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Sifma Led Coalition Details 14 Key Prerequisites for OFR LEI Solution Providers, 3 June Deadline for Submissions

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Following its publication of a wish list for the legal entity identifier (LEI) earlier this month, the 13 strong, Sifma led coalition of industry associations focused on providing feedback to the US Office of Financial Research (OFR) has detailed its 14 key prerequisites for the solution providers that will be tasked with bringing the new identification system to fruition. The group is working to a tight set of deadlines: solution providers have until 3 June to submit their proposals; shortlisted parties must be interviewed by 17 June; and the group must provide the final recommendations on the suitable provider to the OFR by 8 July.

This process has been kicked off with the publication of a solicitation of interest document (available to download at the bottom), which invites solution providers to submit their intent for consideration by providing details of their suitability with regards to 14 main prerequisites across eight categories.

Under the business model category these solution providers must:

  • operate the solution on a cost recovery basis and have a formally documented governance structure with balanced representation for relevant stakeholders (as noted within the wish list provided by the group earlier this month);
  • offer the legal entity identifier service to the public without fees for basic storage, access, cross referencing or redistribution;
  • be able to fund and sustain the effort on an ongoing basis (ergo big enough not to pose a risk of going out of business); and
  • be an appropriate size entity to manage a global utility of this size including adequate personnel, technology and the capacity to issue, maintain and provide access to many millions of LEIs and their related data attributes (smaller players need not apply).

These firms must also be subject to supervision and regulation (under the governance category) and provide quality assurance that includes checks for existing entities such as name searches, address searches, and combinations of text strings and other characteristics (under the data model category). They should also have an experienced legal team at hand to be able to deal with any IP rights issues or legislative quibbles. As well as a strong internal governance model and audit processes rigorous enough to stand up to public scrutiny.

Under the operating model category requirements, these solution providers should allow LEI reference data to be updated with minimal turnaround time (intraday) and market participants and regulators should be able to challenge entries and request amendments. They must also be able to provide for LEI issuance both a self-registration model and have the capabilities to assign LEIs in cases where legal entities don’t self-register with high data quality.

The group also asks providers to be able to assure the security and reliability of all IT systems involved in developing, maintaining and publishing LEI reference data. To this end, these systems “should meet or exceed industry standards for a real-time, high availability market service” (a tough ask given the challenges that many providers have faced during high levels of market volatility).

The associations are also asking for a high degree of experience from their providers, thus limiting the scope to those that have a long track record in “developing large scale, global solution(s) elsewhere within the financial services industry”. This perhaps counts against players such as GS1, which has experience within other industries but not financial services. In terms of experience, the solution providers must also have an international bent and have worked across regions.

Fundamentally, the group is also looking for a provider that can be up and running quickly: it “must be able to issue, register and maintain entity identifiers within 12 months.” This certainly counts out a build from the ground up approach and suggests an existing market infrastructure is likely to be chosen. The DTCC/Swift/ISO pitch is certainly looking the most likely at this point, given the criteria listed thus far.

Obviously, a lot of the work to establish a new LEI is going on in tandem, which is causing a degree of stress for those aiming to keep up to speed on developments. The selection of the standards body, the registration authority, the reconciliation of open issues with global regulators, the selection of supporting organisations for data validation and data enrichment and the clarification of the role of value added providers is all happening at once, ahead of the July deadline set by the OFR. In order to ensure that industry participants are on the same page, the Sifma team is urging those with questions to contact the association directly (use the leiteam@sifma.org address for any queries).

There is also a great degree of uncertainty in the market in the moment about the OFR’s next steps once the bulk of the LEI work has been completed. At A-Team Group’s recent Data Management for Risk, Analytics and Valuations (DMRAV) conference, delegates displayed concern about what would be tackled next on the hit list. John Bottega, chief data officer for the Federal Reserve Bank of New York’s Markets Division, who has recently been seconded to advise the OFR, told attendees that instrument IDs were the likely next target, especially for markets currently lacking these identifiers.

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