The Australian Securities Exchange (ASX) expects to have at least 10 fixed-income exchange traded funds (ETFs) listed in the first half of 2012.

"In the first half of this year, we expect to see 10 plus [products] approximately," ASX AQUA and Warrants manager Stephen Small said.

On Monday 9 January, changes to the ASX operating rules came into effect that allowed for fixed-income AQUA products, including ETFs, to be listed.

Before the change in operating rules, ETFs could only include listed securities.

This excluded most fixed-income products because they are traded over the counter.

Providers can now officially launch their application for new products, Small said.

"All issuers are in discussions with us around applications for these products. We are in the process of processing those applications," he said.

"We would like to see ETFs quoted within the next four to six weeks. That is a realistic time frame."

In a circular to the market, the ASX explained that fixed-income ETFs can include both sovereign and corporate debt, but holdings will initially have to be selected from either the UBS Composite Bond Index or the S&P/ASX Australian Fixed Interest index.

Providers can also include any government or semi-government products for which there is enough reliable information to determine a price.

But Small said the rules did not restrict providers to using just those indices and there is the ability to apply for approval of custom products.

"We are almost pre-approving those two indices. Now, that doesn't restrict ETF providers from using [other] indices. [But] other indices will take a bit longer," he said.

Vanguard is one provider in discussions with the ASX to list new products.

"We have been considering what our product offer will be in this space and now that the rules have been changed, we are able to progress with the product development process," a Vanguard spokesperson said.
 
"In considering what products to offer, we have looked at the needs of our clients across SMSFs (self-managed super funds), direct investors and their advisers and institutions, and what I can say is that any product offer we will make will reflect our philosophy of offering investors low cost, tax effective and diversified index products suitable for a range of investors."

iShares also said it was delighted with the new rules.

"We look forward to meeting client demand by offering fixed income ETFs and complementing our existing popular range of international and Australian equity iShares," iShares Australia managing director Mark Oliver said.

The change of operating rules also allows for ETFs to contain a combination of debt and equity, Small said, which would make the listing of model portfolios or balanced fund type products possible.

"There is nothing that prevents you from doing that. [But] I have not had any discussions around those type products at this stage," Small said.