Heading into the opening bell on Monday, August 24, it was clear that US stocks were going to see some heavy selling. The S&P 500 had ended the prior week on a four-day slide, and markets in Europe and Asia were plunging. What no one expected—and what many experts claimed couldn’t happen—was that prices for many of the largest exchange-traded funds fell far more sharply than the stocks they owned.

ETFs are supposed to-and generally do-trade in lockstep with the stocks they own, with very little tracking error. Yet when the S&P 500 fell as much as 5.3% in the opening minutes of trading, the $65 billion iShares Core S&P 500 ETF fell as much as 26%, some 20 percentage points below its fair value. Disorderly trading affected big ETFs from every major provider: The $18 billion Vanguard Dividend Appreciation ETF and the $12 billion SPDR S&P Dividend plunged 38% apiece, while the PowerShares S&P 500 Low Volatility ETF fell as much as 46% before clawing back an hour after markets opened.