LEI’s Next Phase

With the structures for implementing the legal entity identifier basically in place, now the real work begins—actually implementing registrations

The new year will kick off with a lot of activity on legal entity identifier (LEI) registration and implementation. The US precursor to the LEI, the CFTC Interim Compliant Identifier (CICI), even has a December 31, end-of-year deadline for swaps market participants to adopt it, with subsequent deadlines for other segments of US markets. That's followed by the January 10 deadline for national regulatory authorities to assent to the charter for a global Regulatory Oversight Committee (ROC) issued by the Financial Stability Board (FSB) and the March launch of the FSB's LEI system.

Considering the imminence of global LEI implementation by the FSB in March, a surprisingly low fraction of the industry seems to be prepared. In polling in two recent Inside Reference Data webcasts, on October 17, just 24% of participants said they had registered themselves for a LEI, and on November 27, a total of 28% of participants said their firms had trouble finding time for LEI initiatives or weren't convinced of the LEI's importance.

The FSB has recognized concerns about duplication of LEIs by multiple local operating units (LOUs), and appears to be taking steps related to the March system launch to remedy that issue, according to Bill Hodash, managing director of business development at the Depository Trust & Clearing Corporation. "The inference is every LOU would query against that database before issuing any LEIs, to make sure they haven't duplicated them," he says. "It may be a little time before we get that."

While the industry has come a long way from a year or two ago, when the FSB and regulatory authorities had not yet sorted out who would be administering the LEI and how registration authorities would be set up in jurisdictions worldwide, the process is clearly not yet complete. All industry participants will have to get a second wind to push through the rest of the way—getting their registrations done, and sorting out issues around making sure those identifiers are accurate and complete. The FSB's March launch of its LEI system was never intended to be the end of the process—in fact, it's just the beginning of having the mechanisms available.