To do a quick review of the year passed, the total number of LEI’s jumped 36% in 2018, and now stands at an impressive 1,361,624 in February 2019.
After ESMA granted a six-month extension to Europe’s trading firms prior to the introduction of MiFID II’s “No LEI, No Trade” regime last January, the 1 million LEI milestone was reached and another deadline scramble took place 6 months later further increasing the demand for LEI’s.
Throughout the year, there have been regular uplifts to the LEI adoption rate. Don’t hold your breath as I run through the main headlines… We welcomed some new LOU’s (Local Operating Units) on the scene including RapidLEI, GS1, and APJES of Slovenia. In June, international interest was stimulated as the Bank of England Chairman, Mark Carney described the LEI as “the best corporate identifier”, it was announced that LEIs will be mandatory when reporting OTC derivative transactions in Australia from April 2019 onwards, and in December a bill was passed in Wyoming, USA that new blockchain based banks will be using the LEI as the main identifier... Hurray!
The LEI adoption rate is good, however, the LEI market is dominated by a smaller number of large LEI issuing companies (LOU's). The top five organisations that issue LEIs have been fairly consistent in their performance for a long time now, but one new LOU in particular is making great headway in catching up, RapidLEI of Finland. The GMEI Utility remains far ahead of everybody with over 420,000 LEI’s issued, followed by The London Stock Exchange with around one third of that!
Over the past few weeks of 2019 there has been an average of 3,000 LEI’s issued per week with the lions share going to the GMEI Utility. The main concern at the moment is the rate at which entities are becoming lapsed. We are now looking at nearly 340,000 lapsed LEI’s. That’s near 25% of total LEI’s. LEI Worldwide are currently taking initiative to help resolve this and renew as many lapsed LEI’s as possible. If you have an LEI and you are not sure if it should or when it should be renewed, please contact us at firstname.lastname@example.org or complete a “Quick Renewal” here.
LEI Worldwide expect the LEI market share to level out over the coming months and years. As the market evolves and matures data quality and verification accuracy will become more important than sheer speed and volume, and some issuers will adapt better than others.
Positivity surrounding the potential use cases of the LEI is being explored such as determining how LEI's can be the primary accepted identity in all digital certifications and in Public Key Infrastructure (PKI). We can see already that steps have been taken to make it the primary identifier. Previously the ISIN & CUSIP were in the main ISO identifiers, and now Association of National Numbering Agencies (ANNA) have agreed to match ISIN’s to LEI’s which is a huge step forward towards mapping out the global financial system in real time.
This would provide market participants with a clear picture of their counterparty risk and simultaneously provide regulators with a quality of ownership data that has not been available before, and will conceivably prevent another relapse of the confusion and uncertainty we saw in 2008 with the collapse of the global markets which spurred this initiative in the first place.