Continuing my series on credit ratings and agencies, this week I want to cover some of how rating subscriptions actually work, and how you can help ensure they’re working for you.
Matching Agency Feeds
A crucial step in determining the investment viability of an asset is doing a match of the various credit rating agency feeds.
Matching instrument-level ratings are straightforward due to the many common security identifiers. However, matching issuer rating feeds isn’t as easy because of proprietary issuer hierarchies and company ID schemes.
Certain redistributors are addressing this by augmenting the rating agencies’ issuer with their in-house identifier, but they typically don’t include the original agency Identifier with their redistribution feed. Ultimately, this makes getting off their service at a later stage difficult.
Of course, the substance of the redistributed data should stay the same, though it may be represented somewhat differently. At the same time, it’s rare that the full depth and breadth of data points get redistributed. As well, there may be a lag when that linkage into the redistributor’s own corporate hierarchy scheme has to be established the first time, particularly for newly rated companies.
Alternatively, there are commercial cross-referencing feeds that provide linkage files between the most common rating agency issuer ID schemes. (And, if required, they can also bring in a few more, like the LEI or the RED code.) These feeds have the great benefit of still carrying the original agency’s native company IDs as well. They may need a more sophisticated platform to record – and, if needed, master – the different corporate hierarchies in parallel.
Outlook and Watch have their own lifecycles. A change in a rating does not necessarily come with a change in Outlook or Watch, and vice-versa.
Ratings History
As always, data history is paramount. (Maybe not as essential as with ESG and Sustainability data, but still very important.)
Snapshot information becomes more meaningful when examining how the ratings of a company or, say, a bond have evolved over time.
Some ratings providers also offer ratings history as a separate product for Ratings Onboarding. When planning takeon, both cost and a data volume should be considered.
Within a large universe, historical data can grow fast, so it’s crucial to have smart data modelling and storage of that timeseries information. It is advisable to go with delta feeds, which only flag what has actually changed. (In that case, having a reliable platform and processing becomes even more critical so that you never miss that one important change.)