies in fee calculation warrant careful examination. It emphasizes the need for continual assessment and optimization of the methods the SEC uses to predict and apply transaction fees effectively.

The Federal Register document discusses the adjustments to transaction fee rates determined by the Securities and Exchange Commission (SEC) for the fiscal year 2025. Within this context, several financial aspects are worth highlighting for a general audience.

Spending and Appropriations

The primary financial reference in the document is the total appropriations provided to the SEC for fiscal year 2025. The President signed the Full-Year Continuing Appropriations and Extensions Act of 2025 into law, allocating $2,188,658,000 to the SEC. This appropriation is significant as it sets the target for the SEC's fee collections for the year.

Fee Collections and Adjustments

In line with the appropriations, the SEC is responsible for collecting fees from national securities exchanges and associations based on the sales of covered securities. For this year, the SEC estimated that it would collect $3,523,193,571 in fees before the new rate's effective date. An essential factor in the process is ensuring that this fee collection matches the SEC's regular appropriation. However, the SEC forecasted a negative fee rate of -$23.40 per million due to expected over-collection, which prompted the Commission to set the fee rate to $0.00 per million for the remaining fiscal year.

Relation to Identified Issues

The computation of a negative fee rate, although not implementable, highlights potential inefficiencies in the forecasting methodology. Such over-collections suggest that past estimates of sales and fee collections may not have been accurately aligned with real-world trading volumes or market conditions. This discrepancy raises concerns about the complexity and underlying assumptions in the SEC's calculation models and whether they are sufficiently robust and adaptable to changing market dynamics.

Additionally, the document underlines that no assessments will be made on security futures transactions because they are currently not traded. This situation could reflect inefficiencies or potentially unnecessary maintenance of infrastructure for these assessments, as no revenue will be generated from this source.

Complexity and Accessibility

The detailed methodology underlying these calculations, particularly in Appendix A, uses complex statistical models and financial terms. While necessary for precise adjustments, such complexity might pose challenges for non-expert stakeholders to understand the nuances of the fee rate setting and its implications for the SEC's budget.

Thus, while the financial management and appropriations are critical to the SEC's functioning, the methodologies and assumptions used to reach these financial decisions are key areas that might benefit from increased transparency and simplification to ensure more efficient fiscal planning and stakeholder comprehension.