Exchange traded funds (ETFs) were among the most heavily impacted securities during yesterday’s market turmoil. What happened, and what lessons can be learned from the sell-off?

How were ETF investors affected during Thursday’s volatile market swing? It’s important to understand that outside the 20-minute free-fall, it appeared that the markets acted efficiently. However, during that 20-minute decline, something obviously went awry and the exchange are still researching and reporting on why some stocks and ETFs had pricing and trading at a fraction of their actual cost.

The exchanges have agreed to cancel some of the trades that took place in the 20-minute period, but only for securities that were at least 60% away from their original prices, says Reuters. This means some investors will be affected by the volatility.

While it’s too soon to tell if ETFs were a contributor or a victim in yesterday’s market nosedive, reports suggest that there was some kind of role.

Three-quarters of the canceled trades were ETFs and during the volatile 20-minute period, one-third of the trading volume was ETFs; a heavier than normal portion of that was in leveraged and inverse ETFs. The New York Stock Exchange said that 173 securities – 111 of which were ETFs – were affected by the sell-off. The Nasdaq said 281 securities – 193 of which were ETFs – were impacted on its exchange.

Yesterday, about 210 of 980 ETFs were sold at some point at more than 50% below their eventual closing price, according to Morningstar’s research.

The impacted funds were among the largest and most popular in the industry, including the iShares Russell 1000 Value (NYSEArca: IWD), whose price dropped from $60 to 8 cents before jumping back a few minutes later.

What gives? No one knows for sure, but what many people do know is how popular ETFs are with active traders – particularly leveraged ETFs. Many ETFs also represent the prices of hundreds of single stocks.

ETF providers are all aware of the issue and they’re calling for the exchanges to provide a more reliable marketplace for investors.