How do LEI codes work?
LEI codes, or Legal Entity Identifiers, are a unique alphanumeric code used to identify legal entities that participate in financial transactions. These codes are designed to create transparency and accuracy in financial markets by ensuring that each legal entity has a unique identification. LEI codes are based on a global standard and are managed by the Global Legal Entity Identifier Foundation (GLEIF).
When a legal entity applies for an LEI code, they go through a verification process where their legal and operational information is validated. Once the code is assigned, it becomes publicly available in a global LEI database that can be searched by all interested parties. This enables stock and bond traders to identify and verify the legal entities they trade with, ensuring transparency and trust in the market.
LEI codes - A necessity for stock and bond traders
For stock and bond traders, LEI codes are a necessity. Many financial institutions and regulators require legal entities that engage in financial transactions to have a valid LEI code. This is due to the need to identify and track transactions across different markets and jurisdictions.
By having an LEI code, stock and bond traders can ensure they comply with regulatory requirements and avoid potential penalties or delays in their transactions. LEI codes also allow for better risk management and reporting as they provide a unique identification of the parties involved in a transaction.
How to get an LEI for your legal entity
The process of obtaining an LEI for your legal entity is relatively simple. First, you need to find an authorized LEI registrar to help you with the application process. You will need to submit relevant information about your legal entity, including name, address and registration details.
Once the application is submitted, the registrar will review and verify your information. This may include checking the existence and validity of your legal entity. Once your information has been validated, you will receive your LEI code, which will then become publicly available in the LEI database.
It is important to note that LEI codes have a limited validity period and must be renewed annually. It is therefore important to maintain and update your information to ensure your LEI remains valid.
