European Commission Adopts ISIN and RTS 23 Under MiFID II

The European Commission has adopted several technical standards of the Markets in Financial Instruments Directive (MiFID II), including RTS 23 (Regulatory Technical Standard), which deals with standards and formats for financial instrument reference data. 

The commission is in the process of finalizing level two texts of the regulation.

The initial version of the standards mandated the International Securities Identification Number (ISIN) for reporting under MiFID II, prompting some controversy. This mandate has been retained.

Some industry participants have stated the position that the ISIN is not fit for the purpose of reporting all financial instruments. The Open Symbology Group at data giant Bloomberg has developed what it says is an alternative, the non-proprietary Financial Instrument Global Identifier (FIGI).

Richard Young, head of regulatory and industry relations at the Open Symbology Group, says in a statement: "As we and industry bodies such as the International Swaps and Derivatives Association and Global Financial Markets Association have stressed before, the decision to mandate ISIN as the sole instrument identifier for MiFID II is unworkable as currently proposed. We are concerned that the technical limitations in the ISIN standard, and the governance and transparency issues surrounding the issuance of ISINs will pose substantial challenges for market participants.

"As a result of all these concerns, we recommend to authorize the use of other standards in addition to the ISIN. However, the statement of the European Commission in the adopted RTS fails to recognize that there are alternative, appropriate and proven standards, such as FIGI, which is a free, open source standard subject to well-established governance rules."

David Nowell, head of regulatory compliance and industry relations, UnaVista, London Stock Exchange (LSE) Group, welcomes the development.

"London Stock Exchange welcomes the European Commission's proposals to adopt the ISIN as the instrument identifier under MiFID II. The use of the ISIN and its accompanying Classification of Financial Instruments (CFI) code allows regulators to have both an identifier and associated instrument classification data," says Nowell.

The LSE Group has been involved in industry efforts to develop the ISIN for over-the-counter derivatives reporting. One proposed approach is to combine the ISIN with the CFI for more granular identification of an instrument.