Key Points:

ASIC's paper is the latest step in facilitating the development of a deep and active retail bond market in Australia.

On 20 July 2012, the Australian Securities & Investments Commission released a consultation paper outlining proposals to extend its market integrity rules to the retail trading of Commonwealth Government Securities (CGS).

The paper represents the latest step in the realisation of the Australian Government's commitment to facilitate the development of a deep and active retail bond market in Australia. It builds on a package of banking reforms announced by the Government in December 2010 with the aim of promoting a competitive and sustainable banking system in Australia, including through allowing retail trading of CGS to provide a more visible pricing benchmark for retail bonds.

Since the announcement, the Government has taken a number of steps to facilitate the retail trading of CGS, including the June 2012 introduction of a bill to amend the Commonwealth Inscribed Stock Act 1911, which provides an overall framework for the activities of the Australian Office of Financial Management in issuing, selling and managing CGS. The Bill will also amend the Corporations Act 2001 to prescribe certain information that financial advisers must provide when giving advice to retail investors about CGS.

In view of the Government's wider agenda, ASIC is seeking feedback not only on the specific proposals outlined in its 20 July paper for CGS, but also on the potential broader application of ASIC's market integrity rules to retail corporate bonds.