Under Mifid II rules coming into force on 3 January 2018, all investment firms must secure a Legal Entity Identifier (LEI) for all clients dealt with. Without it a firm cannot provide any transaction services under the regulations.
However, after learning not all firms will manage to secure LEIs for all clients in time, the European Markets and Securities Association (ESMA) has given firms six months from January in order to get their implementation of the new rule up to scratch.
The FCA said it recognised the need for a “smooth introduction” to the new regime, but said firms should submit forms that do not meet the new rules until a date for changed requirements is confirmed.
“We continue to expect firms to make every effort to secure a clients’ LEI before trading on their behalf. Our analysis shows that trading with missing LEI is likely to represent a very small fraction of total trading volumes,” the FCA said.
In the six-month period firms may enter transaction reports for clients if they have provided the LEI documents needed to the client in the meantime, and trading venues can use their own LEI codes of non-EU issuers without a code.
“In the last weeks, ESMA and national competent authorities (NCAs) learnt that not all investment firms will succeed in obtaining LEI codes from all their clients ahead of the entry-into-force of MiFIR on 3 January 2018. The same may be the case for trading venues’ non-EU issuers whose financial instruments are traded on European trading venues,” the regulator said in a statement on Wednesday.
“In that context, and to support the smooth introduction of the LEI requirements, ESMA will allow for a temporary period of six months,” it added.
