Mo Sparks, Direxion

Spending some time looking at global markets, as you referenced, and, continue to do that here at Drexion outside of the US, so Europe, as well as AsiaPAC. And then really formative was, the place where we met each other. And so the New York Stock Exchange. And so a really interesting time in the ETF industry when I joined there in late 2019. the ETF rule had just passed here in the US. those nerdlers call it 6C11. Even the ETF rule is kind of nerdy in itself. But a really important thing for the industry, I kind of saw the writing on the wall, and had an opportunity to come in and help the exchange think through how do you transition to

Potentially a next wave of growth. And that was really what my role was. And so helped new issuers like yourself launch the business. And same point in time, I think importantly, I got to know the ecosystem at a level that I didn't have an appreciation for while I was at Vanguard. Vanguard, I built really strong internal connections. As I said, learned a lot about the ways in which, you can build an organization work and how you build successful products and ensure that those products are healthy within the marketplace. But was in Malvern, Pennsylvania, kind of away from everything. And when I moved to New York City, as a kid growing up in Montana was not on my radar, is a place I thought I would ever live. And there I was in the middle of COVID and the lockdown

Moving into Long Island City. And the following five years, roughly, at the exchange were extremely formative in terms of really everything coming through you at an exchange. And so built relationships like ours and many other across this industry that I'm very grateful for and have served me every single day since that point in time. And then brief flyover at Raymond James, a phenomenal place to work and anticipated, staying there for a longer period of time to help build out their ETF platform. I watch what's happening there. Quite often, they've had good early success with the products that they brought to market, which I'm happy to see. But was really, quite excited about this opportunity here at Direction to become the chief product officer. And so it really came down to

An opportunity to kind of control a phase of growth. And this is a really dynamic firm and dynamic part of the market that, I'd spent some time with previously, but really hadn't dug into. And I've enjoyed them about just a little over a year in. This week was a year anniversary. And it's been a roller coaster as the markets are. And, given the strategies that we primarily deploy to traders into the marketplace today, we feel that very acutely. But it's been a lot of fun. And I'm really, looking forward to what we have coming over the next months and years, because I think, our product lineup is going to continue to grow. We launched four more

ETFs today, single stock strategies focused on, names like United Healthcare, Adobe, Texas Instruments. So names that the traders know, and that we all know and appreciate. Uh, but that's part of our continued evolution as a firm is to, provide those tools,

Very happy. And so, just earlier this week, it's pouring rain outside and my wife sends me a video and he's got a rain jacket on and he's just hitting practice golf balls in our backyard, uh, at five years old. Um, so that is a lot of my time and it's, it's really outdoors, right? That's what keeps me kind of grounded. I spend the days in front of, uh, computers and on the phone and doing things like this, which I, I do enjoy, but I enjoy the human connection more than anything. Uh, but it's fantastic just to, to get outside. And that brings me back to where I grew up in Montana. Yeah. Doesn't matter what it is as long as I'm, I'm outside.

Uh, but most importantly, they were dynamic through that entry point. And so I think, it's fantastic to say, I'm going to launch my ETF. And in the first six months, I'm going to raise, name your target, $25 million in assets. And I'm going to do so by targeting these RAAs in this area, or by using these friends and family that I have or institutions or whoever you kind of lean into. But what you find is once you actually get your product in market, the product takes its second life, right? And you have to then be responding to what that feedback is every single day. Uh, when you're a big organization, you have levels of that and you set committees to manage,

Feedback that comes from sales and from marketing and traffic you're seeing on your website, things of that nature. But for most that I was, truly helping, it was, you're a few people, you're an example of this, Brad, that you're doing everything every day, right? Uh, some are, uh, a co-PM or a PM themselves. And then obviously, you are the face of, of the ETF and the business. And so you got to go tell the story. And so, I think those that found success were always taking in what they're hearing and trying new things, right? Um, and importantly, I think leaning into how distribution is changed. And so, yes, distribution is still kind of carried by some of the bulge brackets and they can bring

You an immense level of scale. Uh, but underneath that, given, what we're doing now and the, the, continued evolution of technology, you as a, as a small issue or have a chance that you never had before to get your message out there and to tell your story and to use tools that admittedly larger organizations struggle to bring into their organization to go target new types of clients and follow up and interact with them in new ways. Uh, and so, I think it's lots of words for it's focus on distribution, have a plan and have a plan that is nimble. Don't be afraid to say, well, throw that one away. Let's go try something new today. Um, but that's my perspective.

I don't know. You live through it. I don't know if there's anything there that resonates with you.

At direction, the, the focus is more so on, and you believe that, uh, tomorrow something is going to happen in the market and you have a view you want to express, uh, based upon that view. And so obviously we're in the midst of a conflict in the middle East, uh, lots of news that continues to come in in regards to it, a ceasefire happening, a ceasefire not happening, right? What our lineup provides is tools for you as a trader to express a view on that theme or that thing that's happening. And what we do is we offer strategies that allow you to magnify your returns. And so, uh, you can go up by two or three X, the stated return of say S&P 500 for a single day.

And I think that, importantly, investors and traders have to understand how our products work. And so, I always say we lead with education. We have direction.com. There's a great resource on there called, uh, the direction ETF university, where we talk through how these strategies are built to, to function and the potential ramifications of holding them for periods longer than a day, because that's what they're built for. They have a daily reset in them to say, Hey, I'll give you, S&P is, is up 3% today. I'll give you three X that that's 9%. But if you hold it that second day, there begins to be factors that come into play that could result in you getting greater leverage or less leverage than that 3%,

3%, excuse me, three, three times. And so I think that's a really important concept, but I think, at its core, what we're building the business towards is, in, 1997, Raffery asset management and kind of like in theory direction was born. We launched our first ETFs in 2008 and 3X. Um, but the catalyst of that was taking something that was largely inaccessible to, most investors or traders because of either cost or complexity or just general access and making it accessible. Right. And so that was what we were after complex, simple, and accessible. So as, as we look at, the lineup on a go forward basis, we're very interested in continuing to build off of that. And our lineup is all from

Broad strategies, like an S&P 500, 3X ETF, SPXL, to what we did today, which we launched, four single stocks. And so highly concentrated, a singular name. And what we're seeing is traders are increasingly interested in expressing their views on a name based upon earnings or news or macro events. And so, I mentioned obviously three of them. PayPal is the fourth, uh, kind of within the list. Uh, and that's a franchise that's growing for us quite quickly. And what we're interested in is just nurturing. And so continuing to put product out there and admittedly, some are going to fail. We announced we're going to liquidate, 10 ETFs, eight of which are single stock names. And that's an acknowledgement that, you know,

Traders are not interested in trading a name like Ford today, right? Retail sentiment may be high in that name and the underlier, but really it doesn't translate to interest in our community. And that's okay, right. That's a learning for us. Um, but to kind of tie a bow on it, as we go forward, it's all about taking complex products and creating accessibility and making them simple. And so in some ways I feel like the market is kind of moving towards us. And so, you and I, you've had a lot of conversations. I spent a lot of time with people across the ecosystem. I think we saw increasingly that more complex things were coming into ETFs from cryptocurrencies and digital assets to private assets to true structure products. And so I think that creates

A lot of opportunity for a firm like Direction to leverage the expertise that we have as an organization in both the capability and the technical knowledge, as well as the storytelling to go do that to new and expanded audiences. And that's what gets me really excited.

Seeing broader interest in, a sector or an industry, or maybe we have increasingly a view of something where, the puck might go this direction in the future. And so it's kind of a balance of those two things. The puck is here right now, very clearly, obviously, the AI trade is in vogue. Semiconductors are an area of focus. We have, a lineup that helps to support that. We've expanded that lineup even today with Texas Instruments is one of the names, right? But maybe one day, semiconductors aren't the things that we're all after, right? At one point in time, it was kind of what's behind me here and people go, what is that? it was gold miners, which obviously is, it was, has very much been in vogue,

Earlier in the year and the last year. And so, you kind of have to balance it. Energy, obviously, is very much a focus. And so, we have a lineup that kind of creates resiliency as I increasingly think about it. for single stocks, we're looking for attractive names that resonate, that are newsworthy. But we're also looking to see how do those names combine with existing either sector or industry or broad-based strategies that we offer for traders, such that you have multiple points of entry. And so, one of the items that we introduced last year from a product standpoint is this concept of concentrated baskets. And we called the series, the Titan series. And really, it was built on, tactical traders can go get broad market

Exposure. They can go get sector exposure or industry exposure. And so, technology, semiconductors, or they can go get the single names, NVIDIA or Texas Instruments. But an in-between would be, well, how do I just want to concentrate on the names that are the ones that are really leading that sector industry? And so, a top five by market capitalization within a sector or industry. So, semiconductors is a perfect example, right? Where you have five names every quarter, it's rotating out and it's equal weights and they're getting two-axis exposure. So, an interesting test to see appetite from traders for new ways in which they can kind of deploy their capital and make decisions. So, I noticed these, these four new issues,

Initially, the bull case was stronger. You look at a name like Adobe, right? Very clearly, we're in the midst of, maybe the SaaS apocalypse and everyone's, rotating out of software. Maybe, I obviously don't know if I had a crystal ball, I, would be doing a few other things on the side as well. But Adobe has been beaten down, right? That there's opportunity there. Where, conversely, last year, we launched, two strategies off of Oracle. And, we provided both sides of the exposure. And we thought, hey, Oracle is now a name that's very topical for traders as well as for retail investors. And there's enough news and sentiment in either direction to move that stock, particularly obviously with, Ellison

Being at the helm of that firm from a chairman perspective, that it makes sense. The other thing I would say is, we continue to assess, appetite for different leverage points. And so, many of our single stock strategies are at negative one today. And, I think that that's a hedging tool. And I think that there is a very discrete use case for that. And we do see that, advisor community is increasingly expressing some interest and using those as a tax efficient way to, not have to sell out of a name if they believe they're maybe overexposed going into an earning cycle or something of that nature. But we're seeing higher leverage points, and maybe there's greater, retail interest in those sorts of things. And so,

It becomes a bit of an assessment of where the market is, and maybe where it's going.

What would be the best use case or some of the best use cases?

Weeks views on a particular sector, industry, or increasingly single stock name. And so, single stocks, let's just use as a practical example. Earnings season is where we tend to see the greatest volume in the lineup. Not at all surprising, right? So, as you're going into earnings, you as an advisor may have a client who, is either already very long the name, and you can use, one of our inverse strategies, excuse me, to hedge it, as we discussed, or they could have expressed interest to you in wanting to be long that name. And here's a way in which you can express that view for them, right? And so, if you go into the cycle, and, you're very bullish on, they've been reading what's happening, say,

At Texas Instruments, and they think they're going to have a blowout quarter because of the continued evolution of AI and, the reliance on chip makers and the shovel and the picks, well, here you go. Here's a solution for you for that period of time. To, other things that are more involved and advanced are on the basket-based products that are higher leverage points is really views associated with the balancing out of your portfolio. And so, if you have your core portfolio, and most advisors tend to take an approach that's a core and a satellite, these strategies are satellite-oriented, right? And so, they're a tactical overlay. So, the same sort of thing going into, say, Federal Reserve announcements, you have a view in which, there's going to be a rate hike or a cut. You can use one of our

Treasury products to express that in either direction, or obviously something broad like S&P 5. And what we tend to see is off those market announcements, there tends to be moves in the market. So, I think that articulates a few different use cases, both for single stocks, as well as for the broader strategies.

Stocks. I think, within the US market, from our point of view, aside from some of the large IPOs that, likely would come to market and maybe, some additional names that kind of fit within the S&P 500, you're getting to a place where you kind of reached the core capacity. And I think for us, we're pretty risk controlled in terms of how we approach the product development there. We want to ensure that there's ample liquidity and capacity in the names that we bring to market. We're not interested in going down to small cap or micro cap strategies and bringing those out, right? So, I think that given that there's a place of maturity within L&I, I kind of view it as defend, observe, think about solutions. That's a bit of the thinking around,

Having these concentrated baskets and potentially you pair that with some single stock exposure as a, way in which you're kind of hedging out component pieces, but you're generally a long basket, right? So, I think that that's one thing. It's really then what's beyond leverage and inverse. And that's where, my team is spending a lot of time is thinking about how we fit within that derivatives marketplace and, how we tell a story that would be adopted by not only our existing base of traders and investors, but also by the next generation of direction clients. And, I think we're pretty close to some things there. We have some things that are publicly filed. We'll have a number of things that'll come here in short order that I'm,

As I said, pretty excited about. And then I think, longer term, yes, we're paying attention to tokenization, very much paying attention to what's happening in digital assets, in particular, just the blockchain and how the infrastructure surrounding our ecosystem will evolve. Because it will evolve. It's just a question of when it happens and to what degree. And so, there's been a lot of recent news, obviously, off of tokens. My prior employer, announcing a partnership with Securitize, Nasdaq getting approval for token strategies. I think there may be something there, but it's really early. And there's a question of who are the true users of those products? And what is that solving? And I think that, there are some kind of scenarios where, increased

Access for those that are just digitally native that have historically, invested via all the wallets and have been investing more so in cryptocurrencies. And this becomes an easy kind of off ramp in terms of diversifying their portfolio to other things, right via tokens. But I think that there's also questions of what's the cost to get there? And, when you kind of jump on it. Well, Mo, this has been a lot of fun. You've been a good friend to me.

Questions that anybody ever has, don't hesitate and reach out to me as well.