Mapping LEI Coordinates

Spirited chatter on Inside Reference Data's LinkedIn discussion group last month, sparked by "Crawling Before Walking," shows conflict over the new LEI standard, the International Securities Identification Numbers (ISINs) and the Stock Exchange Daily Official List (SEDOL) identifiers used in the UK.

This conflict is about whether the global LEI system to be put in place this year will not work with certain data standards that LEI administrators deem "non-eligible," including CUSIPs, ISINs, SEDOLs and RICs (Reuters Instrument Codes). Should that be the case, it would be difficult to establish the sort of links between the LEI and other identifiers envisioned in this space recently.

"In best business practice, this topic is not solved to my understanding at all," says Bruno Schuetterle, a member of SIPUG, the Zurich-based identification procedures administrator. He asks, "Do you think the global LEI system will take contractual measures not to deliver LEI to vendors that are in the status of non-eligible vendors?"

Intellectual property issues also surround the issue of eligibility, adds Schuetterle. The CUSIP Service Bureau (CSB), Thomson Reuters, the London Stock Exchange and others who maintain that their identifiers are intellectual property are unlikely to soften that stance. This is similar to LEI administrators' unyielding position on data standards' eligibility.

While the European Commission in November 2011 did abolish licensing fees for using ISINs, with the cooperation of Standard & Poor's, one comment in our LinkedIn discussion criticized the effectiveness of the EC action.

"CSB is not implementing in good faith the EC ISIN decision," says Rudolf Siebel, vice chair of the Securities Market Practice Group and a managing director at Frankfurt-based asset management firm BVI. This creates concern about being able to combine the LEI and ISIN codes, adds Siebel.

The need to map out identification through the use of both the LEI and the ISIN is likely to eventually fade out, according to Graeme Austin, CEO of ISITC Europe. That, in turn, could solve the intellectual property and fees issues, as adoption of the LEI will "push those who seek to charge firms to use poor identifiers of legal entities to reassess their commercial models," says Austin. "I believe the GLEIS [global LEI standard] is a game changer, not just another of the many hoped-for industry data utilities that have come unstuck by vested interests."

LEI implementation issues, as this discussion makes clear, aren't as simple as just proving the costs will have benefits. There's an underlying thicket when it comes to coordinating the LEI with other identifiers. Coordinating identifiers is a path to making the LEI more effective, as I argued in "Next Step For Identifiers" last month, but before that can be done, all the aforementioned interested parties will have to reach an understanding for a basic functional identification system.