Sizing the MiFID II LEI Wave

How many LEIs have been issued due to MiFID II? Has LEI issuance crested, and if so, when? Did many wait until the end of the year to apply for an LEI? Is MiFID II-related LEI issuance still occurring?

At LEI Smart we’re naturally interested in these questions. That interest was further piqued by ESMA’s last-minute delay to some of MiFID II’s LEI related requirements. We’ve analyzed LEI issuance data to come up with answers to these questions. In addition to sharing our results, this post contains an interactive report that includes the data we used in our analysis.

An Interactive Report on LEI Issuance

The report appears below. It contains two time series: the first shows the number of new LEIs issued on a daily basis, and the second shows the total number of LEIs in existence by a specific date.

Pointing your cursor to a data point in the time series highlights the point’s date and value. Selecting a date range via the selector allows you to zoom in on a specific time period; by default, the date range is from the creation of the first LEI in June 2012 through the end of January 2018. Moving your cursor to the top right corner of a time series reveals a menu providing various options to export the data.

We consider an LEI’s initial registration date to be its issuance date. There is no LEI data element that describes the reason why a registrant applied for an LEI, so we assume that the reason can be inferred with a high degree of certainty based on when the LEI was issued.

Historical Context

The LEI issuance times series over the LEI’s full history supports these two observations:

1. LEI adoption has been driven by regulatory mandates

The complete issuance time series shows there have been two periods of large LEI growth. The first started in late 2013 and continued through Q1 of 2014. This was the time period when swap reporting rules went into effect in the US, Europe, and other jurisdictions. The second, much larger growth event corresponds to MiFID II. This wave of issuance began in earnest in September 2017 and continues into 2018.

A report from McKinsey published in the fall of 2017 highlighted compelling non-regulatory reasons to adopt the LEI in areas such as trade finance and customer on-boarding. The report estimated that such adoption could lead to over $650 million in cost savings for business. An LEI growth spurt due to one or more of these applications might occur at some point in the future, but it hasn’t happened yet. We think that it’s more likely that the growth of LEIs due to existing and future regulatory mandates will make it easier and thus more likely for some of these cost-saving opportunities to come to fruition.

2. MiFID II has substantially increased the value of the LEI data set

MiFID II has been responsible for the creation of more LEIs in the last five months than were created in the previous five years. As of September 1st, 2017, there were a total of 554,490 LEIs. As of January 30, 2018, there were 1,071,686 LEIs. This population growth correspondingly increases the value of the LEI data set as a source for customer, trading partner or issuer master data.

Beyond the LEI and a legal name, the full LEI dataset includes address, trade name, ownership, entity type, business registry, and legal jurisdiction information. The regulatory mandate to renew LEIs and maintain the associated reference data not only ensures the ongoing accuracy of the data but also provides the underlying mechanism for the generation of alerts on important data updates due to:

• merger, acquisition or ownership change
• legal or trade name change
• legal or headquarter’s address change, including jurisdiction
• bankruptcy or dissolution

The ability to use the LEI data to supplement, enhance and maintain your master data is dependent on the degree to which the LEI dataset covers your master data needs. MiFID II means that essentially every business entity that is either a party to a financial transaction in Europe or an issuer of a security that is traded in Europe will now have an LEI. That substantially increases the degree of coverage for many applications.

Questions Answered

Let’s now answer the questions posed in the introduction.

Has the MiFID II LEI issuance wave crested?

Yes, MiFID II related issuance peaked in December 2017. If you adjust the report to a date range of December 2017, you can more easily see the details. The actual peak occurred on December 21st when 10,437 new LEIs were issued. Over 10,000 LEIs were issued on the 12th and there were several days in December when more than 9000 LEIs were issued.

If you’re wondering why the time series resembles an EKG, it’s because LEIs are issued seven days a week, but significantly fewer are issued on weekends and holidays. Still, 566 LEIs were issued on Christmas, a record that is apt to hold for quite some time.

Did many wait until the end of the year to apply? Yes, this appears to be the case. There were close to 160,000 LEIs issued during the month of December. The data seems to support the truism that nothing focuses the mind like a deadline! We’re a bit surprised the consistent “no LEI, no trade - don’t put it off” message from GLEIF, trade associations, the LOUs, and regulators didn’t have more impact.

Our analysis does not account for the time period between submission of an LEI application and actual LEI issuance. There’s no way to measure the length of this period from public data. While it’s possible backlogs at LOUs contributed to delays, we doubt this was a major factor. The median time to issuance may have increased during December, but not enough to warrant press coverage. Additionally, at least one LOU advertised the availability of same-day LEIs.

Is MiFID II-related LEI issuance still occurring?

Yes, but the daily issuance numbers are declining pretty rapidly. The numbers at the end of January were roughly equivalent to the numbers we saw at the end of September. During the week of January 22nd, 15,589 LEIs were issued.

How many LEIs have been issued due to MiFID II?

First, a quick review of the caveats:

• MiFID II-related LEI registrations are still in process
• Many firms requiring an LEI for MiFID II already had one due to existing regulations such as EMIR
• There’s no way from the data to identify an LEI as being issued due to MiFID II with complete certainty

We believe that at least 530,000 LEIs have been issued due to MiFID II. We came up with this number using these relatively conservative assumptions about the number of LEIs issued due to MiFID II by time period:

• 0% of the LEIs issued prior to January 2017 = 0
• 50% of the LEIs issued from January through August 2017 = 35,000
• 95% of the LEIs issued from September 2017 through January 2018 = 495,000

A Question for You

There are other potentially interesting ways to look at MiFID II-related LEIs such as issuance by country, LOU, or entity type. Drop us a line and let us know what sort of analysis you’d find useful.