About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Sifma Hires a Project Manager to Champion its Interests and Those of Seven Other Associations on the OFR LEI Issue

Subscribe to our newsletter

The combined response submitted by the Clearing House Association, EDM Council, the Financial Services Roundtable, the Futures Industry Association (FIA), International Swaps and Derivatives Association (ISDA), the Investment Company Institute, the Managed Funds Association (MFA) and the Securities Industry and Financial Markets Association (Sifma) may be only one of the 20 received this week by the Office of Financial Research on the subject of legal entity identification, but it highlights the seriousness with which these eight associations are taking the matter. In fact, they have banded together to establish a committed working group to discuss the issues related to entity identification and Sifma has also hired a project manager to lead this work and evaluate all the vendor offerings out there on the market to be able to meet the July deadline for establishing such a standard.

“Our intention is to prepare a firm proposal for the (US Treasury) Department’s consideration, well in advance of July 2011, so that regulators can incorporate it into their final rules,” states the response by the eight associations, representatives from which have been meeting on a weekly basis to discuss the issues around entity data.

The industry associations are strongly in favour of the introduction of a legal entity identifier but only in a global applicable context; a common theme throughout many of the responses submitted by the more globally focused respondents. To this end, the response cautions that there should be only one legal entity identification programme for the main regulators across the globe, stating that the development of more than one initiative would be “wasteful” in terms of cost and manpower for both regulators and the industry.

In particular, the response highlights the proposals for a legal entity identifier contained in what it refers to as the Linchpin Report, which was published back in December and was penned by the Fed’s chief data officer John Bottega and Linda Powell, chief of the Micro Statistics Section of the Division of Research and Statistics at the Board of Governors of the Federal Reserve System. The report (“Creating a Linchpin for Financial Data: The Need for a Legal Entity Identifier,” which is available to download at the bottom of the page) suggests a collaborative approach amongst regulators towards establishing and maintaining a legal entity ID and presents a business case to support its recommendations.

It provides a rundown of the current entity identifiers in use within the US regulatory community, including: the Fed Reserve National Information Centre’s ID_RSSD; the Securities and Exchange Commission’s (SEC) Central Index Key (CIK), which is used by the Edgar system; Finra’s Web Central Registration Depository (CRD) and Investment Adviser Registration Depository (IARD) identifiers for the brokerage community; and the National Association of Commissioners’ codes for the insurance industry. It notes that although most of these identifiers are fit for their particular purposes, they do not extend beyond their particular corners of the market. It also highlights that the vendor community and market players such as Swift and the DTCC also have identification initiatives in play.

However, the Linchpin Report indicates that all of these identification standards add up to a “disparate and incomplete” landscape that is “not consistently serving the holistic needs of the finance industry”. In the business case therefore, Bottega and Powell highlight real world examples of how the lack of a consistent and universally adopted identification standard is holding back regulators and market participants from carrying out their functions. For example, the challenges faced by an exchange in identifying broker-dealers due to the use of multiple market IDs for the same participant.

Bottega and Powell list the best practice objectives that they feel should be adopted by the industry when creating a legal entity identifier. These include: elaboration on all the parties that should be covered by the identification standards (a consideration that many respondents to the OFR consultation raised as a concern due to its omission); details about the potential structure of the identifier; data quality assurance processes to be included in the utility; and suggestions about the timeframe for the registration process (intraday in some cases). The report also explores three potential models for the utility tasked with registering and maintaining the identifiers: a private sector approach; a public sector solution; and a private sector solution with public sector involvement.

The response by the eight associations is therefore in keeping with the proposals in the Linchpin Report and stresses that all aspects of the entity identification process should be “considered carefully” and the ID itself should be “neutral”, rather than intelligent or containing complex hierarchical data. The associations also contend that the entity responsible for the legal entity identification process, or the “issuer” of these IDs, should be a “non-profit with a stable funding source and an open and transparent process”. This seems to suggest that a collaborative approach between the regulatory community and commercial vendors is the option most likely to win favour with the industry.

Given the responses submitted to the Office of Financial Research by a number of contenders to the legal entity identifier throne, it seems the regulatory community will not be short of offers when looking for a suitable partner. The length and the detail included in the DTCC’s response are certainly indicative of its eagerness for the job.

Subscribe to our newsletter

Related content


Recorded Webinar: Meeting the challenges of regulatory change

Regulatory change is constant, complex and challenging, calling on financial institutions to attend to details of change whether relatively minor or large scale. Recent regulatory changes include MiFID II post-trade transparency requirements, including ESMA’s increase in data continuity checks that brokers must prepare for, and trading venues must make, when reporting instrument reference and quantitative...


Firms Need a Robust Technology Framework to Manage the Challenges of Market Abuse

By James Causton, Regulatory Sales Consultant, and Darren Lawrence, Compliance Sales Specialist, at SIX. In recent months, the FCA has fined several firms with regards to breaches of market abuse regulation. The increasing focus of the UK’s FCA and other national competent authorities in the EU demonstrate a coordinated focus on improving standards and operational...


TradingTech Briefing New York

TradingTech Insight Briefing New York will explore how trading firms are innovating and leveraging technology as a differentiator in today’s cloud and digital based environment.


Regulatory Data Handbook 2022/2023 – Tenth Edition

Welcome to the tenth edition of A-Team Group’s Regulatory Data Handbook, a publication that has tracked new regulations, amendments, implementation and data management requirements as regulatory change has impacted global capital markets participants over the past 10 years. This edition of the handbook includes new regulations and highlights some of the major regulatory interventions challenging...