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A framework for examining the process of financial market development is proposed. The framework is anchored in studying the incentives facing the key players in financial markets – borrowers, lenders, liquidity providers, and regulators – whose actions determine whether and how markets develop. While different financial instruments embody different concessions by borrowers and lenders, the framework emphasizes two main compromises: the tradeoffs between maturity and collateral, and between seniority and control in the sequencing of market development.