A wave of selling caused many exchange traded funds to tumble below the value of their underlying assets as a bond market sell-off caused stress in the $2 trillion ETF industry.

ETFs track baskets of underlying assets, such as emerging-market stocks or municipal bonds, but discounts widened sharply on Thursday as dealers struggled to keep up with the sell orders.

Emerging-markets ETFs were among the worst affected, as investors took fright that the end of Federal Reserve monetary easing would lead to outflows from developing countries.

(Read More: Bears Return to Emerging-Market ETF)

For example, the share price of the iShares MSCI Emerging Markets Index fell to a 6.5 per cent discount to the underlying asset value.

The selling also caused disruptions in the plumbing behind several ETFs. Citigroup stopped accepting orders to redeem underlying assets from ETF issuers, after one trading desk reached its allocated risk limits.

One Citi trader emailed other market participants to say: "We are unable to take any more redemptions today . . . a very rare occurrence due to capital requirements we are maxed out on the amount of collateral we have out."

A person familiar with the situation said it was a temporary suspension affecting only some clients, caused by the significant amount of sell orders. Citi declined to comment.