MiFID II Compliance: The Importance of Obtaining LEIs

MiFID II Compliance: The Importance of Obtaining LEIs Before January 3, 2018

Update to previously published article.

Major changes to the regulation of European financial markets have arrived with the Markets in Financial Instruments Directive (MiFID II), which went into effect on January 3, 2018 (but with enforcement delays for certain compliance requirements). This much-anticipated EU legislation impacts firms that provide services to clients linked to “financial instruments” (shares, bonds, units in collective investment schemes and derivatives).

MiFID II represents a significant shift in European financial market regulation. Financial institutions are also being asked to negotiate substantial technical and operational challenges as they race to become compliant with new rules.

For legal entities tasked with executing trades, perhaps one of the more significant tasks associated with these regulatory changes is ensuring that Legal Entity Identifiers (LEIs) are in place so that they do not lose access to the financial markets.

UPDATE: On Dec 20, 2017, The European Securities and Markets Authorities granted a 6-month grace period from the original Jan 3 due date for obtaining LEIs so that

  1. “investment firms may provide a service triggering the obligation to submit a transaction report to the client, from which it did not previously obtain an LEI code, under the condition that before providing such service the investment firm obtains the necessary documentation from this client to apply for an LEI code on his behalf; and 

  2. trading venues report their own LEI codes instead of LEI codes of the non-EU issuers while reaching out to the non-EU issuers.” (ESMA statement to support the smooth introduction of the LEI requirements)

LEIs explained

Legal Entity Identifiers are unique 20-digit alpha-numeric identification codes allowing for the consistent and accurate identification of all legal entities (including non-financial institutions) that are parties to a transaction. These codes were designed by the International Organization for Standardization to serve as an international standard for the financial services industry.

Through the use of LEIs, all legal parties to a transaction can be precisely identified, as the LEI links back to a data set of critical information about the transaction—information that may also include ownership of the entity. Additionally, LEIs play a critical role in terms of matching and aggregating market data needed to maintain transparency and serve regulatory purposes. Once an entity is assigned an LEI code, it keeps that code for the duration of its existence.


It should be noted that the term GMEI (Global Markets Entity Identifier) is sometimes used interchangeably with LEI. A GMEI is simply a branded version of an LEI offered by the Depository Trust and Clearing Corporation (and the most popular current LEI solution by global market share). The GMEI utility was also among the first LEI issuers to be endorsed by the LEI Regulatory Oversight Committee. All versions of LEIs from any approved issuer will be compliant with the MiFID II registration requirement.

LEI and MiFID II compliance: The changing regulatory landscape

The major changes to the transaction reporting process brought by MiFID II are intended to significantly strengthen regulatory requirements. All entities trading with European counterparties across all asset classes must secure LEIs, store them in their reporting system and maintain the necessary procedures to ensure that LEIs are renewed as needed.

For the first time, any firm operating under MiFID II must have LEIs in order to report transactions across all asset classes, rather than just derivatives. This requirement can be distilled down to a simple rule: "No LEI, no trade"—a succinct formulation used by Ron Jordan of the Depository Trust and Clearing Corporation.

While reporting requirements are undoubtedly tighter, the use of an LEI will help identify all parties to a transaction regardless of the broker-dealer or entity reporting to the regulator. One example of how the process works: If a firm trades with multiple broker-dealers, that firm will be reported with the same LEI—something that will help regulators better discern and assess systemic risk and determine whether concentrated risk exists within any entity.

The European Securities and Markets Authority (ESMA) has made clear that all market participants must take steps toward full compliance with LEI requirements under MiFID II. Based on prior experience with the adoption of the European Markets Infrastructure Regulation, ESMA is strongly encouraging reporting entities to focus on carrying out these requirements.

Who can request LEIs?

Any legal entity can apply for an LEI. Employees acting in a business capacity on behalf of a firm (or of a firm with a controlling interest over the entity being registered) are authorized to register for an LEI.

It's also possible to register for an LEI via a process called assisted registration. Under this scenario, a third party that is not associated with the entity being assigned the code can register for an LEI in the entity's name provided express permission to do so has been granted. Registered agents and compliance partners are typical choices for assisted registration.


Entities seeking to ensure a smooth transition to the new MiFID II regulatory regime should consider partnering with a trusted advisor who can assist with or facilitate the registration process.

Additionally, an advisor can help validate the data that's required to obtain LEIs (including GMEIs) and help maintain, update and renew important business records (name changes, mergers, liquidations, dissolutions, etc.).

By partnering with a trusted advisor and focusing on compliance, entities can navigate all technical and operational challenges and help ensure that all LEIs are in place according to MiFID II requirements.

To learn more about how we can help you better manage your LEI needs, contact a CT representative at 844-201-2511.

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