LEI Usage Expands

Terry Flanagan

Depository Trust & Clearing Corp.’s Global Markets Entity Identifier utility, offered in collaboration with Swift, has issued over 165,000 legal entity identifiers to entities from more than 140 jurisdictions, representing approximately 50% share of the LEIs issued worldwide.

DTCC and SWIFT have played a significant role in the growth of the Global Legal Entity Identifier System and are key partners with the Global LEI Foundation, which was created last year to help manage the overall system.

“There’s been a significant growth in the total volume of LEI issuance in the entire system with about 340,000 LEIs having been issued,” said Bill Hodash, managing director of business development at DTCC. “There are about 20 endorsed local operating units in the world. We are one of those 20 and we work with the other local operating units to drive the global system forward.”

The GLEIF, created by the Financial Stability Board, has assumed full operational management of the Global LEI System, under the oversight of the LEI Regulatory Oversight Committee (ROC).

“The original principles and framework for the global LEI system always envisioned a central operating unit, and the GLEIF has been established to perform that role,” said Hodash. “That’s a key milestone and they are embarking on their essential coordination activities of the system, working with the ROC and the LOUs, as it grows and expands.”

The GMEI utility is expected to continue to grow in the coming years as regulators increasingly mandate the use of LEIs in new financial rules. Forthcoming EU regulations, including European Market Infrastructure Regulation, Markets in Financial Instruments Directive II and Central Securities Depositories Regulation, all require the use of LEIs in their reporting architecture.

“Regulators continue to issue new final rules in record keeping and reporting that require the LEI to identify the reporting party and their counter-parties on their transactions,” said Hodash. What drove a lot of the growth in the system in 2014 were regulations in Europe, specifically Emir reporting regulations for OTC derivatives, which require dual-sided reporting. LEIs are mandated in that reporting.”

In North America, Canada implemented a rule last Oct. 31 that requires entities under Canadian jurisdiction to report their trades in OTC derivatives to trade repositories registered in Canada, which drove a lot of volume in the late summer and early fall of 2014.

“You have rules in the Americas,” said Hodash. “You have rules in Europe. You have rules in Asia, especially in Singapore, Hong Kong and Australia, that continue to generate LEI registrations and we expect to see lots more rule making embrace the LEI.”

The U.S. the Commodity Futures Trading Commission was the first regulatory body to mandate OTC trade reporting, which drove LEI volumes beginning in 2013. The SEC also mandates the use of LEIs in reporting of security-based swaps.

Multiple U.S. regulators adopted in 2014 a risk-retention rule which requires the securitizer of asset-backed securities to retain not less than 5% of the credit risk of the assets collateralizing the asset-backed securities. The rule encourages, but doesn’t mandate, the use of LEIs.

Featured image via Julia Tim/Dollar Photo Club

Related articles

  1. The paper proposes a path forward for standard SLD documentation.

  2. Exchange group’s crypto suite has had consistent volume and open interest growth.

  3. The derivatives venue owned by FTX wanted to offer products that were not fully collateralized.

  4. The proposed standard applies to the processing of give-ups and allocations.

  5. Basel Committee Consults on Interest-Rate Risk

    The launch is a milestone in establishing €STR as the new benchmark risk-free rate.