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To configure the XML Parser options, open the Preferences dialog box (Options > Preferences) and go to XML > XML Parser.

The configurable options of the built-in XML parser are as follows:
Enable parser caching (validation and content completion)
Enables re-use of internal models when validating and provides content completion in open XML files that reference the same schemas (grammars) such as DTD, XML Schema, or RelaxNG.
Enable system parameter entity expansion in other entity definitions
This security setting controls the expansion of the DTD system parameter entities (the ones that are loaded from disk or from remote sources). This option is off by default, to protect against XXE attacks. If you enable it, make sure the XML files you are opening or processing with the application come from a trusted source.
Ignore the DTD for validation if a schema is specified
Forces validation against a referenced schema (XML Schema, Relax NG schema) even if the document includes also a DTD DOCTYPE declaration. This option is useful when the DTD declaration is used only to declare DTD entities and the schema reference is used for validation against an XML Schema or a Relax NG schema.
Note: Schematron schemas are treated as additional schemas. The validation of a document associated with a DTD and referencing a Schematron schema is executed against both the DTD and the Schematron schema, regardless of the value of the Ignore the DTD for validation if a schema is specified option.
Enable XInclude processing
Enables XInclude processing. If selected, the XInclude support in Oxygen XML Author is turned on for validation, rendering in Author mode and transformation of XML documents.
Base URI fix-up

According to the specification for XInclude, processors must add an @xml:base attribute to elements included from locations with a different base URI. Without these attributes, the resulting infoset information would be incorrect.

Unfortunately, these attributes make XInclude processing to not be transparent to Schema validation. One solution to this is to modify your schema to allow @xml:base attributes to appear on elements that might be included from different base URIs.

If the addition of @xml:base and / or @xml:lang is not desired by your application, you can deselect this option.

Language fix-up
The processor will preserve language information on a top-level included element by adding an @xml:lang attribute if its included parent has a different [language] property. If the addition of @xml:lang is not allowed by your application, you can deselect this option.
DTD post-validation
Select this option to validate an XML file against the associated DTD, after all the content merged to the current XML file using XInclude was resolved. If you deselect this option, the current XML file is validated against the associated DTD before all the content merged to the current XML file using XInclude is resolved.