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WM Datenservice Leads Effort in Europe to Issue pre-LEI Entity Identifiers

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WM Datenservice, acting as a pre-Local Operating Unit (LOU) in the global legal entity identifier (LEI) system, has registered 10 German companies with pre-LEI codes called German Entity Identifiers (GEIs) since it started issuing codes early this month. WM suggests it could issue GEIs to companies outside Germany if more pre-LOUs are not up and running before the September 2013 reporting deadline of European Market Infrastructure Regulation (EMIR), which requires the use of entity identifiers.

WM Datenservice applied to the Financial Stability Board (FSB) to become a pre-LOU on behalf of the German regulator Bundesanstalt f?r Finanzdienstleistungsaufsicht last year, and was awarded the status in November 2012. The company already allocated ISINs and has been closely involved in the development of the LEI, in part through its managing director, Markus Heer, who is a vice chair of the Association of National Numbering Agencies (ANNA) and a member of the LEI initiative’s Private Sector Preparatory Group (PSPG).

Following approval as a pre-LOU, WM Datenservice built systems and operational infrastructure to support the GEI and went live on April 2. Heer explains: “Many companies will apply for GEIs, so we needed to build a highly automated system. It is a little like Amazon: a company logs in, registers, puts a GEI in the shopping basket and completes the order. An email notes that the invoice has been paid and another tells the company that the GEI has been issued.”

While the front-end of the system and a first check of submitted company data are automated, Heer points out that manual intervention is still required to spot entity duplications on other pre-LOU and ultimately LOU registers. In the first instance, duplication must be checked against the only other operating pre-LOU – the US Commodity Futures Trading Commission’s (CFTC) Interim Compliant Identifier, or CICI, issued in partnership with DTCC via the CICI Utility. Manual intervention may be necessary to ensure data quality and validation to regulatory standards. To date, the company has hired five additional staff to work on the issue of GEIs and it will hire more as registration levels rise.

In line with the FSB’s requirement for prefixes for pre-LEI codes, WM Datenservice GEIs carry the prefix 5299, adhere to the ISO 17442 code structure, are randomly generated and include no logic. The company talked to its local regulator about the possibility of using existing regulatory codes for the GEI, but decided against this as not all companies are regulated.

Initial GEI codes are structured to move into the global LEI system as it emerges provided the LEI Regulatory Oversight Committee (ROC) makes no changes to the structure approved by the FSB and in use by pre-LOUs. WM Datenservice is attaching reference data to GEIs following the ISO 17442 guidelines that require business card information, but has added additional data fields, including industry sector and local company registry information.

Hierarchical reference data has not yet been added as no final decision on what it will be has been made by the LEI authorities. Heer says: “We have left room in the system for hierarchical data and will include it once it is decided. We expect to build a spider web of company structures as so many are linked. This will be a major undertaking.”

Heer suggests this will be a phase two activity once the global LEI system is up and running, but he cautions: “We need to consider what is achievable and in the interests of the industry. For example, a company with two thousand subsidiaries can’t immediately produce a print out of all those companies. Finding out what regulators and the market need and how to generate the data and make it public will take time.”

Heer also suggests reaching an operational global LEI system is some way off; perhaps the principles of the system will be in place by mid-2014 ahead of a global roll-out. But he acknowledges that in the wake of previous failed attempts to build a global entity identifier scheme, the first phase of issuing an LEI to every entity is a first and necessary big step towards a global system aimed at measuring and monitoring systemic risk.

Timing is clearly on his mind, as he continues: “It is essential for LOUs to be established in the market. It has been possible to apply since last November, but look who has applied – no organisations in Asia, not many in Europe and it is not clear which organisations will be LOUs in the US. The real challenge is to get the rest of the LOUs up and running. It is hard to see how we will meet EMIR requirements in September with one pre-LOU.”

The French company registry, Infogreffe, recently added its name to the pre-LOUs already approved by the FSB and including the Irish Stock Exchange, sponsored by the Central Bank of Ireland; and the Palestine Securities Exchange, sponsored by the Palestine Capital Market Authority, but it has yet to state a go live date.

Turning his attention to EMIR, Heer says that in principle it is possible for companies in countries other than Germany to register with WM Datenservice for GEIs. He explains: “We have talked to the German regulator who is in favour of this and to other regulators as they see the need to be ready for EMIR, but they haven’t said we should or shouldn’t do this. I don’t want to step on other people’s toes and need something official from the regulators before we go ahead and do this. It would be a huge undertaking, but it is doable if we start very soon and have time for data validation. If we did issue GEIs to company’s outside Germany, we could then port them to other LOUs when they are up and running.”

In terms of difficulties in developing the GEI and ultimately the LEI system, he adds: “We are just launching the GEI system into the German market and the first deadline is EMIR. The biggest problem is getting word to the market. Many companies are not aware of the LEI and there could be a big wave of registration ahead of the September 1 EMIR deadline, which could be difficult to cope with. We are talking to banks not just about applying for GEIs, but also about how they can integrate them into their systems. We have also set up a process in which banks can help corporates register for GEIs.”

With WM Datenservice set up as a pre-LOU in Germany, Heer does not expect others to be set up locally and does not expect all LOUs to be members of Anna. Indeed, the French pre-LOU is not a member. But he does, perhaps, hint at a wide remit for the company in the run-up to EMIR when he says an English version of the GEI registration website will be available within the next few days.

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