SEC report sheds light on the August flash crash

December 30, 2015 at 6:45 p.m. EST

A trader is reflected in his computer screen on the floor of the New York Stock Exchange at the market open in New York. (REUTERS/Carlo Allegri)

When fears of a slowdown in China sent U.S. stocks plummeting in late August, some of the market mechanisms meant to protect investors during times of volatility may have triggered even greater losses among exchange-traded funds, market regulators said in a report released this week.

Some investors were surprised during the early minutes of stock trading on August 24 when they noticed that many ETFs became worth much less than their underlying investments. The study issued by the Securities and Exchange Commission looked at the factors that may have contributed to the unusually wide market moves that morning. About 19 percent of exchange-traded products fell by 20 percent or more that day, the report found.