Market disruption refers to a situation where normal market functioning is severely impaired, characterized by:

1. Trading halts: Exchanges or regulators temporarily suspend trading to prevent further market deterioration.

2. Liquidity evaporation: Market participants withdraw or refuse to provide liquidity, making it difficult to buy or sell assets.

3. Execution difficulties: Traders face challenges executing trades due to:

- Wide bid-ask spreads

- Limited market depth

- High volatility

- Order book fragmentation

4. Market fragmentation: Trading becomes dispersed across multiple platforms, exacerbating liquidity issues.

5. Information asymmetry: Some market participants may have access to better information or resources, creating an uneven playing field.

6. Market sentiment deterioration: Fear, panic, and uncertainty dominate market psychology.

7. Systemic risk: Market disruption can pose a threat to the entire financial system, potentially leading to:

- Financial contagion

- Credit crises

- Economic downturns

Examples of market disruptions include:

1. Flash crashes (e.g., 2010, 2013, 2020)

2. Global financial crises (e.g., 2008)

3. Market reactions to geopolitical events (e.g., elections, trade wars)

4. Sudden changes in monetary policy or interest rates

5. Regulatory changes or enforcement actions

6. Natural disasters or pandemics (e.g., COVID-19)

To mitigate market disruption, regulators and market participants can implement measures such as:

1. Circuit breakers

2. Trading halts

3. Liquidity provision programs

4. Market maker obligations

5. Risk management strategies

6. Market monitoring and surveillance

7. Communication and coordination among market participants and regulators.