SEC Fee

What Is the SEC Fee?

The SEC fee is a nominal fee joined to the sale of exchange-recorded equities, far in excess of any associated brokerage commissions, which may at last be absorbed by investors. The SEC fee is defined in Section 31 of the Securities Exchange Act of 1934 and is in this way frequently alluded to as the Section 31 Transaction Fee.

Starting from the presentation of the fee and up until 2007, the SEC fee was 1% of one three-hundredth of the dollar value of the equities sold. After 2007, the fee was somewhat increased to 1% of one eight-hundredth of the dollar value of the equities sold.

Grasping the SEC Fee

The proceeds of the SEC fee are collected from the brokerage firms and are in the end channeled back to the U.S. Treasury. National securities exchanges in the U.S. must likewise pay this transaction-based fee, which, in their case, is derived from the volume of securities sold over their platforms.

These exchanges might require representative dealers to pay a portion of those fees. Much of the time, representative dealers burdened with these additional costs, thusly, pass the fiscal burden onto their investment clients. The SEC fee gives the vital capital to the government to cover the costs engaged with directing equity dealers and the equities market. In particular, this fee applies to the sale of most classes of equities and equity-related options however doesn't impact the purchase of equities in any capacity.

The SEC every year changes the SEC fee, by either expanding or decreasing that figure. On rarer events, the SEC makes mid-year adjustments. Regardless, the purpose of the adjustments is to normalize the SEC's total transaction fee consumption in a given year. For instance, assuming a securities exchange's transaction volume builds, the SEC will diminish the fee rate, due to the fact that every transaction must now contribute a smaller amount, for the exchange to hit its target on the whole.

Oppositely, assuming transaction volume diminishes, every transaction must thusly be charged a higher fee to empower the SEC to take in that equivalent target amount.

The SEC fee applies to the sale of stocks, yet bonds and other debt instruments are never subject to this fee.

Illustration of a Fee Adjustment

In spring 2018, the SEC announced that the fee rates applicable to most securities transactions would be set at $13 per million dollars worth of sales transactions. This change addressed a reduction in the fee rate for that year. As per the SEC, this adjustment to some extent originated from fundamentally higher dollar amounts in the first months for qualifying transactions.

The SEC stated that further fee reductions or increments might happen from here on out in the event that there is a prominent deviation in the number of sales transactions.

It was announced in August of 2021 that the fee rate for 2022 will be set at $92.70 per million dollars.

Features

• The greater part of the SEC fees are carried by merchant dealers, who, thus, may give the costs to investors.
• The fee depends on the volume of shares traded and applies to the sale of stocks, however not the purchase of stocks.
• The SEC fee is a small fee that exchanges and intermediary dealers must pay the U.S. Treasury, to assist with offsetting the governmental costs associated with managing the equities market.
• Since the SEC fee is a provision under Section 31 of the Securities Exchange Act of 1934, it is frequently alluded to as the Section 31 Transaction Fee.