# Asset-Backed Securities Markets: > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3A5927409984e03500 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text Asset-Backed Securities Markets: Issuance and Structure Diana Knyazeva1 _____________________________________________________________________________________ APRIL 2025 Abstract This paper provides statistics about the market for asset-backed securities (ABS), including information about trends in offering, deal, and collateral characteristics. Subsequent sections provide more detail about the activity of financial intermediaries, such as bookrunners and sponsors, and nationally recognized statistical rating organizations (NRSROs) in these markets. This white paper is provided in the author’s official capacity as an economist in the Commission’s Division of Economic and Risk Analysis but does not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff. The author thanks Robert Fisher, Oliver Richard, Juan Echeverri, Lucretia Zinnen, Lauren Moore, Charles Woodworth, John Prochilo, Catherine Moore, Brandon Hill, and Patrick Boyle for helpful comments and suggestions. 1 I. Background Asset-backed securities (ABS) markets are vital securities markets due to their size,2 broad investor base, as well as their role in facilitating the origination of credit and the transfer of those assets to market participants. ABS can reduce borrowers’ cost of capital and expand access to credit, increase secondary market liquidity for the underlying debt, and enable more efficient capital allocation by investors depending on their risk tolerance, investment horizons, and portfolio composition. ABS can also carry credit, market, liquidity, currency, and reputational risks.3 The risks and characteristics of ABS depend on the risks and characteristics of the asset pools underlying ABS (including the risks and characteristics of individual assets in the pool and their default correlations) and the securitization structure (such as the manner in which the pooled assets are tranched into subordinated classes, including the number of classes, their relative sizes, levels of credit support for senior classes, etc.). This paper provides information about the size and structure of ABS using the Green Street Asset-Backed Alert (AB Alert) database,4 including information about SEC-registered offerings, offerings conducted pursuant to the exemption from registration under Securities Act Rule 144A,5 and traditional private offerings6 priced between 2014 and 2024. The analysis is organized as follows. Section II describes the data. Section III provides an overview of ABS issuance activity and collateral features. Section IV examines trends in the activity of bookrunners and securitization sponsors. Section V describes rating activity by registered NRSROs in ABS markets. II. Data Source and Sample Data The data are from the February 2025 vintage of AB Alert data provided to subscribers by Green Street Advisors. The AB Alert data include the initial terms of non-agency (i.e., private-label) As of December 31, 2024, the total amount outstanding of U.S. ABS was approximately $1.61 trillion. Bd. Governors Fed. Reserve Sys., Fed. Reserve Statistical Rel.: Z.1 Financial Accounts of the U. S., at 106 (Table L.127) (Fourth Quarter 2024), released Mar. 13, 2025, available at: https://www.federalreserve.gov/releases/z1/20250313/z1.pdf. 2 See, e.g., Financial Stability Board, “Vulnerabilities Associated with Leveraged Loans and Collateralised Loan Obligations,” available at https://www.fsb.org/2019/12/vulnerabilities-associated-with-leveraged-loans-andcollateralised-loan-obligations/, at 17. See also Guggenheim Investments, “The ABCs of Asset-Backed Securities,” 2024, available at https://www.guggenheiminvestments.com/cmspages/getfile.aspx?guid=1b930cb1-783b-4b10a6ca-4deadd881338 4 See generally, Green Street Advisors, LLC, Asset-Backed Alert: About the Databases (ABS Database), available at: https://greenstreet.com/news/asset-backed-alert. The data sample is discussed infra in Section II. 3 5 17 CFR § 230.144A. This analysis generally follows the methodology used in prior Commission analyses. See Asset-Backed Securities Disclosure and Registration, Release No. 33–9638 (Sept. 4, 2014) [79 FR 57184 (Sept. 24, 2014)] at 57191. See also Credit Risk Retention, Release No. 34–73407 (Oct. 22, 2014) [79 FR 77602 (Dec. 24, 2014)] (‘‘RR Adopting Release’’) at 77711. 6 DIVISION OF ECONOMIC AND RISK ANALYSIS 1 residential mortgage-backed securities (“non-agency RMBS”), collateralized loan obligations (“CLO”) and collateralized debt obligations (“CDO”), and other ABS (“other ABS”) that are: 1) collateralized by assets of some kind; 2) have a trustee; and 3) have at least one tranche rated by a nationally recognized statistical rating organization (“NRSRO”). The AB Alert data do not include information about agency RMBS,7 commercial mortgage-backed securities, municipal bonds and tax-exempt deals, deals fully retained by a sponsor or an affiliate or sold to an entity operated by a sponsor affiliate, and commercial paper and other continuously offered securities. The sample data include deals between January 2014 and December 2024. The sample data exclude all deals identified in AB Alert with offering type “Outside U.S.” as well as deals with deal type “Non-U.S. ABS/MBS.” Accordingly, where this paper provides data and statistics for “ABS”, it refers to data and statistics across non-agency RMBS, CLOs, CDOs, and other ABS issued pursuant to U.S. securities laws8 and sold within the U.S. Between January 2014 and December 2024, the sample includes approximately 12,000 deals and $6.1 trillion of volume. III. ABS Issuance: Volume and Characteristics ABS are organized or initiated by sponsors, which are financial institutions that sell or transfer a variety of collateral, either directly or indirectly, to issuing entities. ABS deals themselves are large and commonly structured by pooling the underlying assets and directing cash flows to multiple classes (also known as tranches or tiers) with different levels of seniority, credit support, and cash flow structure. This process allows for the creation of securities that appeal to riskaverse investors and securities that attract investors with high risk tolerance. This section documents the structure of ABS issuance, issuance types and collateral characteristics. First, Table 1 reports the total volume of all ABS issuance in the sample data as well as the number of deals during the sample period. ABS markets have grown significantly during the last decade, both by USD volume and by number of deals. Agency RMBS refers to RMBS that is issued or guaranteed by Ginnie Mae, Freddie Mac, Fannie Mae, or other U.S. government agency or government-sponsored enterprise. 7 8 Some ABS, such as CLOs may be offered and sold under exemptions from the Securities Act. These ABS are included in the sample insofar as they have non-missing data in AB Alert and are not categorized with offering type “Outside U.S.” in AB Alert. DIVISION OF ECONOMIC AND RISK ANALYSIS 2 Table 1. Volume of ABS Issuance Year Volume (USD Billion) Deal Count 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 371.1 351.1 311.3 426.9 642.7 550.4 441.8 964.9 577.4 480.6 946.8 704 699 607 749 1,211 1,060 956 1,875 1,106 1,001 2,031 * Source: AB Alert. This Table reports the volume of ABS across non-agency RMBS, CLOs, CDOs, and other ABS and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” ABS can be offered and sold in SEC-registered offerings, pursuant to the exemption from registration under Securities Act Rule 144A, or through traditional private offerings. The AB Alert data provides detailed information about new ABS issues, including their offering type (i.e., SEC-registered, 144A, private). As a caveat, registered and unregistered offerings need not be directly comparable, and the statistics throughout this analysis are not intended to contrast these offering types. Table 2 shows the volume of ABS issuances for each offering type as reported in the sample data. Table 2. Volume of ABS Issuance by Offering Type (USD Billion)* Panel A. SEC-Registered Offerings Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Registered 124.4 98.5 92.6 109.8 104.4 101.7 78.4 102.5 118.6 108.8 118.1 Panel B. Rule 144A Offerings Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 144A 246.7 252.3 218.5 315.2 529.7 442.7 353.3 860.6 453.6 367.5 824.5 Panel C. Other Private Offerings Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Private 0.1 0.3 0.2 1.9 8.6 6.0 10.1 1.8 5.3 4.2 4.2 * Source: AB Alert. This Table reports the volume of ABS issuance by offering type across non-agency RMBS, CLOs, CDOs, and other ABS, and excludes deals with offering type “Outside U.S.” and deals with deal type “NonU.S. ABS/MBS.” DIVISION OF ECONOMIC AND RISK ANALYSIS 3 Figure 1 reports the median deal size by deal type. In 2024, a median CLO/CDO deal (blue line) was $396 million, a median non-agency RMBS deal (red line) was $347 million, and a median other ABS deal (green line) was $480 million. Figure 1. Median Deal Size by Deal Type (USD Million)* 550 500 450 400 350 300 250 200 2014 2015 2016 2017 U.S. CLOs/CDOs 2018 2019 2020 2021 U.S. Non-Agency RMBS 2022 2023 2024 Other U.S. ABS * Source: AB Alert. This Figure reports the median deal size for each of non-agency RMBS deals, CLO/CDO deals, and other ABS deals, and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” ABS issuance can also be analyzed by collateral type. First, Table 3 shows that arbitrage CLOs account for approximately $414 billion in issuance and 982 deals in 2024. The CLO market experienced significant growth during the sample period in both volume and number of deals.9 Table 3. Volume of Arbitrage CLO Issuance* Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Volume (USD Billion) 120.5 96.5 68.4 104.5 262.7 150.2 116.1 393.5 135.0 105.1 413.6 Deal Count 226 186 147 187 519 315 318 866 297 259 982 * Source: AB Alert. This Table reports the volume of issuance based on collateral type identified in AB Alert as “CLO: corporate loans (arbitrage),” and excludes deals with offering type “Outside U.S.” and deals with deal type 9 All arbitrage CLOs in the sample data were issued in reliance on Rule 144A. As discussed above, registered and unregistered offerings are not necessarily directly comparable, and these statistics are not intended to contrast the importance of different offering types. DIVISION OF ECONOMIC AND RISK ANALYSIS 4 “Non-U.S. ABS/MBS.” Second, Table 4 shows that the market for non-agency RMBS accounted for approximately $145 billion in new issuance and 385 deals in 2024. Like other ABS markets analyzed above, nonagency RMBS issuance experienced significant growth in the last few years relative to postfinancial crisis lows. In terms of offering types, non-agency RMBS are placed primarily through Rule 144A offerings accounting for approximately $143 billion in issuance, with no SEC registered issuance and only $2.5 billion placed through traditional private offerings in 2024. The above caveat about the limited comparability of registered and unregistered offerings continues to apply. Table 4. Non-Agency RMBS* Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Volume of Issuance (USD Billion) 144A Private Total 37.0 57.4 38.9 65.9 90.9 114.6 101.1 186.2 133.1 72.0 142.9 0.0 0.0 0.0 0.3 0.0 1.1 2.1 1.0 1.5 1.5 2.5 37.0 57.4 38.9 66.2 90.9 115.7 103.2 187.2 134.6 73.5 145.4 Deal Count 120 151 92 123 173 239 234 403 299 217 385 * Source: AB Alert. This Table reports the volume of issuance based on collateral type identified in AB Alert as “Residential Mortgages,” and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Table 5 presents issuance trends in the markets for ABS backed by credit card receivables, automobile loans and leases, and student loans, which are encompassed in “other ABS” in this paper. As a group, they represent $178.8 billion in issuance in 2024. While the automobile loan and lease ABS market has grown steadily during the sample period, the student loan ABS market has contracted in the last several years, and credit card ABS issuance remained relatively stable through the sample period. In terms of offering type, in 2024 approximately 60% of auto loan ABS are SEC-registered offerings, with the remainder being issued under Rule 144A. Similarly, approximately two thirds of credit card ABS were issued as SEC-registered offerings in 2024. By contrast, all student loan ABS deals in the sample were issued as Rule 144A offerings. Traditional private offerings have been rare in these markets during the sample period. The above caveat regarding the limited comparability of registered and unregistered offering types applies in the non-agency RMBS context as well. DIVISION OF ECONOMIC AND RISK ANALYSIS 5 Table 5. ABS Issuance by Consumer Loan Type (USD Billion)* Automobile Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Registered 62.6 62.0 56.3 56.4 65.4 70.2 66.4 80.7 71.9 80.0 88.6 144A 19.7 22.4 23.5 34.4 33.3 36.0 28.5 41.4 28.8 53.7 60.1 Private 0.0 0.0 0.0 0.6 5.1 2.3 6.0 0.0 0.0 0.0 0.0 Credit Cards Total 82.3 84.4 79.8 91.4 103.8 108.5 100.9 122.0 100.7 133.7 148.7 Registered 43.1 24.0 26.7 42.3 27.7 17.6 2.0 11.5 24.8 17.1 13.0 144A 2.2 3.4 7.8 5.1 8.5 7.8 1.8 6.3 7.8 7.7 7.5 Private 0.0 0.0 0.0 0.0 0.5 0.0 0.7 0.0 0.0 0.0 0.0 Student Loans Total 45.2 27.4 34.5 47.4 36.6 25.3 4.5 17.8 32.6 24.8 20.4 Registered 144A 5.0 10.6 2.8 11.3 0.0 15.0 0.0 16.2 0.0 18.9 0.0 14.4 0.0 20.3 0.0 32.3 0.0 7.6 0.0 8.2 0.0 9.7 Private 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total 15.6 14.3 15.0 16.2 18.9 14.4 20.3 32.3 7.6 8.2 9.7 Source: AB Alert. This Table reports the volume of issuance in “other ABS” backed by credit card receivables, automobile loans and leases, and student loans, and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Automobile ABS include ABS backed by automobile loans and leases, both prime and subprime, automobile and auto-fleet leases, motorcycle loans, and truck loans. * DIVISION OF ECONOMIC AND RISK ANALYSIS 6 The complexity of a given deal is influenced by a number of factors, such as the opacity and risk characteristics of the collateral pool as well as the structure of the deal itself. ABS deals are commonly split up into multiple classes with different levels of seniority, credit support, and corresponding risk and return profiles. While a high number of classes per deal can contribute to deal opacity, it can also allow issuers to more efficiently tailor credit and term risks of the securities to align with the risk appetites of different investor groups. Table 6 reports the distribution in the number of classes per deal for all ABS issuance as well as for different issuance types. A median deal in 2024 had 7 classes, but there is considerable heterogeneity in the measure, with a quarter of ABS deals having 5 or fewer classes and a quarter of all ABS deals having 8 or more classes. Table 6. Deal Structure: Number of Classes per Deal* Panel A. All ABS Issuance 25th Year %-ile Median 2019 3 6 2020 3 5 2021 4 6 2022 4 6 2023 4 6 2024 5 7 Year 2019 2020 2021 2022 2023 2024 75th %-ile 8 7 8 8 7 8 Panel B. Number of Classes per Deal by Type U.S. Non-Agency U.S. CLOs/CDOs RMBS Other U.S. ABS 25th 75th 25th 75th 25th 75th %-ile Median %-ile %-ile Median %-ile %-ile Median %-ile 6 7 8 4 6 9 2 3 5 4 7 8 4 6 9 2 3 5 5 7 8 5 7 10 2 3 5 7 7 8 5 6 8 2 3 5 6 7 8 4 6 8 3 4 5 6 8 9 5 7 9 2 4 5 *Source: AB Alert. The sample data in this table is from AB Alert’s tranche details file, which has limited data availability prior to 2019. The sample period for this analysis is, therefore, shorter than for other statistics. This Table reports the deal structure across non-agency RMBS, CLOs, CDOs, and other ABS and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” DIVISION OF ECONOMIC AND RISK ANALYSIS 7 Risk retention requirements went into effect in December 201510 and can be satisfied in one of three ways. In a vertical risk retention, the sponsor retains a single vertical security or an interest in each ABS class in the issuing entity that constitutes the same proportion of each such class. In a horizontal risk retention, the issuer retains the horizontal residual interest in a single or multiple first-loss classes in the issuing entity in a way that amounts to, individually or in aggregate, at least 5% of the fair value of all ABS interests in the issuing entity. Alternatively, issuers may retain some combination of eligible vertical and horizontal residual interests, which when combined represent at least 5% of the issue11 (“L-shape” retention). Figure 2 shows that the horizontal slice was retained in the majority (by volume) of ABS deals with available risk retention information in the sample data. Figure 2. Risk Retention by Percentage of Issuance Volume (%)* 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2019 2020 2021 Horizontal 2022 L-Shape 2023 2024 Vertical * Source: AB Alert. This figure shows issuance volume percentage by type of risk retention reported by AB Alert across non-agency RMBS, CLOs, CDOs, and other ABS and excludes deals with missing risk retention information, deals with offering type “Outside U.S.,” and deals with deal type “Non-U.S. ABS/MBS.” The length of the time shown is limited due to data availability. IV. Market Participants: Bookrunners and Sponsors Many parties may be involved in the securitization process. The originator – which can be the sponsor or a third-party originator (each of which could also be described as a seller) – is the entity that creates the financial assets that collateralize the ABS. The issuing entity is the trust or other entity that owns or holds the financial assets and in whose name the ABS is issued. The sponsor is the person who organizes and initiates a securitization transaction by selling or transferring assets directly or indirectly to the issuing entity. The sponsor would generally be the CLO manager for a CLO deal, and the sponsor could also include a parent company or be the See RR Adopting Release, supra note 6. Compliance with the risk retention rule with respect to asset-backed securities collateralized by residential mortgages was required beginning December 24, 2015 and compliance with the rule with regard to all other classes of asset-backed securities was required beginning December 24, 2016. 10 11 Id. DIVISION OF ECONOMIC AND RISK ANALYSIS 8 same entity as the originator for non-CLO deals. Bookrunners are generally banking and nonbanking entities that structure, underwrite, and place deals. This section focuses on the activity of bookrunners and sponsors due to their central role in ABS markets. ABS deals in the sample data have between 1 and 11 bookrunners, and each bookrunner receives a certain allocated amount of dollar bookrunner credit towards league tables: for deals with a single bookrunner, that bookrunner’s credit is the entire deal amount; for deals with multiple bookrunners, each bookrunner is allocated bookrunner credit depending on their role in the deal. Figure 3 illustrates a gradual rise in the share of deals with 4 or more bookrunners by issuance volume, while Table 7 reports the percent of issuance volume and of the number of transactions with one or more bookrunners receiving bookrunner credit for a particular deal. The median ABS deal in 2024 had one bookrunner, although approximately 43% of deals were placed by 2 or more bookrunners. This may reflect the value of bookrunner reputation for successful placements, investor risk appetite for ABS, and the pooling of collateral underlying deals. Table 7. Bookrunners per Deal* 1 2 3 4 5 or more # Year % # % # % # % # % 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 53% 49% 38% 43% 54% 43% 47% 59% 40% 36% 57% 439 419 298 388 741 564 574 1,281 552 465 1,307 18% 19% 19% 19% 17% 19% 16% 13% 19% 16% 9% 134 128 130 153 213 203 162 257 222 213 236 23% 23% 28% 20% 17% 20% 12% 9% 17% 14% 11% 102 114 119 120 152 160 89 136 150 125 201 6% 8% 13% 15% 9% 13% 17% 11% 16% 20% 14% 24 33 50 74 79 88 90 110 116 109 172 0% 1% 2% 3% 3% 5% 8% 8% 8% 13% 9% 2 2 9 12 22 39 37 79 59 87 115 * Source: AB Alert. This analysis is based on AB Alert underwriter data and excludes all data with missing underwriter roles, or underwriter roles other than bookrunner and lead bookrunner. This Table reports the number of bookrunners per deal across non-agency RMBS, CLOs, CDOs, and other ABS and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” DIVISION OF ECONOMIC AND RISK ANALYSIS 9 Figure 3. Percentage of Deals with Certain Number of Bookrunners (%)* 100% 80% 60% 40% 20% 0% 2014 2015 1 book runner 2016 2017 2 book runners 2018 2019 3 book runners 2020 2021 4 book runners 2022 2023 2024 5+ book runners * Source: AB Alert. This analysis is based on AB Alert underwriter data and excludes all data with missing underwriter roles, or underwriter roles other than bookrunner and lead bookrunner. This Figure reports the percentage of deals with 1, 2, 3, 4, or 5+ bookrunners across non-agency RMBS, CLOs, CDOs, and other ABS and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” A high degree of market concentration can reflect bookrunner reputation, ability to screen high quality ABS deals, and/or market power. Table 8 reports the market share of the top bookrunners by deal volume and the total number of bookrunners during the sample data period, and Figure 4 illustrates these trends by collateral type. First, the number of bookrunners active in ABS markets has risen from 50 in 2014 to 74 in 2024. The top 5 bookrunners accounted for approximately 44% of all ABS issuance by volume in 2024, and the top 10 bookrunners accounted for 68% in 2024 – figures that have declined consistently through the sample period. Table 8. Market Share of Top Bookrunners and the Number of Bookrunners * Year Top 5 Top 10 Number 2014 55% 82% 50 2015 55% 82% 49 2016 51% 78% 49 2017 51% 76% 47 2018 50% 77% 56 2019 49% 75% 55 2020 47% 71% 50 2021 47% 75% 57 2022 45% 71% 68 2023 44% 67% 60 2024 44% 68% 74 * Source: AB Alert. This analysis is based on AB Alert underwriter data and excludes all data with missing underwriter roles, or underwriter roles other than bookrunner and lead bookrunner. Market Shares are based on bookrunner credit information in AB Alert. This Table reports the market share of top bookrunners and the number DIVISION OF ECONOMIC AND RISK ANALYSIS 10 of bookrunners across non-agency RMBS, CLOs, CDOs, and other ABS and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Figure 4. Market Structure by Collateral Type* Market Share of Top 5 Bookrunners 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Number of Bookrunners 40 35 30 25 20 15 10 5 0 Arbitrage CLOs Non-Agency RMBS Consumer Loans Arbitrage CLOs Non-Agency RMBS Consumer Loans * Source: AB Alert. This analysis is based on AB Alert underwriter data and excludes all data with missing underwriter roles, or underwriter roles other than bookrunner and lead bookrunner. This analysis also excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Arbitrage CLOs are identified based on collateral type “CLO: corporate loans (arbitrage).” Non-Agency RMBS are identified based on collateral type “Residential Mortgages.” Consumer loans include ABS backed by (i) credit card receivables, (ii) student loans, and (iii) automobile loans and leases, both prime and subprime, automobile and auto-fleet leases, motorcycle loans, and truck loans. Another important group of market participants are sponsors. Using historical sponsor information in the sample data, Table 9 computes market shares of top 5 and top 10 sponsors by deal volume as well as reports the number of entities that have sponsored at least one deal. Top 10 sponsors accounted for only 17% of all issuances – a figure that has declined steadily during the sample period. This trend coincided with a steady rise in the number of sponsors, from 284 sponsors in 2014 to 460 sponsors in 2024. Figure 5 shows the distribution in the activity of sponsors and bookrunners in the sample data. The median participant in 2024 sponsored only 2 deals and the most prolific sponsored 46 deals. On the bookrunner side of the market, a median participant in 2024 received credit on 10 deals and the most prolific bookrunner received credit for 427 deals. In combination with Table 8 and Table 9, this suggests that ABS markets have significantly more concentration in activity among bookrunners than among sponsors. DIVISION OF ECONOMIC AND RISK ANALYSIS 11 Table 9. Market Share of Top Sponsors and the Number of Sponsors* Year Top 5 Top 10 Number of Sponsors 2014 18% 26% 284 2015 15% 25% 284 2016 15% 25% 267 2017 16% 26% 294 2018 12% 20% 375 2019 12% 21% 388 2020 15% 24% 342 2021 10% 16% 453 2022 10% 18% 380 2023 11% 18% 370 2024 10% 17% 460 * Source: AB Alert. This Table reports the market share of top sponsors and the number of sponsors across nonagency RMBS, CLOs, CDOs, and other ABS and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Market shares are based on sponsor credit and deal volume information in AB Alert data. Figure 5. The Number of Deals per Participant: 2024* Sponsors Bookrunners * Source: AB Alert. This analysis is based on AB Alert sponsor data for non-agency RMBS, CLOs, CDOs, and other ABS and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” V. Rating Activity Accurate information about the credit risk of various debt issuances can reduce adverse selection, thus facilitating capital formation and lowering the cost of capital for issuers. NRSROs have incentives to issue ratings that inform investors, facilitate successful placement of debt securities, and build a reputation for robust analysis with investors. At the same time, when NRSROs are hired by issuers to rate deals, NRSROs may have an incentive to issue optimistic ratings to win business. These competing incentives can be magnified in ABS compared to traditional fixed income products because the complexity and opacity of ABS deals make their credit risk potentially more difficult to assess and price. This analysis documents recent trends in NRSRO DIVISION OF ECONOMIC AND RISK ANALYSIS 12 ratings of ABS deals and their classes, including the role of newer NRSROs and the characteristics of rated ABS classes. Table 10 reports the volume of all U.S. deals rated by each NRSRO between 2014 and 2024. Figure 6 shows the dollar volume of all new U.S. issuance rated by each NRSRO during the same period. The total volume reported in Table 10 represents the total volume of sample ABS issuance. Importantly, every issue can be rated by multiple NRSROs; therefore, the sum of the counts of rated deals by each agency and the sum of all new issuance volume rated by each agency exceeds the total sample of ABS issuance volume. Relatively larger NRSROs, like Moody’s, S&P, and Fitch, have significant market share, rating approximately 44%, 47%, and 47% respectively of all rated sample ABS by dollar volume in 2024. Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Table 10. All Rated Deals by NRSRO by Volume (USD Billion)* DBRS 12 Moody's S&P Fitch Morningstar Morningstar KBRA 246.2 232.5 199.2 264.3 387.3 286.8 177.8 498.4 293.9 214.5 420.1 224.8 171.2 157.8 213.9 336.0 292.1 264.8 446.7 252.5 236.6 442.1 183.3 182.6 163.8 240.5 366.8 267.1 173.8 246.2 246.3 251.0 448.5 6.8 11.9 10.5 24.2 40.0 76.0 0.0 0.0 0.0 0.0 0.0 43.7 69.3 53.4 82.2 87.1 57.1 93.9 172.3 103.4 69.5 110.8 24.0 28.5 42.2 58.9 79.2 92.0 66.1 168.8 136.1 86.5 138.6 Total Volume 371.1 351.1 311.3 426.9 642.7 550.4 441.8 964.9 577.4 480.6 946.8 * Source: AB Alert. This Table reports volume across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. Importantly, the relative volume of deals rated by different NRSROs varies significantly across different types of deals. For example, arbitrage CLOs are rated almost exclusively by Moody’s, S&P, and Fitch: in 2024, Kroll and DBRS Morningstar accounted for less than 1% of rated arbitrage CLO issuance volume combined. By contrast, in the non-agency RMBS market, Kroll and DBRS Morningstar rated approximately 44% of all U.S. rated volume each in 2024, with Moody’s, S&P, and Fitch accounting for approximately 19%, 18%, and 51% of rated volume respectively. This illustrates the segmentation of rating activity and market structure in U.S. issuance, and some of the analysis below disaggregates trends by issuance type.13 DBRS was acquired by Morningstar in 2019 and the registered NRSRO remains DBRS, Inc., with the combined NRSRO being renamed “DBRS Morningstar.” 12 SEC Office of Credit Ratings staff, Staff Report on Nationally Recognized Statistical Rating Organizations (Jan. 2025), available at: https://www.sec.gov/files/jan-2025-ocr-staff-report.pdf. 13 DIVISION OF ECONOMIC AND RISK ANALYSIS 13 Figure 6. Rated Volume by NRSRO (USD Billion)* 600 500 400 300 200 100 0 2014 2015 Moody's 2016 2017 S&P 2018 Fitch 2019 2020 Morningstar 2021 2022 2023 DBRS Morningstar 2024 KBRA * Source: AB Alert. This Figure reports volume across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. Figure 7. Number of Ratings per Deal by Volume (%): 2024* All Sample ABS U.S. Non-Agency RMBS 3 ratings 1% 1 rating 37% 2 ratings 62% 3 ratings 2% 2 ratings 72% U.S. CLOs/CDOs Other ABS 3 ratings 3% 2 ratings 46% 1 rating 26% 1 rating 16% 1 rating 54% 2 ratings 81% * Source: AB Alert. This Table reports sample data across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. DIVISION OF ECONOMIC AND RISK ANALYSIS 14 Multiple NRSRO ratings can reduce information asymmetries between sellers, sponsors, bookrunners, and investors about a particular issue. To quantify the prevalence of multiple ratings per issue, Figure 7 shows the volume of U.S. issuance with one or more ratings by deal type in 2024. Most such deals have between one and two NRSRO ratings, with only 1% of deals by volume having 3 NRSRO ratings. There is significant variation in rating activity across deal types: while only 46% of U.S. CLO/CDO deals have 2 ratings, 74% of non-agency RMBS deals and 84% of other U.S. ABS deals by volume have multiple ratings. ABS deals can be rated by both larger NRSROs (Moody’s, S&P, and Fitch) and smaller NRSROs (DBRS Morningstar, KBRA, DBRS). Table 11 reports the prevalence of ratings per deal from smaller NRSROs. Panel A shows that, in 2024, out of $946.8 billion of all sample ABS deals, $710 billion of issuance did not carry ratings from smaller NRSROs. Panel B shows that, focusing on the subsample of non-agency RMBS market in 2024, only approximately $22 billion of new deal volume in 2024 did not have a rating from a smaller NRSRO. In untabulated results, approximately 98% of U.S. CLOs/CDOs and approximately 68% of other U.S. private and public ABS by issuance volume did not carry a single rating from a newer NRSRO. Table 11. Number of Ratings per Deal by Smaller NRSROs (USD Billion)* Panel A. All Sample ABS Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 ratings Volume Count 306.3 510 252.6 433 221.2 365 284.8 440 456.5 806 339.9 603 291.8 596 644.0 1,238 350.0 605 334.3 613 710.9 1,459 1 rating Volume Count 55.2 172 87.6 240 74.1 203 120.1 266 166.3 365 196.1 421 139.9 337 300.7 585 215.3 471 136.7 362 222.4 539 DIVISION OF ECONOMIC AND RISK ANALYSIS 2 ratings Volume Count 9.6 22 10.5 25 16.1 39 20.9 39 20.0 40 14.1 35 10.0 23 20.2 52 12.2 30 9.6 26 13.5 33 15 Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Panel B. Non-Agency RMBS 0 ratings 1 rating 2 ratings Volume Count Volume Count Volume Count 7.9 24 20.4 78 8.7 18 6.2 20 42.7 112 8.1 18 9.7 28 22.7 49 6.5 15 7.6 24 49.5 84 8.6 14 11.5 35 67.6 117 11.9 21 12.9 45 98.4 181 4.1 12 25.3 72 73.6 155 4.3 7 46.8 124 135.1 267 5.3 12 15.6 49 115.6 241 3.3 9 12.2 47 59.8 165 1.6 5 22.4 83 117.3 288 5.7 14 * Source: AB Alert. This Table reports sample data across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. For 2024 U.S. sample ABS deals with two NRSRO ratings, the most prevalent rating agency combinations by count and volume were Moody’s and Fitch (434 deals, 22% of rated volume), S&P and Fitch (134 deals, 10% of rated volume), and S&P and Moody’s (130 deals, 9% of rated volume), Fitch and KBRA (80 deals, 3% of rated volume), and Fitch and DBRS Morningstar (71 deals, 3% of rated volume). In the non-agency RMBS market, the most common NRSRO combinations by count and volume were Fitch and KBRA (67 deals, 18% of rated volume), Fitch and DBRS Morningstar (65 deals, 19% of rated volume), S&P and KBRA (35 deals, 13% of rated volume), Moody’s and KBRA (28 deals, 7% of rated volume) and Moody’s and DBRS Morningstar (27 deals, 10% of rated volume). While ABS deals commonly have many classes, NRSROs are not always hired to rate all classes in each deal. For example, classes that are retained or placed privately may not require a rating to place. Issuers may also choose not to pay for NRSRO ratings of some classes if such ratings are likely to be more pessimistic than those of other classes or those obtained from other NRSROs on these classes. Table 12 quantifies the average percent of the dollar volume of classes that were rated by each NRSRO and documents significant heterogeneity in the measure across NRSROs. Table 13 reports the average percentage of class volume given the highest credit rating by each NRSRO. These statistics do not account for the selection of deals for which different NRSROs are hired. DIVISION OF ECONOMIC AND RISK ANALYSIS 16 Table 12. Average Percent of Class Volume Rated by a Given NRSRO * DBRS Year Moody's S&P Fitch Morningstar Morningstar KBRA 2019 79% 83% 66% 82% 84% 86% 2020 72% 88% 73% NA 88% 90% 2021 81% 85% 75% NA 90% 91% 2022 72% 81% 65% NA 91% 92% 2023 67% 75% 65% NA 88% 90% 2024 67% 82% 63% NA 84% 95% * Source: AB Alert. This Table reports sample data across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. Table 13. Percent of Class Volume with the Highest Rating Awarded by a Given NRSRO* Panel A. All Sample ABS Year 2019 2020 2021 2022 2023 2024 Moody's 75% 76% 72% 73% 76% 76% S&P 73% 71% 69% 73% 75% 74% Fitch 77% 77% 77% 75% 74% 63% DBRS Morningstar 78% 76% 76% 72% 73% 77% Morningstar 75% NA NA NA NA NA KBRA 74% 75% 73% 73% 72% 75% Panel B. Non-Agency RMBS Year 2019 2020 2021 2022 2023 2024 Moody's 83% 70% 75% 69% 81% 84% S&P Fitch Morningstar 84% 93% 74% 77% 81% NA 76% 84% NA 70% 78% NA 64% 77% NA 69% 78% NA DBRS Morningstar KBRA 78% 82% 75% 80% 75% 81% 73% 74% 75% 76% 79% 78% * Source: AB Alert. This Table reports sample data across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. Subordination levels capture the maximum amount of principal that the underlying pool can lose without resulting in losses to a given security. Subordination levels, thus, reflect the amount of credit enhancement and, all else equal, higher subordination levels result in greater reduction in credit risk of the resulting securities. Table 14 reports the minimum subordination levels of classes with the highest credit rating awarded by different NRSROs.14 In 2024, ABS classes awarded the highest rating by registered NRSROs had an average of between 27.3% and 34.1% For the purposes of this analysis, the highest credit rating includes the highest rating in both the long-term and the short-term credit rating scales for each NRSRO. 14 DIVISION OF ECONOMIC AND RISK ANALYSIS 17 in subordination. In the non-agency RMBS market, deals with the highest credit ratings had on average minimum subordination levels of between 16.7% and 32.7% Table 14. Minimum Subordination of Classes Rated AAA by a Given NRSRO (%)* Panel A. All Sample ABS Year 2019 2020 2021 2022 2023 2024 Year 2019 2020 2021 2022 2023 2024 Moody's 27.6 29.6 28.0 30.7 29.9 31.2 S&P 27.0 29.3 27.8 30.4 32.4 34.1 Fitch 26.0 24.7 24.3 25.0 23.9 27.8 Morningstar 30.2 NA NA NA NA NA DBRS Morningstar 27.1 29.1 28.2 34.0 34.6 27.3 KBRA 30.2 29.7 30.3 31.8 31.7 29.0 Panel B. Non-Agency RMBS (%) DBRS Moody's S&P Fitch Morningstar Morningstar KBRA 25.5 29.1 20.6 29.4 23.4 19.3 31.8 26.8 20.4 NA 27.8 22.0 26.0 26.3 17.4 NA 27.3 20.6 35.0 33.2 24.0 NA 32.0 27.8 47.9 39.8 25.4 NA 32.6 25.7 16.7 32.7 23.5 NA 23.5 22.7 * Source: AB Alert. This Table reports sample data across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. Finally, Table 15 reports trends in rating disagreement.15 Disagreement percentage is calculated as the percentage of classes with multiple NRSRO ratings, for which the difference between the highest and the lowest rating is nonzero. This analysis yields two main insights. First, when considering all U.S. deals, there is a high level of agreement in NRSRO ratings. Of classes carrying multiple NRSRO ratings, between 25.9% and 34.8% of classes had different numerical ratings during the sample period. Because this measure requires multiple numerical ratings per class, it may underestimate the amount of disagreement among NRSROs if certain NRSROs are less likely to be hired because they issue less favorable ratings on some of the lower classes in Different NRSROs use different letter rating scales, therefore, for numerical comparability, letter grade ratings by each NRSRO are converted into a numerical format. For example, S&P’s highest credit rating for long-term debt is “AAA,” whereas Moody’s highest credit rating for such debt is “Aaa.” See generally Mary Van Keuren and Amelia Buckley, What Are Standard & Poor’s (S&P) Ratings (Nov. 21, 2022), available at: https://www.bankrate.com/insurance/s-and-p/; Moody’s, Rating Symbols and Definitions (Mar. 24, 2025) available at: https://ratings.moodys.com/api/rmc-documents/53954. When converted into a numerical scale, a class with two ratings (“AAA” and “Aaa”) would have the numerical disagreement measure of 0, as would a class with two ratings of “AA” and “Aa2.” However, a class with a rating of “AAA” by one NRSRO and “AA+” by another NRSRO would have the numerical disagreement measure of 1. 15 DIVISION OF ECONOMIC AND RISK ANALYSIS 18 the capital stack or on entire deals. The average magnitude of disagreement is between 1.4 and 1.7 notches – a figure that has remained relatively stable during the sample period. Second, there is far less disagreement in ratings of CLOs and CDOs than in ratings of non-agency RMBS deals. This result is not driven by a reduced propensity of ABS and CLO/CDO issuers to hire multiple NRSROs to rate the deals because the disagreement measure is conditional on a class having multiple ratings. Instead, this may stem from different levels of information asymmetries and the role of competition among NRSROs across different markets. Table 15. Disagreement* Panel A. Disagreement: All U.S. Deals Disagreement Disagreement Year (%) (Magnitude) 2019 25.9 1.7 2020 26.3 1.4 2021 34.3 1.4 2022 34.8 1.6 2023 29.0 1.4 2024 31.8 1.4 Year 2019 2020 2021 2022 2023 2024 Panel B. Disagreement by Deal Type CLO/CDO Non-Agency RMBS Other ABS % Magnitude % Magnitude % Magnitude 2.7 2.1 42.4 1.8 21.4 1.5 0.5 2.0 39.0 1.5 21.4 1.4 0.3 1.0 45.2 1.4 28.2 1.5 3.3 2.3 49.2 1.5 23.6 1.7 1.6 1.0 45.4 1.4 20.4 1.5 2.9 1.9 44.4 1.4 22.3 1.5 * Source: AB Alert. This Table reports sample data across non-agency RMBS, CLOs, CDOs, and other ABS that are rated by NRSROs and excludes deals with offering type “Outside U.S.” and deals with deal type “Non-U.S. ABS/MBS.” Rated deals are identified based on the “rated” flag in AB Alert. Magnitude is the average difference between the highest and lowest rating for a given class (after converting rating scales of different NRSROs into numerical measures; see note 9). DIVISION OF ECONOMIC AND RISK ANALYSIS 19 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A5927409984e03500. Public record. Not legal advice.