March 2013 waterstechnology.com/ird Legal Entity …• Breaking news and in-depth analysis on the ﬁnancial market technology industry • Detailed features on your market and the

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Legal Entity Identifiers

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Crawling Before WalkingIn the Virtual Roundtable conversation on legal entity identi-fiers (LEIs) on page 8, the biggest remaining issues for LEIimplementation that emerge are duplications, concerns aboutdiscrepancies between local operating units, and costs.

UBS’s Simon Taylor says his main concerns are with dupli-cation of entities, which causes problems for assigning CICIs,the US CFTC’s interim identifier and precursor to the LEI.

Taylor believes an underlying country-specific registration ID could increase theaccuracy of identifiers. Scott Preiss of Cusip Global Services says National NumberingAgencies (NNAs) can improve the value of the LEI initiative with their expertise.

That points to efforts to leverage overall benefits from the LEI, about which TonyBrownlee of Kingland Systems observes, later in the conversation, that complexinternal systems and processes in the largest firms could benefit from the presenceof LEIs. Taylor adds that the rating agencies ought to add LEIs to issuer files, whichwould produce a consolidated, straightforward view of ratings.

Alacra’s Tom Cosgrove sees issues with the potential variations that could resultfrom different local operating units (LOUs) administering the LEI, and suggeststhat the central operating unit (COU) will have to carefully monitor them. LOUoperations should be synchronized to have a single LEI database, Cosgrove says.Mark Davies of Avox notes that without a federated structure, differences betweenthe LOUs are inevitable.

Lastly, costs. Participants in the conversation expect significant costs for systemsintegration, data migration, internal systems adoption, data remediation and datagovernance as a result of LEI implementation. Costs are to be expected, saysDavies—and LEI investments can produce better risk management and reporting.

Yours sincerely,

Michael ShashouaEditor, Inside Reference DataEmail: [email protected]. Tel: +1 646 490 3969

Editor’s Letter

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NEWS6 FSB Includes Hierarchical Data

in LEI

6 Element 22 Launches OpenSource LEI Data Model

7 LEI ‘Will Defend Against Money Laundering’

7 News Download

FEATURES8 Virtual Roundtable

Inside Reference Data gathersleading industry professionals todiscuss the implementation ofthe legal entity identifier that isnow set to happen in the financialindustry, and the challenges nowsurfacing in these efforts

22 Q&A Inside Reference Data speaksto Robin Doyle, managingdirector, regulatory strategy andpolicy, at JPMorgan, about theimplementation of legal entityidentifier registration, set tobegin soon

Contents

waterstechnology.com/irdMarch 2013

Legal Entity Identifiers

Sponsored by

SpecialReport

Incisive Media 32–34 Broadwick Street,London W1A 2HG

© 2013 Incisive Media Investments Limited. Unauthorizedphotocopying or facsimile distribution of this copyrighted newsletteris prohibited.All rights reserved. ISSN: 1750-8517

The Financial Stability Board (FSB)has issued plans to include hierarchicaldata with the legal entity identifier (LEI)and outlined policies to prevent pre-LEIsystems from duplicating codes.

The FSB assigned the LEIImplementation Group (IG) to workwith the Private Sector PreparatoryGroup (PSPG), on inclusion ofadditional reference data on directand ultimate parents of legal entitiesand relationship data more generally.This will begin “where relationshipdata collection leverages from theaccounting consolidation approach,”

says the FSB, and would lead toincremental building of an automatedsystem for general relationship data.

The FSB also launched the RegulatoryOversight Committee (ROC) in Januaryas the new governance body for theLEI system, and chose Switzerland asthe legal home of the global LEI foun-dation, which will operate the CentralOperating Unit for the LEI. The boardsaid regulators should support prelimi-nary Local Operating Units (LOUs)to reduce the chances of duplicatingpre-LEI numbers.

Nicholas Hamilton

6 March 2013 irdonline.com

News Review

FSB Includes Hierarchical Data in LEI

Financial industry advisory and designcompany Element 22 has launched theFimod (φmod) Open Source Project,an open-source data model for thelegal entity identifier (LEI). The modelincludes the LEI requirements set out bythe FSB and the CFTC Interim CompliantIdentifier (CICI), a precursor to the LEIin the US, says Predrag Dizdarevic,managing partner at Element 22.

The FSB and CICI standards aren’ta framework for Element 22’s open-source model, but are included in itsdesign, says Dizdarevic. Financial firms

and service providers will be able tobuild on Fimod (φmod), he adds.

“The model provides the ability tohave identification of any legal entitybased on the requirements of the LEI,so you have code specified,” he says.

Element 22 sees the model as a wayto contribute to the industry’s needs,build momentum for the LEI and createa consistent way to model the legalentity data. Feedback from users canbe incorporated, because Fimod is opensource, according to Dizdarevic.

Michael Shashoua

Element 22 Launches Open Source LEI Data Model


News Download

The legal entity identifier (LEI) and hierar-chical data can help to prevent anti-money laundering (AML) failures like those uncov-ered at HSBC and Standard Chartered, according to the chief executive officer of Fenergo, a vendor of client onboarding systems, and experts agree investment in AML will increase as a result of the high-profile and expensive settlements the two banks have agreed to pay.

According to Marc Murphy, Fenergo’sDublin-based CEO, the importance of accu-rate reference data and ultimate beneficialownership data has been underlined bythe cases of HSBC, which agreed to pay USauthorities $1.9 billion to settle accusationsthat it failed to prevent money laundering,and Standard Chartered, which will pay$340 million to settle allegations that it hidtransactions with Iran.

Neill Vanlint, London-based managingdirector EMEA and Asia, at GoldenSource,an EDM software vendor, said operations andIT at global financial firms can struggle tokeep pace with the revenue-generating busi-ness as it enters new jurisdictions, and thiscan create AML failures. Virginie O’Shea,London-based analyst at Aite Group, addedthat client data monitoring and maintenancehas received inadequate investment for along time.

Nicholas Hamilton

ROC Names Reed Chairman,Selects 2 Vice ChairsThe legal entity identifier (LEI)Regulatory Oversight Committee(ROC) has named Matthew Reedof the US Treasury Departmentas its chair, and Jun Mizuguchi ofJapan’s Financial Services Agencyand Bertrand Couillault of Banquede France as vice chairs.

The ROC will continue to seekinput from the LEI Private SectorPreparatory Group of almost 300private sector experts that wasset up by the FSB. The topics itplans to explore include the oper-ational framework for the LEIsystem, relationship data, intel-lectual property, data privacy andconfidentiality.

Interactive Data Adds CICIto Business Entity ServiceData vendor Interactive Data hasintegrated the Commodity FuturesTrading Commission’s (CFTC)interim compliant identifier (CICI)into its Business Entity Service tohelp firms that want to cross-refer-ence to the new standard.

Avox, a data vendor, hasmapped the identifier intoInteractive Data’s infrastruc-ture so customers do not need tocross-reference to it themselves.

LEI ‘Will Defend AgainstMoney Laundering’

Are there remaining accuracy issueswith the LEI, such as corporateaddress information? How mightthese issues be addressed?Tom Cosgrove, vice president, risk products, Alacra: Many of the enti-ties that were initially loaded into the system and converted to CFTC Interim Compliant Identifiers (CICIs) have yet to be certified. The certification process is where the primary party of the entity record reviews and certifies the infor-mation to be accurate and complete as of a particular date. This should be done by a current employee of the firm that is being registered. Many of the records are not certified, and there-fore they have not been validated by a primary party and may contain incor-rect information.

A second issue is that the CICI utilityis submitting—and each entity is certi-fying—only their registered address.While it is an important piece of thepuzzle, the registered address is ofless use than the operating address forassessing country and operational risk.A result of tracking only the registeredaddress is that are many entities, some-times with similar names, registered atthe same address on Victoria Street inBermuda or on North Orange Street inWilmington, Delaware, for example. Sowhile the LEI is meant to facilitate theidentification of an entity, the use of theregistered address can at times makethis more difficult. To understand thefull counterparty risk, the headquar-ters or operating address would ideallyalso be included.

Legal Entity Identifiers:The Last MileInside Reference Data gathers leading industry professionalsto discuss the implementation of the legal entity identifierthat is now set to happen in the financial industry, and thechallenges surfacing in these efforts

Virtual Roundtable


Mark Davies, general manager, Avox:Accuracy issues are never far away fromlegal entity data. Sourcing accurate,up-to-date information on companies isa complex, costly and time-consumingbusiness. Address data is a great exam-ple of that. The first challenge is accu-rate definition. Which address should beused? The ISO 17442 standard outlinestwo addresses—the registered addressand a headquarters address—but firmsneed to be aware of exactly what theyare submitting and viewing. The secondchallenge is sourcing the data for the LEIsystem. Will firms keep their own infor-mation up to date or will the system relyon third-party challenges or corporateactions feeds to stay accurate? Thereare many examples of databases thatrely on self-maintenance alone that havesuffered from major data quality issues.Both Avox and the CICI utility model relyon a combination of self-maintenance,community feedback through chal-lenges and proactive research to keeplegal entity data accurate. To date, it is amodel that has worked well.

Scott Preiss, vice president, CUSIPGlobal Services: Data integrity issuesare—and always should be—a chiefconcern with any data initiative, andthe LEI is no exception. The term “dataprovenance” has been used broadly inthis context, and the use of primary

source documentation and a clear audittrail to that source is essential to achiev-ing the highest possible levels of dataquality. As applied specifically to theLEI, the capture and maintenance ofcorporate registered address informa-tion is a key requirement. This is anoth-er reason for our longstanding positionthat National Numbering Agencies(NNAs) can provide significant value tothe LEI initiative given their federatednetwork, local presence and expertise,and access to primary source docu-ments in each jurisdiction.


“Today’s issues will declineprogressively as more LEIs

are registered and the data isused increasingly throughout

the markets”Tony Brownlee, Kingland Systems

Tom Cosgrove,Vice President, RiskProducts, AlacraTel: +1 (212) 363 9620Alacra.com/products/concordance.asp

Tony Brownlee, managing director, datasystems, Kingland Systems: The LEIdata available throughout the global LEIsystem will continue to improve. Theindustry, working with the DepositoryTrust & Clearing Corporation (DTCC),has started this process, using a balancedapproach of registering LEIs while provid-ing validation of the data. The validationfunction is critical to safeguarding dataquality throughout the industry ensuringdata accuracy and consistency. Today’sissues will decline progressively as moreLEIs are registered and the data is usedincreasingly throughout the markets. Ourexperience tells us the areas of great-est challenge will be cross-jurisdictionrequirements and non-corporate entitiessuch as funds, SPVs, quasi-governmentaland other entity types. Just wait until weall try to tackle hierarchy management.

Ivo Bieri, head of strategic businessdevelopment, SIX Financial Information:

The registrants and the LOUs that havecome forward so far have enough interestto ensure the data is correct, so accuracyissues with the basic data fields should bevery minimal. Over time, this could theo-retically become an issue if the parties donot take their maintenance obligationsseriously. However, the maintenancefee paid to the LOU and the registrants’obligation to submit updates mitigatesthis risk. For the ownership data, if thosefields are declared mandatory then morepotential issues could arise, as reportingobligations in terms of ownership levelsand their declaration are different frommarket to market, and even differentbetween regulations within a market.

Tim Lind, head of legal entity andcorporate actions, Thomson Reuters:To address data quality issues, the CICIutility calls for a certification processafter the data has been submitted. In anassisted registration, this would requirethe record to be certified by the underly-ing entity itself and re-certified every 12months to ensure data remains accurate.Despite these measures, there will beerrors and duplicates in the LEI system.The utility will also allow challenges torecords by end-users if data is believed tobe inaccurate or out of date. Challengeswill prompt the utility to research therecord in question and update informa-tion as appropriate.

Virtual Roundtable


Mark Davies,General Manager, Avox+44 (0)20 7650 1427avoxdata.com

Simon Taylor, head of legal entity change,Group Data Services, UBS: The mainconcerns relate to duplication of entities.Duplication causes problems with assigningCICIs to our internal populations of interestand shakes our confidence in the process.We are also concerned about rules for self-created entities, typically funds. Shouldbond sub-classes really be registered asentities? Are they complete or just subsets?We discussed with our credit risk staffwhether sub-classes are really entities andwhether we wanted to manage risk at thislevel. The consensus is that we manage riskat the level of the overall pension scheme.

It would be really useful to include anunderlying country-specific registrationID in the LEI registration and assignmentprocess, such as a company registry ID ortax ID. Until the process matures and getsto a critical mass that allows us to deter-mine it as complete, it is hard to trust theaccuracy and uniqueness.

What’s your view of the progress, orlack thereof, on LEI registrations?Cosgrove: The lack of a clear regulatorymandate and global agreement on theoperating model has certainly hamperedprogress. But there has been some head-way recently—the CICI utility now hasmore than 17,000 certified records in useto meet the CFTC’s mandated reportingguidelines. One challenge will be to broad-en the geographic scope of the registrants

as most are currently based in the US.Finally, it seems as though many entitiesthat have been registered don’t need to beat this point, making it difficult to assessdata quality. So, progress is being made butslowly and unevenly.

Davies: More than 55,000 CICIs have beenissued and these codes will migrate intothe global system when it is in place. Newregulations mandating CICI (or pre-LEIsystems) will swell this population. Swapsare a relatively small asset class in termsof number of participants, so with newregulators—50 have signed up to the LEIROC charter to date—that want clarity intheir reporting across many asset classes,the database of LEIs globally will expandsignificantly over the next two years. Thismakes it critical for firms to put processesin place now to handle the mapping fromLEI to internal systems and manage theupdates to the associated reference data.


“Our view is that the LEI should be a ‘dumb’ number. If the

numbers within the LEI have meaning, it will be much harder for firms of all sizes to interpret

and implement systems that utilize it”

Tom Cosgrove, Alacra

Preiss: An incredible amount of tractionhas been gained on the LEI in a relativelyshort time—as shown by the volume andglobal breadth of CICI registrations todate. In spite of our collective impatience,this industry has to walk before it runs,and we seem to be off to a good start.

Brownlee: Progress has been encourag-ing. Most people recognize that in thedata industry, the LEI is our chance to“do this right” and do it on a global levelwith the systems, processes, standards,rules and governance. Initiatives like theLEI take time, but if you look at 2012,the collaboration of the industry and theadvances made by the Financial StabilityBoard (FSB) has been impressive.

Bieri: Only companies that are obliged bysome regulatory reporting duty to obtainan LEI will do so. For everyone else, it isassumed they will adopt a wait-and-seeapproach. Hurdles in the form of fees, theobligation to maintain the record and the

required data elements—especially withregards to the ownership structure—aretoo significant to obtain the LEI without aclear regulatory mandate.

Lind: With 50,000 CICIs assigned over thepast six months, I’d say there has beengood progress in registering swap partici-pants. Fund companies have also beenregistering their underlying funds, whichwill be a key segment to capture. It startswith swap participants as mandated bythe CFTC, but we are still at the begin-ning of a very long journey. Principles ofthe LEI system call for an identifier to beassigned to any entity that participatesin financial transactions, excluding indi-viduals or “natural persons.” However,there is no minimum threshold in termsof size, so this approach could result inmany millions of entities eventually regis-tering for an LEI.

Taylor: It’s hard to say, as this is some-thing that’s never been done before. Inever expected that we would suddenlyhave hundreds of thousands of LEIsovernight, especially considering thefocus on US derivatives products. I’mmost concerned about the quality ofrecords and guidance on when recordsshould be created. Internal discussionson implementation and use of the LEIare challenging, and not all the detailedquestions are being answered properly.

Virtual Roundtable


Scott Preiss,Vice President,CUSIP GlobalServices+1 (212) 438 6560cusip.com

Are there ways to adjust the charac-teristics of the identifier to betterrepresent parties involved in theholding of a security?Cosgrove: Our view is that the LEI shouldbe a “dumb” number. If the numbers withinthe LEI have meaning, it will be muchharder for firms of all sizes to interpret andimplement systems that utilize it. Buildinglegal entity characteristics such as benefi-cial owners, security issuers or even ulti-mate legal parents into the LEI itself is alofty goal. Rather than building logic intothe identifier itself, which then requiresmore data complexity for managing corpo-rate actions, it would be better to have adumb number and then define roles andrelationships between legal entities.

Davies: Not really. It is a 20-character identi-fier based on an ISO standard and designedas a dumb code without embedded logic.Changing its characteristics to suit indi-vidual use cases and regulations would becounterproductive. The LEI and the coreattributes of the data record are sufficientto uniquely identify any legal entity, so theyare not expected to adapt and change, butthe way LEI is used in products and firmsinternal processes will certainly evolve.

Preiss: As a participant in several standardsworking groups that grappled with thisvery issue, I can say that a great amount ofthought went into how much “intelligence”

should be embedded within the identifieritself. The current recommendation is anattempt to deal with this delicate balanceand at least be able to identify the issuer ofthe LEI within the code, while linking thediscrete data points (including the identityof counterparties, issuers, and so on) inassociated, but separate, fields.

Brownlee: The identifier itself shouldn’t beadjusted. The LEI should uniquely identifythe entity. Other attributes, such as relation-ship or hierarchy models, can show securityholdings, issuer status, and other types ofinformation. The LEI is the foundation forhundreds of future attributes to come.

Bieri: Let’s first see what concrete imple-mentations take place based on clearmandates, and discuss amendments tothe standard and its attributes later on ifnecessary. An unstable standard will notbe adopted widely.

Lind: Let’s hope not. There were hugedebates over the structure of the LEI andwhether the identifier itself should containany information on the characteristicsof the entity. Persistence of the ID was akey consideration in the standard, specifi-cally avoiding the maintenance burden ofreissuing an LEI in the event a descriptivecharacteristic changed, such as a change inownership. The current standard allocatesthe first four digits to identify the LOU that


assigned the LEI, but beyond that there isno intelligence embedded within the ID.

Taylor: What is primarily important isaccurately linking legal entities to theirrespective instruments. If an LEI can beprovisioned on the market data instru-ment feeds from the big players such asBloomberg, Thomson Reuters and SIXFinancial Information, that will help uscreate the linkage, which in turn wouldreact much better to the dynamic envi-ronment than an identifier on the LEIitself. If the question is whether there’sa way to embed intelligence into the LEIto state exactly what security the firm isinvolved in, then that would be great, butI don’t think it’s realistic.

Do you see differences between howLOUs administer LEIs becoming anissue, and if so, how?Cosgrove: While we support the feder-

ated model approved by the FSB, thereare potential issues with how the LOUsoperate that the Central Operating Unit(COU) will need to monitor carefully.Care must be taken in deciding to includesynchronization between LOUs so thereis a single LEI database; handling andadministration of third-party registra-tions; and ensuring that only entities thatrequire an LEI receive one.

Davies: Issues could range from differ-ent validation quality standards to morefundamental differences, such as avail-ability of data, file formats, costs andsupported fields. The COU will be taskedwith ensuring that appropriate controls,standards and protocols exist and thatLOUs adhere to these on an ongoingbasis. But this infrastructure takes timeto implement. Prior to that, we have anumber of approved pre-LOU systemsthat are licensed to issue pre-LEI codes(including the CICI utility), and as othersbecome operational, it will be importantto understand the level of alignmentneeded in the pre-LEI state.

Preiss: Of course, the types of differencesamong LOUs will determine whether thisis problematic or not. Different view-points, driven by local market expertisethat is shared across borders, can be avery healthy and beneficial “problem”to have, and one that can likely result

Virtual Roundtable


Tony Brownlee,Managing Director,Data Systems,Kingland Systems+1 (641) 335 1000Kingland.com

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in a higher degree of data integrity. Onthe other hand, different interpretationsor applications of stated rules can beextremely detrimental, and in this regard,some centralized arbiter—perhaps in theform of the COU—will be vital to ensur-ing compliance with global requirements.

Brownlee: The biggest challenges will be consistency and accuracy. With the current DTCC solution, consistency and accuracy is well managed and there is sound, interactive governance with both users and participants. As more LOUs emerge for different jurisdictions, this consistency and accuracy will be harder to manage. These challenges can be tackled with strong governance and by leveraging technologies that minimize duplication and institutionalize common quality rules throughout the system.

Bieri: The LOUs are tasked with fulfilling

two main duties—performing the valida-tion of the registrants’ data and updating/synchronizing with the central database.Managing these should not be an issue.However, avoiding duplicates and keep-ing the records updated will become anissue over time as the database grows.

Lind: That is absolutely a concern. Theburden of ensuring consistent adminis-tration of LEI operational standards andadherence to protocol will be the primaryresponsibility of the COU. This will alsorequire the COU to ensure uniquenessof entities that are assigned LEIs, whichwill be a challenge in a federated networkof LOUs creating LEIs for entities thatmight be outside their jurisdiction.

Taylor: I don’t think it should becomean issue. The obvious potential pitfallsaround operating discrepancies, timingand consistency should all be manage-able under a central directive.

How can vendors and their clientsbuild on the LEI to maximize thebenefits derived from the identifier?Cosgrove: In anticipation of a regulatorymandate, we advise clients to prepare tointegrate the LEI into the reference data,know-your-customer and risk reportingareas of their firms. A common identifiercan help link upstream and downstreamsystems, thereby eliminating errors and

Virtual Roundtable


Ivo Bieri,Head of StrategicBusiness Development,SIX FinancialInformation+41 58 399 54 18six-group.com


reducing data silos. Our advice has beento think big—what will be the impact ofmore internal transparency? Maximizingthe LEI’s benefits will take time, but it canonly help to think ahead.

Davies: The challenge for the firms is goingto be finding the right partner to workwith that can offer the solution you need.Ultimately, the enduring accuracy andquality have to be major considerations.LEI mappings that are inadvertently linkedto the wrong associated reference data ornot maintained in line with the LEI systemwill cause significant issues for consumers.

Preiss: Many vendors and market partici-pants alike are preparing for the LEI inprecisely the correct manner—that is,preparing to consume the LEI initially asan additional data point and linking otherentity codes and related reference data toit. There seems to be broad recognitionthat it will take some time for the volumeof available LEIs to reach critical mass, andalso that the LEI cannot solve the world’srisk-mitigation and ID problems alone.Over time, vendors and their clients willincreasingly be able to rely on the LEI asthe common language for identifying a legalentity, thus maximizing the corollary bene-fits of the data linkages, hierarchies anddependencies under development today.

Brownlee: Many firms are putting in place

strategies for how the LEI can be leveraged,how their own processes need to change,and what the future state technology needsto look like to be data-driven. The biggestbenefit longer-term will be in analytics—asconsistent legal entity data enables muchmore consistent, reliable and faster viewsfor executive management into the clientand counterparty activity, risks and oppor-tunities to improve the business. This isn’tmagic, though; it takes a legitimate masterdata management and analytics strategy togain these benefits. As I tell clients, whilethe patient is open for LEI work, spend themoney to become more data-driven—thiscan save millions in the long run.

Bieri: For many years to come, the LEI willbe an additional cross-referencing attributethat vendors will use alongside their ownand third-party numbering schemes. Thebenefits will accrue slowly on the incomingfeeds into vendors as the LEI adoption rateadvances. For the vendors’ clients, the sameis true—the more vendors delivering LEIs,the simpler the processing in multi-vendorenvironments and the report generation toauthorities. As coverage grows beyond thecounterparty identifiers needed for regula-tory reporting, more and more applicationsof the LEI become possible.

Lind: The initial use case is to lever-age LEI as a unique key to help financialservices institutions link their positions

and transactions to issuers and marketcounterparties in order to calculate andreport their total exposures to legalentities. The bigger opportunity is tolink a specific legal entity with a broadarray of data and analytics that willhelp market participants gain predictiveinsight into the credit risk of an issueror counterparty. The LEI will provide astandardized mechanism and commondenominator to attach data to an entityincluding securities issue data, full globalhierarchies, country of risk, credit analyt-ics, news, regulatory status, fundamentaland related financial data.

Taylor: Getting vendors to embed LEIinto their existing data products willhelp with data concordance and aggrega-tion, which should minimize duplicationand overhead in matching feeds whilemaximizing the holistic view of entitiesby piecing together individual parts. Forexample, if the three major rating agen-cies were to add LEI to the rated issuerfiles, then producing a consolidated viewof all ratings for a given counterpartywould be more straightforward. The ensu-ing benefits of this data aggregation forcredit risk management, single-name riskand concentration risk are obvious. UBSis able to have a single, global public legalentity master sourced from external datavendors. If these vendors can guaranteethe timely delivery of all LEI records, the

effort of assigning and remediating LEIsis no longer needed. If onboarding teamslook up the internal legal entities, theydon’t need to do a separate LEI look-up.

Apart from registration fees, whatcosts are associated with imple-menting the LEI?Cosgrove: Firms will have systems inte-gration and data migration costs in addi-tion to the fees required to register foran LEI. These costs may be significant,depending upon the firm’s maturity increating a holistic approach towardsmanaging entity data. Our view is that allfirms—regardless of size—should look atand implement an entity data manage-ment function within their operations.

Davies: This will differ for each firm—andmuch of the cost for LEI implementationcan be blurred with the cost of meetingspecific regulations. LEI itself is not a

Virtual Roundtable


Tim LindHead of Legal Entityand Corporate Actions,Thomson Reuters+1 (617) 856 1121

financial.thomsonreuters.com/legalentitydata

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regulation but a buildingblock that regulationswill leverage. Costsshould be expected inthe ongoing mappingof the LEI to internaldata and setting up theprocesses to make surethat changes to LEI data(as a result of mergers,

name changes, address changes, and soon) are captured and can benefit internalfunctions such as know-your-customer,risk and reporting.

Currently, there are also huge costs tofirms in the offline analysis and amend-ment of data because of ambiguity overwhich company is being identified orbecause information is not well main-tained. Get it right now, and the moneyspent on LEI implementations inter-nally will repay itself many times over.

Brownlee: The biggest costs are adop-tion internally, and I’m not talking aboutmerely adding a new LEI field to thesystems that need it. Adoption meansdeciding where legal entity data actuallyexists, where it should exist, who’s goingto maintain the data, and how systemscan leverage the data. While there arecosts to adoption, there are also benefits.

Bieri: As with every new numberingscheme, there are both one-off and ongo-

ing costs involved. The initial investmentcovers the addition of the LEI attributesto the database, the development of anyseparate incoming feeds, and the chang-es to regulatory report output processes.The recurring costs are the maintenanceof incoming feeds and outgoing reports,plus any additional reconciliation effortsthat might arise from duplicates orunclear entity mappings between differ-ent numbering schemes.

Lind: For a given institution, the cost ofimplementation will vary based on thescope of operations and systems thatwill carry the LEI. Updating legacy trans-action systems to use LEI will be cost-prohibitive and offer little incrementalbenefit. Cross-referencing between multi-ple identification schemes and taxono-mies will remain a perpetual challengethat LEI will not remedy. The real invest-ment is not in LEI but in a more proactiverisk management infrastructure that cantake remedial action before an episode ofsystemic risk threatens market stability.

Taylor: The key costs for us are dataremediation, data governance—lining uprelevant functions throughout the firm,operational—embedding LEI assign-ment into onboarding, and technol-ogy—implementing new xref fields inrelevant internal counterparty systemsand reporting functions.

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What’s your view of the progressmade to date on LEI registrations?We have made excellent progress. As wewent into the end of the year, there wasa tremendous amount of activity withregistrations, as dealers were required tobegin reporting OTC swaps transactionsto the CFTC, and prepared for compli-ance with external business conductrules. A next wave of activity is aboutto occur as new deadlines approachfor additional CFTC swaps, businessconduct and NAIC insurance companyinvestments reporting. The CICI utilityis the only organization currently issuingLEIs, so we’re doing our best to supportmarket participants that need LEIs.

What would you like to see fromLEI data service providers?We’d like to see the data providers focuson integrating the LEI into the servicesthey provide for their clients. That maybe a mapping to other identifiers. It maybe bringing the LEI into the data that’sprovided to us or accepting the LEI aspart of the data that we provide out.

Most importantly, if our service provid-ers are going to integrate the LEI, wewould like to see them do it in a robustfashion. That means keeping their infor-mation up to date by leveraging thedata maintained in the authoritative LEIsystem. This will ensure that what theyinclude in their services meshes withwhat firms are using for their reportingand risk management.

Do you see any legitimate concernsabout identifier accuracy as LEIsare implemented?If the global system is rolled out accord-ing to the FSB’s principles and stan-dards, the accuracy should continue tobe very good. If that’s done, we can main-tain the accuracy. We have to see howit’s going to emerge, but certainly all theright principles are in place and the rightintent is in place. It’s a matter of imple-menting the global system and ensuringall the operating units that ultimatelyare involved in this process operate to acommon standard of accuracy.

For a long version of this Q&A, see irdonline.com

Q&A

Leveraging Identifiers and SystemsInside Reference Data speaks to Robin Doyle,managing director, regulatory strategy and policy,at JPMorgan, about the implementation of legalentity identifier registration, set to begin soon Robin Doyle

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