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CREDIT LOSSES | 12 Months Ended
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Dec. 31, 2023
CREDIT LOSSES |
CREDIT LOSSES | 8. CREDIT LOSSES Current expected credit losses are estimated for accounts receivable and certain notes receivable. 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 allowance for notes receivable credit losses is associated with notes receivable included within other assets, net on the consolidated balance sheets and relates to promissory notes to fund the implementation and operation of the consolidated audit trail (“CAT”), which notes are to be repaid by Consolidated Audit Trail, LLC (“CATLLC”). CAT involves the creation of an audit trail that is required by SEA Rule 613, and it strives to enhance regulators’ ability to monitor trading activity in the U.S. markets through a phased implementation. CATLLC is a national market system plan that was created by self-regulatory organizations that include the Company’s six Exchanges, the other U.S. national securities exchanges and FINRA (who collectively are referred to as the “Plan Participants”) to implement and operate the CAT. The funding of the CAT’s implementation and operations is ultimately expected to be provided by Plan Participants and by broker-dealers (who are referred to as “Industry Members”). However, the funding to date has solely been provided to CATLLC by the Plan Participants in exchange for promissory notes. On September 6, 2023, the SEC issued an order approving an amendment to the CAT national market system plan to implement a revised funding model (“CAT Funding Model”) for Consolidated Audit Trail, LLC (“CATLLC”) to fund the CAT. The approved CAT Funding Model contemplates two categories of CAT fees calculated based on the “executed equivalent shares” of transactions in eligible securities: (i) CAT fees assessed by CATLLC to Industry Members who are CAT Executing Brokers (the brokers responsible for executing each side of the transaction) to recover a portion of historical CAT costs previously paid to CATLLC by the Plan Participants; and (ii) CAT fees assessed by CATLLC to CAT Executing Brokers and Plan Participants to fund prospective CAT costs. To date, the funding of the CAT has solely been provided by the SROs/Plan Participants has been done in exchange for promissory notes. The funds generated from the assessment of CAT fees to recover a portion of historical CAT costs will be used by CATLLC to repay a portion of these promissory notes to the Plan Participants. The Plan Participants submitted fee filings during the first week of January 2024 with the SEC to implement the applicable transaction-based fee rates that are to be assessed by CATLLC to CAT Executing Brokers to recover a portion of historical CAT costs incurred prior to 2022. Additional CAT fees related to other historical CAT costs and to prospective CAT costs are planned to be introduced at a later time through separate fee filings submitted by the Plan Participants. Once the CAT fee related to ongoing prospective CAT costs becomes effective through fee filings submitted by the Plan Participants, it is anticipated there will no longer be any need for Plan Participants to fund CATLLC in exchange for promissory notes. On January 17, 2024, the SEC issued orders suspending each Plan Participant’s fee filing and instituting proceedings to determine whether to approve or disapprove the fees, which orders were published in the Federal Register on February 13, 2024. Comments are due March 5, 2024, and rebuttal comments are due March 19, 2024. Until the fees for historical CAT costs that are associated with the promissory notes are collected from CAT Executing Brokers and remitted by CATLLC to the Plan Participants, and until CAT fees assessed by CATLLC to CAT Executing Brokers and Plan Participants to fund prospective CAT costs are implemented, the Plan Participants may continue to incur additional significant costs, including additional promissory notes to fund CAT. Additionally, portions of promissory notes related to the funding of the implementation and operation of the CAT may not be collectible, including if the SEC finds that the SROs/Plan Participants did not satisfy any of the financial accountability milestones. The allowance for notes receivable credit losses associated with the CAT is calculated using a methodology that is primarily based on the structure of the notes and various potential outcomes under the CAT Funding Model. See Note 23 (“Commitments, Contingencies, and Guarantees”) for more information. The following represents the changes in allowance for credit losses during the years ended December 31, 2023 and 2022 (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Allowance for notes receivable credit losses | ​ | Allowance for accounts receivable credit losses | ​ | Total allowance for credit losses
Balance at December 31, 2021 | ​ | $ | 30.1 | ​ | $ | 1.0 | ​ | $ | 31.1
Current period provision for expected credit losses | ​ | ​ | — | ​ | ​ | 1.6 | ​ | ​ | 1.6
Write-offs charged against the allowance | ​ | ​ | — | ​ | ​ | (0.1) | ​ | ​ | (0.1)
Recoveries collected | ​ | ​ | — | ​ | ​ | (0.3) | ​ | ​ | (0.3)
Balance at December 31, 2022 | ​ | $ | 30.1 | ​ | $ | 2.2 | ​ | $ | 32.3
Current period provision for expected credit losses | ​ | ​ | — | ​ | ​ | 4.0 | ​ | ​ | 4.0
Write-offs charged against the allowance | ​ | ​ | — | ​ | ​ | (1.6) | ​ | ​ | (1.6)
Recoveries collected | ​ | ​ | — | ​ | ​ | (0.1) | ​ | ​ | (0.1)
Balance at December 31, 2023 | ​ | $ | 30.1 | ​ | $ | 4.5 | ​ | $ | 34.6
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