The Financial Stability Board has decided to adopt a 'structured approach' to the numbers that get issued to identity participants in financial transactions around the world.

That differs from the random numbers currently being issued by an alliance of the Depository Trust and Clearing Corporation and the Society for Worldwide Interbank Financial Telecommunication for the U.S. Commodity Futures Trading Commission.

This is "quite heartening,'' said Allan D. Grody, president of the Financial Intergroup, based in New York, which has been an advocate of the structured approach. The choice shows that the FSB and the task force it has charged with implementing a Legal Entity Identifier system has shown "resolve at a very elemental level to re-engineer the global financial system'' and the infrastructure that supports it.

The approach taken by the FSB, which reports to the leaders of the G-20 industrialized nations, differs from the approach launched in August by the DTCC and SWIFT, however. The two utilities started issuing numbers known as Interim Compliant Identifiers that had no structure at all.

Roughly 27,000 interim numbers have been issued so far, that do not fit the structured approach being carried out by the FSB's implementation group.

But the Global Financial Markets Association said Thursday that the structured approach poses no problem.

"We're comfortable with the structured approach," said David Strongin, managing director of the Securities Industry and Financial Markets Association. SIFMA is a lead member of the global group and first recommended that DTCC and SWIFT be selected to issue legal entity identifiers worldwide.

DTCC and SWIFT, he noted, will not have to issue structured numbers until after November 30. He also said the FSB will allow "pre-LEI codes" that adhere to the International Standards Organization's guidelines and that were issued before November 30 to stand.

In adopting the structured approach, the FSB said, "this approach does not affect ISO 17442 compliant numbers issued prior to that date."

"The utility will have no problem ensuring that" numbers issued after the cutoff meet the new structured approach.

The FSB said the 20-digit legal entity identification codes must take this form:

Characters 1-4: A four character prefix allocated uniquely to each "local operating unit" that issues number.

Characters 5-6: Two reserved characters set to zero.

Characters 7-18: Entity-specific characters.

Characters 19-20: Two digits used to check for errors in transmission or storage of the codes.

Identifying exactly what company and parent company is involved in a financial transaction is seen by the FSB and other regulators as fundamental to figuring out what one given party's exposure is to another party; and to monitor the buildup of potentially disruptive exposure of the global financial system to transactions involving one or more large institutions operating worldwide.