DTCC Connection

The Global Markets Entity Identifier (GMEI) utility, a legal entity identifier (LEI) solution in the federated Global LEI system (GLEIS), is designed to create and apply a single, universal standard LEI to any organization or firm involved in a financial transaction globally.

Recently, the DTCC subsidiary operating the GMEI utility was accredited by the Global Legal Entity Identifier Foundation (GLEIF) making it the largest accredited LEI Operating Unit (LOU) representing 50% of the total LEIs issued worldwide.

Since its launch in 2012, the GMEI utility has been collecting “Level 1” data for every entity requiring a registration or renewal of a LEI. This categorization of reference data includes information pertaining to the question “who is who,” including the legal name of the entity, registered address, country of formation and other business card level data.

Beginning May 1, 2017, the GLEIF has mandated that all LOUs, including the GMEI utility, collect additional data known as “Level 2” that answers the question “who owns who” for every Registration and Renewal. DTCC Connection sat down with DTCC’s Eugene Ing, Executive Director, GMEI Product Management, to discuss these changes and the effect it will have on clients and the industry as a whole.

Connection: Why are LEIs important and when would you need one?

Ing: The concept of a LEI was conceived after the 2008 financial crisis. Regulators envisioned a publicly available, unique, standardized code that would identify a legal entity participating in financial transactions across asset classes and trading venues. LEIs work to increase transparency in the global marketplace allowing for improved risk management, more accurate calculation of exposures, increased operational efficiency and simplified regulatory reporting.

Regulatory adoption of LEIs will continue with the revision to MiFID II \ MiFIR which is expected to go into effect in January 2018. Under this revision, all legal entities are required to have, and supply LEIs in their European trade reporting, with guidance from the European Securities and Market Authority (ESMA) on the financial services provider side to mandate a LEI before providing services.

Connection: What exactly is “Level 2” data and why is the GLEIF now requiring it for LEIs?

Ing: “Level 2” data will provide a hierarchal view of the legal entity, by requiring the identification of the Direct and Ultimate Parents of that entity, giving regulators a risk view on a family level. As of May 1, for every new registration and renewal, entities are required to report their “Ultimate Parent”, defined as the highest level legal entity preparing consolidated financial statements, as well as their “Direct Parent”, or the lowest level at which the entity consolidates financials, in addition to their “Level 1” data.

The collection of “Level 2” data is an important step for the system as it was originally envisioned by the LEI Regulatory Oversight Committee (ROC), allowing for even greater transparency in the marketplace, by providing a holistic view of the entity’s full familial risk profile.

Connection: Is the GMEI utility prepared to collect “Level 2” data? Will there be significant changes to the system after May 1?

Ing: The “Level 2” changes are broad, requiring a full front to back update to our systems and record validation processes. The GMEI utility will be updated prior to May 1 to provide for the additional capture of “Level 2” information, as well as incorporation of fields required for the GLEIF’s Common Data Format (CDF) 2.0 format, which is used to produce the GLEIS public file. New fields and values will be added to the GMEI portal, with corresponding updates to the GMEI Bulk Service input formats to enable the capture of this information during registration and renewal. In addition, the GMEI utility will be updating some of its terminology to correspond with the nomenclature that the GLEIF has prescribed in its file formats. For our Operational team, we have enhanced our validation platform, updated support material and are training the team to research and review consolidated financials as required by “Level 2.”

For a complete list of all value changes, please review our GMEI Utility Common Data Format 2.0 and Level 2 Data Frequently Asked Questions document.

Connection: Do existing or new clients need to take any actions on their current LEIs? What about new registrations?

Ing: After May 1, clients will need to provide “Level 2” data on any new LEI registration or upon renewal of their records. In other words clients do not have to actively update their existing record sets, but will need to do so when extending an LEI’s Next Renewal Date.

During registration or renewal, clients will be prompted to supply the LEIs for the entity’s Direct or Ultimate Parent, provide their parent’s information if the parent(s) do not have an LEI, or provide an “Opt Out” reason if they cannot identify their parent(s) or cannot disclose their parent(s).

Connection: Is the industry ready for these changes? How is DTCC helping to educate clients and the industry?

Ing: The GLEIS and regulatory mandates continue to evolve so firms will need to adapt their processes, but we are trying to make the changes as seamless as possible. We have done a lot of analysis on workflows, and field layouts resulting in new fields that are highly intuitive. In regards to education, we have sent a notification and FAQs to our user community and will be holding online sessions to walk through the new functionality.

Connection: Where can I learn more about the GLIEF’s new requirements around “Level 2” data?

Ing: For more information on the GMEI utility and “Level 2” data please visit www.gmeiutility.org or contact our Customer Service Team at [email protected]