Nasdaq Accused of Slacking over Index Management Obligations

Nasdaq explains its side over ETF issue

Earlier this year, Nasdaq Inc. was removed from its role supporting a $1.1 billion cyber security exchange-traded fund as concerns about their management of the fund’s index surface.

On Thursday, Nasdaq sued ETFMG, headed by Samuel Masucci, explaining the theft incident as it was said to have allegedly stolen ETF and several others. Another reported complaint in May was also brought up as PureShares sued ETFMG then. ETFMG has denied both accusations.

Small businesses with concepts for new ETFs can take them to “white-label” providers who can help get those products working. Amongst these providers is Summit, a New Jersey-based ETFMG.

Masucci disclosed in an interview that Nasdaq was failing to actively work on the index of most technology stocks the fund tracked previously before being dismissed as an index provider this summer. He added that it may have caused the fund to slow down a rival product, First Trust NASDAQ Cybersecurity ETF, that tracks a different kind of Nasdaq index.

“They were not managing the index as the methodology said they would,” stated Masucci, expressing that he doesn’t believe the company was doing research on it.

Nasdaq hasn’t commented regarding the statement but reported in its complaint that Masucci and ETFMG made up frivolous reasons to gain control of HACK and other ETFs. According to Nasdaq, it spent “millions” of dollars between the years of 2012 and 2017 to support the fund and upheld its obligations.

The Chase for HACK


The intensive chase for a rare ETF concept is revealed as dispute over HACK goes on.  More investors have switched to lower-cost index funds and PureShares explained how verdicts on the lawsuits could change the way ETF managers operate businesses.

HACK was among a relatively small group of ETFs which became successful. Launched in 2014, it became a blockbuster despite lacking the support of asset managers like Vanguard Group and BlackRock Inc. This eventually attracted the majority of ETF assets.

HACK reported a projection of 14.5 percent total return for the year ended July 31, which is short of the 16.9 percent return of CIBR when the Nasdaq index was replaced. It has continued to slow down CIBR in the nearly three months since the dismissal of Nasdaq, though Masucci stated that it covers stocks that are more easier to buy and sell.

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