"Top investment bank Morgan Stanley said in a comment to institutional clients on Thursday that computer-driven macro hedge fund strategies sold $20 billion in stocks on Wednesday and will sell at least another $25 billion next week after the stock market plunge, one of the largest risk unwinding events in a decade.

The bank said: 'The volatility over the past two weeks started out very rotational,' referring to the recent shift by investors from mega-cap stocks to small-cap stocks. 'But now (Wednesday) it has evolved into broad index deleveraging.'

Morgan Stanley said in the comment that if volatility persists in the coming days, selling will increase rapidly, but declined to comment further. A 1% increase in daily losses in global stocks could trigger $35 billion in selling; a 3% increase in daily losses could see macro hedge funds sell as much as $110 billion."

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