Executive Order 13959
Important Notice Regarding Executive Order 13959 and Office of Foreign Assets Control Guidance Regarding Certain Chinese Securities
On November 12, 2020 President Trump signed an executive order (the “Executive Order”) regarding investments by U.S. persons in the securities of certain Chinese companies, as identified by the Office of Foreign Assets Control, to be directly supporting the Chinese military (“CCMC Securities”). The Executive Order prohibits any U.S. person from engaging in “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to” CCMC Securities. The ban on such transactions takes effect at 9:30 a.m. EST on January 11, 2021.
The index providers with indices impacted by the Executive Order and tracked by Direxion Shares ETFs are MSCI, FTSE/Russell and CSI.
- FTSE/Russell will exclude impacted companies from its benchmarks by January 11.
- MSCI will exclude impacted companies from its benchmarks onward from January 5, 2021.
- CSI has not made and may not make any changes to its benchmarks.
The Direxion Daily Emerging Markets Bull 3X Shares and the Direxion Daily Emerging Markets Bear 3X Shares utilize the MSCI Emerging Markets Index as its underlying index. The Direxion Daily FTSE China Bull 3X Shares and the Direxion Daily FTSE China Bear 3X Shares utilize the FTSE China 50 Index as their underlying index. The Direxion Daily CSI 300 China A Shares Bull 2X Shares and the Direxion Daily CSI 300 China A Shares Bear 1X Shares utilize the CSI 300 Index as their underlying index (the “Direxion CSI ETFs”). The Direxion Daily CSI China Intranet Index Bull 2X Shares utilizes the CSI Overseas China Internet as its underlying index.
The Direxion Shares ETFs do not have direct holdings in CCMC Securities; however, the Direxion CSI ETFs do have exposure to such securities via investments in other U.S. registered exchange-traded funds (“Exposure ETFs”) and swap contracts. The Exposure ETFs, which are also utilized for the Direxion CSI ETFs’ swap exposure, will dispose of securities referenced in the Executive Order prior to the effective date while taking into account expectations for market liquidity. This may lead to increased tracking error going forward for the Direxion CSI ETFs.
Disclosure
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
Market Disruptions Resulting from COVID-19. The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund.
CUSIP Identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard and Poor’s Financial Services, LLC, and are not for use or dissemination in any manner that would serve as a substitute for a CUSIP service. The CUSIP Database, ©2011 American Bankers Association. “CUSIP” is a registered trademark of the American Bankers Association.
Shares of the Direxion Shares are bought and sold at market price (not NAV) and are not individually redeemed from a Fund. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 pm EST (when NAV is normally calculated) and do not represent the returns you would receive if you traded shares at other times. Brokerage commissions will reduce returns. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. Some performance results reflect expense reimbursements or recoupments and fee waivers in effect during certain periods shown. Absent these reimbursements or recoupments and fee waivers, results would have been less favorable.
The CSI 300 Index (“Index”) is calculated by China Securities Index Company (“CSI”). CSI does not make any warranties, express or implied, to any of their customers or anyone else regarding the accuracy or completeness of any data related to the Index. All information is provided for information purposes only. CSI accepts no liability for any errors or any loss arising from the use of information.
Direxion Shares Risks - An investment in the ETFs involves risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration that results from an ETF’s investments in a particular industry or sector which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. The ETFs do not attempt to, and should not be expected to, provide returns which are a multiple of the return of their respective index for periods other than a single day. For other risks including leverage, correlation, daily compounding, market volatility and risks specific to an industry or sector, please read the prospectus.
There are special risk considerations relating to Stock Connect Program and RQFII and QFII investors and the Chinese A-Share market. The Stock Connect Program is subject to daily and aggregate quota limitations, and an investor cannot purchase and sell the same security on the same trading day, which may restrict the other funds’ or counterparties’ ability to invest in A-Shares through the Stock Connect Program and to enter into or exit trades on a timely basis.
A-shares are issued by companies incorporated in the People’s Republic of China (“PRC”). The A-share market in China is made available to domestic PRC investors and certain foreign investors, including those foreign investors that have been approved as Renminbi Qualied Foreign Institutional Investors (“RQFII”) or as Qualified Foreign Institutional Investors (“QFII”). The Fund’s ability to achieve its inverse investment objective is dependent on the ability of other ETFs and counterparties to obtain their QFII or RQFII quota. If the Fund is unable to obtain sufficient exposure to the Index due to the limited availability of necessary investments or financial instruments, the Fund could, among other things, as a defensive measure, limit or suspend creation units until the adviser determines that the requisite exposure to the Index is obtainable. During the period that creation units are suspended, the fund could trade at a significant premium or discount to its NAV and could experience substantial redemptions.
Risks associated with investments in Chinese companies include, among others, (i) the small size of the market for Chinese securities and low trading volume, resulting in a lack of liquidity and in price volatility; (ii) currency devaluations and other currency exchange rate fluctuations or blockages;(iii) the nature and extent of intervention by the PRC government in the Chinese securities markets, whether such intervention will continue and the impact of such intervention or its discontinuation; (iv) the risk of nationalization or expropriation of assets; (v) the risk that the PRC government may decide not to continue to support economic reform programs; (vi) limitation on the use of brokers; (vii) higher rates of inflation;(viii) greater political, economic and social uncertainty; (ix) market volatility caused by potential regional or territorial conflicts or natural disasters and; (x) the risk of increased trade tariffs, embargoes and other trade limitations. These factors can directly affect A-shares, and may indirectly affect investments that derive their value from A-shares. Any reduction or elimination of access to A-shares will have a material adverse effect on the ability of the fund to achieve its investments objective.
Risks of the Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Leverage Risk, Market Risk, Market Disruption Risk, Aggressive Investment Techniques Risk, Counterparty Risk, Intra-Day Investment Risk, Daily Index Correlation/Tracking Risk, Other Investment Companies (including ETFs) Risk, and Emerging Markets Risk. Investing in, and/or having exposure to, emerging markets instruments involves greater risks than investing in issuers located or operating in more developed markets. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
Distributor: Foreside Fund Services, LLC.