Global LEI System Moves Forward

Terry Flanagan

An interim global legal entity identifier (LEI) system developed by Depository Trust & Clearing Corporation (DTCC) in collaboration with Swift has been endorsed by the Regulatory Oversight Committee (ROC) as a pre-Local Operating Unit (LOU).

The CFTC Interim Compliant Identifier (CICI) utility, which was launched by DTCC and Swift in August 2012, creates and assigns unique identifiers to any financial organization that engages in a transaction, and stores and validates the accuracy of the associated reference data. Currently, there are more than 80,000 CICIs issued to legal entities from over 140 jurisdictions, all of which are eligible for reporting to trade repositories registered with the CFTC and now with the global acceptance endorsement by the ROC, to repositories in many other jurisdictions.

The action marks an important milestone in establishing full operational deployment of a Global Legal Entity Identifier System (GLEIS) aimed at giving regulators and firms stronger systemic risk monitoring capabilities so they can analyze positions and transactions they oversee on a global basis.

“The ROC’s endorsement underscores the importance of industry-wide collaboration to develop the necessary principles and requirements for establishing an efficient operating framework for a GLEIS,” said William Hodash, DTCC managing director and chairman of the CICI Utility. “The progress that’s been made in establishing a standard unique global identifier and requiring it on mandatory reporting for all counterparties to derivatives transactions paves the way for other asset classes to be brought under the fold.”

Established by Charter in January 2013, the ROC is comprised solely of global regulators and provides governance and oversight for the GLEIS. The ROC has responsibility for the development of the GLEIS according to Principles and Recommendations issued by the Financial Stability Board (FSB).

In addition to the CICI Utility, the ROC endorsed two other pre-LOUs, WM Datenservice in Germany and INSEE in France. These pre-LOUs will issue pre-LEIs that will serve as common legal entity identifiers and will transition to the global system when it is completed.

“The establishment of a global legal entity identifier system will dramatically improve systemic risk management in the financial industry,” the Global Financial Markets Association said in a statement. “The use of these pre-LEIs is a critical step forward for the GLEIS as it will enable the industry and regulators to start realizing the benefits of common identifiers now while work on the global system is completed.”

As an authorized pre-LOU, the CICI Utility will issue pre-LEIs to entities that self-register and maintain the reference data. The CICI Utility supports the ROC’s federated framework for pre-LOUs and will continue to work with its Committee on Evaluation and Standards on procedures for the GLEIS, including orderly transfers of data between pre-LOUs.

These CICIs are pre-LEIs available for reporting to any regulator that has assented to the ROC charter and that provides for pre-LEIs in their own transaction reporting rules.

This will include trade repositories registered with the Monetary Authority of Singapore starting later in October, as well as trade repositories registered with the European Securities and Markets Authority, the Australian Securities & Investment Commission and various Canadian provincial regulators in 2014. Hong Kong’s trade repository will feature pre-LEIs in OTC derivatives trade reporting as well.

“The value of the CICI Utility goes well beyond the ability to ensure compliance with regulations,” said Ron Jordan, DTCC managing director and chief data officer. “To improve risk management practices, market participants need to make sure the information they hold about themselves and their counterparties or clients is accurate and well-maintained over time. The evolving GLEIS, and the role of the CICI Utility, adds significant value to this, serving as a vital first step in improving transparency, efficiency and risk mitigation in the global marketplace.”

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