ESMA reconfirms end to LEI transition period
28 June 2018 Paris
Image: Shutterstock
The European Securities and Markets Authority (ESMA) has reconfirmed that the six-month transition period it allowed for far-reaching legal entity identifier (LEI) requirements to be complied with will end as planned on 2 July.
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.”
“We fully acknowledge that there is a need for both the industry and the regulators to build on the progress achieved so far to further enhance data harmonisation through the LEI across the EU and beyond.”
“Equally, we consider that international data standards should always be prioritised over local or proprietary solutions in order to foster this important objective.”
Looking ahead to ESMA priorities in this area for next year, she highlighted two important pieces of legislation, which are expected to go-live in the summer of 2019—the Prospectus Regulation and the Securities and Financing Transactions Regulation (SFTR).
The prospectus regulation introduces rules on the identification of issuers of securities that are rather complementary to MiFID II requirements, she observed.
Ross explained: “While under MiFID II it is the trading venue which is responsible for obtaining the LEI code of the issuer, the prospectus regulation and related LEI obligation directly apply to the issuer.”
She added: “From 21 July 2019, issuers will be required to include their LEI in prospectuses, the obligation applies regardless of whether the given issuer already has an LEI or not. It 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.”
“Similar to MiFID II, the rules will apply to both EU and non-EU issuers. In addition, the SFTR will mandate the LEI code for parties involved in securities financing transactions and their beneficiaries.”
She pointed out that the SFTR rules share many commonalities with existing European Market Infrastructure Regulation (EMIR) reporting requirements.
“Under both regimes, the entities involved in such transactions must be identified with an LEI,” she said.
These entities are the counterparties, the beneficiaries, the brokers, the central counterparties and clearing members. In addition, under SFTR, the use of LEIs is further extended to the agent lender, the tri-party collateral provider, the central securities depository participant and the issuers of the securities.
“Overall, there are more than 20 fields where an LEI is required as entity identifier under the SFTR,” she stated, towards the end of the core of the speech. “This widespread use of LEI will also facilitate the EU and global aggregation of SFT data.”
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.”
“We fully acknowledge that there is a need for both the industry and the regulators to build on the progress achieved so far to further enhance data harmonisation through the LEI across the EU and beyond.”
“Equally, we consider that international data standards should always be prioritised over local or proprietary solutions in order to foster this important objective.”
Looking ahead to ESMA priorities in this area for next year, she highlighted two important pieces of legislation, which are expected to go-live in the summer of 2019—the Prospectus Regulation and the Securities and Financing Transactions Regulation (SFTR).
The prospectus regulation introduces rules on the identification of issuers of securities that are rather complementary to MiFID II requirements, she observed.
Ross explained: “While under MiFID II it is the trading venue which is responsible for obtaining the LEI code of the issuer, the prospectus regulation and related LEI obligation directly apply to the issuer.”
She added: “From 21 July 2019, issuers will be required to include their LEI in prospectuses, the obligation applies regardless of whether the given issuer already has an LEI or not. It 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.”
“Similar to MiFID II, the rules will apply to both EU and non-EU issuers. In addition, the SFTR will mandate the LEI code for parties involved in securities financing transactions and their beneficiaries.”
She pointed out that the SFTR rules share many commonalities with existing European Market Infrastructure Regulation (EMIR) reporting requirements.
“Under both regimes, the entities involved in such transactions must be identified with an LEI,” she said.
These entities are the counterparties, the beneficiaries, the brokers, the central counterparties and clearing members. In addition, under SFTR, the use of LEIs is further extended to the agent lender, the tri-party collateral provider, the central securities depository participant and the issuers of the securities.
“Overall, there are more than 20 fields where an LEI is required as entity identifier under the SFTR,” she stated, towards the end of the core of the speech. “This widespread use of LEI will also facilitate the EU and global aggregation of SFT data.”
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