LEIs, CICIs, USIs, UPIs: ID Codes Get Complicated
February 11, 2013
On January 13, 2012, the same day the Commodity Futures Trading Commission published requirements for legal entity identifiers (LEIs), the regulator also set forth requirements for unique swap identifiers (USIs), unique product identifiers (UPIs) and unique counterparty identifier (UCIs).
To date LEIs ,or CICIs (Commodity Futures Trading Commission Interim Compliant Identifiers) as the interim LEIs are now known, have garnered most of the attention, for good reason. The LEI initiative is global, an attempt to assign a single 20-digit code to identify every participant in a securities transaction around the world.
In the United States, the Depository Trust and Clearing Corporation, a nonprofit post-trade processing utility, and CME Group, a for-profit operator of derivatives marketplaces and clearing services, have been vying to take on the processing and storage of CICIs, which eventually will turn into LEIs. Both have established Swaps Data Repositories (SDRs) as has CME rival, the Intercontinental Exchange.
“This is about dominance in a potentially lucrative data market,” says Tom Riesack, a managing principal partner with industry consultancy Capco.
But just how many identifiers will actually get created – and will LEIs really become universal?
Regulators in the U.S. and Europe agree that LEIs are much needed. Notes Riesack, “LEIs will provide complete and consolidated information about the entire firm’s (swap) positions, rather than the narrowly focused silos of mismatched data. A seamless integration between trading, risk, settlement and accounting will become reality.”
OK, but what about that floodtide of other regulatory-backed identifiers the CFTC is promoting. “ It is in the confusion of hasty regulations (make the public feel good that we are taking control) that unintended consequences around swaps regulation arises,” says Allan D. Grody, president of Financial Intergroup, which has proposed an approach to the legal identifiers that has guided the work of the Financial Stability Board, which has been charged to come up with an international standard. “Those of us who are informed have been saying this for years when we sat on pre-regulation task forces and panels and into the present,’’ Grody said, this week.
For example, Grody asks, “ Does the originator of a transaction get identified with USIs? No, the originator gets a (derivative clearing organization’ss internal counterparty number, a (National Futures Association) ID if they come with that, or a CICI if they present that. The rest of the USI is a transaction identifier, unique to the swap, not the swap business entity that was the transactor.”
In other words, USIs are employing what’s called the “name space” method. Under this method, the first characters of each USI will consist of a unique code that identifies the registered entity creating the USI, given to the registered entity by the Commission during the registration process. That differs from other identifiers and the confusion doesn’t just apply to USIs and the like. For example, the Intercontinental Exchange, an operator of global regulated futures exchanges, clearing houses and over-the-counter (OTC) markets, announced that the CFTC provisionally approved ICE Trade Vault as a swap data repository (SDR) for the commodity and energy, interest rate swaps, credit default swaps (CDS) and foreign exchange (FX) asset classes.
