Legal Entity Identifier (LEI)

In relation to obligations arising from the on Regulation on OTC derivatives, central counterparties and trade repositories (EMIR), parties to derivative transactions and central counterparties must report the data on each derivative contract they conclude to a trade repository. To fulfill these obligations, all these persons need to have a unique identification code. The Board of Supervisors of the European Securities and Markets Authority (ESMA) has decided to use the new Legal Entity Identifier (LEI) system for this purpose. The system is in the process of global implementation and in this connection, it has been decided to introduce temporary LEI (pre-LEI) systems in the EU, especially to address the most pressing issues currently related to the reporting of OTC derivatives pursuant to EMIR.

The FSC in the capacity of a national competent authority has the option to sponsor a certain market participant or local institution which may set-up a temporary local operating unit (pre-LOU) which can issue identifiers to legal entities. Sponsorship means mediation between the local person who wishes to set up a pre-LOU and the Regulatory Oversight Committee (ROC), which is responsible for developing the Global LEI System (GLEIS). The FSC will monitor the compliance of the local pre-LOU with all recommendations of the Financial Stability Board (FSB) issued specifically for the implementation of the GLEIS.

For the FSC to become a sponsor, it must first be a member of the ROC. Since the end of July 2013, the Commission has been a member of the Regulatory Committee.

There is another option, namely, to accept from local legal entities codes issued by foreign operating units. At the time, there are several pre-LOUs operating which issue pre-LEIs to foreign legal entities for a fee. Further information on these temporary local operational units can be found at the following address:

https://www.leiroc.org/publications/gls/lou_20131003_2.pdf

A current list of all operational pre-LOUs can be found here:

https://www.leiroc.org/publications/gls/lou_20130318.pdf

It is important to keep in mind that the identifier itself is not owned by the local institution that issued it, but the legal entity owns the code and can transfer it to another pre-LOU or LOU. This ensures one of the main principles that are laid down in the creation of the LEI systems, namely the portability of codes. Other basic principles are the independent and self-initiated registration of legal entities and the uniqueness of codes at the global level.

The code consists of 20 characters and includes numbers and letters, based on ISO 17442. The first four characters are numbers indicating which pre-LOU issued the code. The rest of the code is randomly generated and does not contain any specific information about the legal entity.

More information about the Regulatory Oversight Committee can be found here:

www.leiroc.org

In this section you can also find the following documents:

– ROC Charter;

– Global LEI System High Level Principles and Recommendations of the Financial Stability Board.

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