Interactive Data Predicts Long Wait For Global LEI

The Global Legal Entity Identifier (LEI) may take years to materialize and may still be only one of a number of identifiers that firms are going to have to manage moving forward, says Interactive Data.

The company held its reference data advisory group in New York recently to coincide with the Regulatory Oversight Committee’s (ROC) upcoming Legal Entity Identifiers publication of principles and requirements that should be followed by pre-Local Operating Units (LOUs) wanting to take part in the interim GLEI.

The publication acknowledges that there is still much to be done to implement an interim GLEI system and highlights outstanding issues that may need additional ROC or local direction.

This sets in motion the next steps in establishing the structures around how the LEI will be managed at the local level the local operating unites or pre-LOUs.

The report recognizes that while all 35 of the recommendations set down by the Financial Stability Board (FSB) – the forerunner of the ROC – apply to the GLEIS, six of the recommendations are particularly relevant to the interim system, namely: system flexibility, LEI reference data at system launch, LEI operational and historical data, LEI data validation, contingency arrangements and LEI intellectual property.

The details of the ROC’s principles for pre-LOUs includes compliance with the ISO 17442 standard and related FSB requirements, confirming that the minimum reference data available at the launch of the LEI should be as specified in ISO 17442. This information is: the official name of the legal entity; the address of the headquarters of the legal entity; the address of legal formation; the date of the first LEI assignment and the date of last update of the LEI; and the date of expiry, if applicable.

Discussing the uniqueness and exclusivity of LEIs, the ROC document notes that to support global uniqueness, any pre-LEI code assigned will include a four-digit prefix assigned by the ROC secretariat, two reserve spaces, 12 digits specific to the registered entity and two check digits as specified in ISO 17442. It does not mention codes issued by pre-LOUs before Nov. 30 2012, when pre-LOUs were not endorsed and codes did not follow the exact pattern noted, but in a later section on portability states: “To enable the transfer [of maintenance of reference data for any pre-LEI] from an endorsed pre-LOU, the received pre-LOU must have been endorsed as well. This condition does not apply if the original pre-LOU is not endorsed.”

At Interactive Data’s reference data advisory group it emerged that the industry has a general understanding that even if the LEI is intended to be one all encompassing entity identifier (as was the case when it was first discussed) to get to that point will take at least five years, continuing the relevance of the existing identifications from the industry that are provided by firms such as Dunn & Bradstreet and DTCC as well as firms’ internal proprietary codes. “The LEI is going to be one of a number of identifiers that people are going to have to manage moving forward and that really there’s going to be a need for cross referencing between the LEIs and existing identifiers, just so everything is still working,” said Marty Williams, vice president, reference data product development of Interactive Data.

“Since there are no comprehensive releases of LEIs right now, firms are using current identification schemes like the pre-LEIs, DTCC, Dunn & Bradstreet, and others. There will still be a need for those providers because they provide so much more than the identifier itself, they provide hierarchy information and in some cases additional company information and we think the risk and regulatory applications of the future are going to require that type of information.”

The question is whether, if there is an industry wide standard entity identifier, if there a need for other identifier schemes that are already in the market place, like the Avid ID from DTCC or the D-U-N-S number from D&B. Williams comments: “That may be true if the LEI is ubiquitous and its issued for every issue and its out there in all its glory but that’s not the case right now. Part of what firms have to grapple with is will that be the case and if it is what will I do with my embedded records that may be already wrapped around one of these other identification schemas.

“There was a good range of dialogue at the event around whether the LEI itself goes far enough for meeting the needs of these large diverse organizations, it certainly appears to be a good step in the right direction but it is only a step and not the complete answer.”

Commenting on what could supplement the global LEI, Williams says: “The primary piece is the hierarchy and whether multiple versions of the hierarchy are needed within a very large diverse organization to manage various use cases. A legal hierarchy is very critical and basic. A hierarchy for credit purposes is also important but could be a derivation of the legal hierarchy.”