The European Securities and Markets Authority (ESMA) has published its final report on Regulatory Technical Standards (RTS) for Markets in Financial Instruments II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR). The report covers many aspects of the directive and regulation, and concludes debate over market data reporting, recommending that transaction and instrument reference data should be reported under MiFIR in a common XML format in accordance with ISO 20022 methodology.

The final report on technical standards for MiFID II and MiFIR was published this week, along with final reports on technical standards for Market Abuse Regulation (MAR) and the Central Securities Depositories Regulation (CSDR). The reports have been sent to the European Commission, which has three months to approve them ahead of MAR entering into force in 2016 and MiFID II and MiFIR in 2017. CSDR entered into force back in 2014.

The final report on MiFID II and MiFIR, includes rules that will bring the majority of non-equity products into a robust regulatory regime and move a significant part of over the counter trading onto regulated platforms. Key rules aim to introduce fairer, safer and more efficient markets, greater transparency and stronger investor protection through improved disclosure.

The regulatory reporting requirement has been the subject of great debate over past months, with respondents to the latest ESMA public consultation considering the implementation challenges of formats including FpML, ISO 20022, TREM (a custom XML format defined by ESMA and used for transaction reporting and instrument reference data exchange between competent authorities), IFX, FIX and XBRL.

The formats perceived by respondents to be least challenging and preferred are ISO 20022 and FpML. A study by ESMA to assess which format is best for transaction and reference data reporting concluded that ISO 20022 is most suitable, leading ESMA to state in the report: “Having considered the feedback to the consultation paper, as well as results of the study, ESMA has decided that transactions and instrument reference data should be reported under MiFIR in a common XML format and in accordance with ISO 20022 methodology.”

ISO 20022 is the ISO-approved standardisation methodology for financial messages and data sets. It is syntax-independent, but includes a set of XML design rules to convert message models into XML schemas whenever the use of the ISO 20022 XML-based syntax is preferred. The ISO standard has also been selected for post-trade transparency reports, aligning these with the format used for reference data, but in this case concerning only the way information is represented, for example the same codes are used to represent the same value, and not how data is collected or published.