Apr. 22, 2020
Comment on SEC Proposed Rule #S7-24-15: As an individual investor, I rely on Leveraged and Inverse Funds to perform a hedge against movements in the equity markets. L&I Funds are an essential part of my portfolio strategy for long term growth. Direxion provides potential investors with a Prospectus and other materials that outline the risk and volatility these funds face. Every investor should be able to decide whether L&I Funds are within their goals or not. The SEC shouldn't have the ability to determine the decision for investors or brokerage firms forcefully. The idea would undermine the principles of free choice in the capital marketplace. I'm aware that L&I Funds are highly volatile and are not suppose to get me rich. The reason these funds exist is for hedging and risk aversion from potential equity market volatility. These funds help protect me from potential losses of the S&P 500. It's done just that during the recent COVID-19 Pandemic and Economic downturn. Eliminating the opportunity for existing and potential investors would be detrimental to the existence of the capital markets. I receive language from Direxion and my brokerage firm at Robinhood Financial LLC. Direxion's transparency with shareholders about the potential risks of L&I Funds remains handled well. Below is a recent communication from Direxion from Appendix A - Certain L&I Risk Factors: L&I Funds are not suitable for all investors and are not intended to be used by, and is not appropriate for, investors who do not intend to monitor and manage their portfolios actively. Investors who do not understand the Funds, or do not expect to manage their funds actively and monitor their investments, should not buy the Funds. L&I Funds seek daily leveraged investment results and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. An investment in the Fund remains exposed to the risk that a decline in the daily performance of the Index will continue magnified. L&I Funds pursue daily leveraged investment objectives, which means that the Funds are riskier than alternatives that do not use leverage because the Funds magnify the performance of their underlying index. The pursuit of daily investment objectives by L&I Funds means that the returns will be the product of a series of daily leveraged returns for each trading day during the relevant period. As a consequence, the volatility may affect a Fund’s performance as much, or more than, the return of the underlying index. Compounding affects all investments but has a more significant impact on funds that remain leveraged and that rebalance daily. The effect of compounding becomes more pronounced as Index volatility and the holding period increase. L&I Funds are designed to be utilized only by active investors who: (a) understand the risks associated with the use of leverage; (b) understand the consequences of seeking daily leveraged investment results; (c) for a Bear Fund, understand the risk of shorting; and (d) intend to monitor and manage their investments actively. Bear Funds pursue a daily leveraged investment objective that is inverse to the performance of its underlying index, a result opposite of most mutual funds and exchange-traded funds. I don't know about you, but after reading this, I think I'm aware of risks and volatility the L&I Funds carry. Direxion's done an excellent job of communicating with all of its shareholders and potential shareholders. Overall, the SEC should think twice about implementing limitations for my ability to trade L&I Funds. Thank you, Stephen Cecchini 180 W Adams St, Apt. 702 Chicago, IL 60603 (989) 493-1145