CREDIT LOSSES

9 Months Ended

Sep. 30, 2022

CREDIT LOSSES

CREDIT LOSSES

6. CREDIT LOSSES

Current expected credit losses are estimated for accounts receivable and certain notes receivable. The notes receivable included within other assets, net on the condensed consolidated balance sheets primarily relate to the consolidated audit trail (“CAT”), which involves the creation of an audit trail that strives to enhance regulators’ ability to monitor trading activity in the U.S. markets through a phased implementation. The funding of the CAT is ultimately expected to be provided by both self-regulatory organizations (“SROs”) (which includes the Exchanges) and industry members; however, the funding to date has solely been provided by the SROs in exchange for promissory notes, which are expected to be repaid once fee filings and plan amendments associated with a funding model are approved by the SEC and such industry member fees are collected. Until those fees are collected, the SROs may continue to incur additional significant costs, including additional promissory notes to fund CAT operations. The allowance for notes receivable credit losses associated with the CAT is calculated using a probability of default methodology that is primarily based on various potential outcomes of the funding model proposals being discussed with the SEC. Accounts receivable represent amounts due from the Company’s member firms. The allowance for accounts receivable credit losses is calculated using an aging schedule.

The following represents the changes in allowance for credit losses during the nine months ended September 30, 2022 (in millions):

	Balance at December 31, 2021		Current period provision for expected credit losses		Write-offs charged against the allowance		Recoveries collected		Balance at September 30, 2022
Allowance for notes receivable credit losses	$	30.1	$	—	$	—	$	—	$	30.1
Allowance for accounts receivable credit losses		1.0		1.1		(0.1)		(0.3)		1.7
Total allowance for credit losses	$	31.1	$	1.1	$	(0.1)	$	(0.3)	$	31.8