The Legal Entity Identifier initiative was born out of the G20 measures put in place to reduce systemic risk, at the same time as the declaration which led to rules such as EMIR and the Dodd Frank Act being enacted. The rationale for the initiative is to form a global and reliable list of each counterparty, in order to be able to identify the party of exposure in a concentrated risk situation. MiFID II requires those who report to use LEIs to identify “counterparties” using a LEI. LEIs will also be mandatory for EMIR reporting with the changes coming on 1st November 2017(see here).
The UK’s Financial Conduct Authority(FCA) has reminded the market of the requirement in the latest Market Watch newsletter, which can be found here. A more detailed background into LEIs can be found in this article on the Bobs Guide web site by David Beach.
LEI adoption has been particularly slow in Asia. Many counterparty with connections to Europe will need to obtain an LEI in time for MiFID II. While MiFID II overall has a limited effect on some counterparties (for example see here on the FT web site), it will be necessary for many to obtain an LEI, as reported in this article on the Global Trading web site.