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ESMA Suspends LEI Deadline: Issues MiFID II Updates

The European Securities and Markets Authority (ESMA) has announced a delay gto the implementation of a key element of the impending MiFID II regulation, which is due to go into effect on January 3, 2018.

The Authority says the delay is, “To support the smooth implementation of Legal Entity Identifiers (LEI) requirements under the Markets in Financial Instruments Regulation (MiFIR).”   

MiFIR obliges EU investment firms to identify their clients that are legal persons with LEIs for the purpose of MiFID II transaction reporting. Trading venues equally are obliged to identify each issuer of a financial instrument traded on their systems with an LEI code when making daily data submission to the Financial Instruments Reference data System (FIRDS).

In the last weeks, ESMA says that it, and national competent authorities (NCAs), have learnt that not all investment firms will succeed in obtaining LEI codes from all their clients ahead of the entry-into-force of MiFIR on 3 January 2018. The same may be the case for trading venues’ non-EU issuers whose financial instruments are traded on European trading venues.

“In that context, and to support the smooth introduction of the LEI requirements,” it says. “ESMA will allow for a temporary period of six months that investment firms may provide a service triggering the obligation to submit a transaction report to the client, from which it did not previously obtain an LEI code, under the condition that before providing such service the investment firm obtains the necessary documentation from this client to apply for an LEI code on his behalf.”

ESMA will also allow trading venues report their own LEI codes instead of LEI codes of non-EU issuers currently not having their own LEI codes.

The LEI delay is not the only update issued by ESMA, remarkably, given the proximity of the regulation’s implementation in January, it has also published translations for its guidelines on the management of market operators and data reporting services providers.

The Authority has also published revised procedures and templates for trading halts, saying the reporting template has been amended with the main objective to reduce, to the extent possible, fields with free text and replace those fields with hard-coded input. “This is to facilitate extraction, computation and ultimately the analysis of the files,” ESMA states.

ESMA says it understands that certain trading venues may already have started to calibrate the reporting of their parameters based on the July 2017 template, therefore “it considers it appropriate to publish, together with the revised template, a revised procedure postponing by six months the delivery of the first report to ESMA”.

The first reports were meant to be received by ESMA by end of January 2018 and the revised instructions now clarify that this report should be sent to ESMA by end of June 2018.

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Colin Lambert

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