Regulators Propose Rule to Establish Common Data Standards

Federal agencies proposed a rule to establish common data standards "to promote interoperability of financial regulatory data across these agencies." The rulemaking was required by the Financial Data Transparency Act of 2022 ("FDTA").

In the proposal, the agencies, including the OCC, the Federal Reserve, FDIC, NCUA, CFPB, FHFA, CFTC, SEC and the Treasury Department, said that final standards for certain collections of information would be adopted in separate rulemakings by the agencies. (See also, fact sheet). 

Under the proposed rule, the common standards would include:

• Common Identifiers related to entities, geographic locations, dates and products and currencies. The identifiers would be "non-proprietary ... available under an open license, and free of charge to any interested user." The agencies would establish a Legal Entity Identifier ("LEI") that unambiguously identifies a legal entity and would also establish the following common identifiers as joint standards: (i) Unique product identifier; (ii) Classification of financial instruments; (iii) Financial Instrument Global Identifier; (iv) Date and time format; (v) US Postal Service Abbreviations; (vi) Geopolitical Entities, Names, and Codes standard; and (vii) Currency Codes.
• A principles-based common standard with respect to transmitting and structuring data which would: (i) render data fully searchable and machine-readable; (ii) enable high-quality data through "schemas," with accompanying metadata clearly defining the semantic meaning of the data; (iii) ensure that data, that exists to satisfy an underlying regulatory information requirement, be consistently identified as such in machine-readable metadata; and (iv) be nonproprietary or available under an open license. The agencies noted that they could adopt new open-source file formats as they are developed without being required to amend the joint standards.

Comments will be due 60 days after the proposal's publication in the Federal Register. 

Statements

• SEC Chair Gary Gensler touted the proposal as making financial data collected by the agencies "more accessible, uniform, and useful to the public." 
• SEC Commissioner Mark T. Uyeda expressed concerns regarding the exclusive use of LEI because of the associated fees. He warned that while fees may be minimal to entities, "mandating payments to a private third party as a condition to satisfying legal requirements raises significant concerns – especially when such fees are not subject to approval by Congress or the Commission." He said the SEC should consider alternatives to requiring regulated entities to pay for something.
• SEC Commissioner Hester M. Peirce said the proposed rule "is a reasonable first step in the FDTA implementation journey," but requested answers to questions regarding (i) "the proposal's costs and benefits and the economic consequences of subsequent choices that individual agencies might make in their second phase rulemakings;" (ii) benefits and hurdles of financial data interoperability; (iii) the mandate of a common nonproprietary legal entity identifier; (iv) the proposal's mandate of the Financial Instrument Global Identifier and its omission of the Committee on Uniform Securities Identification Procedure; (v) striking the right balance regarding the scope of the data standards; and (vi) the tension between principles-based regulation and maintaining updated FDTA standards.