On December 20, 2017 the European Securities and Markets Authority (ESMA) issued a statement to support the smooth implementation of Legal Entity Identifiers (LEI) requirements under the Markets in Financial Instruments Regulation (MiFIR).
Many investment firms and trading venues had raised concerns that they will not be able to obtain LEI codes from all their clients ahead of the implementation date of 3 January 2018. “No LEI, no trade” was one of things that market participants were most worried about.
Don’t think this is a blanket 6 months grace period, it’s not. It only relates to trading & transaction reporting of Legal Entity clients where they do not yet have an LEI. Even within this context ESMA is not saying that firms can trade without an identifier for 6 months and send a transaction report without identifiers. Firms will still need to transaction report these trades and will still need an LEI to do so. While firms will be able to trade for Legal Entity clients (subject to strict conditions) who do not have an LEI, they will not be able to transaction report until they have obtained an LEI. The specific conditions are detailed by ESMA within their statement (ref. 1st paragraph, page 2 of the article published – pdf attached) - "…before providing such service, the investment firms must obtain the necessary documentation from their clients to apply for an LEI code on their behalf. The investment firms will need to immediately apply for the issuance of the LEI on behalf of the client. Once the relevant LEI has been obtained, the investment firm should submit its transaction report."
So, it means that:
The FCA has requested that firms should hold back on submitting transaction reports for clients falling under this scenario until they have updated their software. This is because they have validation checks to ensure the date of issue of the LEI is before the trade date. For the 6 months grace period this rule will be relaxed, i.e. the trade date can be before the date the LEI is issued.