You’re Free to Have LEIs, But Not Free of Charge

The costs inherent in implementing the legal entity identifier and new regulatory measures may in fact be an investment in preventing more elephants from entering the proverbial room

Attendees of the reference data discussion stream at the European Financial Information Summit (EFIS) in London earlier this week were treated to a lively discussion of the legal entity identifier (LEI) standard, which certainly has sparked plenty such discussions already.

The new wrinkle, not much noted yet, is the intellectual property LEIs create, or will be creating. It's the proverbial "elephant in the room," some said. Olivier Rose, head of projects and international data management at Société Générale Securities Services (SGSS), asserted that it is "impossible to have the [LEI] data for free." Firms will be obliged to provide LEI data but will need to gain some value in return, Rose said, and noted that SGSS's first tests appeared to be expensive.

But investment firms will have a tough time preventing vendors or providers from charging for LEIs, a challenge the firms are already expecting, especially those on the sell side.

More costs are likely to come from Fatca compliance, of course, as well as the other regulatory concerns discussed during EFIS. But another buzzword, as Ian Blance of SIX Financial Information told us, is transparency. That's the goal of Fatca, getting transparency on what non-US financial institutions are doing with US clients, for tax purposes—and as one asset servicing executive noted this week outside the conference, not much gets by the US Internal Revenue Service.

Certainly, the fact that there are expenses both coming and going—setting up the means for compliance with new standards and regulation, and then paying out taxes on items caught through new systems in the case of Fatca—creates the perception of annoyance that is sometimes reflected in discussions of how these rules and systems will work. As Blance also said, though, the regulation is a necessity in many ways. Its costs could turn out to be an investment in keeping still-larger elephants out.