There has been much discussion recently within the ETF community about capital gains.

In February, the American Stock Exchange made possible the cross-listing and trading of US, European and other internationally sourced, specifically Asian, ETFs.

This is the second article of a two-part series examining that frequently overlooked component of exchange-traded funds: the back office. Last month, ETFR presented the players; this month, we take a close look at the ETF creation/redemption process.

In summarizing performance of exchange-traded funds for the year 2000, Christopher Traulsen, head ETF analyst for Morningstar, describes the year as the bursting of the speculative bubble for technology stocks and the reemergence of forgotten players such as consumers and staples.

One of the more easily overlooked components of exchange-traded fund production is the back office operation.

Six months ago, STOXX, in conjunction with Merrill Lynch and the Deutsche Börse, launched Europe’s first ETF.

Known as the triple Q because of its QQQ ticker (or familiarly as Cubes), this ETF is a stellar performer, and has been since inception in March 1999. Within two months, it began to exhibit the trading pattern that has subsequently made it famous and attracted a wide range of investors and strategies.

As with any novel product or concept, misconceptions will flourish. Exchange-traded funds are no exception. Although they have been around since 1993 when the American Stock Exchange introduced the Spider, an investment vehicle that tracks the S&P 500 and trades intraday, ETFs have only recently achieved limited recognition among the investing public.