The development of financial markets has been regarded as a critical prerequisite for improving the operational effectiveness of the transmission of monetary policy. During the first phase of financial sector reforms, various structural rigidities were eased, so as to 2  BIS central bankers’ speeches  increase participation in financial markets as well as develop and strengthen inter-linkages amongst market segments, and foster competition.
The focus of various reform measures in financial market was on ensuring adequate liquidity in various segments of the market spectrum, and developing the regulatory, legal, institutional and technological infrastructure for orderly functioning of market activity. In the second phase of reforms, more sophisticated financial instruments were introduced. Further, issues relating to the stability of financial markets received priority in the policy agenda.