The European Securities and Markets Authority (ESMA) confirmed today that the six-month delay to the mandate requiring the use of Legal Entity Identifiers (LEIs) for all issuers and counterparties to transactions under MiFID II will not be extended.
The initial delay from January 3, 2018, when MiFID II came into play, to July 3, 2018 was designed to provide a smooth introduction of the use of LEIs as ESMA decided that not all firms requiring the identifiers had succeeded in obtaining them in time for the MiFID II start.
ESMA and National Competent Authorities (NCAs) say they have since observed a significant increase in the LEI coverage of both issuers and clients. Based on these observations, ESMA and the NCAs have concluded that there is no need to extend the initial six-month period.
Instead, NCA activity with respect to LEI requirements is shifting from monitoring to ongoing supervisory actions. To ensure a high degree of supervisory convergence and the full application of MiFID II, ESMA and the NCAs are coordinating the development of an appropriate and proportionate common supervisory action plan focused on compliance with the LEI reporting requirements under respective regulatory provisions.
Commenting on the ESMA decision from an industry perspective, Larry Thompson, DTCC vice chairman, says: “ESMA’s announcement that no additional forbearance will be afforded to market participants means they need to make it a priority to apply for their LEIs ahead of the July 2 expiry date. Firms outside Europe that transact in European markets must also put the necessary measures in place to comply with the MiFID II LEI requirement by this time, otherwise they won’t be able to trade with European counterparties.”