Editor's letter

The argument for more competition among the rating agencies has perhaps never been clearer. Since Moody's upset the market with its new JDA bank ratings methodology - which is currently being revised due to what it politely termed industry "feedback" - its rivals have seized the opportunity to publicise their difference.

In an industry dominated by just three providers, the episode demonstrated why choice is so important. And wading straight into this debate is DBRS, the self-proclaimed "uninvited guest" at the rating agency party. DBRS has been rating banks in its own backyard in Canada for 30 years, and has successfully built a structured finance business in the US.

Now it's turned its attentions to Europe. And focusing on its strengths in financials and structured finance, it plans to play on the theme of challenging the oligopoly. As Walter Schroeder, who founded the company more than 30 years ago, says: "Why would you want to give so much power to Moody's and S&P to dictate when you can come to market, what you can price at? We bring the ability to reduce the immense power that the existing rating agencies have." Our profile of DBRS on the cusp of becoming a global agency starts on page 28.

Continuing the competition theme, this month we also look at the three exchanges currently jostling to get a piece of the action in credit derivatives. They've seen the escalating volumes and profits these instruments are generating, but will their futures and options contracts based on single names and indices take off? Ultimately the factor determining their fate will be liquidity, and without input from dealers on these contracts, they can't survive. And as the most impartial observer can't help but point out, it's hardly in the dealers' interests to promote an exchange that cuts their margin on these products.

- Nikki Marmery, Editor.