Firms Given 6-Month Transition Period to Shore up LEI Obligations

With the implementation of MiFID II less than two weeks away, many firms are scrambling to shore up their compliance. However, trading venues may have a little more wiggle room than previously thought regarding Legal Entity Identifier (LEI) requirements under the Markets in Financial Instruments Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term (MiFIR).

January 3, 2018 will see the passage of MiFID II – the European Securities and Markets Authority (ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term) has for months reiterated its LEI requirements and stressed their importance ahead of the deadline. Today’s announcement however opens the door for a smoother transition and less rigorous deadline. Rather, ESMA will allow for a temporary six-month transition period.

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MiFIR requires that EU investment firms identify their clients that are legal persons with LEIs for the purpose of MiFID II transaction reporting. An LEI represents a 20-digit, alpha-numeric code that enables transparent identification of legal entities participating in financial transactions. Under MiFID II, LEIs are needed by firms to fulfill their reporting obligations, which are of particular note in terms of matching and aggregating market data.

LEIs are a common component of many existing EU regulations and directives, including European Markets Infrastructure Regulation (EMIR), Market Abuse Regulation (MAR), Capital Requirements Regulation (CRR), and several others. In preparation for MiFID II, many venues have also reconciled their LEI obligations, leading to rollout of several new products over the past few months.

Six-month temporary period

In particular, ESMA’s six-month temporary period will allow investment firms to provide a service triggering the obligation to submit a transaction report to the client, from which it did not previously obtain an LEI code. This can be satisfied under the condition that before providing such service the investment firm obtains the necessary documentation from this client to apply for an LEI code on his behalf.

Trading venues during this six-month period must report their own LEI codes instead of LEI codes of non-EU issuers currently not having their own LEI codes. ESMA’s softening stance on LEI obligations follows it learning that many investment firms are lagging behind in their efforts to obtain the codes from all their clients.