MiFID II's LEI Requirements: Transaction Reporting

By Ben Lis | September 14, 2017

“No LEI, No Trade” means investment firms must know their client’s LEI before entering a trade. Without the client’s correct LEI, the trade is not allowed. This rule is part of MiFID II’s transaction reporting requirements. This post reviews the LEI-related specifics of these requirements.

This is our second in a series of posts on MiFID II and the LEI. If you are brand new to the LEI or MiFID II, the first post introduces both.

MiFID II Transaction Reporting Basics

To provide context for this LEI-specific review, below is some basic information about MiFID II transaction reporting.

Who reports?

Investment firms must report. An investment firm is a legal entity that provides investment services to third parties or engages professionally in investment activity.

These services and activities include investment advice, portfolio management, execution of client orders, reception and transmission of orders, trading one’s own account, market making, underwriting and placement, and operating trade facilities. Thus, a broad range of financial institutions are considered investment firms under MiFID II.

What is reported?

Transactions are reported. A transaction is defined as the buying or selling of a financial instrument or the entering or exiting of a derivative contract. Certain activities such as securities financing transactions and portfolio compressions aren’t considered transactions for reporting purposes.

A transaction report is composed of up to sixty-five data fields. Each field in the report belongs to one of three data categories:

  • trade details (e.g. price, quantity, trade date & time)
  • parties (e.g. buyer, seller, executing firm, transmitting firm)
  • financial instrument (ISIN)

The role of the LEI in a transaction report is to identify any party to the trade who is not a natural person.

A transaction report always contains an ISIN. The ISIN identifies the financial instrument being traded. MiFID II requires reference data about the ISIN distinct from the transaction report. The LEI is used in this financial instrument reference data to identify security issuers. The next blog post in this series provides an in-depth review of this use of the LEI.

When are reports submitted?

Reporting is required starting January 3rd, 2018. Transaction reports must be submitted no later than T+1.

Where are reports submitted?

Investment firms report directly to their competent authority (i.e. national regulator) or utilize an approved reporting mechanism (ARM) to do so on their behalf.

Where are the report specifications?

Article 26 of MiFIR establishes the legal requirement to report transactions. The specifications on how they must be reported are detailed in RTS 22: regulatory technical standards on reporting transactions to competent authorities. The final version of RTS 22 was published in the EU Official Journal on March 31st, 2017.

RTS 22 LEI Mandates

A complete review of RTS 22 is required to fully understand MiFID II transaction reporting. Given our focus, this review is limited to the LEI-specific parts of RTS 22: Article 5, Article 13 and Annex I.

Article 5: Identification of the investment firm executing a transaction

Article 5 requires investment firms have an LEI for each of the firm’s legal entities that may execute a transaction. These LEIs must be registered and renewed annually. The data associated with these LEIs has these characteristics:

  • entity status of VALID
  • registration status of ISSUED
    • PENDING_TRANSFER or PENDING_ARCHIVAL in the case of a LOU transfer
  • current & correct reference data including:
  • legal & trade names
    • legal & headquarters address
  • jurisdiction
  • ownership (parent & ultimate parent if applicable)

MiFID II’s LEI maintenance requirements are stringent. For example, to remain MiFID II compliant, an investment firm must renew its LEI on time each year.

Here is the text from Article 5:

  1. An investment firm which executes a transaction shall ensure that it is identified with a validated, issued and duly renewed ISO 17442 legal entity identifier code in the transaction report submitted pursuant to Article 26(1) of Regulation (EU) No 600, 2014.

  2. An investment firm which executes a transaction shall ensure that the reference data related to its legal entity identifier is renewed in accordance with the terms of any of the accredited Local Operating Units of the Global Legal Entity Identifier System.

Article 13: Conditions upon which legal entity identifiers are to be developed, attributed and maintained

The first part identifies the principles of an effective legal entity system and obliges EU member states to maintain one. Suffice it to say, the global legal entity system provided today via the LEI ROC, GLEIF and individual LOUs achieves these principles.

The second part is the “No LEI, No Trade” section. It clearly states that an investment firm cannot provide a service to a client that will trigger a transaction report unless it has the client’s LEI to include in the report. This LEI check must be performed pre-trade, not post-trade.

The third part lists the specific checks that the investment firm must perform on the client’s LEI. Before executing a trade, the investment firm must verify that the client’s LEI is

  • ISO 17442 compliant
  • in the global LEI database
  • references the client in question

Article 13 not only requires investment firms to perform a pre-trade LEI check. It creates two data management tasks for them. Investment firms must:

  1. map (internal) client account data to the correct LEIs
  2. monitor the global LEI database for updates that change the mapping created in (1)

Here’s the text of Article 13:

  1. Member States shall ensure that legal entity identifiers are developed, attributed and maintained in accordance with the following principles: (a) uniqueness; (b) accuracy; © consistency; (d) neutrality; (e) reliability; (f) open source; (g) flexibility; (h) scalability; (i) accessibility. Member States shall also ensure that legal entity identifiers are developed, attributed and maintained using uniform global operational standards, are subject to the governance framework of the Legal Entity Identifier Regulatory Oversight Committee and are available at a reasonable cost.
  2. An investment firm shall not provide a service triggering the obligation to submit a transaction report for a transaction entered into on behalf of a client who is eligible for the legal entity identifier code, prior to obtaining the legal entity identifier code from that client.
  3. The investment firm shall ensure that the length and construction of the code are compliant with the ISO 17442 standard and that the code is included in the Global LEI database maintained by the Central Operating Unit appointed by the Legal Entity Identifier Regulatory Oversight Committee and pertains to the client concerned.

Trading Venues

MiFID II requires trading venues to verify that all participants, including the clients of executing firms, have LEIs. This verification includes a check of the LEI registration status.

Here is the guidance from ESMA’s Final Report: Guidelines on transaction reporting, order record keeping and clock synchronisation under MiFID II :

Trading Venues should perform the checks that are prescribed under Article 5 and 13(3) of RTS 22. This means that trading venues should verify that the LEI of the executing firm is accurately formatted and is in the GLEIF database maintained by the Central Operating Unit (the LEI can be ‘issued’, ‘pending transfer’ or ‘pending archival’). Trading venues should also verify that the LEI of the underlying client of the executing firm is accurately formatted and is in the GLEIF database (in this case the LEI can be ‘issued’, ‘pending transfer’, ‘pending archival’ or ‘lapsed’).

LEI Fields in Transaction Reporting

RTS 22’s Annex I lists and fully describes all sixty-five fields that may appear in a transaction report. In the table below we highlight those fields that identify a party by LEI.





Executing entity identification code

LEI of the firm executing the trade. Typically, an investment firm acting on behalf of a client or on its own account.


Submitting entity identification code

LEI of the trading venue, ARM or executing firm submitting the transaction report to the competent authority.


Buyer identification code

LEI of the acquirer of the financial instrument except when the acquirer is a natural person.


Buyer decision maker code

LEI when the decision maker is a legal entity (e.g. investment firm). Applicable when the decision maker acts under a power of representation.


Seller identification code

LEI of the disposer of the financial instrument except when the disposer is a natural person.


Seller decision maker code

Same as Buyer decision maker code.


Transmitting firm code for buyer

LEI of firm transmitting order for buyer.


Transmitting firm code for seller

LEI of firm transmitting order for seller.


Many firms’ MiFID II LEI requirements go well beyond just having an LEI. MiFID II’s transaction reporting mandates create important LEI requirements including “No LEI, No Trade”. Business entities must be identified by LEIs in transaction reports. To be compliant, investment firms must map, validate, store and monitor their clients’ LEIs.