Finance Minister Mathias Cormann said on Thursday there was an "exceptionally strong level of demand" for the broker firm offer, which closed the day before.

The $12 billion bid by the broker clients is more than double the maximum value of $5.5 billion that the Coalition will reap from the sale of the health insurer. The privatisation of Medibank is priced at between $4.3 billion and $5.5 billion, based on a price range of between $1.55 and $2 a share.

Retail brokers such as CommSec, Bell Potter and Wilson HTM will have to tell clients that they will receive, on average, 12.5 per cent of the value of Medibank shares they bid for. The total $1.5 billion allocated to the retail broker offer suggests a share of the float of between 27 and 35 per cent.

However, the government reiterated that the broker firm allocation could be scaled back by up to 20 per cent, using what is known as a clawback provision, after the institutional offer was complete.

The executive chairman of independent stockbroker BBY, Glenn Rosewall, said he was expecting a "worst case scenario" of less than 10 per cent being allocated to retail brokers so the announcement was "a pretty good outcome".

Mr Rosewall said the strong demand from retail clients was a reflection of the large amounts of "under-utilised cash" sitting in savings accounts and self-managed super funds. "The advantage of having a good brand name," was also boosting demand for Medibank shares, he said.

The threat of the clawback provision and significant hype surrounding the float could have led some shareholders to make large bids in the knowledge that they would not receive the full amount, he said.

"There is always the chance of that," he said. "You try to manage that the best you can, but with any IPO there is always the risk of some bids being exaggerated."

Mr Rosewall said he would watch with great interest what proportion of shares went to foreign funds in the institutional offer. Although he said it was the government's prerogative to determine the best mix of investors, he would have preferred "more of an Australian process".

"Since we have got the largest savings per capita in the world we could almost do this deal without foreign capital," he said.

Some fund managers have warned that Australian money managers could miss out on Medibank shares, given the banks running the float receive a higher commission for shares that are allocated to overseas institutions.

Retail shareholders who missed out on the broker offer can still apply through the general retail offer, which closes on November 14.