Legal Entity Identifier Requirements

From 3 January 2018, the Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) took effect. MiFID II covers the conduct of transactions in “financial instruments”, and includes transferable securities (such as share), money market instruments, units in collective investment undertakings, commodity derivatives, contracts for differences and other instruments.

EU legislation now requires more entities to obtain a Legal Entity Identifier (LEI). Clients who use investment holding companies to trade financial instruments may need to apply for an LEI to allow their activities to continue in future. In many cases, trades in EU markets cannot be completed without supplying the necessary LEIs which may compromise trading strategies, lead to transaction delays and jeopardise successful investment activities. 

What is an LEI?

The LEI is a 20 digit alpha-numeric reference code, rather like a bar code, used across markets and jurisdictions. The LEI uniquely identifies a legal entity that engages in a financial transaction.

LEIs for each market participant are collected together into a Global LEI Index. The data is registered and regularly verified according to protocols and procedures established by the LEI Regulatory Oversight Committee. 

Who needs an LEI?

From 3 January 2018 under MiFID II and MiFIR, the list of legal entities that will be required to have an LEI includes the following. This applies regardless of where they are operating or legally based:

• investment firms which execute transactions in financial instruments in an EU market; 
• the underlying buyer and seller on whose behalf an investment firm executes transactions in financial instruments that are traded on an EU market; 
• any person who makes a decision to acquire a financial instrument that is traded on an EU market (such as an investment manager operating under a discretionary mandate); 
• any firm transmitting an order for the sale or purchase of financial instruments that are traded on an EU market. 

How to obtain an LEI?

Vistra can prepare and submit the application for the LEI on your behalf. An initial application for an LEI is made, and a renewal submitted annually. In the majority of cases, we already have on file the information we need to make the submission. In some cases, however, we may need to ask you for further information. 

Action required

Clients conducting trading activities in EU markets through legal entities should consider carefully whether to apply for an LEI, to avoid the risk of their transactions being disrupted.

Please contact us for more information and/or if you would like us to proceed to obtain an LEI on your behalf.