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Opinion: Reference Data and MiFID II/MiFIR: New ESMA Consultation

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By Chris Pickles, Co-Chair of FIX Trading Community’s Reference Data Subgroup and Member of the Bloomberg Open Symbology Team

Indications from ESMA are that it still intends to issue technical standards for reference data under MiFID II/MiFIR this month, so work being done now to examine the existing draft standards should pay off by enabling organisations to understand more quickly any differences that there may be between draft and final standards.

In addition, ESMA has just issued a new consultation paper (2015/1301) that includes questions about position reporting for firms and trading venues that trade in commodity derivatives, emission allowances and derivatives based on emission allowances.

Consultation documents like these are critical to the success of regulation. But they are also critical to investment firms and market infrastructures as they can provide the only mechanism to influence the final specifications to which firms will have to adapt and build.

For example, when ESMA says in its consultation document that firms must publish data in machine-readable XML format and in “common standard XML format”, what standard format would firms like to use? It asks how derivatives that have been suspended from trading need to be identified and whether ISINs can do the job. A lack of response to an ESMA consultation document can mean that firms end up with regulations that are more difficult and more costly for them to comply with.

While MiFID I focused much of its requirements on equity markets, MiFID II/MiFIR’s broader scope starts to impact areas where new approaches to data and data management may be necessary. Take the example of emission allowances and derivatives on emission allowances. Investment firms and trading venues have to publish and make information available to the market based on the classification of the financial instrument in question. But do industry standards for instrument classification cover these types of instrument? ISO has recently issued updates to some standards that are relevant to MiFID/MiFIR – notably to ISO 10962 (Classification of Financial Instruments) and to ISO 4217 (Currency Codes). It’s been some years since the previous versions of these standards were issued, and it would be easy for data managers to dismiss them as being out-of-date or inadequate. However, now that they have been updated and ESMA is looking to require the use of appropriate industry standards more and more, it’s vital that managers of reference data update their own knowledge of these ISO standards.

Participants in FIX Trading Community’s Reference Data Subgroup are going into exactly this kind of detail, working field-by-field through each of the draft Technical Specifications that ESMA has produced to date. Sharing their expertise and efforts means that more ground is being covered more quickly, to the benefit of all members of the FIX Trading Community. This work also helps to bring clarity to regulators concerning reference data issues that MiFID II/MiFIR present to the financial markets sector internationally.

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