As filed with the Securities and Exchange Commission on December 15, 2017
1933 Act File No. 333-150525
1940 Act File No. 811-22201
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20543
FORM N-1A
REGISTRATION STATEMENT
UNDER
| THE SECURITIES ACT OF 1933 | ||
| Pre-Effective Amendment No. | ||
| Post-Effective Amendment No. 201 |
and/or
REGISTRATION STATEMENT
UNDER
| THE INVESTMENT COMPANY ACT OF 1940 | ||
| Amendment No. 203 |
(Check appropriate box or boxes.)
DIREXION SHARES ETF TRUST
(Exact name of Registrant as Specified in Charter)
1301 Avenue of the Americas (6th Avenue), 28th Floor
New York, New York 10019
(Address of Principal Executive Office) (Zip Code)
Registrant’s Telephone Number, including Area Code: (646) 572-3390
Daniel D. O’Neill, Chief Executive Officer
1301 Avenue of the Americas (6th Avenue), 28th Floor
New York, New York 10019
(Name and Address of Agent for Service)
Copy to:
Angela Brickl Rafferty Asset Management, LLC 1301 Avenue of the Americas (6th Avenue) 28th Floor New York, New York 10019 | Stacy L. Fuller K&L Gates LLP 1601 K Street, NW Washington, DC 20006 |
It is proposed that this filing will become effective (check appropriate box)
| ☐ | immediately upon filing pursuant to paragraph (b) |
| ☐ | On (date) pursuant to paragraph (b) |
| ☐ | 60 days after filing pursuant to paragraph (a)(1) |
| ☐ | On (date) pursuant to paragraph (a)(1) |
| ☒ | 75 days after filing pursuant to paragraph (a)(2) |
| ☐ | on (date) pursuant to paragraph (a)(2) of Rule 485. |
If appropriate, check the following box:
| ☐ | This post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
DIREXION SHARES ETF TRUST
CONTENTS OF REGISTRATION STATEMENT
This registration document is comprised of the following:
Cover Sheet;
Contents of Registration Statement:
Prospectus and Statement of Additional Information for the Direxion Bitcoin ETF;
Part C of Form N-1A; and
Signature Page.
The information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated December 15, 2017
Direxion Shares ETF Trust
| 1301 Avenue of the Americas (6th Avenue), 28th Floor | New York, New York 10019 | (866) 476-7523 |
www.direxioninvestments.com
Direxion Bitcoin ETF ([ ])
The shares offered in this prospectus (the “Fund”), upon commencement of operations, will be listed and traded on the NYSE Arca, Inc. The Fund is an actively managed exchange-traded fund.
These securities have not been approved or disapproved by the U.S. Securities and Exchange Commission (“SEC”) or the U.S. Commodity Futures Trading Commission (“CFTC”), nor have the SEC or CFTC passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
The Direxion Bitcoin ETF (the “Fund”) seeks to provide total return that exceeds that of bitcoin futures contracts (the “Bitcoin Futures Contracts”) over a complete market cycle.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy or hold shares of the Fund (“Shares”). Investors purchasing Shares in the secondary market may pay costs (including customary brokerage commissions) charged by their broker.
Annual Fund Operating Expenses
| Management Fees | [ ]% |
| Distribution and/or Service (12b-1) Fees | [ ]% |
| Other Expenses of the Fund(1) | [ ]% |
| Acquired Fund Fees and Expenses(1) | [ ]% |
| Total Annual Fund Operating Expenses | [ ]% |
| Expense Cap/Reimbursement(2) | [ ]% |
| Total Annual Fund Operating Expenses After Expense Cap/Reimbursement | [ ]% |
| (1) | Estimated for the Fund's current fiscal year. |
| (2) | Rafferty Asset Management, LLC (“Rafferty” or the “Adviser”) has entered into an Operating Expense Limitation Agreement with the Fund. Under the Operating Expense Limitation Agreement, Rafferty has contractually agreed to cap all or a portion of its management fee and/or reimburse the Fund for Other Expenses through [September 1], 2019, to the extent that the Fund’s Total Annual Fund Operating Expenses exceed [ ]% of the Fund’s daily net assets (excluding, as applicable, among other expenses, taxes, swap financing and related costs, acquired fund fees and expenses, dividends or interest on short positions, other interest expenses, brokerage commissions and extraordinary expenses). |
| Any expense cap is subject to recoupment by the Adviser within the following three years only if overall expenses fall below these percentage limitations. This agreement may be terminated or revised at any time with the consent of the Board of Trustees. |
Example -
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A
higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example, affect the Fund’s performance.
Principal Investment Strategy
The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to provide total return that exceeds that of bitcoin futures contracts over a complete market cycle. The Fund will generally seek to achieve its investment objective by investing, under normal circumstances, in bitcoin futures contracts traded on the CME and/or CBOE futures exchanges and swaps on bitcoin futures contracts that trade on the CME and/or CBOE future exchanges (the “Bitcoin Futures Contracts”). The Fund attempts to exceed the return of the Bitcoin Futures Contracts through the active management of a portfolio of Treasury bills, other government securities, money market funds, cash, other short-term bond funds, highly rated corporate or other non-government fixed-income securities, with maturities of up to 12 months. The Fund is an actively managed ETF that does not seek to replicate the performance of a specified index.
Bitcoin is a cryptocurrency and a peer-to-peer payment system. It is a digital asset that is not issued by any government, bank or organization and instead is based on the decentralized, open source protocol of the peer-to-peer bitcoin computer network (the “Bitcoin Network”). No single entity owns or operates the Bitcoin Network; the infrastructure is collectively maintained by a decentralized user base. The Bitcoin Network is accessed through software, and software governs bitcoin’s creation, movement/transfer, and ownership. The value of bitcoin is determined by the supply and demand for bitcoin on websites that facilitate the transfer of bitcoin in exchange for government-issued currencies (“Bitcoin Exchanges”), and in private end-user-to-end-user transactions.
Bitcoin transactions and ownership records are reflected on the “Blockchain,” which is a digital public record or ledger. The Blockchain is stored on the computers of each Bitcoin Network user. Transaction information is permanently recorded in files called “blocks,” which reflect transactions that have been recorded and authenticated by Bitcoin Network participants. The Bitcoin Network software source codes includes protocols that govern the creation of bitcoin and the cryptographic system that secures and verifies bitcoin transactions.
The CME bitcoin futures contracts are agreements between two parties where one party agrees to buy and the other party to sell a set amount of bitcoin (5 bitcoin) at a pre-determined future date and price. The value of the CME bitcoin futures contracts are based on the CME CF Bitcoin Reference Rate (BRR), which aggregates bitcoin trading activity across major bitcoin spot exchanges each weekday between 3:00 pm and 4:00 pm London time. The CME bitcoin futures contracts will list, trade and be cleared on CME, a
| 1 | Direxion Shares ETF Trust Prospectus |
U.S.-registered designated contract market and derivatives clearing organization.
The CBOE bitcoin futures contracts are agreements between two parties where one party agrees to buy and the other party to sell a set amount of bitcoin (1 bitcoin) at a pre-determined future date and price. The value of the CME bitcoin futures contracts are determined by the Gemini Exchange Auction conducted by the Gemini Exchange each weekday as of 4:00 p.m. Eastern time. The CBOE bitcoin futures contracts will list, trade and be cleared on CBOE, a U.S.-registered designated contract market and derivatives clearing organization.
The trading and clearing of Bitcoin Futures Contracts is regulated by the Commodity Futures Trading Commission (the “CFTC”). Rafferty will replace each expiring Bitcoin Futures Contract based on an optimization process that selects a contract from the universe of bitcoin exchange-traded futures contracts within the next 13 month period. Bitcoin futures contracts are subject to position limits, which limit the total number of bitcoin futures contracts that may be held by an entity, including the Fund. Additionally, Bitcoin Futures Contracts are subject to daily price fluctuation limits on any given business day ( any date that the CME and CBOE is open for trading).
The Fund utilizes a subsidiary (the “Subsidiary”) for purposes of investing in Bitcoin Futures Contracts. The Subsidiary is a limited partnership operating under Cayman Islands law and is wholly-owned and controlled by the Fund and is advised by the Adviser. The Adviser will use its discretion to determine how much of the Fund’s total assets to invest in the Subsidiary and may invest up to 25% of the Fund’s assets in the Subsidiary. The Fund’s investment in the Subsidiary is expected to provide the Fund with exposure to commodity futures contract returns within the limits of the federal tax laws, which limit the ability of investment companies such as the Fund to invest directly in such instruments. The Subsidiary has the same investment objective as the Fund and will follow the same general investment policies and restrictions. Except as noted, for purposes of this Prospectus, references to the Fund’s investment strategy and risks include those of its Subsidiary.
Although the Fund, through the Subsidiary, will invest in Bitcoin Futures Contracts, the Fund and the Subsidiary will be actively managed and will not be required to invest in all, or limit, their investments solely to Bitcoin Futures Contracts. After investing in the Subsidiary, the Fund seeks to exceed the performance of the Bitcoin Futures Contracts by investing its remaining assets directly in cash, Treasury bills, other government securities, money market funds, other short-term bond funds, highly-rated corporate or other non-government fixed-income securities, with maturities of up to 12 months that provide liquidity and have differing maturity rates. The Fund will hold such fixed income instruments directly, whereas the Subsidiary will hold commodity futures contracts, as well as short-term fixed income instruments and cash directly.
The Fund is “non-diversified,” meaning that a relatively high percentage of its assets may be invested in a limited number
of issuers of securities. References to the Fund include the Subsidiary.
The CFTC has adopted certain requirements that subject registered investment companies and their advisors to regulation by the CFTC if a registered investment company invests more than a prescribed level of its net assets in CFTC-regulated futures, options and swaps, or if a registered investment company markets itself as providing investment exposure to such instruments. Due to the Fund’s potential use of CFTC-regulated futures and swaps above the prescribed levels, it is considered a “commodity pool” under the Commodity Exchange Act.
Principal Investment Risks
An investment in the Fund entails risk. The Fund may not achieve its investment objective and there is a risk that you could lose all or a portion of your money invested in the Fund. The Fund should not be relied upon as a complete investment program. In addition, the Fund presents some risks not traditionally associated with most mutual funds and ETFs. It is important that investors closely review all of the risks listed below and understand how these risks interrelate before making an investment in the Fund.
Futures Strategy Risk —
As a futures contract approaches its settlement date, the Fund may sell futures contracts and replace the position with a similar contract with a more distant settlement date. This process is referred to as “rolling” a futures contract. The successful use of such a strategy depends upon the Adviser’s skill and experience. Although the Fund will attempt to roll from an expiring futures contract to another contract that the Adviser believes will generate the greatest yield for the Fund, the Fund nevertheless may endure a cost to “roll” the contracts. In the event of a commodity futures market where near month contracts to expire trade at a higher price than the next expiring month contract, a situation referred to as “backwardation,” then absent the impact of the overall movement in commodity prices, the Fund may benefit because it would be selling more expensive contracts and buying less expense contracts when it “rolls” the futures contracts. Conversely, in the event of a commodity futures market where near month contracts trade at a lower price than next expiring month contract, a situation referred
| Direxion Shares ETF Trust Prospectus | 2 |
to as “contango,” then absent the impact of the overall movement in commodity prices, the Fund may experience an adverse impact because it would be selling less expensive contracts and buying more expense contracts. The impact of backwardation and contango may cause the total return of the Fund to vary significantly from the total return of other price references. In the event of a prolonged period of contango, and absent the impact of rising or falling commodity prices, there could be a significant negative impact on the Fund when it “rolls” its futures contract positions.
Bitcoin Futures Market Risk —
Gap Risk —
Bitcoin Investing Risk
| • | Bitcoin is a new technological innovation with a limited history. Investing in bitcoin is speculative and there is no |
| assurance that usage of bitcoin will continue to grow. A contraction in use of bitcoin may result in increased volatility or a reduction in the price of bitcoin, which could adversely impact the value of the Fund. Bitcoin was invented in 2009; the asset, bitcoin, and its trading history thus have existed for a relatively short time, which limits a potential shareholder’s ability to evaluate an investment in the Fund. | |
| • | Bitcoin trading prices are volatile and shareholders could lose all, or substantially all, of their investment in the Fund. Speculators and investors who seek to profit from trading and holding bitcoin generate a significant portion of bitcoin demand. Bitcoin speculation regarding future appreciation in the value of bitcoin may inflate and make the price of bitcoin more volatile. As a result, bitcoin may be more likely to fluctuate in value due to changing investor confidence in future appreciation in the price of bitcoin. |
| • | A decline in the adoption, use or demand of bitcoin could negatively impact the performance of the Fund. As a new asset and technological innovation, the Bitcoin industry is subject to a high degree of uncertainty. The viability of bitcoin will require growth in its usage and in the blockchain, for various applications and an accommodating regulatory environment. A lack of expansion or a contraction in the usage of bitcoin and the blockchain could adversely affect an investment in the Shares. In addition, there is no assurance that bitcoin will maintain its value over the long-term. The value of bitcoin is subject to risks related to its usage. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term. A contraction in use of bitcoin may result in increased volatility or a reduction in the price of bitcoin, which would adversely impact the value of the Shares. |
| • | Regulation of bitcoin continues to evolve in both the U.S. and foreign jurisdictions, which may restrict the use of bitcoin or otherwise impact the demand for bitcoin. Both domestic and foreign regulators and governments have focused on regulation of bitcoin. In the United States, bitcoin is regulated by both federal and state authorities, depending on the context of its usage. Bitcoin market disruptions and resulting governmental interventions are unpredictable, and may make bitcoin illegal altogether. Future foreign regulations and directives may conflict with those in the United States, and such regulatory actions may restrict or make bitcoin illegal in foreign jurisdictions. Future regulations and directives in regulation may impact the demand for bitcoin, and may also affect the ability of bitcoin exchanges to operate and for other market participants to enter into bitcoin transactions. To the extent that future regulatory actions or policies limit or restrict bitcoin usage, bitcoin trading or the ability to convert bitcoin to government currencies, the demand for bitcoin may be reduced, which may adversely affect investment in the Shares. Regulation of bitcoin continues to evolve, the ultimate impact of which remains unclear and may adversely affect, among other things, the availability, value or performance of bitcoin and, thus, the bitcoin futures contracts, swap contracts and other derivatives in which the Fund invests. Moreover, in addition to exposing the |
| 3 | Direxion Shares ETF Trust Prospectus |
| Fund to potential new costs and expenses, additional regulation or changes to existing regulation may also require changes to the Fund’s investment strategies. Although there continues to be uncertainty about the full impact of these and other regulatory changes, it is the case that the Fund may be subject to a more complex regulatory framework, and incur additional costs to comply with new requirements as well as to monitor for compliance with any new requirements going forward. | |
| • | Newly created bitcoin are generated through a process referred to as “mining,” and such bitcoin are referred to as “newly mined bitcoin.” Approximately 1,800 newly mined bitcoin are created each day. If entities engaged in bitcoin mining choose not to hold the newly mined bitcoin, and, instead, make them available for sale, there can be downward pressure on the price of bitcoin which could negatively affect an investment in the Fund. A bitcoin mining operation may be more likely to sell a higher percentage of its newly created bitcoin, and more rapidly so, if it is operating at a low profit margin, thus reducing the price of bitcoin. Lower bitcoin prices may result in further tightening of profit margins for miners and worsening profitability, thereby potentially causing even further selling pressure. Decreasing profit margins and increasing sales of newly mined bitcoin could result in a reduction in the price of bitcoin, which could adversely impact an investment in the Fund. |
| • | Disruptions at bitcoin exchanges and potential consequences of a bitcoin exchange’s failure could adversely affect an investment in the Fund. Bitcoin exchanges operate websites on which users can trade bitcoin for U.S. dollars, other government currencies or other digital assets. Trades on bitcoin exchanges are unrelated to transfers of bitcoin between users via the Bitcoin Network. Bitcoin trades on bitcoin exchanges are recorded on the bitcoin exchange’s internal ledger only, and each internal ledger entry for a trade will correspond to an entry for an offsetting trade in U.S. dollars, other government currency or other digital asset. To sell bitcoin on a bitcoin exchange, a user will transfer bitcoin (using the Bitcoin Network) from him or herself to the bitcoin exchange. Conversely, to buy bitcoin on a bitcoin exchange, a user will transfer U.S. dollars, other government currency or other digital assets to the bitcoin exchange. After completing the transfer of bitcoin or U.S. dollars, the user will execute his or her trade and withdraw either the bitcoin (using the Bitcoin Network) or the U.S. dollars back to the user. Bitcoin exchanges are an important part of the Bitcoin industry. Bitcoin exchanges have a limited history. Since 2009, several bitcoin exchanges have been closed or experienced disruptions due to fraud, failure, security breaches or distributed denial of service attacks. In many of these instances, the customers of such exchanges were not compensated or made whole for the partial or complete losses of their funds held at the exchanges. In 2014, the largest bitcoin exchange at the time, Mt. Gox, filed for bankruptcy in Japan amid reports the exchange lost up to 850,000 bitcoin, valued then at over $450 million. Bitcoin exchanges are also appealing targets for hackers and malware. In August 2016, Bitfinex, a bitcoin exchange located in Hong Kong, |
| reported a security breach that resulted in the theft of approximately 120,000 bitcoin valued at the time at approximately $65 million, a loss which was allocated to all Bitfinex account holders (rather than just specified holders whose wallets were affected directly), regardless of whether the account holder held bitcoin or cash in their account. The potential for instability of bitcoin exchanges and the closure or temporary shutdown of exchanges due to fraud, business failure, hackers, DDoS or malware, or government-mandated regulation may reduce confidence in Bitcoin, which may result in greater volatility in bitcoin. | |
| • | The Bitcoin Network and bitcoin hold a “first-to-market” advantage over other digital assets. This first-to-market advantage is driven in large part by having the largest user base and the largest combined mining power in use to secure the blockchain and transaction verification system. It is possible that a digital asset other than bitcoin could have features that make it more desirable to a material portion of the digital asset user base, resulting in a reduction in demand for bitcoin, which could have a negative impact on the price of bitcoin and adversely affect an investment in the Fund. Having a large mining network results in greater user confidence regarding the security and long-term stability of a digital asset’s network and its blockchain; as a result, the advantage of more users and miners makes a digital asset more secure, which makes it more attractive to new users and miners, resulting in a network effect that strengthens the first-to-market advantage. Bitcoin also enjoys significantly greater acceptance and usage than other digital asset networks in the retail and commercial marketplace, due in large part to the relatively well-funded efforts of payment processing companies including BitPay and Coinbase. Despite the marked first-mover advantage of the Bitcoin Network over other digital assets, it is possible that an altcoin (, a cryptocurrency that is an alternative to bitcoin) could become materially popular due to either a perceived or exposed shortcoming of the Bitcoin Network protocol that is not immediately addressed by the Core Developers or a perceived advantage of an altcoin that includes features not incorporated into Bitcoin. For example, the “smart contract” focused development of the ethereum network has permitted the value of its native unit (ether) to rival bitcoin for periods of time. If an altcoin obtains significant market share (either in market capitalization, mining power or use as a payment technology), this could reduce Bitcoin’s market share and have a negative impact on the demand for, and price of, bitcoin. As of August 9, 2017, according to CoinMarketCap.com’s calculations, bitcoin represented more than 45% of the total market capitalization of all digital asset, which is down from 87.6% on January 1, 2017. |
| • | Miners may cease expanding processing power to create blocks and verify transactions if they are not adequately compensated. Miners generate revenue from both newly created bitcoin (known as the “block reward”) and from fees taken upon verification of transactions. If the aggregate revenue from transaction fees and the block reward is below a miner’s cost, the miner may cease operations. An acute cessation of mining operations would reduce |
| Direxion Shares ETF Trust Prospectus | 4 |
| the collective processing power on the blockchain, which would adversely affect the transaction verification process by temporarily decreasing the speed at which blocks are added to the blockchain and make the blockchain more vulnerable to a malicious actor obtaining control in excess of 50 percent of the processing power on the blockchain. Reductions in processing power could result in material, though temporary, delays in transaction confirmation time. Any reduction in confidence in the transaction verification process or mining processing power may adversely impact the price of bitcoin. Furthermore, the block reward will decrease over time as a function of the bitcoin-generating algorithm. In the summer of 2020, the block reward will reduce from 12.5 to 6.25 bitcoin, and to 3.125 bitcoin in 2024. As the block reward continues to decrease over time, the mining incentive structure will transition to a higher reliance on transaction verification fees in order to incentivize miners to continue to dedicate processing power to the blockchain. If transaction verification fees become too high, the marketplace may be reluctant to use bitcoin. Decreased demand for bitcoin may adversely affect its price, which may adversely affect an investment in the Fund. | |
| • | Bitcoin Network contributors could propose amendments to the Bitcoin Network’s protocols and software that, if accepted and authorized by the Bitcoin Network, could adversely affect an investment in the Fund. A small group of individuals contribute to the Bitcoin Core project. These individuals can propose refinements or improvements to the Bitcoin Network’s source code through one or more software upgrades that alter the protocols and software that govern the Bitcoin Network and the properties of bitcoin, including the irreversibility of transactions and limitations on the mining of new bitcoin. However, bitcoin is an open source project and, although there is an influential group of contributors in the Bitcoin community, there is no designated developer or group of developers who formally control the Bitcoin Network. Any individual can download the Bitcoin Network software and make any desired modifications, which are proposed to users and miners on the Bitcoin Network through modifications typically posted to the Bitcoin development forum. When a modification is introduced and a substantial majority of users and miners consent to the modification, the change is implemented and the Bitcoin Network remains uninterrupted. However, if less than a substantial majority of users and miners consent to the proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork” (i.e., “split”) of the Bitcoin Network (and the blockchain), with one prong running the pre-modified software and the other running the modified software. The effect of such a fork would be the existence of two versions of the Bitcoin Network running in parallel, but with each version’s bitcoin (the asset) lacking interchangeability. Additionally, a fork could be introduced by an unintentional, unanticipated software flaw in the multiple versions of otherwise compatible software users run. Although several chain forks have been addressed by community-led efforts to merge the two chains, such |
| a fork could adversely affect Bitcoin’s viability. It is possible, however, that a substantial number of Bitcoin users and miners could adopt an incompatible version of Bitcoin while resisting community-led efforts to merge the two chains. This would result in a permanent fork. On August 1, 2017, after extended debates among developers as to how to improve the Bitcoin Network’s transaction capacity, the Bitcoin Network was forked by a group of developers and miners resulting in the creation of a new blockchain, which underlies the new digital asset “Bitcoin Cash” alongside the original Bitcoin blockchain. Bitcoin and Bitcoin Cash now operate on separate, independent blockchains. Although the Bitcoin Network remained unchanged after the fork, it is unclear how such actions will affect the long term viability of bitcoin and, accordingly, may adversely affect an investment in the Fund. | |
| • | A malicious actor may attack the Bitcoin Network in various ways, including a “50 Percent Attack” or a spam attack. If a malicious actor obtains a majority of the processing power (referred to herein as “aggregate hashrate”) dedicated to mining on the Bitcoin Network, it will be able to exert unilateral control over the addition of blocks to the blockchain. As long as the malicious actor enjoys this majority it may be able to double-spend its own bitcoin (i.e., spend the same bitcoin in two or more conflicting transactions) as well as prevent the confirmation of other bitcoin transactions. If such a scenario were to occur, it could adversely affect an investment in the Fund. A malicious actor could also attempt to flood the pool of unconfirmed transactions with tens of thousands of transactions in an effort to significantly slow the confirmation of legitimate transactions across the Bitcoin Network. Such a delay, if sustained for extended periods of time, could negatively impact the secondary market price of bitcoin. These or any other form of attack on the Bitcoin Network could adversely affect an investment in the Fund. |
| • | Intellectual property rights claims may adversely affect the operation of the Bitcoin Network. Third parties may assert intellectual property claims relating to the holding and transfer of digital assets and their source code. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in the Bitcoin Network’s long-term viability or the ability of end-users to hold and transfer bitcoin may adversely affect an investment in the Fund. Additionally, a meritorious intellectual property claim could prevent end-users from accessing the Bitcoin Network or holding or transferring their bitcoin. As a result, an intellectual property claim could adversely affect an investment in the Fund. |
| • | An investment in the Shares may be adversely affected by competition from other methods of investing in bitcoin or from other digital assets. The Fund will compete with direct investments in bitcoin and other potential financial vehicles, possibly including securities backed by or linked to bitcoin and digital asset exchange traded products that are similar to the Fund or that focus on other digital assets. Market and financial conditions, and other conditions beyond the Fund’s control, may make it more attractive |
| 5 | Direxion Shares ETF Trust Prospectus |
| to invest in other financial vehicles, including vehicles that focus on other digital assets, or to invest in bitcoin directly, which could limit the market for the Fund and reduce the liquidity of the Fund. | |
| • | The Bitcoin Network’s functionality relies on the internet. A significant disruption of internet connectivity affecting large numbers of users or geographic areas could impede the functionality of the Bitcoin Network and adversely affect the Fund. In addition, certain features of the Bitcoin Network, such as decentralization, open source protocol, and reliance on peer-to-peer connectively, may increase the risk of fraud or cyber-attack by potentially reducing the likelihood of a coordinated response. |
Volatility Risk —
Derivatives Risk —
-
-
-