TALK.L Share News (TALK)

* Cybersecurity "ISPY" ETF up 3 pct since launch

* Issue in spotlight after attack on TalkTalk

* Certain stocks have outperformed after TalkTalk hack

By Sudip Kar-Gupta

LONDON, Oct 30 (Reuters) - The hacking scandal at broadbandprovider TalkTalk has heightened interest in stocks andcompanies dealing in cyber security, with some fund managersbetting on more growth in the sector.

British police said on Friday that they had arrested asecond teenager in connection with the breach at TalkTalk, whichmay have led to the theft of personal data from among thecompany's more than 4 million customers.

TalkTalk was not the first such incident, but traders andinvestors said it should re-ignite interest in companiesoffering protection against hack attacks.

Market research firm Gartner has estimated that globalspending on IT security is set to increase 8.2 percent in 2015to $77 billion. Corporations around the world will spend $101billion on information security in 2018, Gartner says.

That has caught the attention of financial markets. The ISPY exchange-traded-fund, which lets investors hold abasket of cyber security stocks - such as Cisco Systems and Sophos Group - has risen around 3 percent.

"As cyber crime continues to grow, governments and companiesare prioritising cyber security as an essential investment. Thisis a sector we can expect to dominate headlines and corporatebudgets," said Kris Monaco, the head of ISE ETF Ventures.

Others focussed on some relatively small British stockswhose shares have risen, in contrast to those of TalkTalk whosestock has fallen 6 percent in the last week.

Falanx Group has climbed 15 percent over that sameperiod. NCC Group and Corero Network Security - an offshoot of the former Corero software business - haverisen 3 percent.

Corero's products include software that protects againstattacks on Internet sites and domain addresses.

NCC has similar services, including one to test howvulnerable a company is to "phishing" - where internal emailsare hacked by someone posing as an employee or outside contact -while Falanx has services monitoring clients' computerinfrastructure for signs of suspicious activity.

John Blamire, a former British Army officer who is chiefexecutive at Falanx, said customer interest had risen since theattack on TalkTalk.

"Incidents such as the one at TalkTalk actively bringsattention to organisations such as ours," he said.

To be sure, stocks such as these would carry the usual risksassociated with "small cap" stocks with a relatively smallmarket valuation - less liquidity, which can then make them moreprone to a slump and harder to sell than bigger stocks.

Nevertheless, they have attracted some big-name investmenthouses, with Liontrust Asset Management holding a near 10percent stake in NCC while Blackrock Investment Management has anear 3 percent holding in Corero. Both Liontrust and Blackrockdeclined to comment on those holdings.

Mark Slater, chief investment officer at Slater Investments,holds around 3 million NCC shares in his company's portfolio,and he expected NCC and others to continue to grow.

"The nature of the Internet makes it open to attack. Theseproblems are not going to go away." (Reporting by Sudip Kar-Gupta; Editing by Lionel Laurent, LarryKing)