The Government wants Fonterrra's proposed shareholders fund to have at least $500 - 900 million in it, to ensure there is enough liquidity for trading.
The legislation governing the dairy sector needs to be changed to let Fonterra introduce share trading among its farmer owners.
The fund will allow farmers to sell some of their shares for cash to outside investors, who would not own the share but could receive a dividend or other payout.
Ministry of Agriculture Sector Performance Policy director Iain Cossar says the farmers' market needs to have at least half a billion dollars to ensure it does not become imbalanced, with sellers but no buyers or vice versa.
The Ministry of Agriculture is considering five different options for the Dairy Industry Restructuring Act, DIRA, to allow Fonterra to introduce share trading.
The act was introduced in 2001 to ensure that Fonterra remained competitive and allowed farmers to enter and exit the cooperative.
Submissions on the proposed legislative changes are due by 7 March.
