LEI Codes Up and Running Quickly. Maybe Too Quickly.
December 10, 2012
At this point, the FSB has indicated that the “interim” identifiers will be let stand and additional characters be added in front, to identify and track them, as part of the overall system.
But the CFTC ran into an unexpected roadblock on November 8, only three days after the G-20 meeting in Mexico City had concluded. Exchange operator CME Group, asked a U.S. court to prevent the CFTC from enforcing swap-reporting rules passed after the 2008 financial crisis.
In the lawsuit, CME challenged the requirement that exchanges make available non-public reports of cleared swap transactions to new CFTC-registered entities called "swap data repositories" (SDRs) which would, in turn, make the swap data available to the CFTC. The CME suit set off countersuits and a fiery debate about how the interim CICIs should be processed and stored.
Specifically:
• DTCC filed a motion with a U.S. District Court in Washington, D.C., to intervene as a defendant on the side of the CFTC in the case filed by the CME.
• CFTC amended its swaps policy which meant that CME could compete with DTCC and form its own repository for swaps-related data.
• CME dropped its suit against CFTC.
• DTCC lashed out at the CFTC. “The Commission's action unexplained and an abrupt reversal of course. This action is inconsistent with the Commission’s previous actions, and will cause market participants to question the finality of any Commission rule or interpretation. This will ultimately disrupt the progress the industry and regulators have achieved so far to implement the financial reforms mandated by the Dodd-Frank Act.
" What's happening is that lots of people are grabbing onto pieces of the LEI process without thinking about the overall objectives, that of systemic risk analysis,” says Grody. “That, in turn, begs the question of how to use hierarchies of these LEIs for cash flow and valued position aggregation. Without understanding that, not a single LEI should be issued."
And the European take on this? Siebel says he is OK with having more than one repository. “The only thing that would concern us is if an entity would get two identifiers if CME could also issue its own CICIs.”
Says Grody, "If CME creates an SDR, which they are planning to, they will be able to assign their own CICIs according to swaps regulations.”
That means, according to Grody, the FSB will have to determine just how many different types of ID codes will have to be united under its banner – and how to do that, if the CME and the CFTC each have different approaches to the 20-digit codes that were to be part of a single, global system.
