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MiFID regulation | MiFID II LEI

MiFID regulation 

MiFID is the Markets in Financial Instruments Directive. Applicable across the European Union since November 2007. Being a cornerstone of the European Union’s regulation of financial markets looking to improve their competitiveness by generating a single market for investment services and activities, and to guarantee a high degree of systematised protection for investors in financial instruments.


MiFID sets out (as stated on European Securities and Market Authority): 

  • conduct of business and organisational requirements for investment firms;
  • authorisation requirements for regulated markets;
  • regulatory reporting to avoid market abuse;
  • trade transparency obligation for shares; and
  • rules on the admission of financial instruments to trading.

MiFID II improvements

MiFID II and MiFIR (The Markets in Financial Instruments Regulation accompanying the European Union’s second Markets in Financial Instruments Directive or Mifid II) will help to ensure unbiased, securer and more efficient markets, whilst facilitating more transparency for all participants. The advanced reporting requirements and tests and tests expand the information available, and reduce the use of dark pools and over-the-counter trading. High-frequency-trading rules will force a strict set of organisational requirements on investment firms and trading venues. Whilst the provision regulating the non-discriminatory access to central counterparties (CCPs), trading venues and benchmarks increase competition.

The protection of investors is reinforced through the introduction of the new requirements on product governance, as well as independent investment advice, the extensions of existing rules to structured deposits, also improvement of requirements in several areas, including the responsibility of management bodies, information inducements, reporting to clients, cross-selling, remuneration of staff, and best execution.

“No LEI, No trade”

MiFID II’s “No LEI, No trade” policy, somewhat neglected, however, is the requirement for issuers of financial instruments that are admitted to trade on an EU trading venue (TOTV) to have an LEI. As stated by the Regulatory Technical Standards (RTS) 23, every day, trading venues must provide European Securities and Market Authority (ESMA) with a list of the instruments that trade on their venue. Under the same RTS, investment companies have to provide ESMA with a list of instruments for which they act as a systematic internaliser (SI), where the underlying is a financial instrument, traded on a trading venue, or and index or perhaps a basket composed of financial instruments that are traded on a trading venue.

One of the fields which needs to be provided in the RTS 23 instrument registration report is the issuer’s LEI (Annex 1, table 3, fields 27).

With ESMA’s relief from 2017, an interesting dynamic emerged. Instruments can be TOTV without the “issuer concerned” having an LEI. Which means that if an issuer does not have an LEI, trading venues (regulated markets, OTFs, MTFs) will be unable to trade the instrument on their platform. Investment companies therefore will not be able to trade the instruments as SI since they will not be able to comply with RTS 22.

What is an LEI?

The Legal Entity Identifier (LEI) is a 20-digit reference number used to uniquely identify parties in financial transactions worldwide, based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). The code was introduced as a critical measure to better the quality and precision of financial data systems for better risk management post the Global Financial Crisis.

Who needs an LEI number?


LEI (The Legal Entity Identifier) will be issued to any legal identity including but not limited to all

  •  Banks, lenders, and investment companies
  •  Commodities traders
  • CFDs (Contracts For Differences)
  • Entities listed on the stock exchange
  • Financial intermediaries
  • Investors in mutual funds and hedge funds
  • Trade OTC derivatives
  • Self-Managed Superannuation Fund traders and investors
  • Pension schemes
  • Any entity needing to comply with the SFTR (Securities Financing Transaction Regulation)  

LEI will be assigned on application from the legal entity and after due validation of data.
For an organisation, LEI will be: 

  1. Used as a means of identification for a financial entity
  2. Facilitate transaction reporting to Trade Repositories
  3. Ensure compliance with regulatory requirements 



LEI number search and LEI lookup


An LEI consists of 20 characters and will be issued to each company once:

  • The first 4 characters are unique to the LOU which has issued the LEI.
  • The 5th and 6th characters are the same – 0 for every company.
  • The following 12 characters consist of letters and numbers and are unique for each company.
  • The final 2 characters are known as the checking characters. An LEI code search will reveal crucial information based on the ownership structure of the entity. As such, it can be used to establish ‘who is who’ and ‘who owns whom.’ Hence essentially, an LEI search will provide you with access to a global directory of participants that exist within the financial market.   




LEVEL 1 – “who is who”            LEVEL 2 – “who owns whom.”


Level 1 data includes entity registration details, like a legal name, number of registration, legal address, HQ address etc.

Level 2 data provides information about an entity’s ownership structure, thus answers the question who owns whom. To put it simply, the available LEI data pool transfers unstructured entity registration data into a standardised global directory, which greatly enhances transparency in the global marketplace.