3D-printed images of logos of Meta Platforms and Facebook
Direxion’s target stocks include Facebook’s parent Meta Platforms, Netflix, Apple, Microsoft, Amazon and Google © Reuters

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Direxion is racing to catch up with a new leveraged and inverse exchange traded fund product innovation: single-stock funds.

The manager filed an application to the US Securities and Exchange Commission last week to launch 21 funds, each offering exposure to the daily inverse or leveraged returns of a high-profile tech stock.

Alternative asset manager AXS Investments filed earlier this month for 18 similar ETFs, each designed to replicate two times either the daily performance or daily inverse performance of nine well-known stocks, though not all of them tech-oriented.

Both companies’ rollouts include chipmaker Nvidia among their target stocks. Other Direxion’s target stocks include Meta Platforms, Netflix, Apple, Microsoft, Amazon and Google. AXS’s funds also invest in Tesla, ConocoPhillips, Boeing, PayPal, Wells Fargo, Pfizer, Salesforce and Nike.

This article was previously published by Ignites, a title owned by the FT Group.

Neither filing disclosed expense ratios.

Another application for the Innovator Hedged Tesla ETF would provide hedged exposure to a single stock, Tesla’s. Innovator Capital Management filed for its rollout on January 31.

The products represent a novel twist on leveraged and inverse ETFs and have not been approved for launch. Their approval is by no means assured given that the SEC is drafting new rules for such products.

SEC’s chair Gary Gensler announced in October he had tasked commission staff with drawing up recommendations for rulemakings addressing the risks of investing in “complex financial products”, including leveraged and inverse ETFs.

The funds “can pose risks even to sophisticated investors and can potentially create system-wide risks by operating in unanticipated ways when markets experience volatility or stress conditions”, Gensler said at the time.

Soon after, the SEC rejected plans for a leveraged Bitcoin futures fund, dashing the hopes of applicants including AXS and Direxion.

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.

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