557. As established under EMIR, ESMA proposed in the Consultation Paper that the format and encoding of data files which are exchanged for the purposes of the inter-TR reconciliation between the TRs should be the same. Furthermore, with regards to establishing common format and encoding of the data files exchanged between the TRs for the reconciliation of derivative data reported to two TRs, ESMA proposed the use of an ISO 20022 XSD containing a subset of all the reportable fields, and to include additional technical fields to facilitate the analysis of the data

558. Given that the submission to the TRs will be made in ISO 20022 XSD and the provision of data to authorities will be instrumented in a similar fashion, ESMA indicated in the Consultation Paper that the use of ISO 20022 XSD for the inter-TR reconciliation will further enhance the process from compatibility perspective and will reduce any potential data transformation issues that might affect the quality of the data or otherwise hinder the process. The use of common XSD will ensure high-quality data and reduce the risk related to non-reconciling records where the counterparties have reported identical data, but where the data transformations at the TR level led to differences. ESMA considers that the relevant cost impact to TRs will be significantly reduced given that they will be implementing ISO 20022 XSD processing at the counterparty reporting level and at the regulatory reporting level.

559. One respondent proposed to make XSD backward compatible in order to ensure that the trade state of the previously reported derivatives can be included. ESMA agrees with this proposal.