Identifiers’ place significant tech demands on industry, say dealers

Progress to create a new set of industry standard codes to identify institutions, products and transactions is moving forward as regulatory reporting deadlines loom, but it remains one of the biggest market structure challenges of 2012 for foreign exchange banks, platforms and vendors

The first versions of the ‘legal entity identifier’ (LEI), a 20-digit code that will be used to identify every financial institution that reports derivatives trades to central repositories under the US Dodd-Frank Act, will be published online early this week as market participants prepare to meet regulatory deadlines set by the Commodity Futures Trading Commission (CFTC).

Provisional legal entity identifiers have been developed by the Brussels-based Society for Worldwide Interbank Financial Telecommunication (Swift) – the designated registration authority for the standard LEI. According to Swift, the first iteration of the codes will appear on its website and that of the Securities Industry and Financial Markets Association within days.

“Priority one is to make sure firms can respond to the requirements that are put forward by the CFTC, and that means being compliant with the new regulatory reporting rules. These firms will have to prepare their systems to integrate the LEIs. The first provisional LEIs will be allocated to counterparties that are in the credit and interest rate trade repositories. Priority two will be the foreign exchange, commodities and equities counterparties, with an October time frame,” says Paul Janssens, LEI programme director at Swift.

Swift expects the standard LEI to be finalised in late April, with implementation on a phased basis as reporting requirements move beyond Europe and the US to be implemented in Hong Kong, Canada and Australia in early 2013.

The release of the provisional LEIs represents the first stage of the implementation of a standard industry framework for identifying entities, products and individual transactions so that trades can be seamlessly and accurately reported to repositories without duplication or omission. In addition to LEIs, globally consistent universal swap identifiers (USIs) and unique product identifiers (UPIs) must also be created.

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