Last Thursday's market pyrotechnics have spawned a lot of mysteries. One of the more vexing concerns is exchange traded funds. For some reason, many ETFs plummeted in price much more than the value of their underlying indexes at the peak of selling. Some ETF investors--and many are retail investors--may be facing losses.

According to Reuters, exchanges have agreed to cancel trades that took place during the 20 minutes of intense pressure. But "only trades at least 60 percent away from prices at 2:40 p.m. will be retracted." So if an investor had a stop-loss order set up for protection, that order may have been activated. He or she would have sold out and would have missed the rebound. One would think that ETFs would simply mimic the value of its indexes, but that wasn't the case.

To some extent, this is a good test of the ETFs. Until now, we never saw what might happen to them under intense selling pressure. Now we know, and it is not necessarily comforting. The big ETF firms will have to address this. Some brokerages may consider some make-good trades.  

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