With the delivery of the Australian government's 2010/11 Budget on Tuesday night, ASIC made the long-awaited announcement that it provided class order relief, allowing certain offers of listed 'vanilla' corporate bonds to retail investors, to be made using a short-form prospectus. There was some excitement among market participants when ASIC first flagged the possibility of this development when it released a discussion paper on the proposed changes in December. However, in the intervening period the market seems to have lost its ardour. There are some major hurdles to the development of a retail corporate bond market that ASIC's proposed changes do not address - at least, not at first glance.The first is the matter of directors' liability that attaches to the issue of a prospectus. There is no way around this.The second is the absence of credit ratings. With no rating agency holding a retail licence, retail investors will have no objective and comparable measure of the credit quality of the bond issuer. The risk for retail investors is that they will buy on name familiarity and unless there is a reasonable degree of institutional investor participation in the issue, they will not be fairly compensated for the credit risk being taken. This hurdle is not insurmountable; retail bond markets can function without credit ratings. There are many unrated issuers in the New Zealand retail market. Another related potential problem is the absence of listed government bonds. Without these there isn't a risk-free benchmark that retail investors can use to assess the relative pricing of corporate bonds. This would seem a bit of a furphy though, given that the brokers used by retail investors would be well aware of the risk-free yield curve, as well as the bank bill and swap rates, against which corporate bonds are typically priced. The last hurdle is, if the wholesale market struggles to attract Australian corporate issuance as it is, why would a new and untested retail market attract any issuance?