3 This allowed buyers and sellers of wheat to trade in standardized "warehouse receipts," rather than specific lots, with inexpensive quality verification by third-party policy and certification. The idea of standardized grading and thirdparty assessment was introduced to credit markets by rating agencies in the early 20th century.
Of course, as recent events have made clear, the qualitative and multi-faceted nature of credit risk limits the extent to which investors can or should rely on ratings as the sole measure of quality. A more subtle form of the quality assurance problem arises when a transaction results in future contingent obligations by the counterparties.