According to the Financial Conduct Authority in the UK, from 3 January 2018 firms subject to the new Markets in Financial Instruments Directive (MiFID) II transaction reporting obligations will not be able to execute a trade on behalf of a client who is eligible for a Legal Entity Identifier (LEI) and does not have one.

APIR Systems chief executive Chris Donohoe said that Australian financial services entities including funds, brokers, traders and trustees of self-managed superannuation funds may therefore be unable to transact with European counterparties from 3 January 2018 if they don’t yet have a LEI code.

“There is a still a large number of LEIs that need to be acquired by Australian financial entities that transact with European counterparties before the go-live of the new Markets in Financial Instruments Directive (MiFID II) reporting regime on 3 January 2018,” he said.

“The European Securities and Markets Authority (ESMA) has stated that firms should not trade with counterparties that do not have an LEI as they will not be able to submit valid transaction reports, and overseas parties take this requirement very seriously,” Mr Donohoe said.

The potential impact of these new regulations is still not fully understood by some financial services participants in Australia, he said.

“While MiFID II does not directly regulate Australian entities, it can affect them,” he warned.