SEC Comment Letter 0000000000-23-004718 to Direxion Shares ETF Trust (CIK 0001424958)
Direxion Shares ETF Trust (CIK 0001424958)
Date: May 5, 2023 · CIK: 0001424958 · Accession: 0000000000-23-004718
AI Filing Summary & Sentiment
File numbers found in text: 333-150525, 811-22201
Letter
May 5, 2023 Stacy L. Fuller K&L Gates LLP 1601 K St NW #1 Washington, DC 20006 Re: Direxion Shares ETF Trust File Nos. 333-150525 and 811-22201 Dear Ms. Fuller: On April 11, 2023, Direxion Shares ETF Trust (the “Trust”) filed Post-Effective Amendment No. 391 to the Trust’s Registration Statement on Form N-1A pursuant to Rule 485(a) under the Securities Act of 1933 and Ame ndment No. 393 to the Registration Statement under the Investment Company Act of 1940 (the “Act ”) to register shares of the Direxion Daily Bitcoin Strategy Bull 2X ETF (the “Fund”).
We have the following initial comments. Please note that we will have additional comments that will be communicated in a subsequent letter. 1. Please explain in greater detail to the staff how the Fund intends to obtain the targeted 2x exposure. Does the Fund intend to do that sole ly via investment in U.S. exchange-traded bitcoin futures (“bitcoin futures”) through th e commodity subsidiary? In your explanation to the staff, please discuss the impact of high margin requirements associated with bitcoin futures on the Fund’s ability to obtain the targ eted 2x exposure via investments in bitcoin futures. 2. Please describe how you would expect the Fund to perform during significant daily downturns in the price of bitcoin and bitcoin futures, such as June 13, 2022 and November 8 and 9, 2022. a. Would such price changes impact the F und’s operations, including the Fund’s creation process and/or its ability to meet its investment objective and execute on its principal strategies? b. Would margin requirements during the mont hs of June and November 2022 have prevented the Fund from carrying out its strategy? c. What would you expect to occur in terms of discounts or premiums in response to significant changes in secondary market demand for Fund shares? For example, describe the potential impact on the Fund ’s premium (or discount) if a large number of investors ( e.g. more than 50% of net assets) were to buy (or sell) shares.
Stacy L. Fuller K&L Gates LLP May 5, 2023 Page 2 of 2
d. Describe any mismatch between the Fund’ s holdings and the construct of the index it tracks that could occur during such extreme price changes. 3. Please provide simulated performance for a hypothetical $10,000 invested in the Fund on Jan. 1 through Dec. 31, 2022. Please include projected daily, weekly, monthly, and annual performance data fo r the simulated period. 4. Please provide a VaR calculation as require d under rule 18f-4 under the Act for the simulated portfolio for each day in the mont hs of June and November 2022. Also include the same calculation for the index the Fund tracks.
*** Please provide a response letter in the form of EDGAR correspondence (with a courtesy email copy to the staff) as soon as practicable. We remind you that the Fund and its management are responsible for the accuracy and adequacy of th eir disclosures, notwithstanding any review, comments, action, or absence of action by the staff. Should you have any questions, please feel free to contact me at 617-573-4521 or worthingtonti@sec.gov.
Sincerely, /s/ Timothy Worthington
Timothy Worthington Attorney Advisor
cc: Andrea Ottomanelli Magove rn, Assistant Director
Asen Parachkevov, Branch Chief
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May 5, 2023 Stacy L. Fuller K&L Gates LLP 1601 K St NW #1 Washington, DC 20006 Re: Direxion Shares ETF Trust File Nos. 333-150525 and 811-22201 Dear Ms. Fuller: On April 11, 2023, Direxion Shares ETF Trust (the “Trust”) filed Post-Effective Amendment No. 391 to the Trust’s Registration Statement on Form N-1A pursuant to Rule 485(a) under the Securities Act of 1933 and Ame ndment No. 393 to the Registration Statement under the Investment Company Act of 1940 (the “Act ”) to register shares of the Direxion Daily Bitcoin Strategy Bull 2X ETF (the “Fund”). We have the following initial comments. Please note that we will have additional comments that will be communicated in a subsequent letter. 1. Please explain in greater detail to the staff how the Fund intends to obtain the targeted 2x exposure. Does the Fund intend to do that sole ly via investment in U.S. exchange-traded bitcoin futures (“bitcoin futures”) through th e commodity subsidiary? In your explanation to the staff, please discuss the impact of high margin requirements associated with bitcoin futures on the Fund’s ability to obtain the targ eted 2x exposure via investments in bitcoin futures. 2. Please describe how you would expect the Fund to perform during significant daily downturns in the price of bitcoin and bitcoin futures, such as June 13, 2022 and November 8 and 9, 2022. a. Would such price changes impact the F und’s operations, including the Fund’s creation process and/or its ability to meet its investment objective and execute on its principal strategies? b. Would margin requirements during the mont hs of June and November 2022 have prevented the Fund from carrying out its strategy? c. What would you expect to occur in terms of discounts or premiums in response to significant changes in secondary market demand for Fund shares? For example, describe the potential impact on the Fund ’s premium (or discount) if a large number of investors ( e.g. more than 50% of net assets) were to buy (or sell) shares. Stacy L. Fuller K&L Gates LLP May 5, 2023 Page 2 of 2 d. Describe any mismatch between the Fund’ s holdings and the construct of the index it tracks that could occur during such extreme price changes. 3. Please provide simulated performance for a hypothetical $10,000 invested in the Fund on Jan. 1 through Dec. 31, 2022. Please include projected daily, weekly, monthly, and annual performance data fo r the simulated period. 4. Please provide a VaR calculation as require d under rule 18f-4 under the Act for the simulated portfolio for each day in the mont hs of June and November 2022. Also include the same calculation for the index the Fund tracks. *** Please provide a response letter in the form of EDGAR correspondence (with a courtesy email copy to the staff) as soon as practicable. We remind you that the Fund and its management are responsible for the accuracy and adequacy of th eir disclosures, notwithstanding any review, comments, action, or absence of action by the staff. Should you have any questions, please feel free to contact me at 617-573-4521 or worthingtonti@sec.gov. Sincerely, /s/ Timothy Worthington Timothy Worthington Attorney Advisor cc: Andrea Ottomanelli Magove rn, Assistant Director Asen Parachkevov, Branch Chief