Navigating the Future of Financial Data: FDTA First Round Rulemaking

In early August, a significant milestone was reached in the journey towards modernizing financial data reporting. Multiple federal financial agencies collectively issued the first round of rulemaking under the Financial Data Transparency Act (FDTA). This proposed joint rule sets the stage for new technical standards that will guide how financial data is submitted to various federal regulatory agencies.

The FDTA, enacted as part of the 2022 National Defense Authorization Act, aims to revolutionize the way financial data is collected and shared by federal regulators. A key aspect of this modernization is the mandate for data submissions to be in a machine-readable format, enhancing transparency and accessibility, but also creating some worry concerning future compliance.

For municipal securities issuers, this development is particularly noteworthy. The U.S. Securities and Exchange Commission (SEC) is now required to establish data standards for information provided to the Municipal Securities Rulemaking Board (MSRB). This includes the primary and continuing disclosures that state and local governments submit to the MSRB’s Electronic Municipal Market Access (EMMA) platform, such as annual comprehensive financial reports.

However, the specifics of how these new standards will affect municipal market information hinge on the SEC's incorporation of the joint rule into its own regulatory framework. The recently proposed joint standards are the first step in this process, aiming to promote interoperability of financial data across agencies by standardizing identifiers for entities, locations, dates, products, and currencies.

The proposed identifiers include:

·???????? ISO 4914 – Unique product identifier (UPI)

·???????? ISO 10962 – Classification of financial instruments (CFI) code

·???????? Financial Instrument Global Identifier (FIGI) – Established by the Object Management Group

·???????? ISO 8601 – Date and time format

·???????? U.S. Postal Service Abbreviations – As outlined in Postal Addressing Standards

·???????? Geopolitical Entities, Names, and Codes (GENC) – Country codes

·???????? ISO 4217 – Currency codes

Additionally, the rule establishes the “Legal Entity Identifier (LEI)” as a global standard for uniquely identifying legal entities, further underscoring the move towards uniformity and clarity in financial data.

While the joint proposal outlines these identifiers and suggests a framework for data structuring and formatting, it stops short of prescribing a specific data schema or taxonomy. Instead, it emphasizes that the schema should be:

·???????? Fully searchable and machine-readable

·???????? Capable of enabling high-quality data through well-defined schemas and metadata

·???????? Consistently identifying regulatory information in machine-readable metadata

·???????? Nonproprietary or openly licensed

It's important to note that the joint rule has not yet been published for public comment in the Federal Register. The next steps will involve agency-specific rules that will incorporate these standards and more clearly define what will be expected of state and local governments providing information to EMMA – stay tuned for that update.

The issuance of these standards marks a significant step towards a future where financial data is more transparent, accessible, and interoperable - SEC Fact Sheet: https://www.sec.gov/files/33-11295-fact-sheet.pdf