There is a more or less widely recognized sequencing for capital market development and it goes like this: •  It usually starts with treasury bill issues, to fund government’s short term financing needs and the formation of some kind of money market in which there is the trading of short term funds – a good example is the inter-bank money market.
The cornerstones are central clearing counterparties or “CCPs” for repos and OTC derivatives. Properly risk-proofed CCPs act as firewalls against the propagation of default shocks across major market participants. Through centralised clearing, authorities can also require the use of through-the-cycle margins, which would reduce liquidity spirals and their contribution to boom-bust cycles.