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6184. Transactions in Exchange-Traded Managed Fund Shares ("NextShares")

(a) Members that effect secondary market transactions otherwise than on an exchange in exchange-traded managed fund shares or "NextShares," as defined under Nasdaq Rule 5745, must report such transactions to a FINRA/Nasdaq Trade Reporting Facility or the Alternative Display Facility in accordance with this Rule and the rules applicable to the trade reporting facility used by the reporting member. Such transactions cannot be reported to the FINRA/NYSE Trade Reporting Facility. As used in this Rule 6184, the term "FINRA/Nasdaq Trade Reporting Facility" means the FINRA/Nasdaq Trade Reporting Facility Carteret or the FINRA/Nasdaq Trade Reporting Facility Chicago, as applicable, depending on the facility to which the member elects to report.
(b) Reports of transactions in NextShares executed outside of Regular Market Session hours, in violation of Nasdaq Rule 5745, will be rejected by the FINRA trade reporting facility to which the trade report was submitted. "Regular Market Session" for purposes of this Rule shall have the meaning set forth under Nasdaq Rule 4120(b)(4).
(c) Except as otherwise provided in paragraph (d) of this Rule, members must use the "proxy price" format established by Nasdaq, and not the final trade price, on all reports of transactions in NextShares submitted to FINRA, including all tape and non-tape reports, intraday clearing reports, as/of reports and reports of reversals.
(d) Submission of Transactions in NextShares for Clearing
(1) Transactions in NextShares can only be designated for submission by FINRA to the National Securities Clearing Corporation ("NSCC") for clearance and settlement through the FINRA/Nasdaq Trade Reporting Facility. The Alternative Display Facility does not accept such transactions for clearing purposes. Members that do not clear through the FINRA/Nasdaq Trade Reporting Facility must have an alternative means of clearing (e.g., via direct Qualified Special Representative ("QSR") submission to NSCC) such transactions.
(2) Where a member submits a transaction in NextShares for submission by the FINRA/Nasdaq Trade Reporting Facility to NSCC, the following requirements apply:
(A) For each transaction, members must submit two clearing reports to the FINRA/Nasdaq Trade Reporting Facility. First, the member must submit a clearing report intraday in the proxy price format in accordance with paragraph (c) of this Rule. Second, following publication of the NextShares Fund's net asset value per share ("NAV"), the member must submit a separate "Clearing Copy" report in accordance with paragraph (d)(2)(B) to reflect the final NAV-based trade price.
(B) Reporting the Final NAV-Based Trade Price
(i) Members must submit a separate clearing-only report for the transaction (a "Clearing Copy" report) with the final NAV-based trade price before the close of the FINRA/Nasdaq Trade Reporting Facility on the same day as submission of the transaction in the proxy price format.
(ii) Clearing Copy reports should only be submitted to the FINRA/Nasdaq Trade Reporting Facility if the transaction was originally reported in the proxy price format to the FINRA/Nasdaq Trade Reporting Facility.
(iii) Multiple transactions reported in the proxy price format cannot be aggregated and submitted in a single Clearing Copy report.
(iv) Clearing Copy reports must contain (1) the unique indicator specified by FINRA to denote a Clearing Copy report; and (2) the control number of the original transaction report assigned by the FINRA/Nasdaq Trade Reporting Facility.
(v) Following submission of the Clearing Copy report, the member is not required to cancel the initial clearing submission for the transaction in the proxy price format.
(C) Clearing reports for the purpose of transferring a position related to a previously executed trade, such as step-outs, must reflect the final NAV-based trade price, if submitted after publication of the NAV. Such reports shall not be "Clearing Copy" reports, as described in paragraph (d)(2)(B).

• • • Supplementary Material: --------------

.01 Proxy Price Format

As provided under Nasdaq Rule 5745, NextShares will trade at market-based premiums or discounts to the fund's next-determined NAV. Because the NAV is not determined until after the market closes, the final NAV-based trade price will not be known at the time of trade execution. Accordingly, pursuant to paragraph (c) of this Rule, when reporting transactions in NextShares to FINRA, members are required to use the "proxy price" format established by Nasdaq to reflect the trade price. In proxy price format, a NextShares Fund's next-determined NAV is represented as 100.00 and a premium or discount of a stated amount to the next-determined NAV is represented by the same increment or decrement from 100.00. For example, NAV-$0.01 will be reported as 99.99 and NAV+$0.01 will be reported as 100.01. The securities information processor will publicly disseminate trades in the proxy price format. Thus, all transactions reported to FINRA for publication purposes must reflect the trade price in the proxy price format, in accordance with paragraph (c) of this Rule, even if the final NAV-based trade price is known at the time of submission (e.g., trades reported on an as/of basis).

Transactions that are designated for submission by the FINRA/Nasdaq Trade Reporting Facility to NSCC must be reported for clearing purposes both intraday in the proxy price format (even if the final NAV-based trade price is known at the time of submission, e.g., trades reported on an as/of basis) and at the final NAV-based trade price. However, transactions will not be submitted by the FINRA/Nasdaq Trade Reporting Facility to NSCC in the proxy price format. Rather, the FINRA/Nasdaq Trade Reporting Facility will calculate the contract price of the trade based on the fund's last published Intraday Indicative Value ("IIV"), as defined under Nasdaq Rule 5745, and submit the transaction in real-time to NSCC for purposes of intraday risk management. Transactions will not clear and settle at the price reported in the proxy price format or the IIV-based price, but instead at the final NAV-based trade price submitted by the reporting member in accordance with paragraph (d)(2)(B) of this Rule.

.02 End of Day Processing

Members that clear transactions in NextShares directly at NSCC, e.g., via direct QSR submission, must ensure that they submit to NSCC all pricing information, including the IIV-based price on intraday submissions and the final NAV-based trade price after market close, in accordance with NSCC requirements; such information will not be provided to NSCC by FINRA.

Following publication of the NAV, the FINRA/Nasdaq Trade Reporting Facility will make available to market participants a daily file with the final NAV-based trade price for each transaction in NextShares reported during the trading day to the FINRA/Nasdaq Trade Reporting Facility for public dissemination purposes.

Amended by SR-FINRA-2018-013.
Amended by SR-FINRA-2016-012 eff. April 4, 2016.
Adopted by SR-FINRA-2015-043, eff. Feb. 26, 2016.

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