13 December 2011

Developing the Retail Corporate Bond Market

Today I am releasing a discussion paper for consultation on reforms to develop a deep and liquid retail corporate bond market in Australia.

The paper looks at potential ways to reduce regulatory burdens and barriers faced by Australian corporate entities when seeking to issue bonds to retail investors, particularly in the area of streamlining disclosure and liability requirements.

The paper looks at aligning the disclosure for retail corporate bond issues with the process already allowed for share entitlement offers so as to allow a very high level of protection for investors as well as reduced transactions costs for issuers.

Creating a large and liquid corporate bond market is a long-term project with no quick fixes, but the Government is committed to work with the industry to encourage the development of this important market over time.

As part of this process, I will convene with industry today a roundtable of issuers, investors and regulators in Sydney to hear further views and progress discussions in this area.

The discussion paper, Developing the Retail Corporate Bond Market: Streamlining disclosure and liability requirements, is available on the Treasury website. Submissions on the discussion paper are due by Friday, 10 February 2012.

As part of our aim to foster a deep and liquid corporate bond market, the Government has also committed to allowing retail investors to buy and trade Commonwealth Government Securities (CGS) on a retail platform, in a similar way they already trade equities.

This will provide retail investors with a more visible pricing benchmark for investments they may wish to make in corporate bonds issued by Australian businesses, as well as help further encourage retail investors to consider diversifying their savings through investments in fixed-income products.

The Australian Office of Financial Management (AOFM), the Australian Securities and Investments Commission and Treasury are continuing to progress this initiative in consultation with stakeholders.

Discussions with potential market operators indicate that an 'indirect' or 'beneficial ownership' type of trading model would be the most efficient, cost-effective and timely method for facilitating retail CGS trading.

Beneficial ownership models are already in place for trading CGS on wholesale markets, and are used on retail financial markets. Accordingly, I have agreed that the Government will consider proposals from market operators based on such a model.

Reflecting the Government's commitment to financial market competition, the AOFM's request for proposals is an open-ended process to allow multiple market operators to move into this space should they wish to do so.