Act Now: The Concept of the ‘Registration Agent’, Introduced by GLEIF, Helps Firms to Comply with Reporting Requirements under MiFID II / MIFIR to Apply as of January 2018
A Registration Agent assists legal entities to access the network of LEI issuing organizations responsible for performing LEI issuance and related services
Author: Stephan Wolf
Estimated Reading Time: 7 minutes
The European Union revised Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), covering securities markets, investment firms and intermediaries, will significantly expand the requirement to use the Legal Entity Identifier (LEI). MiFID II and MiFIR, together with the related European Commission’s delegated acts as well as regulatory and implementing technical standards, will be applicable from 3 January 2018.
This legislative initiative requires hundreds of thousands of actors to obtain an LEI that are under no such obligation to date. The Global Legal Entity Identifier Foundation (GLEIF) stresses the urgency for impacted market participants to obtain an LEI as soon as possible to avoid the risks arising from delaying the process. The longer firms procrastinate, the bigger is the risk that there will be a delay. We do not guarantee that everyone who comes late to the registration process will get an LEI in time for MiFID II / MiFIR to kick in. Firms must be aware that failure to obtain an LEI in time will prevent them from being able to trade as of 3 January 2018.
To further streamline the issuance of LEIs, GLEIF has introduced the concept of the ‘Registration Agent’.
The role of the Registration Agent
The Registration Agent’s role in the Global LEI System is directly connected to the LEI issuing organization.
LEI issuing organizations – also referenced as Local Operating Units – supply registration, renewal and other services, and act as the primary interface for legal entities wishing to obtain an LEI. A legal entity is not limited to using an LEI issuer in its own country. Instead, it can use the registration services of any Local Operating Unit that is accredited and qualified to validate LEI registrations within its jurisdiction. The Global LEI System is designed to encourage competition between LEI issuers to the benefit of legal entities seeking to obtain an LEI.
A Registration Agent acts as a third party service provider that assists the LEI issuing organization with the performance of its duties in the Global LEI System.
The duties of an LEI issuing organization are specified in the Service Level Agreement, i.e. Appendix 6 to the Master Agreement (see ‘related links’ below). The Master Agreement is the contractual framework governing the relationship between GLEIF and LEI issuing organizations.
Possible tasks performed by a Registration Agent include:
Publish on its website information helping a legal entity to apply for an LEI with an LEI issuing organization.
Manage communications with the legal entity.
Process or receive secure payment for the issuance or renewal of an LEI.
Collect and transmit to the LEI issuing organization the information required to verify the existence of the entity applying for the LEI.
Registration Agents will neither be responsible for issuing LEIs nor will they have editorial access to LEI data. It will always be the LEI issuing organization that remains fully responsible and liable to GLEIF for the execution of its duties.
With a GLEIF blog post published in April 2016 (see ‘related links’ below), we had previously stressed that investment firms need to take early action to ensure compliance with regulatory reporting requirements to apply under MiFID II / MiFIR relevant to the LEI.
Citing an article by Chris Johnson published in DerivSource on 18 February 2016, we reported that guidance from the European Securities and Market Authority (ESMA) “is that LEIs are required in advance of trading: ‘No LEI; no trade’. MiFID II/MiFIR requires LEIs to be supplied for each of the parties involved in investment. Examples include executing entity, submitting entity, buyer, seller, transmitting firm for the buyer and transmitting form (sic) for the seller.”
“Trading venues will require LEIs for issuers and there are also maintenance requirements for the entity that submitted the order, the client and any non-executing brokers. This means that investment firms and trading venues must obtain LEIs for multiple parties for each transaction report, must store these in their reporting system and have in place the necessary maintenance procedures.”
Chris Johnson furthermore emphasized that “each of the LEIs must be ‘active’ to be eligible for transaction reporting. To remain ‘active’ the LEI must be renewed annually by its owner, rather like car tax renewal.”
“The ‘No LEI; no trade’ requirement for MiFID places a very strong incentive for firms to tackle the data requirements as soon as possible given that the required data might not be in existence yet. The logical step that can be taken by all investment firms without any delay is to measure current data availability, for the required data fields, that is already available for their held assets and current counterparties and clients, and identify the data gaps. It would be a high risk strategy to assume that others will take steps to solve the regulatory market data gaps. It is only by performing coverage checks now, and speaking to suppliers and counterparties, that firms can assess the scale of the challenge and ensure that their needs are prioritized and data gaps closed and actioned in plenty of time to deliver compliant transaction reporting.”
GLEIF calls on impacted firms to get an LEI now. The LEI issuing organizations are standing ready to assist legal entities to obtain an LEI as well as to collaborate with firms interested in acting as a Registration Agent.
European Securities and Markets Authority published new Q&A document on the practical application of MiFID II and MiFIR
On 20 December 2016, ESMA published its latest Questions and Answers (Q&A) document on MiFIR data reporting (see ‘related links’ below). As stated by ESMA, the purpose of this document is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR in relation to regulatory data reporting topics. It provides responses to questions posed by the general public, market participants and competent authorities in relation to the practical application of MiFID II and MiFIR on:
The LEI of the issuer.
Date and time of the request of admission and admission.
With this Q&A, ESMA advises that GLEIF’s Registration Agent facility “will enable trading venues and systematic internalizers to assist the issuer applying for the LEI to access the network of LEI issuing organizations.”
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Stephan Wolf is the CEO of the Global Legal Entity Identifier Foundation (GLEIF). Since January 2017, Mr. Wolf is Co-convener of the International Organization for Standardization Technical Committee 68 FinTech Technical Advisory Group (ISO TC 68 FinTech TAG). In January 2017, Mr. Wolf was named one of the Top 100 Leaders in Identity by One World Identity. He has extensive experience in establishing data operations and global implementation strategy. He has led the advancement of key business and product development strategies throughout his career. Mr. Wolf co-founded IS Innovative Software GmbH in 1989 and served first as its managing director. He was later named spokesman of the executive board of its successor IS.Teledata AG. This company ultimately became part of Interactive Data Corporation where Mr. Wolf held the role of CTO.