Cybersecurity is an ongoing concern, especially with a heavier reliance on the internet these days. That said, it opens the path for ETF opportunities within the cybersecurity space.
One such fund worth noting is the First Trust NASDAQ Cybersecurity ETF (CIBR), which follows the Nasdaq CTA Cybersecurity Index. The fund allocates its net assets in the common stocks and depositary receipts that comprise the index, which includes securities of companies classified as “cyber security” companies by the CTA.
Key points of summary for CIBR:
- The index includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices in order to provide protection of the integrity of data and network operations.
- Each security must have a worldwide market capitalization of $250 million, have a minimum three-month average daily dollar trading volume of $1 million, and have a minimum free float of 20%.
- The index is evaluated semi-annually in March and September, but if at any time during the year other than the evaluation, an index security no longer meets the eligibility criteria, or is otherwise determined to have become ineligible for inclusion in the index, the security is removed from the index and is not replaced. Any index security that reaches its foreign investment limit between quarterly re-balances is removed from the index.
- The index employs a modified liquidity-weighted methodology which includes caps on the percentage of any individual security to derive the final weights of the securities.
- The index is re-balanced quarterly.
Support by Federal Government Initiatives
Support from the federal government should also push CIBR higher. Realizing that cybersecurity is of ongoing importance, U.S. president Joe Biden was quick to sign federal initiatives to support cybersecurity.
“President Biden recently signed a National Security Memorandum on cybersecurity,” a JDSupra article notes. “This memorandum was required by an earlier executive order, which we previously have discussed here. The new memorandum (NSM) requires certain network cybersecurity measures for any government information system that is used for highly sensitive national security purposes. The requirements go into effect on a rolling basis over the next 6 months.”
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