Direxion leaps across the Atlantic to test Europe's appetite for some of its leveraged funds, just when the SEC has put a temporary freeze on new geared funds in the U.S.
Direxion, an ETF provider specializing in inverse and leveraged securities, is now listing six of its existing ETFs on the NYSE Euronext’s
The Newton, Mass.-based firm, which always rolls out its funds in bull-and-bear pairs, is also listing two other pairs of ETFs in Amsterdam that are focused on large-cap and financial companies, respectively. One is based on the Russell 1000 Index and the other is based on the Russell 1000 Financial Services Index. These ETFs also offer investors triple exposure and its inverse.
Expanding to European markets could give Direxion additional momentum at an opportune time. It looks to be among the firms that will benefit from last week’s decision by the Securities and Exchange Commission to more closely examine the use of sophisticated financial tools, such as swaps, in actively managed and leveraged funds, including ETFs. The decision halts existing or planned filings to offer such ETFs until the SEC completes its review, but doesn’t affect products already being marketed.
“It’s a good, low-impact, way for us to get some exposure in Europe to see if there’s any interest in our products,” Direxion’s Director of Marketing Andy O’Rourke said in a telephone interview. O’Rourke says up until now, the only way for non-U.S. investors to trade Direxion products was with a brokerage account they had to open in the U.S.
The pairs of funds to be listed in Holland include the Direxion Daily Emerging Markets Bull 3x Shares (NYSE Euronext: EDC) and the Direxion Daily Emerging Markets Bear 3x Shares (NYSE Euronext: EDZ); the Direxion Daily Large Cap Bull 3x Shares (NYSE Euronext: BGU) and the Direxion Daily Large Cap Bear 3x Shares (NYSE Euronext: BGZ); and the Direxion Daily Financial Bull 3x Shares (NYSE Euronext: FAB) as well as the Direxion Daily Financial Bear 3x Shares (NYSE Euronext: FAZ).
All the funds already trade on the New York Stock Exchange and, with the exception of the bullish financial fund, have the same trading symbols as their U.S.-listed counterparts. The Direxion Daily Financial Bull 3x Shares trades on NYSE Arca using the symbol “FAS.”
Downplaying SEC’s Review
O’Rourke played down the potentially positive competitive advantages the SEC’s decision could have on companies like Direxion that are already offering leveraged ETFs, saying he didn’t think many players were rushing into the leveraged fund market to begin with.
He also noted that the SEC’s review will delay the potential approval of a filing Direxion made to get the go-ahead on a family of leveraged ETFs that would rebalance monthly instead of daily, as the company’s current ETFs do. While the company is known for its triple-exposure ETFs, the new family of proposed ETFs that are now on hold would offer investors double exposure and its inverse.
“I’d say it’s good for them to be looking at products that have caused some confusion. We would hope it doesn’t take too long. If it takes too long, it could hamper industry innovation,” O’Rourke said.
Direxion competes with firms such as ProShares and Rydex that also market leveraged and inverse funds.