The revised Markets in Financial Instruments Directive, or MiFID II, requires each entity trading with a European counterparty across all asset classes to obtain a legal entity identifier (“LEI”) prior to January 3, 2018. The “No LEI, No Trade” rule is unambiguous. Failure to comply will prevent trading with EU counterparties after the cut-off date.

An LEI is a unique 20 character alphanumeric code issued to a legal entity. Although LEIs were initially developed in conjunction with derivatives trading and reporting, global regulators already require or will mandate their use across various markets (including stocks, bonds, futures and options) to identify parties to transactions, regardless of who is reporting the relevant trade. Once assigned, the LEI belongs to a legal entity for the duration of its existence. The legal entity is responsible for ensuring renewal of the LEI on an annual basis.

In addition to the expansion of the LEI requirement to asset classes other than derivatives, MiFID II requires that an LEI be obtained by additional parties by January 3, 2018. These parties include, but are not limited to, any non-EU entity trading with an EU counterparty. For example, a non-EU investment manager trading on behalf of a non-EU fund with an EU counterparty is required to obtain an LEI in its own name (in addition to having an LEI for the fund), even if the trades are booked in the name of the fund.

We anticipate a surge in last minute registrations. Accordingly we recommend that clients apply for LEIs well in advance of the January 3, 2018 deadline rather than wait until the last minute.

If you have any questions regarding the foregoing, please contact one of the attorneys listed below, or an attorney in the Investment Management Group at Seward & Kissel LLP.