Unfortunately, I do not have a Halloween tale about an operations nightmare that would scare the bejesus out of you. Instead, there appears to be a bit of good news on the global legal entity identifier (LEI) front, which is a welcome change from the recent horrors of government shutdowns, record fines and markets fearing the end of quantitative easing. So, I guess you could say it’s more of a treat.In short, the CICI Utility, the brainchild of the DTCC and Swift, has been issuing the CFTC Interim Compliant Identifiers (CICIs) since August 2012, and those CICIs have gone from interim to permanent.
Targeting the swap data reporting regulations of the over-the-counter derivatives trading market, the CICI Utility oversees the creation of unique identifiers for any financial organization engaged in transactions, and manages the associated accumulation of reference data. At last count, the utility facilitates more than 80,000 CICIs issued to legal entities from more than 140 jurisdictions.
As expected by many, the CICI Utility has gotten the blessings of the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) to be a pre-Local Operating Unit (LOU). The ROC, created by the Financial Stability Board and the G-20 nations, consists of global regulators that govern GLEIS. (I apologize for all the acronyms.)
Ultimately, this means that CICIs have the same status as LEIs created outside of the swaps realm, and firms that have been assigned a CICI do not have to go back to the drawing board to get an updated, post-CICI unique identifier. From the start, most in the industry expected CICIs to become real LEIs. However, some skeptics, citing past unique identifier efforts, were cautioning that the CICIs might have to undergo another transformation because of the inevitable changes wrought by so many participants in the LEI push. Luckily, the industry dodged that bullet.
In fact, the CFTC announced yesterday that registered entities and swap counterparties that have to comply with CFTC swap data recordkeeping and reporting regulations can use CICIs or other LEI codes that the ROC deems “globally acceptable.” (The list of acceptable LEIs is at www.leiroc.org/publications/gls/lou_20131003.pdf.)
So, with its status as an authorized pre-LOU, the CICI Utility is now allowed to issue pre-LEIs to entities that self-register, say ROC and CFTC officials.
The utility will make its pre-LEI database available minus charges or restrictions, and will operate it on a cost-recovery basis. The CICI Utility will support the federated framework for pre-LOUs and will coordinate with the ROC’s Committee on Evaluation and Standards on procedures for GLEIS, which should lead to “orderly transfers of data between pre-LOUs.” At the same time, other pre-LOUs — WM Datenservice in Germany and INSEE in France — have also recently gotten ROC authorization.
Thus the CICIs are pre-LEIs that can be used for reporting to regulators that conform to the ROC charter and use pre-LEIs as part of their transaction reporting rules, say ROC officials. The initial list of such regulators and repositories encompasses the Monetary Authority of Singapore, Hong Kong’s trade repository featuring pre-LEIs in over-the-counter derivatives trade reporting, trade repositories registered with the European Securities and Markets Authority, the Australian Securities and Investment Commission and next year Canadian provincial regulators.
While there are legitimate concerns about the effectiveness of a federated vs. a tightly run centralized system, the sum of these actions means that some big steps forward have been made toward a truly global LEI system.
For more on swaps data repository reporting issues, attend the FTF DerivOps NY show on November 13th.
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