Federal Register / Vol. 77, No. 45 / Wednesday, March 7, 2012 / Notices 13663 

1 15 U.S.C. 78ee. 

2 15 U.S.C. 78ee(b). 

3 15 U.S.C. 78ee(c). 

4See 15 U.S.C. 78ee(j)(1) (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 such fiscal year, is reasonably likely to 

produce aggregate fee collections under [Section 31] 

(including assessments collected under [Section 

31(d)]) that are equal to the regular appropriation 

Continued 

Act and will enhance the interests of the 

Company’s stockholders while retaining 

for them the important protections 

afforded by the Act. In addition, because 

the joint participants will conduct their 

operations as though they comprise one 

company, the participation of one will 

not be on a basis different from or less 

advantageous than the others. 

Accordingly, applicants submit that the 

standard for relief under section 57(i) 

and rule 17d–1 is satisfied. 

17. Section 54 of the Act provides that 

a closed-end company may elect BDC 

treatment under the Act if the company 

has either a class of equity securities 

registered under section 12 of the 

Exchange Act or has filed a registration 

statement pursuant to section 12 of the 

Exchange Act for a class of its equity 

securities. Section 12(g) of the Exchange 

Act requires issuers with specified 

assets and a specified number of 

security holders to register under the 

Exchange Act. As a BDC, the Company 

has registered its common stock under 

section 12(b) of the Exchange Act. In 

order to elect BDC treatment under the 

Act, Fidus SBIC voluntarily registered 

its securities under the Exchange Act 

even though it is not required to do so 

by section 12(g) of the Exchange Act. 

18. By filing a registration statement 

under section 12 of the Exchange Act, 

absent an exemption, Fidus SBIC would 

be required to make periodic filings 

with the Commission, even though 

Fidus SBIC will have only one equity 

holder. Section 13 of the Exchange Act 

is the primary section requiring such 

filings. Accordingly, applicants request 

an order under section 12(h) of the 

Exchange Act exempting Fidus SBIC 

from the reporting requirements of 

section 13(a) of the Exchange Act. 

19. Section 12(h) of the Exchange Act 

provides that the Commission may 

exempt an issuer from section 13 of the 

Exchange Act if the Commission finds 

that by reason of the number of public 

investors, amount of trading interest in 

the securities, the nature and extent of 

the activities of the issuer, income or 

assets of the issuer, or otherwise, that 

such action is not inconsistent with the 

public interest or the protection of 

investors. Fidus SBIC has only one 

investor, which is itself a reporting 

company, and no public investors. 

There will be no trading in Fidus SBIC 

securities, so no public interest or 

investor protective purpose will be 

served by separate Fidus SBIC reporting. 

Further, applicants state that the nature 

and extent of Fidus SBIC’s activities are 

such that its activities will be fully 

reported through consolidated reporting 

in accordance with normal accounting 

rules. Accordingly, applicants believe 

that the requested exemption meets the 

standards of section 12(h) of the 

Exchange Act. 

Applicants’ Conditions 

Applicants agree that the requested 

order will be subject to the following 

conditions: 

1. The Company will at all times own 

and hold, beneficially and of record, all 

of the outstanding limited partnership 

interests in Fidus SBIC and all of the 

outstanding membership interests in the 

New General Partner, or otherwise own 

and hold beneficially all of the 

outstanding voting securities and equity 

interests of Fidus SBIC. 

2. Fidus SBIC will have investment 

policies not inconsistent with those of 

the Company, as set forth in the 

Company’s registration statement. 

3. No person shall serve as a member 

of the Fidus SBIC Board unless such 

person shall also be a member of the 

Company’s Board. The Fidus SBIC 

Board will be appointed by the equity 

owners of Fidus SBIC. 

4. The Company will not itself issue 

or sell any senior security and the 

Company will not cause or permit Fidus 

SBIC to issue or sell any senior security 

of which the Company or Fidus SBIC is 

the issuer except to the extent permitted 

by section 18 (as modified for BDCs by 

section 61); provided that immediately 

after the issuance or sale of any such 

senior security by either the Company 

or Fidus SBIC, the Company and Fidus 

SBIC on a consolidated basis, and the 

Company individually, shall have the 

asset coverage required by section 18(a) 

(as modified by section 61(a)). In 

determining whether the Company and 

Fidus SBIC on a consolidated basis have 

the asset coverage required by section 

18, as modified by section 61(a), any 

senior securities representing 

indebtedness of Fidus SBIC shall not be 

considered senior securities, and for 

purposes of the definition of ‘‘asset 

coverage’’ in section 18(h), shall be 

treated as indebtedness not represented 

by senior securities. 

5. The Company will acquire 

securities of Fidus SBIC representing 

indebtedness only if, in each case, the 

prior approval of the SBA has been 

obtained. In addition, the Company and 

Fidus SBIC will purchase and sell 

portfolio securities between themselves 

only if, in each case, the prior approval 

of the SBA has been obtained. 

6. No person shall serve or act as 

investment adviser to Fidus SBIC unless 

the Board and the stockholders of the 

Company shall have taken such action 

with respect thereto that is required to 

be taken pursuant to the Act by the 

functional equivalent of the Fidus SBIC 

Board and the equity holders of Fidus 

SBIC. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–5515 Filed 3–6–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66495/March 1, 2012] 

Order Making Fiscal Year 2012 MidYear Adjustments to Transaction Fee 

Rates 

I. Background 

Section 31 of the Securities Exchange 

Act of 1934 (‘‘Exchange Act’’) requires 

each national securities exchange and 

national securities association to pay 

transaction fees to the Commission.1

Specifically, Section 31(b) requires each 

national securities exchange to pay to 

the Commission fees based on the 

aggregate dollar amount of sales of 

certain securities transacted on the 

exchange.2 Section 31(c) requires each 

national securities association to pay to 

the Commission fees based on the 

aggregate dollar amount of sales of 

certain securities transacted by or 

through any member of the association 

other than on an exchange.3

Section 31 of the Exchange Act 

requires the Commission to annually 

adjust the fee rates applicable under 

Sections 31(b) and (c) to a uniform 

adjusted rate, and in some 

circumstances, to also make a mid-year 

adjustment. The Dodd-Frank Act 

amendments to Section 31 of the 

Exchange Act establish a new method 

for annually adjusting the fee rates 

applicable under Sections 31(b) and (c) 

of the Exchange Act. Specifically, the 

Commission must now adjust the fee 

rates to a uniform adjusted rate that is 

reasonably likely to produce aggregate 

fee collections (including assessments 

on security futures transactions) equal 

to the regular appropriation to the 

Commission for the applicable fiscal 

year.4 For fiscal year 2012, the regular 


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13664 Federal Register / Vol. 77, No. 45 / Wednesday, March 7, 2012 / Notices 

to the Commission by Congress for such fiscal 

year.’’). 

5 Id. 

6Order Making Fiscal Year 2012 Annual 

Adjustments to Transaction Fee Rates, Rel. No. 34– 

66202 (January 20, 2012). 

7The amount $71,646,369,036,088 is the baseline 

estimate of the aggregate dollar amount of sales for 

fiscal year 2012 calculated by the Commission in 

its Order Making Fiscal Year 2012 Annual 

Adjustments to Transaction Fee Rates, Rel. No. 34– 

66202 (January 20, 2012). 

8The Financial Industry Regulatory Authority, 

Inc. (‘‘FINRA’’) and each exchange is required to 

file a monthly report on Form R31 containing dollar 

volume data on sales of securities subject to Section 

31. The report is due on the 10th business day 

following the month for which the exchange or 

association provides dollar volume data. 

9Although Section 31(j)(2) indicates that the 

Commission should determine the actual aggregate 

dollar volume of sales for fiscal 2012 ‘‘based on the 

actual aggregate dollar volume of sales during the 

first 5 months of such fiscal year,’’ data are only 

available for the first four months of the fiscal year 

as of the date the Commission is required to issue 

this order, i.e., March 1, 2012. Dollar volume data 

on sales of securities subject to Section 31 for 

February 2012 will not be available from the 

exchanges and FINRA for several weeks. 

10See Appendix A. 

11 15 U.S.C. 78ee(j)(2). The term ‘‘fees collected’’ 

is not defined in Section 31. Because national 

securities exchanges and national securities 

associations are not required to pay the first 

installment of Section 31 fees for fiscal 2012 until 

March 15, the Commission will not ‘‘collect’’ any 

fees in the first five months of fiscal 2012. See 15 

U.S.C. 78ee(e). However, the Commission believes 

that, for purposes of calculating the mid-year 

adjustment, Congress, by stating in Section 31(j)(2) 

that the ‘‘uniform adjusted rate * * * is reasonably 

likely to produce aggregate fee collections under 

Section 31 * * * that are equal to 

[$1,321,000,000],’’ intended the Commission to 

include the fees that the Commission will collect 

based on transactions in the six months before the 

effective date of the mid-year adjustment. 

12The calculation is as follows: ($1,321,000,000 

¥ $597,429,581 ¥ $16,425)/$32,330,785,567,489 = 

0.0000223797. Round this result to the seventh 

decimal point, yielding a rate of $22.40 per million. 

13 15 U.S.C. 78ee. 

appropriation to the Commission is 

$1,321,000,000.5 On January 20, 2012 

the Commission issued an order under 

Section 31(j)(1) of the Exchange Act 

setting the fee rates applicable under 

Sections 31(b) and (c) for fiscal year 

2012.6

II. Determination of the Need for a MidYear Adjustment in Fiscal 2012 

Under Section 31(j)(2) of the 

Exchange Act, the Commission must 

make a mid-year adjustment to the fee 

rates under Sections 31(b) and (c) in 

fiscal year 2012 if it determines, based 

on the actual aggregate dollar volume of 

sales during the first five months of the 

fiscal year, that the baseline estimate 

$71,646,369,036,088 is reasonably likely 

to be 10% (or more) greater or less than 

the actual aggregate dollar volume of 

sales for fiscal year 2012.7 To make this 

determination, the Commission must 

estimate the actual aggregate dollar 

volume of sales for fiscal year 2012. 

Based on data provided by the 

national securities exchanges and the 

national securities association that are 

subject to Section 31,8 the actual 

aggregate dollar volume of sales during 

the first four months of fiscal year 2012 

was $21,401,568,899,359.9 Using these 

data and a methodology for estimating 

the aggregate dollar amount of sales for 

the remainder of fiscal year 2012 

(developed after consultation with the 

Congressional Budget Office and the 

OMB),10 the Commission estimates that 

the aggregate dollar amount of sales for 

the remainder of fiscal year 2012 to be 

$42,485,082,013,879. Thus, the 

Commission estimates that the actual 

aggregate dollar volume of sales for all 

of fiscal year 2012 will be 

$63,886,650,913,238. 

Because the baseline estimate of 

$71,646,369,036,088 is more than 10% 

greater than the $63,886,650,913,238 

estimated actual aggregate dollar 

volume of sales for fiscal year 2012, 

Section 31(j)(2) of the Exchange Act 

requires the Commission to issue an 

order adjusting the fee rates under 

Sections 31(b) and (c). 

III. Calculation of the Uniform Adjusted 

Rate 

Section 31(j)(2) specifies the method 

for determining the mid-year adjustment 

for fiscal 2012. Specifically, the 

Commission must adjust the rates under 

Sections 31(b) and (c) to a ‘‘uniform 

adjusted rate that, when applied to the 

revised estimate of the aggregate dollar 

amount of sales for the remainder of 

fiscal year 2012, is reasonably likely to 

produce aggregate fee collections under 

Section 31 (including fees collected 

during such 5-month period and 

assessments collected under Section 

31(d)) that are equal to 

$1,321,000,000.’’ 11 In other words, the 

uniform adjusted rate is determined by 

subtracting fees collected prior to the 

effective date of the new rate and 

assessments collected under Section 

31(d) during all of fiscal year 2012 from 

$1,321,000,000, which is the amount to 

be collected for fiscal year 2012. That 

difference is then divided by the revised 

estimate of the aggregate dollar volume 

of sales for the remainder of the fiscal 

year following the effective date of the 

new rate. 

The Commission estimates that it will 

collect $597,429,581 in fees for the 

period prior to the effective date of the 

mid-year adjustment and $16,425 in 

assessments on round turn transactions 

in security futures products during all of 

fiscal year 2012. Using the methodology 

referenced in Part II above, the 

Commission estimates that the aggregate 

dollar volume of sales for the remainder 

of fiscal year 2012 following the 

effective date of the new rate will be 

$32,330,785,567,489. This amount 

reflects more recent information on the 

dollar amount of sales of securities than 

was available at the time of the setting 

of the initial fee rate for fiscal year 2012, 

and indicates a significant reduction in 

sales. Based on these estimates, and 

employing the mid-year adjustment 

mechanism established by statute, the 

uniform adjusted rate must be adjusted 

to $22.40 per million of the aggregate 

dollar amount of sales of securities.12

The aggregate dollar amount of sales of 

securities subject to Section 31 fees is 

illustrated in Appendix A. 

IV. Effective Date of the Uniform 

Adjusted Rate 

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

Act provides that a mid-year adjustment 

shall take effect on April 1 of the fiscal 

year in which such rate applies. 

Therefore, the exchanges and the 

national securities association that are 

subject to Section 31 fees must pay fees 

under Sections 31(b) and (c) at the 

uniform adjusted rate of $22.40 per 

million for sales of securities transacted 

on April 1, 2012, and thereafter until the 

annual adjustment for fiscal 2013 is 

effective. 

V. Conclusion 

Accordingly, pursuant to Section 31 

of the Exchange Act,13

It is hereby ordered that each of the 

fee rates under Sections 31(b) and (c) of 

the Exchange Act shall be $22.40 per 

$1,000,000 of the aggregate dollar 

amount of sales of securities subject to 

these sections effective April 1, 2012. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

Appendix A 

A. Baseline Estimate of the Aggregate Dollar 

Amount of Sales 

First, calculate the average daily dollar 

amount of sales (ADS) for each month in the 

sample (January 2002–January 2012). The 

data obtained from the exchanges and FINRA 

are presented in Table A. The monthly 

aggregate dollar amount of sales from all 

exchanges and FINRA is contained in 

column C. 

Next, calculate the change in the natural 

logarithm of ADS from month-to-month. The 

average monthly change in the logarithm of 

ADS over the entire sample is 0.007 and the 

standard deviation 0.126. Assume the 

monthly percentage change in ADS follows a 

random walk. The expected monthly 

percentage growth rate of ADS is 1.5 percent. 


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14The value 1.015 has been rounded. All 

computations are done with the unrounded value. 

Now, use the expected monthly percentage 

growth rate to forecast total dollar volume. 

For example, one can use the ADS for 

January 2012 ($236,326,110,324) to forecast 

ADS for February 2012 ($239,879,615,120 = 

$236,326,110,324 × 1.015).14 Multiply by the 

number of trading days in February 2012 (20) 

to obtain a forecast of the total dollar volume 

for the month ($4,797,592,302,406). Repeat 

the method to generate forecasts for 

subsequent months. 

The forecasts for total dollar volume are in 

column G of Table A. 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 m = 0.007 and s = 0.126, 

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 (m + s2/2), or on 

average ADSt = 1.015 × ADSt¥1. 

6. For February 2012, this gives a forecast 

ADS of 1.015 × $236,326,110,324 = 

$239,879,615,120. Multiply this figure by the 

20 trading days in February 2012 to obtain 

a total dollar volume forecast of 

$4,797,592,302,406. 

7. For March 2012, multiply the February 

2012 ADS forecast by 1.015 to obtain a 

forecast ADS of $243,486,551,999. Multiply 

this figure by the 22 trading days in March 

2012 to obtain a total dollar volume forecast 

of $5,356,704,143,984. 

8. Repeat this procedure for subsequent 

months. 

B. Using the Forecasts From A To Calculate 

the New Fee Rate 

1. Determine the aggregate dollar volume of 

sales between 10/1/11 and 2/20/12 to be 

$24,520,003,895,923. Multiply this amount 

by the fee rate of $19.20 per million dollars 

in sales during this period and get 

$470,784,075 in actual and projected fees 

collected during 10/1/11 and 2/20/12. 

Determine the projected aggregate dollar 

volume of sales between 2/21/12 and 3/31/ 

12 to be $7,035,861,449,826. Multiply this 

amount by the fee rate of $18.00 per million 

dollars in sales during this period and get an 

estimate of $126,645,506 in projected fees 

collected during 2/21/12 and 3/31/12. 

2. Estimate the amount of assessments on 

security futures products collected during 

10/1/11 and 9/30/12 to be $16,425 by 

summing the amounts collected through 

January 2012 of $5,716 with projections of a 

1.5% monthly increase in subsequent 

months. 

3. Determine the projected aggregate dollar 

volume of sales between 4/1/12 and 9/30/12 

to be $32,330,785,567,489. 

4. The rate necessary to collect 

$1,321,000,000 in fee revenues is then 

calculated as: ($1,321,000,000 ¥ 

$470,784,075 ¥ $126,645,506 ¥ $16,425) ÷ 

$32,330,785,567,489 = 0.0000223797. 

5. Round the result to the seventh decimal 

point, yielding a rate of 0.0000224000 (or 

$22.40 per million). 

BILLING CODE 8011–01–P 


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13668 Federal Register / Vol. 77, No. 45 / Wednesday, March 7, 2012 / Notices 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 34–66250 

(January 26, 2012), 77 FR 5070 (February 1, 2012). 

In its filing with the Commission, CME included 

statements concerning the purpose of and basis for 

the proposed rule change. The text of these 

statements is incorporated into the discussion of the 

proposed rule change in Section II below. 

4 15 U.S.C. 78s(b)(2)(B). 

5 15 U.S.C. 78q–1(b)(3)(F). 

6 15 U.S.C. 78s(b)(2). 

7 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition and capital formation. 15 

U.S.C. 78c(f). 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

BILLING CODE 8011–01–C 

[FR Doc. 2012–5453 Filed 3–6–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66506; File No. SR–CME– 

2012–01] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange, Inc.; 

Order Approving Proposed Rule 

Change To Amend Rules Relating to 

Credit Default Swap Guaranty Fund 

March 2, 2012 

I. Introduction 

On January 23, 2012, Chicago 

Mercantile Exchange Inc. (‘‘CME’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change SR–CME–2012–01 

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

Securities Exchange Act of 1934 

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

The proposed rule change was 

published for comment in the Federal 

Register on February 1, 2012.3 The 

Commission received no comment 

letters regarding the proposal. For the 

reasons discussed below, the 

Commission is granting approval of the 

proposed rule change. 

II. Description 

The rule change would replace CME’s 

‘‘aggregate performance bond 

requirement’’ standard, which 

determines how CME calculates each 

CDS Clearing Member’s allocation to the 

CDS Guaranty Fund, with a new 

standard that CME believes better 

allocates tail risk. Currently CME rules 

provide that each CDS Clearing 

Member’s allocation to the CDS 

Guaranty Fund will be the greater of (i) 

$50,000,000 and (ii) its proportionate 

share of the 90-day trailing average of its 

aggregate performance bond 

requirements and average gross notional 

open interest outstanding at the Clearing 

House. The proposal would change the 

CDS Guaranty Fund so that the 

allocation will be made on the basis of 

each CDS Clearing Member’s potential 

residual loss (‘‘PRL’’). PRL is a stress 

test of the tail risk CDS Clearing 

Member portfolios bring to the market. 

CME is also proposing to make 

conforming changes to its CDS Manual 

of Operations. 

III. Discussion 

Section 19(b)(2)(B) of the Act directs 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if it finds that such 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization.4 In 

particular, Section 17A(b)(3)(F) 5 of the 

Act requires, among other things, that 

the rules of a clearing agency be 

designed to assure the safeguarding of 

securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible. 

The proposed rule change would 

allow CME to change the method used 

for calculating individual CDS Clearing 

Member contributions to the CDS 

Guaranty Fund and is designed to more 

accurately align the allocation of its CDS 

Guaranty Fund requirement to CDS 

Clearing Members based on the risk 

presented by each such member. Thus, 

the proposed rule change to change 

CME’s CDS Guaranty Fund allocation is 

consistent with the requirement in 

Section 17A(b)(3)(F) that CME safeguard 

the securities and funds which are in 

the custody or control of CME or for 

which it is responsible. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and in particular with the 

requirements of Section 17A of the Act 

and the rules and regulations 

thereunder. 

It Is Therefore Ordered, pursuant to 

Section 19(b)(2) 6 of the Act, that the 

proposed rule change (File No. SR– 

CME–2012–01) be, and hereby is, 

approved.7

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–5513 Filed 3–6–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66497; File No. SR–Phlx– 

2012–23] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing of Proposed Rule Change To 

Amend Registration and Qualification 

Requirements 

March 1, 2012. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on February 

16, 2012, NASDAQ OMX PHLX LLC 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by the Exchange. The 


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