The LEI Regulatory Oversight Committee (http://www.leiroc.org/) has, as of November 18, more than 50 members representing over 30 countries. Most of the committee members represent the central bank or another regulatory body in their respective jurisdictions. What continues to surprise and confuse market participants, though, is that to date only two regulatory bodies have mandated the use of LEIs for recordkeeping and trade reporting:
- The Commodity Futures Trading Commission (CFTC) requires that all parties to swaps and certain foreign exchange transactions, including foreign exchange forwards, swaps and options (Transactions), obtain a legal entity identifier (LEI) and comply with new recordkeeping and (in some cases) reporting requirements. LEIs will be used in connection with recordkeeping and reporting for Transactions.
- Under the European Market Infrastructure Regulation (EMIR) technical standards on format and frequency of trade reporting, counterparties are expected to have an LEI for reporting to trade repositories from 12 February 2014.
Regulators in several other jurisdictions have all recognized the importance of developing a unique legal entity identifier, but other than the CFTC and EMIR, none have made their use mandatory. Two examples of support but no mandate:
- Canadian Securities Administrators Consultation Paper 91-402 says, “Each derivative market participant should be assigned a unique legal entity identifier based on universal internationally accepted standards…”
- MAS (Monetary Authority of Singapore) supports international initiatives to adopt unique identifiers to facilitate data aggregation. As such, MAS proposes to require specified persons to report, where available, Legal Entity Identifier (LEI), Universal Transaction Identifier (UTI) and Universal Product Identifiers.
Perhaps the most important support for the LEI recently came from the European Banking Authority which published a consultation paper in October suggesting the usage of LEIs for all bank reporting.
- The European Banking Authority (EBA) launches today a consultation on a Recommendation on the use of the Legal Entity Identifier (LEI). The document will require all entities for which information is required under EU reporting obligations to obtain a pre-Legal Entity Identifier (pre-LEI) code for reporting purposes.
While slow but steady LEI progress is being made, many market participants outside the derivatives area explain their situation like this: “I’m busy, I’m not required to do anything, so I’m not doing anything. I have other more pressing regulatory requirements. I’m sure someone will tell me when I have to do something to prepare for the LEI. I’ll call you then.”
It seems the best way to get the LEI off the ground faster, and not have it fall back to earth, is to increase the number and geographical spread of regulatory mandates.