The Financial Stability Board (FSB) has allocated a second prefix for the issuance of entity identifiers ahead of the global legal entity identifier (LEI) system going live next year to pre-local operating unit (LOU) WM Datenservice, which is issuing entity identifiers on behalf of German regulatory authority the Federal Financial Supervisory Authority.
The entity identifiers issued by WM Datenservice will include the random four-character prefix 5299. This allocation of a prefix to a pre-LOU service follows the allocation of the first prefix earlier this month to the DTCC and Swift collaboration that has been issuing CFTC Interim Compliant Identifiers, or CICIs, on behalf of the US Commodity and Futures Trading Commission since August 2012.
While the FSB has set down arrangements for public authorities to sponsor local pre-LEI issuance that will transition to the global LEI system when it is introduced in March 2013, the concept of multiple pre-LEI schemes has not been well received by market participants as it could add complexity to a global system designed to be relatively easy to use, efficient and transparent.
Nor are practitioners enthused by suggestions that a second set of interim, so-called pre-LEIs may be set for introduction in early 2013. The suggestion – that an interim LEI may emerge to handle European entities only – was discussed at a panel session on LEI at this week’s FIMA conference in London.
In a response that seems representative of the overall market perspective, panel member Sue Baldwin, global head of vendor management at JP Morgan, said: “If there’s another code, I’ll just have to build another cross reference, and I don’t want to.”
Others are concerned that pre-LOUs may not turn out to be the actual LOUs in ‘local’ jurisdictions when the global LEI system is up and running. This means organisations issuing pre-LEIs may not be the ones administering the LEIs in future and calls for some form of cross-referencing within the global system to indicate which organisation issued the LEI and which is administering it.
Uncertainty about any pre-LOU and LEI schemes is not eased by the lack of a final ruling on prefixes. While the FSB has condoned such schemes and no doubt considered carefully how to prefix pre-LEI identifiers so that they can transition into the global system, the responsibility for allocating prefixes will transfer to the Regulatory Oversight Committee and Central Operating Unit of the global LEI system once they are in place early next year. It is these organisations that will then decide the rule for new four-character prefixes that will be allocated uniquely to each LOU and form part of the 20-character entity identifier used in the global scheme.