All swap end users that are not dealers or major swap participants need to obtain a legal entity identifier (LEI) by April 10. The LEIs will be used in all derivatives record-keeping to ensure all parties know exactly who is on the other side of a contract. Dealers and major swap counterparties are already required to have LEIs.
The LEI program established by the Commodity Futures Trading Commission is a precursor to a global regime that has not yet been launched. In the meantime, the CFTC will issue “CFTC Interim Compliant Identifiers” (CICI).
There has been some confusion regarding what entities need to obtain a CICI – all counterparties, or just those that report derivatives activities to regulators (e.g., a business line versus a holding company). According to recent clarification from the CFTC:
“Because CICIs are required for recordkeeping as well as for reporting, swap counterparties subject to the Commission’s jurisdiction must obtain a CICI by the compliance date applicable to them, whether or not they are the reporting counterparty for any swaps.”
The LEI issue has turned out to be thornier than originally envisioned for dealers and end users, since the living wills generated by SIFIs have forced the dealers to assign all derivatives “ownership” to a specific legal entity within it, in case the bank eventually needs to be broken up. This could leave some end users with counterparties they had not anticipated.
A CICI can be obtained from the DTCC at its “CICI Utility” website for $200.