S&P Global

S&P Global Inc. is one of three global credit-rating agencies that matter for most bond deals. Issuers pay for the rating that investors require. That issuer-pays model and the small number of accepted agencies are a long-standing competition and conflicts problem.

The firm also owns indices used by ETFs and futures, and after the IHS Markit merger it owns more commodity, pricing, and identifier data. The Justice Department reviewed that deal and required divestitures so some price-reporting and identifiers would not sit in one company.

A benchmark that regulation or contracts name specifically — 'S&P 500' — cannot be swapped for a look-alike without rewriting the contract. That is data lock-in created by incorporation into other people's documents.

Rating shopping is the issuer-side complaint: an issuer picks the agency most likely to be generous, and the oligopoly still gets paid. Investors live with the grade.

Three-agency ratings markets are the structure. A merger among them would be extraordinary.

The IHS Markit remedy shows where data overlaps were already too tight.

Named benchmarks in ETFs and futures are switching costs written into contracts.

Identifier systems that clearing and loans require are essential data inputs.

Savers in index funds track a benchmark S&P administers. The fee is inside the fund expense ratio.

A company issuing bonds pays a rating agency because buyers demand one of the big three, not because a statute always says so.