Just to be clear, neither the PureFunds ISE Cyber Security ETF (NYSEArca: HACK) nor its issue are in trouble for insider trading. Rather, what has the potential to be a wide-ranging insider trading probe could be the next catalyst for HACK, 2015’s darling ETF.
On Tuesday, Reuters reported that the Securities and Exchange Commission is investigating a group of hackers that allegedly breached corporate email accounts to find confidential data, such as details on mergers, to trade on.
Bud Fox posing as a janitor this is not. This is the 21st century. Cyber criminals are, obviously, technologically sophisticated and those searching for trading tips teeter on the brink of organized crime.
“According to people familiar with the matter, the SEC’s inquiry and a parallel probe by the U.S. Secret Service – which investigates cyber crimes and financial fraud – were spurred by a December report by security company FireEye Inc about a sophisticated hacking group that it dubbed FIN4,” according to Reuters.
A troop of hackers raiding corporate email accounts in search of stock tips is a legal nightmare but a dream come true for HACK. It is likely the reason the ETF closed modestly higher Tuesday on nearly double the average daily volume, extending its year-to-date gain to 26.3%. [Headlines Help HACK]
As we have noted several times in HACK’s short lifespan (the ETF debuted in November), the fund is positively correlated to negative cyber security news.
Undoubtedly, what is bad news in the world of cyber security in terms of data breaches and thefts turns into good news for HACK and its 31 constituent firms. That is something that has been widely covered in this space and, recently, Goldman Sachs picked up on the theme.
According to Goldman, there have been 17 high-profile cyber security breaches since the second quarter of last year involving companies such as Apple (NasdaqGS: AAPL), Tesla (NasdaqGS: TSLA), Starbucks (NasdaqGS: SBUX) and, on multiple occasions, the federal government. HACK debuted in November, so it has been around for at least 10 of the cyber scrares mentioned by Goldman.
HACK’s index “tracks the performance of companies actively engaged in providing services for cyber security and for which cyber security business activities are a key driver of their business model. These cyber security services are designed to protect computer hardware, software, networks and data from unauthorized access, vulnerabilities, attacks and other security breaches,” according to PureFunds.
On June 18, PureFunds officially said HACK had $1 billion in assets under management. In the three trading days since then, the ETF has tacked nearly $100 million in new assets. [HACK Hits $1 Billion in Assets]
PureFunds ISE Cyber Security ETF