Recent conversations with executives close to the GLEIF (Global Legal Entity Identification Foundation) revealed an underlying conflict in the creation of the LEI database. The LEI registration process and data collection activities are being optimized for three constituencies: the regulators, the registrants, and the Local Operating Units (LOUs). However, a fourth constituency, equal in importance to the other three, has been ignored. These are non-regulatory data consumers who are ultimately the users of the LEI. Unless the data can be widely utilized for purposes other than transaction reporting, the vision of a ubiquitous LEI solving a broad range of financial market problems will not be realized.
Alacra’s current analysis indicates that, while the number of registered entities has increased, quality and utility issues within the database have increased as well. For example, there are now a large number (about 50,000) of lapsed entities in the database. The Tokyo-based LOU is registering entities in Japanese, which may be appropriate, but makes it diffcult for many firms to consume the data as their systems do not recognize Japanese characters. And coverage of entities where there has been a regulatory mandate or recommendation is still not complete, so the LEI universe is an eclectic set of entities. These issues (and many others) can be resolved but a stronger central presence (the GLEIF) needs to step in to insist on better process, better quality, and better coverage
Overlap between Alacra Authority File and LEI Universe
The Alacra Authority File provides reference data and entity identifier mapping on a universe of over 200,000 entities that are either rated, regulated or listed. This dataset contains most of the common customers and counterparties of large, global financial institutions. The chart to the left shows the overlap between the rated, regulated and listed universe and the LEI universe (without the entities registered by the Japanese LOU).