Most shape memory alloys (SMAs) used in real applications are polycrystals. Recent experiments on the mechanical response of nano-grained polycrystalline NiTi SMA in small tube configuration revealed many interesting phenomena such as dynamic formation, self-merging, topology transition and front instability of a macroscopic deformation domain. In this talk, I will first present the observed experimental phenomena about instability, domain pattern and hysteresis of this material in the microtubing configuration. Then, theoretical modelling and nonlocal FEM simulation results on the deformation pattern evolution are presented. The possible physical origin of the resulting stress hysteresis during solid-solid martensitic type phase transition as well as its grain size dependence are explored. The computational results captured many important quantitative features of the experimental observations.