LONDON (Reuters) - The European Union’s securities watchdog has urged financial institutions not to delay applying for their unique identification code by January 2018 when new EU trading rules designed to increase transparency come into force.
The European Securities and Markets Authority (ESMA) said the legal entity identifier, or LEI, a 20-digit code that is unique to each market participant, was a requirement under the new MiFID II rules.
The rules require trades to be reported by a wider range of market participants, and the LEI makes it easier for regulators to identify who is ultimately behind each transaction.
Trading from January without an LEI would be a breach of the rules, which could mean fines.
Many market participants already have LEIs under EU rules already in force, such as the EMIR law on derivatives trading, but MiFID II will broaden reporting requirement to funds and others who normally trade through a bank.
“Based on its previous experience with EMIR reporting, ESMA urges reporting entities not to delay in addressing this important matter, as advance preparation will help in avoiding backlogs and ensuring that all market participants are ready for the new regime,” ESMA said in a statement.
Reporting by Huw Jones, editing by Louise Heavens