Introduction:
In the realm of financial regulations, EMIR REFIT (European Market Infrastructure Regulation-Regulatory Fitness and Performance Programme), plays a vital role in improving transparency and stability within the derivatives market. One crucial aspect of complying with EMIR REFIT requirements is the conversion of data between XML (eXtensible Markup Language), and CSV (Comma-Separated Values) formats. In this article, we will explore the reasons why XML to CSV conversion and vice versa is essential in the context of EMIR REFIT, and how to achieve that.
ESMA introduced the ISO 20022 XML schema with the aim of enhancing quality of reporting, which provides an industry-wide framework to all financial standards initiatives.
In July 2020, ESMA went live with SFTR in accordance with the ISO 20022 XML methodology, and it will be a requirement under EMIR refit announced in April 2023.
Previously, each trade repository had its own unique submission format, which led to difficulties in data sharing and matching between repositories. Moreover, switching trade repositories was proving challenging for firms. By standardising the submission format to the ISO 20022 XML scheme, ESMA and FCA intends to eliminate discrepancies caused by inconsistent data, and hence facilitate the generation of cleaner data and interoperability. This standardisation also reduces the variation of file formats among repositories, making matching processes more efficient and improving the data quality.
While the adoption of the ISO 20022 standard is expected to improve data sharing, there are challenges associated with creating files in XML format. Transforming data into the appropriate format for XML reporting can be operationally challenging and may result in additional costs for reporting parties.
Firstly, let’s take a look at what XML and CSV means. XML and CSV are two commonly used formats for representing structured data. XML provides a hierarchical structure with tags, making it suitable for complex and nested data representations. On the other hand, CSV offers a simple tabular structure, making it easier to process and analyse large volumes of data. By converting XML to CSV and vice versa, financial institutions can achieve data interoperability, allowing them to utilize the data in different systems, tools, and reporting processes.
EMIR REFIT mandates accurate and timely reporting of derivative transactions to the relevant regulatory authorities. XML will be the format for reporting these transactions due to its flexibility and support for complex data structures. However, the current application architecture is designed with CSV format data submissions in most firms. Hence, the conversion from XML to CSV becomes necessary to ensure compliance with regulatory reporting requirements.
Options:
There are three possible options to be considered for XML to CSV conversions:
Build an In-House Solution:
The ability to create or edit XML files manually is extremely difficult compared to CSV, and it is not easily readable, so performing a visual check is incredibly difficult. Building an In-House solution will provide capabilities to test harness, platform, test system, and processes to support creation and submission. But building this inhouse is complex and akin to reinventing the wheel. In high volume scenarios where firm has robust inhouse platform, this feature can be developed.
Utilise a third party solution:
There are external regulatory reporting firms who provide solutions that will accept bespoke formats of client files, convert these to ISO 20022 XML format for submission to the trade repository, and will provide ‘easy to read’ responses. Reg-X offers a comprehensive feature for XML to CSV and vice versa conversion as part of its current toolset at no extra cost. This will reduce your dependency on the Trade Repository, and provide you flexibility in case you want to switch. Moreover, you don’t have to develop this functionality in-house saving on build and maintenance costs.
Use the CSV to XML ancillary service of the trade repository:
Trade repositories are offering its clients a CSV to XML service in support of EMIR Refit. The advantage of this is that firms can continue to send CSV files to UnaVista under EMIR Refit, but you will still need to do analysis on sourcing additional fields and build those additional fields into the current extract. There will be a cost associated with these ancillary services, and there will be no need to build ISO 20022 XML expertise within firms.
Other key aspects firms should consider when deciding on the approach for XML to CSV are:
Data Validation and Quality Control:
During the conversion process, XML to CSV and vice versa, financial institutions can implement data validation checks and quality control measures. These checks help identify any inconsistencies or errors in the data, ensuring the accuracy and integrity of the information being exchanged. If it is done by a vendor, then the vendor should perform conversion, validation and data cleansing, minimising the risk of reporting incorrect or incomplete information.
Complexity
XML conversion to csv or any other format and vice versa is complex. Key challenges involved are addressing all instruments, event types and trade statuses and making sure the mandatory and optional fields balance for each of the scenario is correct. Guideline document provides some examples but addressing all permutations and combinations is very complex.
Feedback from Trade Repositories:
As Trade repositories are mandated to send data in XML, you have to consider the data conversion from XML to CSV as well. This is not just one way conversion, but it is both ways and firm will need to understand ISO schemas in both directions. This conversion is necessary for you to build oversight for EMIR trade reporting.
Analytical Insights and Business Intelligence:
CSV format is widely used for data analysis and reporting purposes. By converting XML to CSV, financial institutions gain the ability to leverage a wide range of analytical tools, including spreadsheets, statistical software, and business intelligence platforms. These tools provide valuable insights into derivative transactions, risk management, compliance monitoring, and decision-making processes. The conversion process facilitates the utilisation of powerful analytical capabilities on EMIR REFIT data.
Conclusion:
The conversion between XML and CSV formats is a crucial step in ensuring compliance with EMIR REFIT requirements. Financial institutions rely on this conversion process to achieve data interoperability, facilitate regulatory reporting, implement data validation and quality control measures, integrate systems, and derive valuable insights from derivative transaction data. Firms doing manual reporting will need to rethink both aspects that is increased number of fields and the xml conversion as part of their post EMIR Refit operating model. The detailed options provided above will guide you in deciding on the approach. By understanding the significance of XML to CSV and vice versa, organisations can streamline their EMIR REFIT processes, enhance data management capabilities, improve regulatory reporting data quality, and meet regulatory obligations effectively.
For such detailed information and smooth conversion from XML to CSV Reg-X provides seamless and cutting-edge technology to achieve most efficient outcome.
Appendix:
FCA format specifications for EMIR Refit:
https://www.fca.org.uk/markets/uk-emir/reporting-obligation
If you want to discuss this or any other EMIR reporting topic to expedite your EMIR Refit efforts, schedule a 15-min call with us or email us at [email protected] to see how we can help.
