The collapse of market liquidity in securities markets – notably in the US – that followed the Russian default and the LTCM rescue in 1998, was considered at the time to be almost unprecedented. Even Mr Greenspan remarked "we do not as yet fully understand the new system’s dynamics". Clearly, the pattern was unusual in that it affected the deepest and most liquid markets in the world. However, the broad phenomenon of abrupt declines in securities market liquidity is not unusual. Amongst parallel episodes are the collapse of the FRN market in 1987, the junk bond crisis of 1990, the collapse of the Swedish commercial paper market also in 1990 and the difficulties of the ECU bond market in 1992. Admittedly, most of these comparable patterns in the past affected rather minor and segmented markets, which tended to feature a concentrated structure of market makers, investors and/or issuers. The most similar episode was perhaps that in the US CP market at the time of the Penn Central bankruptcy in 1970, which was considered of sufficiently systemic dimensions to warrant a policy response.

It is suggested that a recurrent pattern can be traced in debt securities markets, which is similar in some ways to contagious bank runs. In effect, markets cease to function, so that securities are transformed temporarily into non-marketable loans, or at least suffer major price shifts. This may entail severe difficulties for those relying on their liquidity, including investors, issuers and market makers, and can lead to systemic risk in the financial system more generally. Difficulties are more threatening now than in the past given the increasing use of securities markets for funding, trading and investment by banks and other institutions with a maturity mismatch, the incidence of "herding" behaviour as investors adopt similar portfolio strategies and the prevalence of leveraged position taking.