Are You Sure You Don't Need A Pre-LEI?

The clock is ticking down to the start of European Market Infrastructure Regulation (EMIR) trade reporting and Europe's embrace of the legal entity identifier (LEI). However, confusion about the scope of the regulation and differences between it and the Dodd-Frank Act in the US mean some market participants have been slow to realize they need a pre-LEI, and they now face a tough few weeks before reporting begins on February 12.

During the drafting of EMIR, there were calls for more time before introducing trade reporting for exchange-traded futures and options. As a result, some market participants were lulled into a false sense of security that the February 12 deadline would only apply to OTC derivatives. They have now been rudely awoken to find the industry's calls for a dispensation were unsuccessful, and futures and options are in scope from February 12, along with OTC derivatives.

Some have also made the mistake of assuming that, like the Dodd-Frank Act, EMIR only applies to financial counterparties. Others incorrectly believed they could use a Bank Identifier Code instead of a pre-LEI.

Those who have fallen into such traps and have not registered for a pre-LEI now face a busy three weeks, and their first question is likely to be: "How quickly can I get a pre-LEI?"

The answer varies from 24 hours to several weeks. It depends on the pre-local operating unit (pre-LOU) you choose to register with and a number of other factors, including the domicile of an entity and whether its request for a pre-LEI is submitted with those of other entities as part of a bulk application.

Single entities that register with a pre-LOU in their own country are likely to receive their codes quickest, as it is easier for the pre-LOU to validate the data of a domestic entity. Bulk registrations and registrations with a pre-LOU in a foreign country are likely to result in longer turnaround times. Pre-LOUs also point out that their ability to provide codes quickly is dependent on entities paying them promptly.

Some leading practitioners have recommended firms register their entire hierarchies with a single pre-LOU so they do not have to maintain relationships with multiple external organizations. This is sound advice, no doubt, but further raises the stakes for frazzled data managers who have not yet chosen a pre-LOU.

With three weeks to go, spare a thought for those who are yet to get a pre-LEI and staff at the pre-LOUs who are churning them out as quickly as they can.