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Thursday, July 2, 2015

UTP Vendor Alert #2015 - 10
UTP SIP Will Revise Issue Symbol Directory Message to Support Exchange Traded Managed Funds

Markets Impacted:

Products Impacted:

Contact Information:

What you need to know:

  • At a recent meeting, the UTP Operating Committee (UTPOC) voted to modify the Issue Symbol Directory message format to support Exchange Traded Managed Funds (ETMFs).
  • In accordance with the vote, the UTP Securities Information Processor (UTP SIP) will update the Issue Symbol Directory message format to add a two-byte Issue Sub-Type field. Within the new Issue Sub-type field, ETMFs will be identified by the code “EM”.
  • The UTP SIP is currently working with Nasdaq and the other UTP participants to confirm the testing and implementation schedule for the Issue Symbol Directory release.

What is changing?

At the request of the UTP Operating Committee (UTPOC), the UTP Securities Information Processor (UTP SIP) will append the Issue Symbol Directory to support a two-byte Issue Sub-Type field. The Issue Sub-Type field will be added at the end of existing Category A – Type B message format in the 4th Quarter of 2015. The Issue Symbol Directory message is supported on UQDF, UTDF and OMDF.

The Issue Sub-Type field will be used to provide instrument details. The Issue Sub-Type code of “EM” will be used to denote an ETMF instrument.

The UTP specifications with the updated Issue Symbol Directory message format are located on the UTP Technical Specifications webpage.

What is an Exchange Trade Mutual Fund (ETMF)?

Approved by the SEC in November 2014, ETMFs are new Nasdaq-listed instruments that combine features of open-end mutual funds and exchange- traded funds (ETFs). ETMFs will trade on Nasdaq using a new trading protocol called ‘‘NAV-Based Trading.’’ In NAV-Based Trading, all bids, offers, and execution prices will be expressed as a premium/discount (which may be zero) to the ETMF’s next-determined net asset value (NAV). Executions using NAV-Based Trading will be binding at the time orders are matched on Nasdaq’s facilities, with the transaction prices contingent upon the determination of the ETMF’s NAV at the end of the business day.

To address format limitations for order and trade systems, Nasdaq will represent that ETMF’s next-determined NAV via a proxy price (e.g., $100.00) and a premium/discount of a stated amount to the next-determined NAV. This will be represented by the same increment/decrement from the proxy price used to denote NAV (e.g., NAV-$0.01 would be represented as $99.99; NAV+$0.01 as $100.01).

The UTP SIP will disseminate all ETMF data elements, including quotations, trades and Limit Up Limit Down (LULD) price bands in proxy price format only. Under Regulation NMS rules, all UTP participants will have the option to quote and trade ETMFs.

Where can I find Additional Information on ETMF's?

Nasdaq has created an ETMF product page on the Nasdaq Trader website with additional information.

Will there be testing opportunities?

As is the normal process, the UTP SIP plans to offer evening format and Saturday testing opportunities for UQDF, OMDF and UTDF data feed subscribers prior to release to ensure that firms can process the new Issue Symbol Directory message format. Once the UTP SIP confirms its testing and release schedule with the UTP participants, it will post a follow up notice with the dates.

Where can I find Additional Information?