The FCA has welcomed the European regulator’s decision to allow a grace period for the introduction of legal entity identifiers under Mifid II.
The European Securities and Markets Authority announced this morning that it was aware that not all investment firms would be able to obtain LEI codes from their clients ahead of Mifid II coming into force on 3 January.
The same is true for trading venues seeking codes from non-EEA issuers operating in the European market.
Esma therefore says it is allowing a six-month grace period for the “smooth introduction” of the LEI requirements, which requires investment firms to identify clients for Mifid II transaction reporting and trading venues to identify issuers using their systems with the special codes.
During the six-month period, investment firms can provide services to clients without an LEI as long as they obtain the necessary documents to obtain the code on their behalf.
Trading venues will be able to report their own LEI for non-EU issuers that have not yet acquired their own code.
The FCA said in a statement that it recognises the importance of LEIs to deliver “safer and cleaner” markets, but also the need for a smooth introduction to the new regime, which Esma is seeking to address.
Despite the grace period, the FCA says it expects firms to make every effort to secure clients’ or issuers’ LEIs. The regulator expects trading with missing LEIs is likely to represent a small fraction of total trading volumes.