Direxion
Shares ETF Trust
Prospectus
|
535 Madison
Avenue, 37th
Floor |
New York,
New York 10022 |
(866)
476-7523 |
www.direxion.com
Direxion
NASDAQ-100®
Equal Weighted Index ETF (QQQE)
(formerly the Direxion NASDAQ-100® Equal Weighted Index Shares)
(formerly the Direxion NASDAQ-100® Equal Weighted Index Shares)
The
shares of the Direxion NASDAQ-100® Equal Weighted
Index ETF (the “Fund”) are listed and traded on the Nasdaq Stock Market LLC.
There is no
assurance that the
Fund will achieve its investment objective and an investment in the Fund could
lose money. No single Fund is a complete investment program.
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.
Summary
Section
|
Management
Fees |
|
|
Distribution
and/or Service (12b-1) Fees |
|
|
Other
Expenses (Operating Services Fees)(1)
|
|
|
Total
Annual Fund Operating Expenses |
|
(1)
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
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 of your
money invested in the Fund. The Fund
is
not a complete investment program. It is important that investors closely review
all of the risks listed below and understand them before making an investment in
the Fund.
1
Direxion
Shares ETF Trust Prospectus
Direxion
Shares ETF Trust Prospectus
2
3
Direxion
Shares ETF Trust Prospectus
Special
Risks of Exchange-Traded Funds
|
|
Returns |
Period
Ending |
|
|
% |
|
|
|
-
% |
|
|
|
% |
|
|
|
1 Year |
5
Years |
10
Years |
|
Return
Before Taxes |
|
|
|
|
Return
After Taxes on
Distributions |
|
|
|
|
Return
After Taxes on
Distributions
and Sale of
Fund
Shares |
|
|
|
|
Nasdaq
Composite Total
Return
Index (reflects
no
deduction
for fees,
expenses
or taxes) |
|
|
|
|
S&P
500®
Index (reflects
no
deduction
for fees,
expenses
or taxes) |
|
|
|
|
NASDAQ-100®
Equal
Weighted
Index (reflects
no
deduction
for fees,
expenses
or taxes) |
|
|
|
Direxion
Shares ETF Trust Prospectus
4
Management
Investment
Adviser. Rafferty Asset
Management, LLC is the Fund’s investment adviser.
Portfolio
Managers. The following
members of Rafferty’s investment
team are jointly and primarily responsible for the day-to-day
management of the Fund:
|
Portfolio
Managers |
Years of
Service
with the
Fund |
Primary
Title |
|
Paul
Brigandi |
Since
Inception in
March
2012 |
Portfolio
Manager |
|
Tony
Ng |
Since
September
2015 |
Portfolio
Manager |
Purchase
and Sale of Fund Shares
The
Fund’s individual shares may only be purchased or sold in the secondary market
through a broker-dealer or other financial intermediaries at market price rather
than at net asset value. The market price of Shares will fluctuate in response
to changes in the value of the Fund’s holdings and supply and demand for the
Shares, which may result in shareholders purchasing or selling the Shares on the
secondary market at a market price that is greater than net asset value (a
premium) or less than net asset value (a discount). A shareholder may incur
costs attributable to the difference between the highest price a buyer is
willing to pay for the Fund’s Shares (bid) and the lowest price a seller is
willing to accept for the Fund’s Shares (ask) when buying or selling Shares on
the secondary market (the “bid-ask spread”) in addition to brokerage
commissions. The bid-ask spread may vary over time for Shares based on trading
volume and market liquidity. Recent information regarding the Fund Shares such
as net asset value, market price, premiums and
discounts
and bid-ask spreads and related other information is available on the Fund’s
website, www.direxion.com/etfs?producttab=performance.
The
Fund’s shares are not individually redeemable by the Fund. The Fund will issue
and redeem Shares only to Authorized Participants in exchange for cash or a
deposit or delivery of a basket of assets (securities and/or cash) in large
blocks, known as creation units, each of which is comprised of
50,000 Shares.
Tax
Information
The
Fund intends to make distributions that may be taxed as ordinary income or
long-term capital gains. Those distributions will be subject to federal income
tax and may also be subject to state and local taxes, unless you are investing
through a tax-deferred arrangement, such as a 401(k) plan or an individual
retirement account. Distributions or investments made through tax-deferred
arrangements may be taxed later upon withdrawal. Distributions by the Fund
may
be significantly higher than those of most other ETFs.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank or financial adviser), the Fund and/or its Adviser
may pay the intermediary for the sale of Fund shares and related services. These
payments may create a conflict of interest by influencing the broker-dealer or
other financial intermediary and your salesperson to recommend the Fund over
another investment. Ask your salesperson or visit your financial intermediary’s
website for more
information.
Index
Information
Nasdaq®,
Nasdaq-100®, and Nasdaq-100
Index®, are
trademarks
of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”)
and are licensed for use by the Adviser. The Fund has not been passed on by the
Corporations as to its legality or suitability. The Fund is not issued,
endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE
FUND.
5
Direxion
Shares ETF Trust Prospectus
Overview
of the Fund
The Direxion
Shares ETF Trust (the “Trust”) is a registered investment company offering a
number of separate exchange-traded funds (“ETFs”). This Prospectus describes the
Direxion
NASDAQ-100®
Equal Weighted Index
ETF (the
"Fund"). Rafferty
Asset Management, LLC serves as the investment adviser to the Fund ("Rafferty"
or the "Adviser").
The Fund, under normal
circumstances, invests at least 80% of its net assets (plus any borrowings for
investment purposes) in the
securities of the
NASDAQ-100®
Equal Weighted
Index
(the “Index”) or
investments with economic characteristics similar to the securities included in
the Index.
The Fund’s investment objective
is a non-fundamental policy of the Fund that may be changed by the Board without
shareholder approval.
Subject to the
limitations described in the “Investment Restrictions” section, the Fund may
engage in the investment strategies discussed
below.
Shares of the
Fund (“Shares”) are
listed and traded on the Nasdaq Stock Market LLC (the “Exchange”), where the
market prices for the
Shares may be different from the intra-day value of the Shares disseminated by
the Exchange and from their net asset value (“NAV”). Unlike conventional mutual
funds, Shares are not individually redeemable directly with a Fund. Rather,
the Fund issues and
redeems Shares on a continuous basis at NAV only in large blocks of Shares
called “Creation Units.” A
Creation Unit consists of 50,000. As a result, retail investors
generally will not be able to purchase or redeem Shares directly
from, or with, the
Fund. Most retail investors will purchase or sell Shares in the secondary market
through a broker.
There is no
assurance that the
Fund will achieve its investment objective and an investment in the Fund could
lose money. No single Fund is a complete investment program.
Changes
in Investment Objective. The Fund’s investment objective
is not a fundamental policy and may be changed by the Fund's Board of Trustees
without shareholder approval.
Defensive
Policy.
The
Fund pursues its
investment objective regardless of market conditions and does not generally take
defensive positions.
Additional
Information Regarding Investment Techniques and
Policies
Rafferty uses a
number of investment techniques in an effort to achieve the stated investment
objective for the
Fund. To do this,
Rafferty uses statistical and quantitative analysis to determine the investments
the Fund makes and
the techniques it employs. In
general, if the Fund
is performing as designed, the return of the Index will dictate the return for
the Fund. Rafferty does
not invest the assets of the Fund in securities,
derivatives or other investments based on Rafferty’s view of the investment
merit of a particular security, instrument or company, nor does it conduct
conventional investment research or analysis or forecast market movements or
trends. The Fund
pursues its investment objective regardless of market conditions and does not
generally take defensive positions. If a Fund takes a temporary defensive
position, it may not meet its investment objective during such
periods.
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Shares ETF Trust Prospectus
6
Additional
Information Regarding Principal Risks
An investment in
the Fund entails
risks. The Fund may not achieve its investment objective and may decline in
value. It is important that
investors closely review and understand all of the Fund’s risks before making an
investment. The Fund is not a complete investment program. Risks of investing in
the Fund are described below.
Index
Correlation Risk
There is no
guarantee that the
Fund will achieve a high degree of
correlation to the
Index and therefore achieve its investment
objective. The Fund
may have difficulty achieving its
investment objective for many reasons, including fees, expenses (including
rebalancing expenses), transaction costs, the Fund’s, valuation methodology
differing from the the Index’s valuation methodology, accounting standards
and
their application to income items, required compliance with the Fund’s Exchange listing
standards, disruptions or illiquidity in
the markets for the securities held by the Fund, the Fund’s holding of
uninvested cash, costs of complying with various new
or existing regulatory requirements and tax considerations, which may cause
the Fund to hold (or
not
hold) certain Index
constituents. Activities surrounding index
reconstitutions and other index rebalancing events may hinder the Fund’s ability to meet its
investment objective. The Fund may not have investment exposure to all of the
constituents of
the the Index or its
weighting of investment exposure to the
constituents may be different from that of the Index, which may reduce the
Fund’s correlation to the Index.
In addition,
the Fund may invest
in securities that are not included in
the Index. The Fund
may also invest directly in or use other
investment companies, such as ETFs to pursue its investment objective. An ETF’s
performance may differ from the index it tracks, thus resulting in additional
tracking error for the Fund. Any of these factors
could decrease correlation
between the performance of the Fund and the Index and may hinder the Fund’s
ability to meet its investment objective.
Information
Technology Sector Risk
The
value of stocks of information technology companies and companies that rely
heavily on technology is particularly vulnerable to rapid changes in technology
product cycles, rapid product obsolescence, government regulation, and
competition, both domestically and internationally, including competition from
competitors with lower production costs. In addition, many information
technology companies have limited product lines, markets, financial resources or
personnel. Information technology companies and companies that rely heavily on
technology, especially those of smaller, less-seasoned companies, tend to be
more volatile and less liquid than the overall market. Information technology
companies are heavily dependent on patent and intellectual property rights, the
loss or impairment of which may adversely affect profitability. Additionally,
companies in the information technology sector may face dramatic and often
unpredictable changes in growth rates and competition for the services of
qualified personnel. Companies in the application software industry, in
particular, may also be negatively affected by the risk that subscription
renewal rates for their products
and
services decline or fluctuate, leading to declining revenues. Companies in the
systems software industry may be adversely affected by, among other things,
actual or perceived security vulnerabilities in their products and services,
which may result in individual or class action lawsuits, state or federal
enforcement actions and other remediation costs. Companies in the computer
software industry may also be affected by the availability and price of computer
software technology components.
Passive
Investment and Index Performance Risk
A third party
(the “Index Provider”), who is unaffiliated with the Fund or Adviser, maintains
and exercises complete control over
the Index. The Index
Provider may delay or add a rebalance
date, which may adversely impact the performance of the Fund and its correlation to
the Index. There is no
guarantee that the methodology used by the
Index Provider
to identify constituents for the Index will achieve its
intended result or positive performance. The Index relies on
various sources of information to assess the potential constituents of
the Index, including
information that may be based on
assumptions or estimates. There is no assurance that the sources of information
are reliable, and the Adviser does not assess the due diligence conducted by
the Index
Provider with
respect to the data it uses or the Index
construction and
computation processes. Industry calculations in the Index will fluctuate with
changes in constituents’ market values such that
the Index may become
more, or less, concentrated
over time. There can be no guarantee that the methodology underlying
the Index or the
calculation of the Index will be free from error
or that an error will be identified
and/or corrected, which may have an adverse impact on the Fund.
The Fund generally will not
change its investment exposures, including by
buying or selling securities or instruments, in response to market conditions.
For example, the
Fund generally will
not sell a constituent due to a decline in its performance or based on changes
to the prospects of a constituent, unless that constituent is removed from
the Index with which
the Fund seeks correlated performance.
Market
Risk
The Fund’s investments are
subject to changes in general economic
conditions, general market fluctuations and the risks inherent in investment in
securities markets. Investment markets can be volatile and prices of investments
can change substantially due to various factors including, but not limited to,
economic growth or recession, inflation rates and/or investor expectations
concerning such rates, changes in interest rates, changes in the actual or
perceived creditworthiness of issuers, general market liquidity, exchange
trading suspensions and closures, and public health risks. Interest rates and
inflation rates may change frequently
7
Direxion
Shares ETF Trust Prospectus
and drastically
as a result of various factors and the Fund’s investments may not
keep pace with these changes.
Securities
markets also may experience long periods of decline in value. During a general
downturn in the securities markets, multiple asset classes may decline in value
simultaneously and changes in the financial condition of a single issuer can
impact a market the markets broadly. The Fund is subject to the risk that
geopolitical events will disrupt markets and adversely affect global economies,
markets, and exchanges. Local, regional or global events such as war, tariffs
and trade wars, acts of terrorism, natural disasters, the spread of infectious
illness or other public health issues, conflicts and social unrest or other
events could have a significant impact on the Fund, its investments and the
Fund’s ability to achieve its investment
objective. The economic, fiscal, monetary and foreign policies of the U.S.
government, including the imposition of tariffs, changes to the federal agencies
and regulatory policies will impact the U.S. economy and could lead to increased
market volatility and may adversely impact the overall market and individual
securities, including the various counterparties utilized
by the Fund.
To
the extent that the instruments utilized by a Fund are thinly traded or have a
limited market, a Fund may be unable to meet its investment objective due to a
lack of available investments or counterparties. During such periods, a Fund’s
ability to issue additional Creation Units may be adversely affected. As a
result, a Fund’s shares could trade at a premium or discount to their NAV or the
bid-ask spread of a Fund’s shares could widen. Under such circumstances, a Fund
may increase its transaction fee, change its investment objective by, for
example, seeking to track an alternative index, reduce its leverage or close. If
a Fund must sell all or a portion of its investments, whether due to
redemptions, a leverage reduction, its liquidation or otherwise, such sales may
be at unfavorable
prices and adversely affect a Fund.
Markets
and market participants are increasingly reliant on information data systems.
Inaccurate data, software or other technology malfunctions, programming
inaccuracies, unauthorized use or access and similar circumstances may impair
the performance of these systems and may have an adverse impact upon a single
issuer, a group of issuers, or securities
markets more broadly.
Large-Capitalization
Company Risk
Large-capitalization
companies typically have significant financial resources, extensive product
lines and broad markets for their goods and/or services. However, they may be
less able to adapt to changing market conditions or to respond quickly to
competitive challenges or to changes in business, product, financial, or market
conditions. Larger companies may not be able to maintain growth at rates that
may be achieved by well-managed smaller and mid-size companies, which may affect
the companies’ returns.
Depositary
Receipt Risk
To the extent
the Fund invests in,
or has exposure to, foreign companies,
investment may be in the form of depositary receipts or other securities
convertible into securities of foreign issuers. American Depositary Receipts
(“ADRs”) are receipts typically issued by an American bank or trust company that
evidence ownership of underlying securities issued by a
foreign
corporation. European Depositary Receipts (“EDRs”) are receipts issued in Europe
that evidence a similar ownership arrangement. Global Depositary Receipts
(“GDRs”) are receipts issued throughout the world that evidence a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets, and EDRs, in bearer form, are designed for use in
European securities markets. GDRs are tradable both in the United States and in
Europe and are designed for use throughout the world. Depositary receipts will
not necessarily be denominated in the same currency as their underlying
securities. The issuers of certain depository receipts are under no obligation
to distribute shareholder communications to holders of such receipts, or to pass
through to them any voting rights with respect to the deposited securities.
Investments in depository receipts may be less liquid than the underlying shares
in their primary trading markets. The issuers of depository receipts may
discontinue issuing new depository receipts and withdraw
existing depository receipts at any time.
Depositary
receipts may be purchased through “sponsored” or “unsponsored” facilities. A
sponsored facility is established jointly by the issuer of the underlying
security and a depositary, whereas a depositary may establish an unsponsored
facility without participation by the issuer of the depositary security. Holders
of unsponsored depositary receipts generally bear all the costs of such
facilities and the depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through voting rights to the holders of such
receipts of the deposited securities. Fund investments in depositary receipts,
which include ADRs, GDRs and EDRs, are deemed to be investments in foreign
securities for purposes of the Fund’s investment
strategy.
Foreign
Securities Risk
Foreign
instruments may involve greater risks than domestic instruments. As a result,
the Fund’s returns
and NAV may be affected to a
large degree by fluctuations in currency exchange rates, interest rates,
political, diplomatic or economic conditions and regulatory requirements in
other countries. The laws and accounting, auditing, and financial reporting
standards in foreign countries typically are not as strict as they are in the
United States, and there may be less public information available about foreign
companies. Pursuant to regulatory changes effective in May 2024, many U.S.,
Canadian, and Mexican securities transitioned to a "T+1" (trade date plus one
day) settlement cycle, while securities trading in most other foreign securities
markets have longer settlement cycles. As a result, there are potential
operational, settlement and other risks for the Funds associated with
differences in the timing of settlement cycles between markets.
Foreign
securities may involve additional risk, including, greater market volatility,
the availability of less reliable financial information, higher transactional
and custody costs, taxation by foreign governments, decreased market liquidity
and political instability. Certain foreign markets may rely heavily on
particular industries or foreign capital and are more vulnerable to diplomatic
developments, the imposition
Direxion
Shares ETF Trust Prospectus
8
of economic
sanctions against a particular country or countries, organizations, entities
and/or individuals, changes in international trade patterns, trade barriers, and
other protectionists or retaliatory measures. Additionally, the Fund may be impacted
by a limitation on foreign ownership of securities, the imposition of
withholding or other taxes, restrictions on the repatriation of cash or other
assets, higher transaction and custody costs, delays in the settlement of
securities, difficulties in enforcing contractual obligations and lower levels of regulation in
the securities markets.
Liquidity
Risk
Holdings of
the Fund may be
difficult to buy or sell or may be illiquid,
particularly during times of market turmoil. There is no assurance that a
security or derivative instrument that is deemed liquid when purchased will
continue to be liquid. Illiquid securities may be difficult to value, especially
in changing or volatile markets. If the Fund is forced to buy
or
sell an illiquid security or derivative instrument at an unfavorable time or
price the Fund may
be adversely impacted.
Certain market conditions or restrictions may prevent the Fund from limiting losses,
realizing gains or achieving its
investment objective. In certain market conditions the Fund may be one of many
market participants that are attempting to
transact in the securities of the Index. Under such
circumstances, the market for securities of the Index
may
lack sufficient liquidity for all market participants' trades. Therefore,
the Fund may have
more difficulty transacting in the
securities or financial instruments and the Fund's transactions
could exacerbate illiquidity and price volatility in the securities of the
Index.
To the extent
that the instruments utilized by the Fund are thinly traded or
have a limited market, the Fund may be unable to meet
its investment objective due to a lack of available investments or
counterparties. During such periods, the Fund's ability to issue
additional Creation Units may be adversely
affected. As a result, the Fund's shares
would
trade at a
premium or discount to their NAV and/or the bid ask spread of the Fund's shares
could widen. Under such circumstances,
the Fund may be
unable to rebalance its exposure
properly which may result in significantly more or less exposure and losses to
the Fund. In such an
instance, the Fund may increase its transaction fee, utilize derivatives
instruments that
are less correlated to the Index, change its investment
objective, reduce its exposure for a period of time or
close.
Early
Close/Trading Halt Risk
An exchange or
market may close early and unexpectedly
or
issue trading halts on specific securities or financial instruments, including
shares of the Fund.
Under such circumstances,
the ability to buy or sell certain portfolio securities or financial instruments
may be restricted, which may result in the Fund being unable to execute
intended portfolio
transactions, may
disrupt the Fund’s creation/redemption
process and may temporarily prevent investors from buying and selling shares of
the Fund. In
addition,
the Fund may be
unable to accurately price its investments, may
fail to achieve its investment objective and may incur substantial losses
or reduced gains
Equity
Securities Risk
Publicly-issued
equity securities, including common stocks, are subject to market risks that may
cause their prices to fluctuate over time. Fluctuations in the value of equity
securities in which the Fund invests will cause the
NAV of the Fund to fluctuate.
Cash
Transaction Risk
At
certain times, a Fund may effect creations and redemptions for cash rather than
for in-kind securities. As a result, a Fund may not be tax efficient and may
incur brokerage costs related to buying and selling securities to achieve its
investment objective thus incurring additional expenses than if it had effected
creations and redemptions in kind. To the extent that such costs are not offset
by fees payable by an authorized participant, a Fund may bear such costs, which
will decrease a Fund’s
NAV.
Tax
Risk
In order to
qualify for the special tax treatment accorded a regulated investment company
(“RIC”) and its shareholders, the Fund must derive at least 90%
of its gross income for each taxable
year from “qualifying income,” meet certain asset diversification tests at the
end of each taxable quarter, and meet annual distribution requirements.
The Fund’s pursuit
of
its investment strategy will potentially be limited by the
Fund’s intention
to qualify for such treatment and could adversely affect the Fund’s ability to
so qualify. The Fund
can
make certain investments, the treatment of which for these purposes is unclear.
If, in any year, the
Fund was to fail to qualify
for the special tax treatment accorded a RIC and its shareholders, and was
ineligible to or was not able to cure such failure, the Fund would be taxed in the
same manner as an
ordinary corporation subject to U.S. federal income tax on all its income at the
fund level. The resulting taxes could substantially reduce the Fund’s net assets and
the
amount of income available for distribution. In addition, in order to requalify
for taxation as a RIC, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest, and make certain
distributions. Please see the section entitled “Dividends, Other Distributions
and Taxes” in the
SAI for more information.
Securities
Lending Risk
Securities
lending involves the risk that the Fund may lose money because
the borrower of the loaned securities fails to return the securities in a timely
manner or at all. The
Fund could also
lose money in the event of a decline in the value of collateral provided for
loaned securities, a decline in the value of any investments made with cash
collateral, or a “gap” between the return on cash collateral reinvestments and
any fees the Fund
has agreed to pay a borrower. These
events could also trigger adverse tax consequences for the Fund. In the event of a large
redemption while
the Fund has loaned
portfolio securities, the Fund may suffer
losses (e.g. overdraft fees) if it is unable
to recall the securities
on loan in time to fulfill the redemption. There is also a risk that
the Fund may not be
able to recall loaned securities in
sufficient time to vote on material proxy matters.
9
Direxion
Shares ETF Trust Prospectus
Special
Risks of Exchange-Traded Funds
Authorized
Participants Concentration Risk. The Fund may have a limited
number of financial institutions that may act as Authorized Participants. To the
extent that those Authorized Participants exit the business or are unable to
process creation and/or redemption orders, Shares may trade at larger bid-ask
spreads and/or premiums or discounts to NAV. Authorized Participant
concentration risk may be heightened for a fund that invests in non-U.S.
securities or other securities or instruments that have lower trading
volumes.
Absence
of Active Market Risk. Although Shares
are listed for
trading on a stock exchange, there is no assurance that an active trading market
for them will develop or be maintained. In the absence of an active trading
market for Shares, they will likely trade with a wider bid/ask spread
and
at a greater premium or discount to NAV.
Market
Price Variance Risk.
Shares of the Fund can be bought and sold in the
secondary market at market prices rather than at NAV. When Shares trade at a
price greater than NAV, they are said to trade at a “premium.” When they trade
at a price less than NAV, they are said to trade at a “discount.” The market
price of Shares fluctuates based on changes in the value of the Fund’s holdings, the supply
and demand for
Shares, and other market factors. Because Shares can be created and redeemed in
Creation Units at NAV, the Adviser believes that large discounts or premiums to
the net asset value of Shares should not be sustained over the long term.
Nevertheless, the market price of Shares may vary significantly from NAV during
periods of market volatility. Further, to the extent that exchange specialists,
market makers and/or Authorized Participants are unavailable or unable to trade
the Fund’s Shares
and/or create and redeem Creation Units, bid/ask
spreads and premiums or discounts may widen. The exact exposure of an investment
in the Fund intraday
in
the secondary market is a function of the difference between the value of the
Index at the market
close on the first trading
day and the value of the Index at the time of
purchase.
Trading
Cost Risk. Buying or
selling Fund shares on an exchange
involves two types of costs that apply to all securities transactions. When
buying or selling shares of the Fund through a
broker, a buyer may incur a brokerage commission and other charges. In addition,
a buyer may incur the cost of the “spread”; that is, the difference between what
investors are willing to pay for Fund shares (the “bid” price) and the price at
which they are willing to sell Fund shares (the “ask” price). The spread, which
varies over time for shares of the
Fund based on
trading volume and market liquidity, is generally narrower if the Fund has more
trading volume and market liquidity and wider if the Fund has less trading
volume and market liquidity. In addition, increased market volatility may cause
wider spreads. There may also be regulatory and other charges that are incurred
as a result of trading activity. Because of the costs inherent in buying or
selling Fund shares, frequent trading may detract significantly from investment
results and an investment in Fund shares may not be advisable for investors who
anticipate regularly making small investments through a brokerage account.
Exchange
Trading Risk. Shares
are listed for trading on the listing exchange
identified on the cover of the Prospectus. They also may be listed or traded on
other U.S. and non-U.S. stock exchanges and may trade on electronic
communication networks. Trading in Shares on their listing exchange may be
halted due to market conditions or for reasons that, in the view of the
exchange, make trading in Shares inadvisable, including if they fail to meet the
listing requirements of the exchange. Under certain circumstances, Shares may
even be delisted. Trading halts of Shares should be expected to disrupt the
creation/redemption process and may temporarily prevent investors from buying
and selling Shares. Like other listed securities, Shares may be sold short, and
short positions in Shares may place downward pressure on their market price.
U.S. markets and exchanges may close early due to market or other circumstances,
which may result in the Fund incurring
substantial losses, not meeting its investment objective, or rebalancing its
portfolio appropriately.
Other Risks of the
Fund
Cybersecurity
Risk
The increased
use of technologies, such as the internet, to conduct business increases the
operational, information security and related “cyber” risks both directly to
the Fund
and
through its service providers. Similar types of cyber security risks are also
present for issuers of securities in which the
Fund may invest,
which could result in material adverse consequences for such issuers. Unlike
many other types of risks faced by the Fund, these risks typically
are not covered by insurance.
Cyber incidents can result from deliberate attacks or unintentional events.
Cyber incidents may include, but are not limited to, gaining unauthorized access
to digital systems (e.g., through “hacking” or malicious
software coding) for purposes of
misappropriating assets or sensitive information, corrupting data, causing
physical damage to computer or network systems, or causing operational
disruption. Cyber attacks may also be carried out in a manner that does not
require gaining unauthorized access, such as causing denial-of-service attacks
on websites (i.e., efforts to make network
services unavailable to intended users).
Failures or
breaches of the electronic systems of the Fund, the Fund’s adviser,
distributor, other service providers, counterparties,
securities trading venues, or the issuers of securities in which the Fund invests have the ability
to cause disruptions and
negatively impact the Fund’s business operations,
potentially resulting in financial losses to the
Fund and its
shareholders. Cyber attacks may also interfere with the Fund’s calculation of
its NAV, result in the submission of erroneous trades or erroneous creation or
redemption orders, and could lead to violations of applicable privacy and other
laws, regulatory fines, penalties, reputational damage, reimbursement or other
compensation costs and/or additional compliance costs. While the Fund has established
business
continuity plans, there are inherent limitations in such plans, including the
possibility that certain risks have not been identified and that prevention and
remediation efforts will not be successful. Furthermore, the Fund cannot
Direxion
Shares ETF Trust Prospectus
10
control the
cyber security plans and systems of the Fund’s service
providers or issuers of securities in which the Fund invests.
Investment
Risk
An investment in
the Fund is not a
deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. When you sell your Shares, they could be worth less than what
you paid for
them.
Risk
of Global Economic Shock
Widespread
disease, including public health disruptions, pandemics and epidemics (for
example, COVID-19 including its variants), have been and may continue to be
highly disruptive to economies and markets. Health crises could exacerbate
political, social, and economic risks, and result in breakdowns, delays,
shutdowns, social isolation, civil unrest, periods of high unemployment,
shortages in and disruptions to the medical care and consumer goods and services
industries, and other disruptions to important global, local and regional supply
chains, with potential corresponding results on the performance of the Fund and its
investments.
Additionally,
wars, military conflicts, sanctions, acts of terrorism, sustained elevated
inflation, supply chain issues or other events could have a significant negative
impact on global financial markets and economies. Russia’s military incursions
in Ukraine have led to, and may lead to additional sanctions being levied by the
United States, European Union and other countries against Russia. The ongoing
hostilities between the two countries could result in additional widespread
conflict and could have a severe adverse effect on the region and certain
markets. Sanctions on Russian exports could have a significant adverse impact on
the Russian economy and related markets and could affect the value of
the Fund’s
investments, even beyond any direct exposure the Fund may have to the region or
to adjoining geographic regions. The
extent and duration of the military action, sanctions and resulting market
disruptions are impossible to predict, but could have a severe adverse effect on
the region, including significant negative impacts on the economy and the
markets for certain securities and commodities, such as oil and natural gas.
Furthermore, the possibility of a prolonged conflict between Hamas and Israel,
and the potential expansion of the conflict in the surrounding areas and the
involvement of other nations in such conflict, such as the Houthi movement’s
attacks on marine vessels in the Red Sea, could further destabilize the Middle
East region and introduce new uncertainties in global markets, including the oil
and natural gas markets. How long such tensions and related events will last
cannot be predicted. These tensions and any related events could have
significant impact on the Fund performance and the
value of an investment in the Fund.
Natural
Disaster/Epidemic Risk
Natural
or environmental disasters, such as earthquakes, fires, floods, hurricanes,
tsunamis and other severe weather-related phenomena generally, and widespread
disease, including pandemics and epidemics (for example, COVID-19), have been
and can be highly disruptive to economies and markets and have recently led, and
may
continue to
lead, to increased market volatility and significant market losses. Such natural
disaster and health crises could exacerbate political, social, and economic
risks, and result in significant breakdowns, delays, shutdowns, social
isolation, and other disruptions to important global, local and regional supply
chains affected, with potential corresponding results on the operating
performance of the
Fund and its investments. A
climate of uncertainty and panic, including the contagion of infectious viruses
or diseases, may adversely affect global, regional, and local economies and
reduce the availability of potential investment opportunities, and increases the
difficulty of performing due diligence and modeling market conditions,
potentially reducing the accuracy of financial projections. Under these
circumstances, the
Fund may have
difficulty achieving its investment objective, which may adversely impact Fund
performance. Further, such events can be highly disruptive to economies and
markets, significantly disrupt the operations of individual companies
(including, but not limited to, the Fund’s investment advisor,
third party
service providers, and counterparties), sectors, industries, markets, securities
and commodity exchanges, currencies, interest and inflation rates, credit
ratings, investor sentiment, and other factors affecting the value of
the Fund’s
investments.
These factors can cause substantial market volatility, exchange trading
suspensions and closures, changes in the availability of and the margin
requirements for certain instruments, and can impact the ability of the Fund to complete
redemptions and otherwise affect Fund performance. A widespread crisis would
also affect the global economy in ways that cannot necessarily be foreseen. How
long such events will last and whether they will continue or recur cannot be
predicted. Impacts from these events could have a significant impact on
the Fund’s
performance, resulting in losses to your investment.
Regulatory
Risk
The Fund is subject to the risk
that a change in U.S. law and related
regulations will impact the way the Fund operates, increase the particular costs
of the Fund’s operations and/or change the competitive landscape. Additional
legislative or regulatory changes could occur that may materially and
adversely affect the
Fund.
Valuation
Risk
In certain
circumstances, such as when market quotations for securities or other assets are
unavailable or unreliable or when a trading halt ends trading in a security or
closes an exchange or market early, a holding may be fair valued for the day or
for a longer period of time. The fair valuation of the holding may be different
from other value determinations of the same holding. Holdings that are valued
using techniques other than market quotations, including “fair valued” holdings,
may be subject to greater fluctuation in their value form one day to the next
than would be the case if market quotations were used. In addition, the price
the Fund could
receive upon the sale of a holding may differ from
the Fund’s valuation
of the holding or from the value used by the
Index, particularly
for holdings that trade in low volume or
volatile markets or that are valued using a fair value methodology as a result
of trade suspensions or halts or for any other
reason.
11
Direxion
Shares ETF Trust Prospectus
A
Precautionary Note to Retail Investors. The Depository Trust Company
(“DTC”), a limited trust company and securities depositary that serves as a
national clearinghouse for the settlement of trades for its participating banks
and broker-dealers, or its nominee, will be the registered owner of all
outstanding Shares of each Fund of the Trust. Your ownership of Shares will be
shown on the records of DTC and the DTC Participant broker through whom you hold
the Shares. THE TRUST WILL NOT HAVE ANY RECORD OF YOUR OWNERSHIP. Your account
information will be maintained by your broker, who will provide you with account
statements, confirmations of your purchases and sales of Shares, and tax
information. Your broker also will be responsible for ensuring that you receive
shareholder reports and other communications from the Fund whose Shares
you
own. Typically, you will receive other services (e.g., average basis
information) only if your broker offers these services.
A
Precautionary Note to Purchasers of Creation Units. Because
new
Shares may be issued on an ongoing basis, a “distribution” of Shares could be
occurring at any time. As a dealer, certain activities on your part could,
depending on the circumstances, result in your being deemed a participant in the
distribution, in a manner that could render you a statutory underwriter and
subject you to the prospectus delivery and liability provisions of the
Securities Act of 1933, as amended (“Securities Act”). For example, you could be
deemed a statutory underwriter if you purchase Creation Units from an issuing
Fund, break them down into the constituent Shares and sell those Shares directly
to customers, or if you choose to couple the creation of a supply of new Shares
with an active selling effort involving solicitation of secondary market demand
for Shares. Whether a person
is
an underwriter depends upon all of the facts and circumstances pertaining to
that person’s activities, and the examples mentioned here should not be
considered a complete description of all the activities that could cause you to
be deemed an underwriter. Dealers who are not “underwriters,” but are
participating in a distribution (as opposed to engaging in ordinary secondary
market transactions), and thus dealing with Shares as part of an “unsold
allotment” within the meaning of Section 4(3)(C) of the Securities Act, will be
unable to take advantage of the prospectus delivery exemption provided by
Section 4(3) of the Securities
Act.
A
Precautionary Note to Investment Companies. For purposes of the
Investment Company Act of 1940, as amended (“1940 Act”), the Fund is a registered
investment company, and the acquisition
of its Shares by other investment companies is subject to the restrictions of
Section 12(d)(1) thereof. Rule 12d1-4 provides an exemption from these
restrictions for registered investment companies seeking to invest in
the
Fund, subject to
certain terms and conditions, including that such registered investment
companies enter into an agreement with the Trust. Any investment company
considering purchasing Shares of the Fund in amounts that
may
cause it to exceed the restrictions in Section 12(d)(1) should contact the
Trust.
A
Precautionary Note Regarding Unusual Circumstances. Under certain
circumstances, the
Fund may postpone payment of redemption
proceeds. For information on such potential postponements, see the “Purchases
and Redemptions - Suspension or Postponement of Right of Redemption” section
of the
SAI.
Direxion
Shares ETF Trust Prospectus
12
About
Your Investment
Share Price of
the Fund
A fund’s share
price is known as its NAV. The Fund’s share price is
calculated as of the close of regular trading on the NYSE, usually 4:00
p.m. Eastern Time (“Valuation Time”), each day the NYSE is open for business
(“Business Day”). The NYSE is open for business Monday through Friday, except in
observation of the following holidays: New Year’s Day, Martin Luther King, Jr.
Day, President’s Day, Good Friday, Memorial Day, Juneteenth National
Independence Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. The NYSE may close early on the business day before each of these holidays
and on the day after Thanksgiving Day. NYSE holiday schedules are subject to
change without notice. Because the Fund is exchange traded,
the price an individual shareholder will buy or sell Fund shares at will be
based on the market price determined by the secondary
market, which may be higher or lower than the NAV of the Fund.
If the exchange
or market on which the Fund’s investments are
primarily traded closes early, the NAV may be calculated prior to its normal
calculation time. Creation/redemption transaction order time cutoffs would also
be accelerated.
The value of
the Fund’s assets
that trade in markets outside the United States or in currencies other than the
U.S. Dollar may fluctuate when foreign markets are open but the Fund is not open
for business.
Share price is
calculated by dividing the Fund’s net assets by its
shares outstanding. Portfolio securities and other assets are valued
chiefly by market prices from the primary market in which they are traded. Under
Rule 2a-5 under the 1940 Act, a market quotation is readily available when that
“quotation is a quoted price (unadjusted) in active markets for identical
investments that the fund can access at the measurement date, provided that a
quotation will not be readily available if it is not reliable.” The Fund uses the following
methods to price securities or assets held in its portfolio with readily
available market quotations:
●
Equity securities
listed and traded principally on any domestic or foreign national securities
exchange are valued at the last sales price. Exchange-traded funds are valued at
the last sales price prior to Valuation Time. Securities primarily traded in the
NASDAQ Global Market® are valued using
the NASDAQ® Official Closing
Price. Over-the counter securities are valued at the last sales price in the
over-the-counter market;
●
Futures contracts
are valued at (1) the settlement prices established each day on the exchange on
which they are traded if the settlement price reflects trading prior to the
Valuation Time, (2) at the last sales price prior to the Valuation Time if the
settlement prices established by the exchange reflects trading after Valuation
Time, or (3) at the last sales price of the exchange prior to the Valuation
Time;
●
Options are
valued at the composite price, using National Best Bid and Offer quotes;
and
●
Securities and
other assets for which market quotations are unavailable or unreliable are
valued at fair value estimates as determined by the Adviser pursuant to its fair
valuation policies.
Fair
Value Pricing. When a market
quotation is not readily available or is unreliable, the Trust’s Board of
Trustees (the “Board”) is
responsible for determining in good faith the fair value of the portfolio
security or other asset. Pursuant to Rule 2a-5, the Board designated the
responsibility for fair valuation to the Adviser as its valuation designee
(“Valuation Designee”). Fair value determinations are made in good faith in
accordance with procedures adopted by the Adviser, which set forth the
methodologies by which a portfolio security or other asset will be fair valued.
The Adviser may utilize fair valuation services of a
pricing service to obtain a fair value for certain portfolio securities or other
assets as well.
An
investment that relies on Level 2 or Level 3 inputs according to ASC 820, such
as swap agreements, is required to be fair valued as such investments do not
have readily available market quotations by definition. Swap agreements are
valued based on the closing value of the underlying reference instrument.
Additionally, the Adviser will fair value a portfolio security or other asset if
there is not a readily available market quotation, which may occur in the
following situations: (1) to the extent that a Fund holds foreign securities,
when foreign markets close before the NYSE opens or may not be open for business
on the same calendar days as the Fund; (2) if there has been a significant event
in the markets that makes the price of a portfolio security or asset unreliable;
(3) if there is a lack of an active market, such as the market for certain
preferred securities or for corporate bonds; and (4) if trading in a security is
limited during the trading day and a limited number of quotes are available or
If trading in a security is halted during a trading day and does not resume
prior to the closing of the
exchange or other market.
Fair
valuation determinations of portfolio securities or other assets introduce an
element of subjectivity to pricing of such portfolio securities or other assets.
As a result, the price of a security or other asset determined through fair
valuation techniques may differ from the price quoted or published by other
sources and may not accurately reflect the market value of the security when
trading resumes. If a reliable market quotation becomes available for a security
formerly valued through fair valuation techniques, the Adviser compares the
market quotation to the fair value price to evaluate the effectiveness
of
the Adviser’s fair valuation procedures.
13
Direxion
Shares ETF Trust Prospectus
Rule
12b-1 Fees
The Board of
Trustees of the Trust has adopted a Distribution and Service Plan (the “Plan”)
pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Plan,
the Fund may pay an
amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No 12b-1 fees
are currently authorized to be paid by the Fund, and there are no plans
to impose these fees. However, in the event 12b-1
fees are charged in the future, because the fees are paid out of the Fund’s assets, over time
these fees will increase the cost of your investment and may cost you more than
certain other types of sales charges.
Frequent
Purchases and Redemptions. Investors such as market
makers, large investors and institutions who wish to deal in Creation
Units directly with the Fund must have entered into
an authorized participant agreement (“Authorized Participant Agreement”) with
the principal underwriter and the transfer agent, or purchase through a
broker-dealer that has entered into such an agreement. The Trust’s Board of
Trustees has determined not to adopt policies and procedures designed to prevent
or monitor for frequent purchases and redemptions of the Fund’s shares because the
Fund sells and redeems its shares at NAV
only in Creation Units pursuant to the terms of an Authorized Participant
Agreement between the Authorized Participant and the Distributor, and such
direct trading between the Fund and Authorized Participants is critical to
ensuring that the Fund’s shares trade at or close to NAV. Further, the vast
majority of trading in Fund shares occurs on the secondary market, which does
not involve the Fund
directly and therefore does not cause the Fund to experience many of the harmful
effects of
market timing, such as dilution and disruption of portfolio management. In
addition, the Fund
imposes a Transaction Fee on Creation
Unit transactions, which is designed to offset transfer and other transaction
costs incurred by the Fund in connection with the issuance and redemption of
Creation Units and may employ fair valuation pricing to minimize potential
dilution from market timing. Although the Fund reserves the right to
reject any purchase orders, the Fund does not currently impose any
trading restrictions on frequent trading or actively monitor for trading abuses.
Transaction fees are imposed as set forth in the table in the
SAI.
How
to Buy and Sell Shares
The Fund directly issues and
redeems Shares only in large blocks (called “Creation Units”) of 50,000 and only
in transactions with Authorized Participants.
Individual
Shares, once listed for trading on the Exchange, can be bought and sold
throughout the trading day in the secondary market like other listed securities.
Most investors will buy and sell Shares in secondary market transactions through
brokers. The Fund
does not require any minimum investment in secondary market
transactions.
When
buying or selling Shares through a broker, investors may incur customary
brokerage commissions and charges, and may pay some or all of the “spread”
–
that is, any difference between the bid price (the highest price a buyer is
willing to
pay for a share of a fund) and the ask price (the lowest price a seller is
willing to accept for a share of a fund). In addition, because secondary market
transactions occur at market prices, which typically vary from NAV, investors
may pay more than NAV when buying
Shares, and receive less than NAV when selling Shares.
The Fund’s Exchange trading
symbol is as follows:
|
Fund |
Symbol |
|
Direxion
NASDAQ-100® Equal
Weighted Index ETF |
QQQE |
Book
Entry. Shares are
held in book-entry form, which means that no stock certificates are issued. DTC
or its nominee is the record owner
of all outstanding Shares of the Fund and is recognized as the
record owner of all Shares for all purposes.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. Participants in DTC include securities brokers and dealers, banks,
trust companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. Beneficial owners of
Shares must rely upon the procedures of DTC and its participants to exercise any
rights as owners of Shares. These procedures are the same as those that apply to
any other stocks that held in book entry or
“street name” through a brokerage account.
Management
of the Fund
Rafferty
provides investment management services to the Fund. Rafferty has been managing
investment companies since 1997. Rafferty
is located at 535
Madison
Avenue,
37th Floor, New York, New York 10022.
As of October 31, 2025, the Adviser had approximately $60.1 billion in assets
under management.
Pursuant to an
investment advisory agreement between the Trust and Rafferty, the Fund pays Rafferty the
following fee at an annualized rate based on a percentage of the Fund’s average
daily net assets:
Direxion
Shares ETF Trust Prospectus
14
|
Fund |
Advisory Fee
Charged |
|
Direxion
NASDAQ-100® Equal
Weighted Index ETF |
0.30% |
A discussion
regarding the basis on which the Board of Trustees approved the investment
advisory agreement for the Fund
is included in the
Fund's Annual Financial Statements and Additional Information for the period
ended October 31, 2025.
Rafferty has
entered into an Operating Services Agreement with the Fund. Under this Operating
Services Agreement, Rafferty, in exchange for
an Operating Services Fee paid to Rafferty by the Fund, has contractually
agreed to pay all Fund expenses as long as it is
advisor of the Fund
other than the following: management fees, Rule 12b-1 distribution and/or
service fees, taxes, swap
financing and related costs, dividends or interest on short positions, other
interest expenses, brokerage commissions, expenses incurred in connection with
any merger or reorganization, acquired fund fees and expenses, and extraordinary
expenses such as indemnification and litigation or other expenses outside the
typical day-to-day operations of the Fund. This Operating Services
Agreement may be terminated at any time with the consent of the Board of
Trustees.
For the fiscal year ended October
31, 2025, the aggregate fee paid to the Adviser as a percentage of average daily
net assets from the Fund is as follows:
|
Fund |
Percentage |
|
Direxion
NASDAQ-100® Equal
Weighted Index ETF |
0.35% |
Paul Brigandi
and Tony Ng are jointly and primarily responsible for the day-to-day management
of the Fund (the
“Portfolio Managers”). An
investment trading team of Rafferty employees assists the Portfolio Managers in
the day-to-day management of the Fund subject to their primary
responsibility and oversight. The Portfolio Managers work with the investment
trading team to decide
the target allocation of the Fund’s investments and on a
day-to-day basis, an individual portfolio trader executes
transactions for the Fund consistent with the target
allocation. The members of the investment trading team rotate
periodically among the various series of the Trust, including the Fund, so that no single
individual is assigned to a specific Fund for extended periods of
time.
Mr.
Brigandi has been a Portfolio Manager at Rafferty since June 2004. Mr. Brigandi
was previously involved in the equity trading training program for Fleet Boston
Financial Corporation from August 2002 to April 2004. Mr. Brigandi is a 2002
graduate of
Fordham University.
Mr.
Ng has been a Portfolio Manager at Rafferty since April 2006. Mr. Ng was
previously a Team Leader in the Trading Assistant Group with Goldman Sachs from
2004 to 2006. He was employed with Deutsche Asset Management from 1998
to
2004. Mr. Ng graduated from State University of New York at Buffalo in
1998.
The Fund's SAI provides additional
information about the investment team members’ compensation, other accounts they
manage and their ownership of shares of the Fund.
Portfolio
Holdings
The Fund’s portfolio holdings are
disclosed on the Fund’s website at www.direxion.com each day the Fund is open
for business. A
description of the Fund's policies and procedures
with respect to the disclosure of the Fund's portfolio securities is available
in the Fund's SAI.
other
service providers
ALPS
Distributors, Inc. (“Distributor”) serves as the Fund's distributor. U.S. Bancorp
Fund Services, LLC (“USBFS”) serves as the Fund's administrator. Bank of New
York Mellon (“BNYM”) serves as the Fund's transfer agent, fund accountant,
custodian and index receipt agent. The Distributor is not affiliated with
Rafferty, USBFS, or BNYM.
Distributions
Fund
Distributions. The
Fund pays out dividends from its net investment income, and distributes any net
capital gains, if any, to its
shareholders at least annually. The Fund is authorized to declare
and pay capital gain distributions. The Fund may have
extremely high portfolio turnover, which may cause it to generate significant
amounts of taxable income. The
Fund will
generally need to distribute net short-term capital gain to satisfy certain tax
requirements. As a result of the Fund's high portfolio turnover,
it could need to make larger and/or more frequent distributions than traditional
ETFs.
A
shareholder that holds shares of the Fund when a Fund pays a distribution will
receive the distribution which reflects net investment income and net capital
gains the Fund earned prior to the shareholder’s holding period. Because of the
15
Direxion
Shares ETF Trust Prospectus
significant
amount of trading a Fund conducts due to its daily investment objective, a
shareholder may receive a large distribution with
a significant tax impact even if the shareholder holds the shares for a short
period of time.
Dividend
Reinvestment Service. Brokers may make the DTC
book-entry dividend reinvestment service (“Reinvestment Service”) available to
their customers who are shareholders of the Fund. To determine whether
the Reinvestment Service is available and whether
there is a commission or other charge for using the service, consult your
broker. Fund shareholders should be aware that brokers may require
them to adhere to specific procedures and timetables to use the Reinvestment
Service.
Taxes
As with any
investment, you should consider the tax consequences of buying, holding, and
disposing of Shares. The tax information in this Prospectus is only a general
summary of some important federal tax considerations generally affecting
the Fund and its
shareholders. No attempt is made to present a complete explanation of the
federal tax treatment of the Fund's activities, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors are urged to
consult their own tax advisers for more detailed information and for information
regarding any state, local, or foreign taxes applicable to
the Fund and to an investment in Shares.
Fund
distributions to you and your sale of your Shares will have tax consequences to
you unless you hold your Shares through a tax-exempt entity or tax-deferred
retirement arrangement, such as an individual retirement account (“IRA”) or
401(k) plan.
The Fund intends to continue to
qualify each taxable year for taxation as a “regulated investment company” under
Subchapter M of the
Internal Revenue Code of 1986, as amended (the “Code”). If the Fund so qualifies and
satisfies certain distribution requirements,
the Fund will not be subject to federal income tax on income that is distributed
in a timely manner to its shareholders in the form of
income dividends or capital gain distributions.
Taxes
on Distributions.
Dividends from the Fund’s investment company taxable income – generally,
the sum of net investment income, the
excess of net short-term capital gain over net long-term capital loss, and net
gains and losses from certain foreign currency transactions, if any, all
determined without regard to any deduction for dividends paid – will be
taxable to you as
ordinary income to the extent of its earnings and profits, whether they are paid
in cash or reinvested in additional Shares. However, dividends the Fund pays to you that are
attributable to its “qualified dividend income” (i.e., dividends it receives on
stock of most domestic and certain foreign corporations with respect to which it
satisfies certain holding period and other restrictions) generally will be taxed
to you, if you are an individual, trust, or estate and satisfy those
restrictions with respect to your Shares, for federal income tax purposes, at
the rates of 15% or 20% for such shareholders with taxable income exceeding
certain thresholds (which will be indexed for inflation annually). A portion of
the Fund’s dividends
also may be eligible
for the dividends-received deduction allowed to corporations – the
eligible portion may not exceed the aggregate
dividends the Fund receives from domestic corporations subject to federal income
tax (excluding real estate investment trusts) and excludes dividends from
foreign corporations – subject to
similar restrictions; however, dividends a corporate
shareholder deducts pursuant to that deduction are subject indirectly to the
federal alternative minimum tax. The Fund does not expect to earn
a significant amount of income that would qualify for those maximum rates or
that deduction.
Distributions of
the Fund’s net
capital gain (which is the excess of net long-term capital gain over net
short-term capital loss) that it
recognizes on sales or exchanges of capital assets (“capital gain
distributions”), if any, will be taxable to you as long-term capital gains, at
the maximum rates mentioned above if you are an individual, trust, or estate,
regardless of your holding period for the Shares on which the distributions are
paid and regardless of whether they are paid in cash or reinvested in additional
Shares. The Fund’s
capital gain distributions may vary considerably from one year to the next as
a
result of its investment activities and cash flows and the performance of the
markets in which it invests. The Fund does not expect to earn
a significant amount of net capital gain.
Distributions in
excess of the Fund’s
current and accumulated earnings and profits, if any, first will reduce your
adjusted tax basis in
your Shares in the Fund and, after that basis is reduced to zero, will
constitute capital gain. That capital gain will be long-term capital gain, and
thus will be taxed at the maximum rates mentioned above if you are an
individual, trust,
or estate if the distributions are attributable to Shares you held for more than
one year.
Investors
should be aware that the price of Shares at any time may reflect the amount of a
forthcoming dividend or capital gain distribution, so if they purchase Shares
shortly before the record date therefor, they will pay full price for the Shares
and receive some part of the purchase price back as a taxable distribution even
though it represents a partial return of invested
capital.
In
general, distributions are subject to federal income tax for the year when they
are paid. However, certain distributions paid in January
may be treated as paid on December 31 of the prior year.
Fund
distributions to tax-deferred or qualified plans, such as an IRA, retirement
plan or pension plan, generally will not be taxable. However, distributions from
such plans will be taxable to the individual participant notwithstanding the
character
Direxion
Shares ETF Trust Prospectus
16
of the income
earned by the qualified plan. Please consult a tax adviser for a more complete
explanation of the federal, state, local and foreign tax
consequences of investing in the Fund through such a plan.
Taxes
When Shares are Sold. Generally, you will recognize
taxable gain or loss if you sell or otherwise dispose of your Shares. Any gain
arising from such a disposition generally will be treated as long-term capital
gain if you held the Shares for more than one year, taxable at the maximum rates
(15% or 20%) mentioned above if you are an individual, trust, or estate;
otherwise, the gain will be treated as short-term capital gain. However, any
capital loss arising from the disposition of Shares held for six months or less
will be treated as long-term capital loss to the extent of capital gain
distributions, if any, received with respect to those Shares. In addition, all
or a portion of any loss recognized on a sale or exchange of Shares of
the Fund will be
disallowed to the extent other Shares of the same Fund are purchased (whether
through reinvestment of distributions
or otherwise) within a period of 61 days beginning 30 days before and ending 30
days after the date of the sale or exchange; in that event, the basis in the
newly purchased Shares will be adjusted to reflect the disallowed
loss.
Holders
of Creation Units. A person who
purchases Shares of a Fund by exchanging securities for a Creation Unit
generally will
recognize capital gain or loss equal to the difference between the market value
of the Creation Unit and the person’s aggregate basis in the exchanged
securities, adjusted for any Balancing Amount paid or received. A shareholder
who redeems a Creation Unit generally will recognize gain or loss to the same
extent and in the same manner as described in the immediately preceding
paragraph.
Miscellaneous.
Backup
Withholding. The
Fund must withhold and remit to the U.S. Treasury 24% of dividends and capital
gain
distributions otherwise payable to any individual or certain other non-corporate
shareholder who fails to certify that the social security or other taxpayer
identification number furnished to the Fund is correct or who furnishes an
incorrect number (together with the withholding described in the next sentence,
“backup withholding”). Withholding at that rate also is required from
the Fund’s dividends
and capital gain distributions otherwise payable to such a shareholder who is
subject to
backup withholding for any other reason. Backup withholding is not an additional
tax, and any amounts so withheld may be credited against
a shareholder’s federal income tax liability or refunded.
Additional
Tax. An individual
must pay a 3.8% federal tax on the lesser of (1) the individual’s “net
investment income,” which generally
includes dividends, interest, and net gains from the disposition of investment
property (including dividends and capital gain distributions the Fund pays and net gains
realized on the sale or redemption of Shares), or (2) the excess of the
individual’s “modified adjusted gross income” over a threshold amount ($250,000
for married persons filing jointly and $200,000 for single taxpayers). This tax
is in addition to any other taxes due on that income. A similar tax will apply
for those years to estates and trusts. Shareholders should consult their own tax
advisers regarding the effect, if any, this provision may have on their
investment in Fund shares.
Basis
Determination. A shareholder
who wants to use the average basis method for determining basis in Shares he or
she acquires
after December 31, 2011 (“Covered Shares”), must elect to do so in writing
(which may be electronic) with the broker through which he or she purchased the
Shares. A shareholder who wishes to use a different IRS-acceptable method for
basis determination (e.g., a specific
identification method) may elect to do so. Fund shareholders are urged to
consult with their brokers regarding the application of the basis determination
rules to them.
You may also be
subject to state and local taxes on Fund distributions and dispositions of
Shares.
Non-U.S.
Shareholders. A
“non-U.S. shareholder” is an investor that, for federal tax purposes, is a
nonresident alien individual, a foreign
corporation or a foreign estate or trust. Except where discussed otherwise, the
following disclosure assumes that a non-U.S. shareholder’s ownership of Shares
is not effectively connected with a trade or business conducted by such non-U.S.
shareholder in the United States and does not address non-U.S. shareholders who
are present in the United States for 183 days or more during the taxable year.
The tax consequences to a non-U.S. shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Non-U.S.
shareholders should consult their tax advisers with respect to the particular
tax consequences to them of an investment in the Fund.
Withholding. Dividends paid by the Fund to
non-U.S. shareholders will be subject to withholding tax at a 30% rate or a
reduced rate
specified by an applicable income tax treaty to the extent derived from
investment income (other than “qualified interest income” or “qualified
short-term capital gains,” as described below). In order to obtain a reduced
rate of withholding, a non-U.S. shareholder will be required to provide an IRS
Form W-8BEN (or substitute form) certifying its entitlement to benefits under a
treaty. The withholding tax does not apply to regular dividends paid to a
non-U.S. shareholder who provides an IRS Form W-8ECI, certifying that the
dividends are effectively connected with the non-U.S. shareholder’s conduct of a
trade or business within the United States. Instead, the effectively connected
dividends will be subject to regular U.S. income tax as if the non-U.S.
shareholder were a U.S. shareholder. A non-U.S. corporation’s earnings and
profits attributable to such dividends may also be
subject to additional “branch profits tax” imposed at a rate of 30% (or lower
treaty rate).
A
non-U.S. shareholder who fails to provide an IRS Form W-8BEN or other applicable
form may be subject to backup withholding at the
appropriate rate. See the discussion of backup withholding under “Miscellaneous”
above.
Exemptions
from Withholding. In general,
federal income tax will not apply to gain realized on the sale or other
disposition of
Shares or to any Fund distributions reported as capital gain dividends,
short-term capital gain dividends, or interest-related dividends.
17
Direxion
Shares ETF Trust Prospectus
“Short-term
capital gain dividends” are dividends that are attributable to “qualified
short-term gain” the
Fund realizes (generally, the
excess of the Fund’s
net short-term capital gain over long-term capital loss for a taxable year,
computed with certain
adjustments). “Interest-related dividends” are dividends that are attributable
to “qualified net interest income” from U.S. sources. Depending on its
circumstances, the
Fund may report all, some or none of its potentially eligible dividends
as
short-term capital gain dividends and interest-related dividends and/or treat
such dividends, in whole or in part, as ineligible for this exemption from
withholding. To qualify for the exemption, a non-U.S. shareholder will need to
comply with applicable certification requirements relating to its non-U.S.
status (including, in general, furnishing an IRS Form W-8BEN or substitute
form). In the case of shares held through an intermediary, the intermediary may
withhold even if the
Fund designates the payment as a
short-term capital gain dividend or an interest-related dividend. Non-U.S.
shareholders should contact their intermediaries with respect to
the application of these rules to their accounts.
Foreign
Account Tax Compliance Act (“FATCA”). Under FATCA, “foreign financial
institutions” (“FFIs”) or “non-financial foreign
entities” (“NFFEs”) that are Fund shareholders may be subject to a generally
nonrefundable 30% withholding tax on income dividends. As discussed more fully
in the Fund's SAI
under “Taxes,” the FATCA withholding tax generally can be avoided (a)
by an FFI, if it reports certain information regarding direct and indirect
ownership of financial accounts U.S. persons hold with the FFI and (b) by an
NFFE, if it certifies as such and, in certain circumstances, that (i) it has no
substantial U.S. persons as owners or (ii) it does have such owners and reports
information relating to them to the withholding agent. The U.S. Treasury has
negotiated intergovernmental agreements (“IGAs”) with certain countries and is
in various stages of negotiations with other foreign countries with respect to
one or more alternative approaches to implement FATCA; entities in those
countries may be required to comply with the terms of the IGA instead of
Treasury regulations. Non-U.S. shareholders should consult their own tax
advisers regarding the application of these requirements to their own situation
and the impact thereof on their investment in
the Fund.
More information about taxes is
available in the Fund's SAI.
Additional
Information ABOUT THE TRUST
The Trust enters
into contractual arrangements with various parties, which may include, among
others, the Fund's
investment adviser,
custodian, and transfer agent, who provide services to the Fund. Shareholders are not
parties to any such contractual arrangements and
are not intended beneficiaries of those contractual arrangements, and those
contractual arrangements are not intended to create in any shareholder any right
to enforce them against the service providers or to seek any remedy under them against the service
providers, either directly or on behalf of the Trust.
This Prospectus
provides information concerning the Fund that you should consider in
determining whether to purchase Fund shares.
Neither this Prospectus nor the SAI is intended, or should be read, to be or
give rise to an agreement or contract between the Trust or the Fund and any investor, or to give
rise to any rights in any shareholder or other person other than any rights
under federal or state law that may not be waived.
Many states have
unclaimed property rules that provide for transfer to the state (also known as
“escheatment”) of unclaimed property under various circumstances. These
circumstances include inactivity (e.g., no owner-initiated contact for a certain
period), returned mail (e.g., when mail sent to a shareholder is returned by the
post office as undeliverable), or a combination of both inactivity and returned
mail. Unclaimed or inactive accounts may be subject to escheatment laws, and the
Fund
and
the Fund's transfer
agent will not be liable to shareholders and their representatives for good
faith compliance with those laws.
Index
Licensors
NASDAQ
Index. The
NASDAQ-100® Equal WeightedSM Index is not sponsored,
endorsed, sold or promoted by Nasdaq Inc. (“Nasdaq”) or
its affiliates (Nasdaq with its affiliates are referred to as the
“Corporations”). The Corporations have not passed on the legality or suitability
of, or the accuracy or adequacy of descriptions and disclosures relating to, the
Direxion NASDAQ-100® Equal Weighted ETF. The
Corporations make no representation or warranty, express or implied to the
owners of the Direxion
NASDAQ-100® Equal Weighted ETF or any member
of the public regarding the advisability of investing in securities
generally or in the Direxion NASDAQ-100® Equal Weighted ETF particularly,
or the ability of the NASDAQ-100®
Equal
WeightedSM Index to track general stock
market performance. The Corporations’ only relationship to Rafferty Asset
Management, LLC
(“Licensee”) is in the licensing of the NASDAQ®, OMX®, NASDAQ OMX®, and NASDAQ-100® Equal WeightedSM
Index, Index
registered trademarks, and certain trade names and service marks of the
Corporations and the use of the NASDAQ-100® Equal WeightedSM Indexwhich is determined,
composed and calculated by NASDAQ OMX without regard to Licensee or
the Direxion NASDAQ-100® Equal Weighted ETF. NASDAQ OMX
has no obligation to take the needs of the Licensee or the
owners of the Direxion NASDAQ-100® Equal Weighted ETF into
consideration in determining, composing or calculating
the NASDAQ-100® Equal WeightedSM Index. The Corporations are not
responsible for and have not participated in the
determination of the timing of, prices at, or quantities of the Direxion
NASDAQ-100® Equal Weighted ETF to be
Direxion
Shares ETF Trust Prospectus
18
issued or in the
determination or calculation of the equation by which the Direxion
NASDAQ-100® Equal Weighted ETF is
to
be converted into cash. The Corporations have no liability in connection with
the administration, marketing or trading of the Direxion
NASDAQ-100® Equal Weighted ETF.
THE CORPORATIONS
DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE
NASDAQ-100®
EQUAL WEIGHTED
INDEX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS
OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE DIREXION
NASDAQ-100® EQUAL WEIGHTED ETF, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE NASDAQ-100® EQUAL WEIGHTED INDEX OR ANY DATA
INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE NASDAQ-100® EQUAL WEIGHTED INDEX OR ANY
DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL
THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
19
Direxion
Shares ETF Trust Prospectus
Financial
Highlights
The financial
highlights table is intended to help you understand the financial performance of
the Fund for the
periods indicated. The information set forth below was derived from the
financial statements audited by Ernst & Young LLP,
Independent Registered Public Accounting Firm, whose report, along with the
Fund's financial
statements, is included in the Annual shareholder report, which is available
upon request and incorporated by reference into the
Fund's SAI.
Certain information reflects financial results for a single Share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset
Value,
Beginning
of
Year/Period |
Net
Investment
Income
(Loss)1 |
Net
Realized
and
Unrealized
Gain
(Loss)
on
Investments3 |
Net
Increase
(Decrease)
in
Net
Asset
Value
Resulting
from
Operations |
Dividends
from
Net
Investment
Income |
Distributions
from
Realized
Capital
Gains |
Distributions
from
Return
of
Capital |
Total
Distributions |
Net
Asset
Value,
End
of
Year/Period |
Total
Return4 |
|
Direxion
NASDAQ-100®
Equal Weighted Index ETF |
|
|
|
|
|
|
|
|
|
|
|
For
the Year Ended October 31, 2025 |
$89.07 |
0.60 |
14.59 |
15.19 |
(0.59
) |
– |
– |
(0.59
) |
$103.67 |
17.12
% |
|
For
the Year Ended October 31, 2024 |
$71.30 |
0.76 |
17.79 |
18.55 |
(0.78
) |
– |
– |
(0.78
) |
$89.07 |
26.04
% |
|
For
the Year Ended October 31, 2023 |
$63.90 |
0.63 |
7.45 |
8.08 |
(0.68
) |
– |
– |
(0.68
) |
$71.30 |
12.66
% |
|
For
the Year Ended October 31, 2022 |
$87.33 |
0.53 |
(20.59
) |
(20.06
) |
(0.50
) |
(2.87
) |
– |
(3.37
) |
$63.90 |
-23.78
% |
|
For
the Year Ended October 31, 2021 |
$63.03 |
0.39 |
24.33 |
24.72 |
(0.39
) |
(0.03
) |
– |
(0.42
) |
$87.33 |
39.30
% |
Direxion
Shares ETF Trust Prospectus
20
Financial
Highlights (continued)
|
|
|
RATIOS
TO AVERAGE NET ASSETS5 |
Portfolio
Turnover
Rate7 | |||||
|
|
Net
Assets,
End
of
Year/Period
(000's
omitted) |
Net
Expenses6 |
Total
Expenses |
Net
Investment
Income
(Loss)
after
Expense
Reimbursement |
Net
Expenses2,6 |
Total
Expenses2 |
Net
Investment
Income
(Loss)
after
Expense
Reimbursement2 | |
|
Direxion
NASDAQ-100®
Equal Weighted Index ETF |
|
|
|
|
|
|
|
|
|
For
the Year Ended October 31, 2025 |
$1,176,645 |
0.35
% |
0.35
% |
0.64
% |
0.35
% |
0.35
% |
0.64
% |
33
% |
|
For
the Year Ended October 31, 2024 |
$1,278,182 |
0.35
% |
0.35
% |
0.88
% |
0.35
% |
0.35
% |
0.88
% |
34
% |
|
For
the Year Ended October 31, 2023 |
$791,471 |
0.35
% |
0.35
% |
0.87
% |
0.35
% |
0.35
% |
0.87
% |
30
% |
|
For
the Year Ended October 31, 2022 |
$699,676 |
0.35
% |
0.35
% |
0.75
% |
0.35
% |
0.35
% |
0.75
% |
34
% |
|
For
the Year Ended October 31, 2021 |
$432,264 |
0.35
% |
0.35
% |
0.49
% |
0.35
% |
0.35
% |
0.49
% |
30
% |
1
Net investment
income (loss) per share represents net investment income divided by the daily
average shares of beneficial interest outstanding throughout each
period.
2
Excludes interest
expense and extraordinary expenses which comprise of tax and litigation
expenses.
3
Due to the timing
of sales and redemptions of capital shares, the net realized and unrealized gain
(loss) per share will not equal the Fund's changes in net realized and
unrealized gain (loss) on investments, in-kind redemptions, futures and swaps
for the period.
4
Total return is
calculated assuming an initial investment made at the net asset value at the
beginning of the period, reinvestment of all dividends and distributions at net
asset value during the period and redemption on the last day of the period.
Total return calculated for a period of less than one year is not
annualized.
5
For periods less
than a year, these ratios are annualized.
6
Net expenses
include effects of any reimbursement/waiver or recoupment.
7
Portfolio turnover rate is not
annualized and excludes the value of portfolio securities received or delivered
as a result of in-kind creations or redemptions of the Fund's capital shares.
Portfolio turnover rate does not include effects of turnover of the swap and
future contracts portfolio. Short-term securities with maturities less than or
equal to 365 days are also excluded from portfolio turnover
calculation.
21
Direxion
Shares ETF Trust Prospectus
Prospectus
|
535 Madison
Avenue, 37th
Floor |
New York,
New York 10022 |
(866)
476-7523 |
More
Information on the Direxion Shares ETF Trust
Statement
of Additional Information (“SAI”):
The Fund's SAI contains more
information on the Fund and its investment policies. The SAI is
incorporated in this Prospectus by reference (meaning it is legally part of this
Prospectus). A current SAI is on file with the Securities and Exchange
Commission (“SEC”).
Annual
and Semi-Annual Reports to Shareholders:
The Fund's reports will provide
additional information on the Fund's investment holdings,
performance data and information discussing the market conditions and investment
strategies that significantly affected the Fund's performance during that
period. The
Fund's Form N-CSR
will contain additional information about the Fund's
investments and the
Fund's annual and semi-annual financial statements.
To
Obtain the SAI or Fund Reports Free of Charge or for Other Information, such
as
Fund Financial Statements, or Shareholder Inquiries:
|
Write
to: |
Direxion
Shares ETF Trust |
|
|
535
Madison Avenue, 37th
Floor
New York,
New York 10022 |
|
Call: |
(866)
476-7523 |
|
By
Internet: |
www.direxion.com |
Reports and
other information about the Fund may be viewed on screen or
downloaded from the EDGAR
Database on the SEC’s website at http://www.sec.gov. Copies of these documents
may be obtained, after paying a duplicating fee, by electronic request at the following e-mail
address: [email protected].
SEC
File Number: 811-22201