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10 October 2017

Regulation Forex

ESMA highlights MiFID II LEI code requirements


The MiFID II countdown is now in full swing. Ahead of its implementation date, ESMA has released its latest documentation regarding LEI requirements under the new regime. As a result, ESMA highlights MiFID II LEI code requirements. Let's take a look at MiFID II LEI code requirements.

10 October, AtoZForex - The European Securities and Markets Authority (ESMA) has urged financial institutions to apply their unique identification code by January 2018. ESMA says legal entity identifier (LEI)  was a requirement under the new MiFID II rules.

ESMA highlights MiFID II LEI code requirements

The MiFID II rules entail trades to be reported by a wider range of market participants. The LEI makes it easier for regulators to identify who is ultimately behind each transaction.

The Legal Entity Identifier (LEI) is a 20-digit code that enables clear and unique identification of legal entities participating in financial transactions. Firms need LEIs to fulfill their obligations under financial regulations and directives. LEIs are also keys for matching and aggregating market data, both for transparency and regulatory purposes.

A set of key reference information linked to the code relating to the legal entity in question such as name and address. Once a legal entity obtains a LEI code, the code is assigned to that legal entity for its entire life.

In a related issue, ESMA urges firms not to waste time and start maintaining full compliance with the new MiFID II requirements. This requires multiple steps to achieve full satisfaction of LEI obligations.

ESMA Chairman urges to obtain LEIs as soon as possible

ESMA Chairman Steven Maijoor commented:

“This is not a difficult process, if you make the effort now you can obtain your LEI within a short time frame. It costs a few hundred euros and will save your time and expense in the long run while providing comfort to your clients, counterparties and regulators.”

ESMA also highlighted that LEIs represents its continued push towards broader market transparency. However, the codes are an integral factor of the new regulations. They constitute a unique identifier for all participated entities in financial transactions which can use on a cross-border basis.

Speaking in brief, this demands an updated free and open database on a daily basis. In doing so, this framework provides a well-defined structure for identifying potential levels of exposure. However, it also shores up risk management of financial transactions and some of the strongest market surveillance coverage to date.

“LEIs play a key role under the new MiFID data-reporting regime as well as being essential in supporting regulators work on transparency and market surveillance. It is vital that investment firms and trading venues make the necessary efforts to obtain their LEIs in good time,” added chairman.

Meanwhile, entities interested in obtaining the LEI can follow the Global LEI Foundation (GLEIF) website for the process. After following the outlined steps, the issuance of the LEI will take within 24 to 48 hours.

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