Direxion, a US provider of leveraged long and short ETFs, is to cross-list six of its ETFs on the NYSE Euronext Amsterdam exchange.
The funds offer 300% exposure to the daily price movements of indices tracking emerging market, financial and large cap US stocks. Direxion is bringing the following ETFs to Europe:
- Daily Emerging Markets Bull 3x Shares (EDC)
- Daily Large Cap Bull 3x Shares (BGU)
- Daily Financial Bull 3x Shares (FAB)
- Daily Emerging Markets Bear 3x Shares (EDZ)
- Daily Large Cap Bear 3x Shares (BGZ)
- Daily Financial Bear 3x Shares (FAZ)
According to Hedge Funds Review, NYSE Euronext Amsterdam has been chosen as the listing venue as the Dutch financial regulator permits the registration of funds supervised by the US Securities and Exchange Commission. Since NYSE Euronext operates a single order book in Amsterdam, Paris and Brussels, the Direxion ETFs will also be tradable in France and Belgium, according to the publication.
The Amsterdam “loophole” has been used by one other US ETF to cross-list in Europe: State Street has listed its “Diamonds” Dow Jones Industrial Average ETF in Amsterdam. The overwhelming majority of European ETFs are domiciled in the region and structured under Europe’s UCITS regulations.
However, the US regulator does not permit European ETF issuers to cross-list their funds in the United States, something that has been a bone of contention for some providers.
According to ETF Database, the SEC announced last week that it is looking into whether sufficient investor protections are in place surrounding the use of derivatives by mutual funds and ETFs and that, as a result, launches of new leveraged ETFs in the US will be halted until the review process is complete.
Leveraged and inverse ETFs represent a smaller proportion of the European than the US market, where they are highly popular amongst day traders and retail investors. However, Hedge Funds Review quotes Ian Rogers, partner at Simmons and Simmons (a law firm advising Direxion in Europe), as saying that Direxion’s funds are being targeted more at institutional and hedge fund investors than at retail traders.
According to the latest edition of Deutsche Bank’s US ETP Liquidity Trends report, Direxion manages just over US$5 billion in ETFs in the US, giving the firm a 0.6% market share. Direxion’s funds are pricier than average, however, with a total expense ratio of 0.94% compared to an average of 0.31% for US ETFs in general.