Federal Register / Vol. 72, No. 87 / Monday, May 7, 2007 / Notices 25809 

2Applicants state that a cash-in-lieu amount will 

replace any ‘‘to-be-announced’’ (‘‘TBA’’) transaction 

that is listed as a Deposit Security of any New Fund. 

A TBA transaction is a method of trading mortgagebacked securities where the buyer and seller agree 

upon general trade parameters such as agency, 

settlement date, par amount and price. The actual 

pools delivered generally are determined two days 

prior to the settlement date. The amount of 

substituted cash in the case of TBA transactions 

will be equivalent to the value of the TBA 

transaction listed as a Deposit Security. 

3 In accepting Deposit Securities and satisfying 

redemptions with Fund Securities that are 

restricted securities eligible for resale pursuant to 

rule 144A under the Securities Act, New Funds will 

comply with the conditions of rule 144A, including 

in satisfying redemptions with such rule 144A 

eligible restricted Fund Securities. The prospectus 

for a New Fund will also state that an authorized 

participant that is not a ‘‘Qualified Institutional 

Buyer,’’ as defined in rule 144A under the 

Securities Act, will not be able to receive, as part 

of a redemption, restricted securities eligible for 

resale under rule 144A. 

1 15 U.S.C. 77f(b). 

2 15 U.S.C. 78m(e). 

3 15 U.S.C. 78n(g). 

least 80% of its total assets in 

component securities and investments 

that have economic characteristics that 

are substantially identical to the 

economic characteristics of the 

component securities of its Underlying 

Index. Applicants expect that each New 

Fund will have a tracking error relative 

to the performance of its respective 

Underlying Index of less than 5 percent. 

5. Applicants state that a New Fund 

will comply with the federal securities 

laws in accepting a deposit of a portfolio 

of securities designated by the Adviser 

to correspond generally to the price and 

yield of the New Fund’s Underlying 

Index (‘‘Deposit Securities’’) 2 and 

satisfying redemptions with portfolio 

securities of the New Fund (‘‘Fund 

Securities’’), including that the Deposit 

Securities and Fund Securities are sold 

in transactions that would be exempt 

from registration under the Securities 

Act.3

6. Applicants state that the New 

Funds will operate in a manner 

identical to the operation of the existing 

series of the Trusts in the Prior Order, 

except as specifically noted by 

applicants (and summarized in this 

notice), and will comply with all of the 

terms, provisions and conditions of the 

Prior Order, as amended by the present 

application. Applicants believe that the 

requested relief continues to meet the 

necessary exemptive standards. 

Future Relief 

7. Applicants also seek to amend the 

Prior Order to modify the terms under 

which the Trusts may offer additional 

series in the future based on other 

securities indices (‘‘Future Funds’’). The 

Prior Order is currently subject to a 

condition that does not permit 

applicants to register the shares of any 

Future Fund by means of filing a posteffective amendment to a Trust’s 

registration statement or by any other 

means, unless applicants have requested 

and received with respect to such 

Future Fund, either exemptive relief 

from the Commission or a no-action 

letter from the Division of Investment 

Management of the Commission, or if 

the Future Fund could be listed on a 

national securities exchange 

(‘‘Exchange’’) without the need for a 

filing pursuant to rule 19b–4 under the 

Exchange Act. 

8. The order would amend the Prior 

Order to delete this condition. Any 

Future Funds will (a) be advised by the 

Adviser or an entity controlled by or 

under common control with the 

Adviser; (b) track Underlying Indices 

that are created, compiled, sponsored or 

maintained by an entity that is not an 

affiliated person, as defined in section 

2(a)(3) of the Act, or an affiliated person 

of an affiliated person, of the Adviser, 

the Distributor, the Trusts or any SubAdviser or promoter of a Future Fund, 

and (c) comply with the respective 

terms and conditions of the Prior Order, 

as amended by the present application. 

9. Applicants believe that the 

modification of the future relief 

available under the Prior Order would 

be consistent with sections 6(c) and 

17(b) of the Act and that granting the 

requested relief will facilitate the timely 

creation of Future Funds and the 

commencement of secondary market 

trading of such Future Funds by 

removing the need to seek additional 

exemptive relief. Applicants submit that 

the terms and conditions of the Prior 

Order have been appropriate for the 

existing series of the Trusts and would 

remain appropriate for Future Funds. 

Applicants also submit that tying 

exemptive relief under the Act to the 

ability of a Future Fund to be listed on 

an Exchange without the need for a rule 

19b–4 filing under the Exchange Act is 

not necessary to meet the standards 

under sections 6(c) and 17(b) of the Act. 

Applicants’ Condition 

Applicants agree that any amended 

order granting the requested relief will 

be subject to the same conditions as 

those imposed by the Prior Order, 

except for condition 1 to the Prior 

Order, which will be deleted. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8598 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

FEDERAL REGISTER CITATION OF PREVIOUS

ANNOUNCEMENT: [To be Published]. 

STATUS: Closed meeting. 

PLACE: 100 F Street, NE., Washington, 

DC. 

DATE AND TIME OF PREVIOUSLY ANNOUNCED

MEETING: Tuesday, May 8, 2007 at 2 p.m. 

CHANGE IN THE MEETING: Time change. 

The closed meeting scheduled for 

Tuesday, May 8, 2007 at 2 p.m. has been 

changed to Tuesday, May 8, 2007 at 

12:30 p.m. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. For further 

information and to ascertain what, if 

any, matters have been added, deleted 

or postponed, please contact the Office 

of the Secretary at (202) 551–5400. 

Dated: May 2, 2007. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8649 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release Nos. 33–8794; 34–55682] 

Order Making Fiscal Year 2008 Annual 

Adjustments to the Fee Rates 

Applicable Under Section 6(b) of the 

Securities Act of 1933 and Sections 

13(e), 14(g), 31(b), and 31(c) of the 

Securities Exchange Act of 1934 

April 30, 2007. 

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 proxy 

solicitations and statements in corporate 

control transactions.3 Finally, Sections 

31(b) and (c) of the Exchange Act 

require national securities exchanges 

and national securities associations, 

respectively, to pay fees to the 


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4 15 U.S.C. 78ee(b) and (c). In addition, Section 

31(d) of the Exchange Act requires the Commission 

to collect assessments from national securities 

exchanges and national securities associations for 

round turn transactions on security futures. 15 

U.S.C. 78ee(d). 

5Pub. L. No. 107–123, 115 Stat. 2390 (2002). 

6See 15 U.S.C. 77f(b)(5), 77f(b)(6), 78m(e)(5), 

78m(e)(6), 78n(g)(5), 78n(g)(6), 78ee(j)(1), and 

78ee(j)(3). Section 31(j)(2) of the Exchange Act, 15 

U.S.C. 78ee(j)(2), also requires the Commission, in 

specified circumstances, to make a mid-year 

adjustment to the fee rates under Sections 31(b) and 

(c) of the Exchange Act in fiscal years 2002 through 

2011. 

7The 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 offsetting collection amount’’ specified in 

Section 6(b)(11)(A) for that fiscal year. 

8Congress determined the target offsetting 

collection amounts by applying reduced fee rates to 

the CBO’s January 2001 projections of the aggregate 

maximum offering prices for fiscal years 2002 

through 2011. In any fiscal year through fiscal year 

2011, the annual adjustment mechanism will result 

in additional fee rate reductions if the CBO’s 

January 2001 projection of the aggregate maximum 

offering prices for the fiscal year proves to be too 

low, and fee rate increases if the CBO’s January 

2001 projection of the aggregate maximum offering 

prices for the fiscal year proves to be too high. 

9Appendix A explains how we determined the 

‘‘baseline estimate of the aggregate maximum 

offering price’’ for fiscal year 2008 using our 

methodology, and then shows the purely 

arithmetical process of calculating the fiscal year 

2008 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 

2008. 

10Order Making Fiscal Year 2007 Annual 

Adjustments to the Fee Rates Applicable under 

Section 6(b) of the Securities Act of 1933 and 

Sections 13(e), 14(g), 31(b) and 31(c) of the 

Securities Exchange Act of 1934, Rel. No. 33–8681 

(April 28, 2006), 71 FR 26132 (May 3, 2006). 

11The annual adjustments, as well as the midyear adjustments required in specified 

circumstances under Section 31(j)(2) in fiscal years 

2002 through 2011, are designed to adjust the fee 

rates in a given fiscal year so that, when applied 

to the aggregate dollar volume of sales for the fiscal 

year, they are reasonably likely to produce total fee 

collections under Section 31 equal to the ‘‘target 

offsetting collection amount’’ specified in Section 

31(l)(1) for that fiscal year. 

12Congress determined the target offsetting 

collection amounts by applying reduced fee rates to 

the CBO’s January 2001 projections of dollar 

volume for fiscal years 2002 through 2011. In any 

fiscal year through fiscal year 2011, the annual and, 

in specified circumstances, mid-year adjustment 

mechanisms will result in additional fee rate 

reductions if the CBO’s January 2001 projection of 

dollar volume for the fiscal year proves to be too 

low, and fee rate increases if the CBO’s January 

2001 projection of dollar volume for the fiscal year 

proves to be too high. 

Commission on transactions in specified 

securities.4

The Investor and Capital Markets Fee 

Relief Act (‘‘Fee Relief Act’’) 5 amended 

Section 6(b) of the Securities Act and 

Sections 13(e), 14(g), and 31 of the 

Exchange Act to require the 

Commission to make annual 

adjustments to the fee rates applicable 

under these sections for each of the 

fiscal years 2003 through 2011, and one 

final adjustment to fix the fee rates 

under these sections for fiscal year 2012 

and beyond.6

II. Fiscal Year 2008 Annual Adjustment 

to the Fee Rates Applicable Under 

Section 6(b) of the Securities Act and 

Sections 13(e) and 14(g) of the Exchange 

Act 

Section 6(b)(5) of the Securities Act 

requires the Commission to make an 

annual adjustment to the fee rate 

applicable under Section 6(b) of the 

Securities Act in each of the fiscal years 

2003 through 2011.7 In those same fiscal 

years, Sections 13(e)(5) and 14(g)(5) of 

the Exchange Act require the 

Commission to adjust the fee rates 

under Sections 13(e) and 14(g) to a rate 

that is equal to the rate that is applicable 

under Section 6(b). In other words, 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. 

Section 6(b)(5) sets forth the method 

for determining the annual adjustment 

to the fee rate under Section 6(b) for 

fiscal year 2008. 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 2008], is reasonably likely to 

produce aggregate fee collections under 

[Section 6(b)] that are equal to the target 

offsetting collection amount for [fiscal 

year 2008].’’ That is, the adjusted rate is 

determined by dividing the ‘‘target 

offsetting collection amount’’ for fiscal 

year 2008 by the ‘‘baseline estimate of 

the aggregate maximum offering prices’’

for fiscal year 2008. 

Section 6(b)(11)(A) specifies that the 

‘‘target offsetting collection amount’’ for 

fiscal year 2008 is $234,000,000.8

Section 6(b)(11)(B) defines the ‘‘baseline 

estimate of the aggregate maximum 

offering price’’ for fiscal year 2008 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 

2008] 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 2008, the Commission is 

using the same methodology it 

developed in consultation with the 

Congressional Budget Office (‘‘CBO’’) 

and Office of Management and Budget 

(‘‘OMB’’) to project aggregate offering 

price for purposes of the fiscal year 2007 

annual adjustment. Using this 

methodology, the Commission 

determines the ‘‘baseline estimate of the 

aggregate maximum offering price’’ for 

fiscal year 2008 to be 

$5,959,775,433,491.9 Based on this 

estimate, the Commission calculates the 

fee rate for fiscal 2008 to be $39.30 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. Fiscal Year 2008 Annual 

Adjustment to the Fee Rates Applicable 

Under Sections 31(b) and (c) of the 

Exchange Act 

Section 31(b) of the Exchange Act 

requires each national securities 

exchange to pay the Commission a fee 

at a rate, as adjusted by our order 

pursuant to Section 31(j)(2),10 which 

currently is $15.30 per million of the 

aggregate dollar amount of sales of 

specified securities transacted on the 

exchange. Similarly, Section 31(c) 

requires each national securities 

association to pay the Commission a fee 

at the same adjusted rate on the 

aggregate dollar amount of sales of 

specified securities transacted by or 

through any member of the association 

otherwise than on an exchange. Section 

31(j)(1) requires the Commission to 

make annual adjustments to the fee rates 

applicable under Sections 31(b) and (c) 

for each of the fiscal years 2003 through 

2011.11

Section 31(j)(1) specifies the method 

for determining the annual adjustment 

for fiscal year 2008. Specifically, 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 [fiscal year 2008], is 

reasonably likely to produce aggregate 

fee collections under [Section 31] 

(including assessments collected under 

[Section 31(d)]) that are equal to the 

target offsetting collection amount for 

[fiscal year 2008].’’

Section 31(l)(1) specifies that the 

‘‘target offsetting collection amount’’ for 

fiscal year 2008 is $892,000,000.12

Section 31(l)(2) defines the ‘‘baseline 

estimate of the aggregate dollar amount 

of sales’’ as ‘‘the baseline estimate of the 

aggregate dollar amount of sales of 

securities * * * to be transacted on 

each national securities exchange and 

by or through any member of each 

national securities association 

(otherwise than on a national securities 


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13Appendix B explains how we determined the 

‘‘baseline estimate of the aggregate dollar amount of 

sales’’ for fiscal year 2007 using our methodology, 

and then shows the purely arithmetical process of 

calculating the fiscal year 2007 annual adjustment 

based on that estimate. The appendix also includes 

the data used by the Commission in making its 

‘‘baseline estimate of the aggregate dollar amount of 

sales’’ for fiscal year 2007. 14The calculation of the adjusted fee rate assumes 

that the current fee rate of $15.30 per million will 

apply through October 31, 2007, due to the 

operation of the effective date provision contained 

in Section 31(j)(4)(A) of the Exchange Act. 

15 15 U.S.C. 77f(b)(8)(A). 

16 15 U.S.C. 78m(e)(8)(A) and 78n(g)(8)(A). 

17 15 U.S.C. 77f(b), 78m(e), 78n(g), and 78ee(j). 

exchange) during [fiscal year 2008] 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 dollar amount of sales for 

fiscal year 2008, the Commission is 

using the same methodology it 

developed in consultation with the CBO 

and OMB to project dollar volume for 

purposes of prior fee adjustments.13

Using this methodology, the 

Commission calculates the baseline 

estimate of the aggregate dollar amount 

of sales for fiscal year 2008 to be 

$78,732,152,559,457. Based on this 

estimate, and an estimated collection of 

$18,017 in assessments on security 

futures transactions under Section 31(d) 

in fiscal year 2008, the uniform adjusted 

rate for fiscal year 2008 is 11.00 per 

million.14

IV. Effective Dates of the Annual 

Adjustments 

Section 6(b)(8)(A) of the Securities 

Act provides that the fiscal year 2008 

annual adjustment to the fee rate 

applicable under Section 6(b) of the 

Securities Act shall take effect on the 

later of October 1, 2007, or five days 

after the date on which a regular 

appropriation to the Commission for 

fiscal year 2008 is enacted.15 Section 

13(e)(8)(A) and 14(g)(8)(A) of the 

Exchange Act provide for the same 

effective date for the annual adjustments 

to the fee rates applicable under 

Sections 13(e) and 14(g) of the Exchange 

Act.16

Section 31(j)(4)(A) of the Exchange 

Act provides that the fiscal year 2008 

annual adjustments to the fee rates 

applicable under Sections 31(b) and (c) 

of the Exchange Act shall take effect on 

the later of October 1, 2007, or 30 days 

after the date on which a regular 

appropriation to the Commission for 

fiscal year 2008 is enacted. 

V. Conclusion 

Accordingly, pursuant to Section 6(b) 

of the Securities Act and Sections 13(e), 

14(g), and 31 of the Exchange Act,17

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 

$39.30 per million effective on the later 

of October 1, 2007, or five days after the 

date on which a regular appropriation to 

the Commission for fiscal year 2008 is 

enacted; and 

It is further ordered that the fee rates 

applicable under Sections 31(b) and (c) 

of the Exchange Act shall be $11.00 per 

million effective on the later of October 

1, 2007, or 30 days after the date on 

which a regular appropriation to the 

Commission for fiscal year 2008 is 

enacted. 

By the Commission. 

Nancy M. Morris, 

Secretary. 

Appendix A 

With the passage of the Investor and 

Capital Markets Relief Act, Congress has, 

among other things, 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 2008, 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 March 2007, 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 

2008 

First, calculate the aggregate maximum 

offering prices (AMOP) for each month in the 

sample (March 1997–March 2007). 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 March 

1997 to March 2007. 

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 Dt = log 

(AAMOPt) ¥ log(AAMOPt–1). This 

approximates the percentage change. 

5. Estimate the first order moving average 

model Dt = a + bet–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 Dt. The forecast error is 

expressed as et = Dt ¥ a ¥ bt–1. The model 

can be estimated using standard 

commercially available software such as SAS 

or Eviews. Using least squares, the estimated 

parameter values are a = 0.00781 and b = 

¥0.76766. 

6. For the month of April 2007 forecast Dt

= 4/07 = a + bet = 3/07. For all subsequent 

months, forecast Dt = a.

7. Calculate forecasts of log(AAMOP). For 

example, the forecast of log(AAMOP) for June 

2007 is given by FLAAMOP t = 6/07 = 

log(AAMOP t = 3/07) + D t = 4/07 + Dt = 5/07 + 

Dt = 6/07. 

8. Under the assumption that et is normally 

distributed, the n-step ahead forecast of 

AAMOP is given by exp(FLAAMOPt + sn

2/2), 

where sn denotes the standard error of the nstep ahead forecast. 

9. For June 2007, this gives a forecast 

AAMOP of $21.2 Billion (Column I), and a 

forecast AMOP of $444.9 Billion (Column J). 

10. Iterate this process through September 

2008 to obtain a baseline estimate of the 

aggregate maximum offering prices for fiscal 

year 2008 of $5,959,775,433,491. 

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 10/1/07 and 9/30/08 to be 

$5,959,775,433,491. 

2. The rate necessary to collect the target 

$234,000,000 in fee revenues set by Congress 

is then calculated as: $234,000,000 ÷ 

$5,959,775,433,491 = 0.00003926 (or $39.30 

per million.). 

BILLING CODE 8010–01–P 


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18Congress requires that the Commission make a 

mid-year adjustment to the fee rate if four months 

into the fiscal year it determines that its forecasts 

of aggregate dollar volume are reasonably likely to 

be off by 10% or more. 

19The value 1.021 has been rounded. All 

computations are done with the unrounded value. 

BILLING CODE 8010–01–C 

Appendix B 

With the passage of the Investor and 

Capital Markets Relief Act, Congress has, 

among other things, established a target 

amount of monies to be collected from fees 

charged to investors based on the value of 

their transactions. This appendix provides 

the formula for determining such fees, which 

the Commission adjusts annually, and may 

adjust semi-annually.18 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 dollar 

transaction volume on the securities 

exchanges and certain over-the-counter 

markets over the course of the year. As a 

percentage, the fee rate equals the ratio of the 

target amounts of monies to the projected 

dollar transaction volume. 

For 2008, the Commission has estimated 

dollar transaction volume by projecting 

forward the trend established in the previous 

decade. More specifically, dollar transaction 

volume was forecasted for months 

subsequent to March 2007, the last month for 

which the Commission has data on 

transaction volume. 

The following sections describe this 

process in detail. 

A. Baseline Estimate of the Aggregate Dollar 

Amount of Sales for Fiscal Year 2008 

First, calculate the average daily dollar 

amount of sales (ADS) for each month in the 

sample (March 1997–March 2007). The 

monthly aggregate dollar amount of sales 

(exchange plus certain over-the-counter 

markets) is presented in column C of Table 

B. 

Next, calculate the change in the natural 

logarithm of ADS from month to month. The 

average monthly percentage growth of ADS 

over the entire sample is 0.014 and the 

standard deviation 0.115. Assuming the 

monthly percentage change in ADS follows a 

random walk, calculating the expected 

monthly percentage growth rate for the full 

sample is straightforward. The expected 

monthly percentage growth rate of ADS is 

2.1%. 

Now, use the expected monthly percentage 

growth rate to forecast total dollar volume. 

For example, one can use the ADS for March 

2007 ($238,343,650,750) to forecast ADS for 

April 2007 ($243,433,544,609 = 

$238,343,650,750 × 1.021).19 Multiply by the 

number of trading days in April 2007 (20) to 

obtain a forecast of the total dollar volume for 

the month ($4,868,670,892,189). Repeat the 

method to generate forecasts for subsequent 

months. 

The forecasts for total dollar volume are in 

column G of Table B. 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 μ = 0.014 and s = 0.115, 

respectively. 

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 (μ + s2/2), or on 

average ADSt = 1.021 × ADSt–1. 

6. For April 2007, this gives a forecast ADS 

of 1.021 × $238,343,650,750 = 

$243,433,544,609. Multiply this figure by the 

20 trading days in April 2007 to obtain a total 

dollar volume forecast of $4,868,670,892,189. 

7. For May 2007, multiply the April 2007 

ADS forecast by 1.021 to obtain a forecast 

ADS of $248,632,134,545. Multiply this 

figure by the 22 trading days in May 2007 to 

obtain a total dollar volume forecast of 

$5,469,906,959,979. 

8. Repeat this procedure for subsequent 

months. 

B. Using the Forecasts From A to Calculate 

the New Fee Rate 

1. Use Table B to estimate fees collected for 

the period 10/1/07 through 10/31/07. The 

projected aggregate dollar amount of sales for 

this period is $6,355,786,096,164. Projected 

fee collections at the current fee rate of 

0.0000153 are $97,243,527. 

2. Estimate the amount of assessments on 

securities futures products collected during 

10/1/07 and 9/30/08 to be $18,017 by 

projecting a 2.1% monthly increase from a 

base of $1,150 in March 2007. 

3. Subtract the amounts $97,243,527 and 

$18,017 from the target offsetting collection 

amount set by Congress of $892,000,000 

leaving $794,738,456 to be collected on 

dollar volume for the period 11/1/07 through 

9/30/08. 

4. Use Table B to estimate dollar volume 

for the period 11/1/07 through 9/30/08. The 

estimate is $72,376,366,463,293. Finally, 

compute the fee rate required to produce the 

additional $794,738,456 in revenue. This rate 

is $794,738,456 divided by 

$72,376,366,463,293 or 0.0000109806. 

5. Round the result to the seventh decimal 

point, yielding a rate of .0000110 (or $11.00 

per million). 

BILLING CODE 8010–01–P 


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1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 55493 

(March 20, 2007), 72 FR 14315. 

4See ISE Rule 716(c). 

5Supplementary Material .03 to ISE Rule 716 

prohibits members from entering Responses for the 

account of an options market maker from another 

options exchange. This is the only limitation 

regarding who may enter Responses. 

6 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

7 15 U.S.C. 78f(b)(5). 

8 15 U.S.C. 78s(b)(2). 

9 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

[FR Doc. 07–2194 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–C 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55683; File No. SR–ISE–

2006–77] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Order Granting Approval to 

Proposed Rule Change, as Modified by 

Amendment No. 1, Relating to Penny 

Increments for Block Mechanism 

Orders 

April 30, 2007. 

I. Introduction 

On December 13, 2006, the 

International Securities Exchange, LLC 

(‘‘ISE’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

allow orders to be entered into the Block 

Mechanism in penny increments and to 

receive executions in penny increments. 

On March 19, 2007, the Exchange filed 

Amendment No. 1 to the proposed rule 

change. The proposed rule change was 

published for comment in the Federal 

Register on March 27, 2007.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change as 

modified by Amendment No. 1. 

II. Description of the Proposal 

The Exchange currently offers a Block 

Mechanism for the execution of singlesided, block-sized orders.4 The Block 

Mechanism exposes orders of at least 50 

contracts to all ISE members for three 

seconds, giving members an opportunity 

to respond with contra-side trading 

interest for their own account or on 

behalf of their customers.5 Currently, 

orders may be entered and executed 

using the Block Mechanism at the 

standard 5 and 10 cent increments and 

at ‘‘split prices’’ (2.5 cents for options 

trading in 5 cent standard increments 

and 5 cents for options trading in 10 

cent standard increments). The 

Exchange proposes to amend ISE Rule 

716 to allow these orders to be entered 

and executed in penny increments. 

Such orders would no longer be 

permitted to be executed at split prices. 

III. Discussion 

After careful review of the proposal, 

the Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.6 In 

particular, the Commission finds that 

the proposal is consistent with Section 

6(b)(5) of the Act,7 which requires, 

among other things, that the rules of an 

exchange be designed to prevent 

fraudulent and manipulative acts, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Specifically, the Commission believes 

that the proposed rule change is 

consistent with the Act because it will 

provide greater flexibility in the pricing 

of block-size orders and enhanced 

opportunities for block-size orders to 

receive price improvement. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,8 that the 

proposed rule change (SR–ISE–2006–

77), as modified by Amendment No. 1, 

be, and hereby is, approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–8597 Filed 5–4–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55678; File No. SR–

NASDAQ–2007–044] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change to Increase the 

Nasdaq Trading Rights Fee 

April 27, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 25, 

2007, The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared substantially by 

Nasdaq. Nasdaq filed the proposal 

pursuant to Section 19(b)(3)(A)(ii) of the 

Act 3 and Rule 19b–4(f)(2) 4 thereunder, 

as establishing or changing a member 

due, fee, or other charge, which renders 

the proposed rule change effective upon 

filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq proposes to increase the 

monthly trading rights fee paid by 

Nasdaq members. Nasdaq will 

implement this proposed rule change on 

May 1, 2007. The text of the proposed 

rule change is available at 

Nasdaq, http://www.nasdaq.com, and 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. Nasdaq has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Nasdaq is increasing its monthly 

trading rights fee, which is assessed on 

all Nasdaq members, from $200 to $500 

per month. The fee had initially been set 

at a level to ease the transition of the 

Nasdaq Market Center’s status as a 

facility of the NASD to a facility of a 

new self-regulatory organization 

(‘‘SRO’’). Now that Nasdaq has an 

established membership base, Nasdaq 

believes that the fee increase is 


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