The temporary period allowing for a smooth introduction of the use of legal entity identifiers (LEIs) under Markets in Financial Instruments Regulation (MiFIR), ends today (2 July).
Earlier this month, The European Securities and Markets Authority (ESMA) reconfirmed that the six-month transition period it allowed for far-reaching LEI requirements would end as planned on 2 July and that there will be no further extension.
The LEI ruling covers all issuers of securities, which seek admission to trading on a regulated market and offer securities to the public as defined in the Prospectus Regulation.
Verena Ross, ESMA executive director, made this a feature of her speech to a conference in Paris, arranged by the Banque de France, on 27 June.
While hailing early success since the implementation of the LEI rules in Europe on the implementation of the second Markets in Financial Instruments Directive (MiFID II), she acknowledged that there are some areas for improvement to ensure that its requirements deliver MiFID II’s objectives.
Ross said: “These issues are high on our agenda for the coming months. I would like to emphasise that, while it requires some efforts at the beginning, the consistent use of the LEI across the various EU requirements also generates tangible benefits to the industry by reducing operational complexities, and, ultimately, decreasing compliance costs.”
She continued: “Many stakeholders are now calling for the LEI to be the standard pan-European identifier that can be used for all regulatory purposes.”
Commenting on the LEI deadline, Volker Lainer, vice president of product management at GoldenSource, said despite the temporary period of introduction, some in the financial services industry may still be caught out in the future.
He said: “Fears of tanking trading volumes are wide of the mark. Sure, certain trades will be missed or refused if a counterparty doesn’t have an LEI. But it is only likely to be smaller investment houses, many of whom are yet to register for an LEI, that will be caught out by today’s deadline.”
He added: “The truth is that most brokers will not leave themselves open to the risk of being fined by putting on a small trade for an non-LEI equipped investment manager. After all, no broker wants to incur the reputational and financial backlash that goes with falling foul of MiFID II’s stringent transaction reporting rules.”
