Grace period for new EU trade identifier

london — The European Union has given banks and their customers a further six months to comply with a requirement from January that all parties to a financial trade must have a unique reference number to help regulators spot abuses.

It marks a further delay to the EU’s efforts to introduce rules that have had to be postponed by a year already.

The new rules, known as MiFID II, come into force on January 3 and require everyone involved in a transaction to have a “legal entity identifier” or LEI to submit trades to regulators.

Many customers of banks have yet to obtain one, which would make it impossible to execute a trade.

The European Securities and Markets Authority (Esma) said that banks could apply for an LEI on behalf of customers. Trading venues could also use their own LEI codes for non-EU issuers that currently don’t have one.

These measures will “support the smooth introduction of the LEI requirements... for a temporary period of six months”, the Esma said.

Britain’s Financial Conduct Authority, which regulates Europe’s biggest securities market, said it would reflect the Esma’s temporary changes in its own rules but this could not be done by January 3.

Until the FCA’s own rules have been amended, firms should not seek to submit trade reports that would not normally comply with the new MiFID requirement, the FCA said in a statement.

“We continue to expect firms to make every effort to secure a clients’ LEI before trading on their behalf,” the FCA said.

“Our analysis shows that trading with missing LEI is likely to represent a very small fraction of total trading volumes.”

Jake Green, a regulation lawyer at Ashurst, said the Esma’s announcement was a surprise last minute move and contrary to the FCA’s “no LEI, no trade mantra”. —