Transaction Credits and Marketcore Patent discussed in July Issue of Risk Magazine

In response to the SEC’s solicitation of comments on various proposals to reform the institutional framework of credit ratings, David M. Rowe writes in the July, 2011 Issue of Risk Magazine that:

Trying to reform market structure in search of a non-existent objective measure of credit quality and associated risk amounts to a mission impossible.

He suggests instead that they should seek  “a framework that will make all the relevant data underlying such securities readily available in a standard format to a broad community of analysts.” He describes how Transaction Credits™ can be used to promote that structure, and then goes on to point out that the outline of such a system already exists, in the U.S. Patent granted to Marketcore and titled, Efficient Market for Financial Products. He concludes:

In the end, the SEC would do well to spend more time considering how to foster this type of institutional structure that encourages and rewards disclosure than in tilting at windmills in the belief that reshaping the credit rating market can produce uniquely reliable risk estimates of new, complex and historically untested financial instruments.

You can read the entire article by downloading the PDF here or read it below. (Please click on the image to see a larger version.)

Mission Impossible for Ratings, David M. Rowe, Page 60, Risk Magazine, July 2011

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