3q12 financial statement
TRANSCRIPT
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BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros
The Brazilian Securities, Commodities and Futures Exchange
Quarterly
Financial
Report
Three-month period ended September 30, 2012
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Dear Shareholders,
We are pleased to present to you this discussion and analysis of the financial condition and results of operations
of BM&FBOVESPA S.A. (BM&FBOVESPA or Company or us) for the quarter ended September 30, 2012 (3Q12).
OPERATING PERFORMANCE
Bovespa Segment
The average daily trading value in the quarter to September 2012 hit R$7.2 billion, up 8.7% from the year-ago
third quarter (3Q11) but down by 6.1% from the historical record average registered in the previous quarter
(2Q12).
The year-on jump in third-quarter daily average traded value is attributable primarily to the outstanding
performance of the cash equity market, where this average climbed by 9.8% due mainly to a 6.6% rise in stock
market capitalization1
and increased turnover velocity,2
as it hit 70.4% in 3Q12 as compared to 69.3% in 3Q11.
A highlight of the quarter, average daily value traded of R$8.4 billion in the month of September hit a new historic
monthly record helped by R$10.5 billion in volume registered with the tender offer for Redecard shares.
Average Daily Traded Value (ADTV)(In R$ millions, unless otherwise indicated)
Source: BM&FBOVESPA.
In contrast, the average daily value traded on the equity options market plunged 12.9% from the year-ago
quarter due primarily to sinking volumes traded in (i) options on Vale shares, which despite having been the
most traded option, closed the quarter at R$106.2 million in terms of value traded versus R$143.9 million in the
prior year third quarter; and (ii) options on Bovespa index (Ibovespa), which accounted for average daily value
traded of R$33.0 million versus R$42.8 million one year earlier.
Moreover, the average daily number of trades spiked 28.7% from the year-ago third quarter due mainly to a build-
up in high frequency trading (HFT), whereas having dropped slight 0.6% sequentially. A comparative analysis of the
evolution of average number of trades to average trading value between third quarters shows the average ticket
size per trade3 went down to R$8.9 thousand in 3Q12 versus R$10.5 thousand in 3Q11.
Average Daily Number of Trades
(In thousands of trades, unless otherwise indicated)
Source: BM&FBOVESPA.
The average stock market capitalization climbed 6.6% year-on-year, to R$2,383.1 billion in the quarter to
September 2012 from R$2,234.8 billion in the same quarter one year earlier. A measurement in absolute terms of
1Stock market capitalization is a measure of the size of the stock market given by the total market capitalization of al l listed issuers, where the
market cap per issuer is calculated as stock price multiplied by the number of shares outstanding of each listed issuer (Bovespa segment) .2Turnover velocity for the quarter is defined as the ratio of annualized turnover (value) of stocks traded on the cash market over a three -month
period to average market capitalization for the same period.3Average ticket is a measure of average financial value traded determined by the average size per trade over a given period.
Markets 3Q12 3Q11Change
3Q12/3Q112Q12
Change
3Q12/2Q12
Cash 6,823.3 6,216.8 9.8% 7,223.0 -5.5%
Forward 96.3 93.4 3.1% 105.9 -9.1%
Options 250.7 287.8 -12.9% 305.5 -18.0%
Total 7,173.7 6,599.7 8.7% 7,636.6 -6.1%
Markets 3Q12 3Q11Change
3Q12/3Q112Q12
Change
3Q12/2Q12
Cash 667.8 540.6 23.5% 676.2 -1.2%
Forward 0.9 1.0 -5.4% 1.1 -14.7%
Options 138.9 86.2 61.2% 134.8 3.0%
Total 807.6 627.7 28.7% 812.2 -0.6%
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market capitalization by sector shows consumer stocks, financial stocks and utilities stocks performed better to
increase market cap, whereas the worst performing were basic materials stocks, oil, gas and biofuels and
telecommunications, which lost the most ground.
Average stock market capitalization and Turnover velocity
Source: BM&FBOVESPA.
As a percentage of the overall value traded on equities and equity derivatives markets, foreign investors and local
institutional investors, top amongst other investor categories, accounted for the larger shares of 40.2% and 31.4%,
respectively. A highlight for the quarter, foreign investor activity measured in terms of ADTV jumped 26.2% year-
over-year.Allocation of average daily value traded by investor category
(In R$ billions)
Source: BM&FBOVESPA.
The third quarter net flow of foreign investments into the equities and equity derivatives markets amounted to
negative R$2.4 billion. While inflows included $1.0 billion worth of investments in equity offerings, secondary
market outflows totaled R$3.4 billion, influenced mainly by considerable outflows in connection to the R$10.5
billion tender offer for shares of Redecard.
Net flow of foreign investments into the equities markets(In R$ billions)
Source: BM&FBOVESPA.
In the nine-month period to September 30, 2012, three initial public offerings and five follow-ons offerings
completed, totaling combined gross proceeds on the order of R$9.8 billion. One of these offerings, the R$1.8 billion
follow-on of TAESA - Transmissora Aliana de Energia Eltrica S.A., a power transmission company, was completed
in the third quarter.
Trading in Exchange Traded Funds (ETFs) over the quarter hit daily average traded value of R$102.3 million soaring
90.2% from the year-ago third quarter. However, as compared to the second quarter, when the volumes traded in
2.2 2.2 2.5 2.4 2.4
69.3% 66.6% 66.2% 75.0% 70.4%
-
3Q11 4Q11 1Q12 2Q12 3Q12
Average Stock Market Capitalization (BRL trillions) Turnover Velocity (%)
1.5 1.3 1.4 1.3 1.3
2.2 2.1 2.3 2.5 2.3
2.3 2.42.8 3.2 2.9
0.6 0.60.6
0.60.5
0.1 0.10.1 0.1 0.1
6.6 6.47.2 7.6 7.2
-
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
3Q11 4Q11 1Q12 2Q12 3Q12
Individuals Institutional Investors Foreign Investors Financial Institutions Companies Others
0.8
(1.0)
4.8
(2.6)(3.4)
0.80.0 0.0
3.5
1.01.5
(1.0)
4.8
0.9
(2.4)
3Q11 4Q11 1Q12 2Q12 3Q12
Secondar Market Public Offers Total
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BM&F Segment
The average daily trading volume for the segment stumbled 4.0% from the year-ago third quarter due primarily to
the lower volume traded in FX contracts and index-based futures contracts, which plunged 13.8% and 17.3%
respectively, coupled with lower high frequency volumes and toned down volatility of the Brazilian real to U.S.
dollar rate over the quarter, as shown in the chart below.
BRL to USD rate volatility
Source: BM&FBOVESPA.
Moreover, as compared to the prior quarter, the average daily volume went down 19.8%, due mainly to a 21.8%
fall in volume traded in Brazilian-interest rate contracts, since the third quarter saw toned down uncertainties as to
the direction of the local benchmark rate, the Selic rate, when compared to the second quarter.
Average daily volume(ADV)(In thousands of contracts)
Source: BM&FBOVESPA.
The quarterly average rate per contract (RPC) went up 14.7% from the year-ago quarter. In particular, the RPC for
FX futures contracts soared 36.2% while having surged 25.3% for U.S. dollar-denominated interest rate contracts, in
either case due to appreciation of the U.S. dollar rate5, as the fees we charge for these contracts are denominated
in U.S. dollars.
Average rate per contract (RPC)(In Brazilian reais)
Source: BM&FBOVESPA.
5The U.S. dollar appreciated 29.8% against the Brazilian realover the quarter, as measured by the fluctuation in the average selling rate compiled by the
Central Bank (PTAX selling rate) for the last business days of the months of June, July and August 2011 and 2012 (which served as the basis on which we
calculated the RPC for the months of July, August and September 2011 and 2012, respectively). The quarter over quarter appreciation was 6,5% considering
PTAX selling rate for the last business day of the months of March, April and May 2012 (which served as the basis on which we calculated the RPC for the
months of April, May and June 2012). Source: Central Bank of Brazil.
0%
5%
10%
15%
20%
25%
30%
35%
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Vol. DOL (R$/US$) - Var. Margem
3Q12 3Q11Change
3Q12/3Q112Q12
Change
3Q12/2Q12
BRL interest rate contracts 1,766.9 1,810.3 -2.4% 2,260.4 -21.8%
FX contracts 452.8 525.0 -13.8% 542.4 -16.5%Index-based contracts 118.6 143.4 -17.3% 204.0 -41.9%
USD interest rate contracts 151.3 142.7 6.0% 151.0 0.2%
Commodities derivatives 13.2 17.0 -22.2% 11.6 14.3%
Mini-sized contracts 175.8 155.6 13.0% 177.5 -1.0%
OTC derivatives 13.4 10.6 26.9% 9.0 48.6%
Total 2,692.0 2,804.5 -4.0% 3,356.0 -19.8%
3Q12 3Q11Change
3Q12/3Q112Q12
Change
3Q12/2Q12
BRL interest rate contracts 1.074 0.975 10.1% 0.961 11.7%
FX contracts 2.416 1.773 36.2% 2.077 16.3%
Index-based contracts 1.550 1.493 3.8% 1.450 6.9%
USD interest rate contracts 1.087 0.868 25.3% 0.990 9.9%
Commodities derivatives 2.325 1.886 23.3% 2.065 12.6%
Mini-sized contracts 0.110 0.121 -9.3% 0.116 -5.4%
OTC derivatives 1.888 1.658 13.8% 1.357 39.1%
Total 1.269 1.106 14.7% 1.133 12.0%
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Additionally, the RPC for Brazilian-interest rate contracts went up 10.1% due to greater volume concentration on
longer maturity (4th, 5th maturities) futures contracts, from which we derive higher trading fee rates. The table
below sets forth data on trading volume distribution by standard maturity date.
Brazilian-interest rate futures contracts Volume distribution by standard maturity date
*(BD = Business Days)
*1st
Maturity - 21 BD 2nd
Maturity - 42 BD 3rd
Maturity - 63 BD 4th
Maturity - 84 BD 5th
Maturity - 105 BD
Source: BM&FBOVESPA
In the comparison between 3Q12 and 2Q12, the average RPC rose 12.0% mainly due to increased RPC of Brazilian-interest rate futures contracts (+11.7%), reflecting the decreased participation of day trades and higher RPC for FX
contracts (+16.3%), reflecting the appreciation of the U.S. dollar rate and lower participation of HFTs.
The distribution of average daily trading volume by type of investor category remained virtually unchanged from
the prior year quarter. Financial institutions and local institutional investors, still the top investor categories in the
BM&F segment, accounted each for 34% of the overall volume traded.
BM&F Segment Distribution of average daily volume (ADV) by investor category
(In percentage of ADV)
Source: BM&FBOVESPA
HFT activity within the BM&F segment
The high frequency volume traded in financial and commodity derivatives hit 6.7% of the overall quarterly volumewith daily average declining both year-on-year and sequentially, due mainly to a fall in volumes traded in FX
contracts and index-based contacts, which was in line with the drop in overall volumes traded in these contracts
across the board.
HFT - Average daily trading volume (buy and sell sides)
(In thousands of contracts)
Source: BM&FBOVESPA.
15% 3% 6%
16%
7% 2%
4%
4% 2%
8%
7% 22%
57%79% 68%
3Q11 2Q12 3Q12
1s t Maturity 2nd Maturity 3rd Maturity 4th Maturity 5th Maturity
33%
36%
36%
34%
34%
33%
33%
33%
33%
34%
26%
25%
25%
26%
26%
5%
5%
5%
5%
4%
2%
1%
1%
2%
2%
3Q11
4Q11
1Q12
2Q12
3Q12
Financial Institutions Institutional Investors Foreign Investors Retail Companies Central Bank
68.2 50.9 46.5 68.7 58.3
148.3119.9 129.5 140.0 73.8
178.7
139.6 134.8
224.0
209.1
24.4
24.8101.4
9.8
0.9
7.8% 7.2% 8.0% 6.3% 6.7%
419.5335.2
412.2 442.5342.2
-
100,0
200,0
300,0
400,0
500,0
3Q11 4Q11 1Q12 2Q12 3Q12
Equities FX Mini contracts Interest Rates % in Ove rall Volume
RPC +10.1% (3Q12 vs. 3Q11)
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Net income and EBITDA8
Net income for the quarter to September 2012 amounted to R$276.5 million, down 5.3% from the same quarter
one year earlier. This drop in net income is attributable primarily to the previously discussed decline in net interest
income and increase in the income tax and social contribution line item, both of which combined were
comparatively greater than the increase in revenues.
The 3Q12 EBITDA amounted to R$375.6 million, up 8.1% from the year-ago third quarter reflecting mainly the
changes in revenues and expenses previously discussed herein. The EBITDA Margin was 72.0%, as compared to
70.4% in the year-ago third quarter.
The table below sets forth our calculation of EBITDA and EBITDA Margin.
EBITDA Reconciliation(in R$ millions, except for percentages)
EBITDA Reconciliation 3Q12 3Q11 %
GAAP net income(*
) 276.5 292.3 -5.3%
Non-controlling interest 0.2 (0.08) -334.2%Income tax and social contribution 152.9 143.2 6.8%
Interest income, net (45.5) (82.7) -44.9%Depreciation and amortization 24.1 20.7 16.4%Equity in results of investees (37.2) (28.3) 31.5%Tax on dividends paid by associate (CME Group) 4.7 2.6 76.1%
EBITDA 375.6 347.5 8.1%
EBITDA Margin 72.0% 70.4% 162 bps(*
)Attributable to BM&FBovespa shareholders
Source: BM&FBOVESPA.
CAPEX
We capitalized investments on the order of R$52.3 million over the quarter, including R$51.1 million related to
investments in our technology infrastructure and R$1.2 million related to other projects, such as equipment and
certain facilities. Total investments capitalized over the nine-month period ended September 30, 2012, amountedto R$124.2 million. The 2012 Capex budget is set an interval between R$230.0 million and R$260.0 million.
Main line items of consolidated balance sheet statement as of September 30, 2012
Main lines items under Assets
Total assets. Per our consolidated balance sheet statement as of September 30, 2012, BM&FBOVESPA had total
assets amounting to R$24,133.6 million, up just 2.3% from total assets at December 31, 2011.
Cash and cash equivalents plus short- and long-term financial investments. Cash and cash equivalents plus short-
and long-term financial investments totaling R$3,998.8 million accounted for 16.6% of total assets.
Non-current assets. Non-current assets totaled R$20,439.7 million, comprised of R$727.6 million in long-termreceivables (including long-term financial investments) plus R$2,946.0 million in investments, R$328.7 million in
property and equipment, and R$16,437.4 million in intangible assets.
Intangible assets comprise primarily goodwill attributable to expected future profitability related to the acquisition
of Bovespa Holding. Goodwill was tested for impairment in December 2011. The tests yielded a valuation report
prepared by a specialist firm, which found goodwill to be appropriately stated, no adjustments to carrying value
being required. We have not identified at this time (3Q12) any internal or external factors that would change the
December 2011 findings; therefore, in the absence of impairment indicators, as of September 2012 the carrying
value of goodwill requires no adjustments.
8EBITDA is earnings before interest, taxes, depreciation and amortization.
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Main lines items under Liabilities and Shareholders Equity
Current liabilities. Current liabilities amounting to R$1,610.4 million accounted for 6.7% of total liabilities and
shareholders equity, down 16.6% from December 31, 2011.
Non-current liabilities. Non-current liabilities at the quarter-end amounted to R$2,898.8 million, which is up 20.7%
from December 31, 2011, and consist mainly of R$1,234.1 million in loans and R$1,605.9 million in deferred incometax and social contribution.
Shareholders equity. Shareholders equity totaled R$19,624.4 million, up just 1.9% rise from December 31, 2011,
and consists mainly of capital stock in the amount of R$2,540.2 million and capital reserves of R$16,031.6 million.
OTHER INFORMATION
Payouts
On November 6, 2012, our board of directors declared dividends and interest on capital amounting to R$221.2
million, for payment on December 17, 2012, based on the ownership structure at the book closure date on
November 21, 2012.
Share buyback program
We have not to repurchased shares under the share buyback program approved on June 26, 2012. However, the
authorization to repurchase up to 60 million shares stands. The program is set to end on June 28, 2013.
Central counterparty risk Risk management
Transactions carried out on markets we operate are secured with collateral pledged by market participants in
the form of cash, government bonds and corporate debt securities, bank letters of guarantee and stocks,
among other eligible collaterals. As of September 30, 2012, the aggregate of pledged collaterals at our
clearinghouses totaled R$181.3 billion.
Financial value of collaterals deposited with clearing utilities
Clearing houses September 30, 2012 September 30, 2011 Variation June 30, 2012 Variation
In R$ millions In R$ millions (%) In R$ millions (%)
Equities clearinghouse 69,596.5 67,265.2 3.5% 67,070.8 3.8%Derivatives clearinghouse 106,833.5 102,019.4 4.7% 106,901.8 0.1%FX clearinghouse 3,778.5 3,396.8 11.2% 4,005.5 5.7%Assets clearinghouse
(1) 1,041.7 825.8 26.1% 1,109.6 6.1%
Total 181,250.2 173,507.2 4.5% 179,087.7 1.2%______________________________________________
(1)The assets clearinghouse clears and settles trades in government bonds and debt securities.
Source: BM&FBOVESPA.
The balance of collaterals deposited with our clearing utilities at the quarter-end went up 4.5% from the year-ago
third quarter. The volume of collaterals pledged as security for transactions in financial and commodity derivatives
climbed by 4.7% due primarily to a rise in the volume of open positions at our derivatives clearinghouse (BM&F
segment) at the quarter-end. Meanwhile, a 3.5% climb in volume of collaterals posted as security for trades in
equities, equity derivatives and corporate debt securities (Bovespa segment) is explained mainly by increase of
open positions value at the securities lending facility.
In our activities as central counterparty, corporate and operational risk exposures are monitored, assessed and
managed under oversight of our Risk Committee, a standing advisory committee to our board of directors, whose
primary responsibilities include adopting both a strategic and structural approach in monitoring and assessing
exposures to market risks, liquidity and credit risks and, not least importantly, systemic risk within the markets
operated by our Company.
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Sustainability; Social Investments
On September 6, we presented the highlights of a questionnaire to be answered by issuers seeking to have their
shares included in the eighth portfolio of our Corporate Sustainability Index (ISE). Based on the assessment of their
responses and sustainability standards, on November 29 will be announced the new theoretical portfolio for the ISE
index to take effect from the first business day of January 2013. For more information on the new portfolio, youmay accesswww.isebvmf.com.br. Also in September, at a seminar hosted by us, the Joint Committee for Guidance
on Disclosure Standards (Comit de Orientao para Divulgao de Informao ao Mercado), or CODIM, of whichBM&FBOVESPA is a member, announced Guidance Pronouncement No. 14 on Better Recommended Practices on
Sustainability Disclosures
OTHER HIGHLIGHTS; EVENTS AFTER THE REPORTING PERIOD
Technology Developments; New Product Offerings
PUMA Trading System: On October 9, BM&FBOVESPA hosted a technical workshop on the implementation of our
new trading platform for equities and equity-based derivatives markets, which we developed for our Bovespa
segment in cooperation with the CME Group in the context of our strategic partnership. In addition, in the same
month we started the last testing cycle of the equities module of our new trading system. Implementation of this
module is set to take place during the last quarter of the year.
CME Group BM&FBovespa cross-listings of exchange-traded derivatives. Consistent with our cross-listings
program schedule, on October 1, CMEs cash-settled e-mini S&P-500 futures contracts start trading on our
Exchange. E-mini S&P-500 futures contracts are cash-settled to the special opening quotation of the Standard and
Poor's 500 Stock Price Index (S&P 500 Index) traded on the Chicago Mercantile Exchange. This is the first derivative
instrument having a U.S. stock index as the underlying to be authorized to trade on the Brazilian exchange. We
expect this will facilitate trading for local investors seeking access to one of the most important and commonly
followed stock indices across the world. In addition, also within the scope of our strategic partnership with the
CME Group, on October 22
nd
futures on U.S. dollar-denominated Ibovespa started trading on CMEs markets.New stock market indices. On September 3, we launched three new stock market indices, namely: (i) the Special
Corporate Governance Stock Index Novo Mercado (ndice de Aes com Governana Corporativa Diferenciada -Novo Mercado), or IGC-NM, which tracks the performance of a theoretical portfolio composed of shares of 127issuers listed on the Novo Mercado segment, which requires special and more stringent corporate governance
standards; (ii) the Real Estate Funds Index (ndice de Fundos de Investimento Imobilirios), or IFIX, which tracks theperformance of Real Estate Funds (FIIs - Fundos de Investimento Imobilirios) return based on a portfolio of sharesof 44 top traded FIIs selected for their liquidity and weighted by market capitalization. Unlike other indices, the IFIX
theoretical portfolio includes both exchange-traded and OTC-traded FIIs; and (iii) the Unsponsored BDRs Global
Index (ndice de BDR No Patrocinado GLOBAL), or BDRX, tracks the performance of 70 Unsponsored BrazilianDepositary Receipts listed on BM&FBOVESPA, which reflects the valuation of those equities of foreign issuers which
are not freely distributed at the stock exchange but limited to qualified investors.
INDEPENDENT AUDITORS
Our Company and subsidiaries have retained PricewaterhouseCoopers to audit our financial statements.
The policy that governs the engagement of external audit services by us and our subsidiaries is based on
internationally accepted accounting principles, which preserve service independence and include the following
practices: (i) the auditors cannot hold executive or managerial positions in the Company or its subsidiaries; (ii) the
auditors cannot perform operating activities in the Company or its subsidiaries which could compromise the
auditing function; and (iii) the auditors must be impartial in order to avoid conflicts of interest and loss of
independence, and must be objective in their opinions and reports about the financial statements.
In the nine-month period ended September 30, 2012, neither the independent auditors, nor their related parties
have provided to our Company non-audit expert services at a level in excess of 5% of the total annual fees charged
for external audit services.
http://www.isebvmf.com.br/http://www.isebvmf.com.br/http://www.isebvmf.com.br/http://www.codim.org.br/downloads/Melhores_Praticas_de_Divulgacao_de_Informacoes_sobre_Sustentabilidade_fnal.pdfhttp://www.codim.org.br/downloads/Melhores_Praticas_de_Divulgacao_de_Informacoes_sobre_Sustentabilidade_fnal.pdfhttp://www.codim.org.br/downloads/Melhores_Praticas_de_Divulgacao_de_Informacoes_sobre_Sustentabilidade_fnal.pdfhttp://www.codim.org.br/downloads/Melhores_Praticas_de_Divulgacao_de_Informacoes_sobre_Sustentabilidade_fnal.pdfhttp://www.codim.org.br/downloads/Melhores_Praticas_de_Divulgacao_de_Informacoes_sobre_Sustentabilidade_fnal.pdfhttp://www.codim.org.br/downloads/Melhores_Praticas_de_Divulgacao_de_Informacoes_sobre_Sustentabilidade_fnal.pdfhttp://www.isebvmf.com.br/ -
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. Bolsa de Valores,Mercadorias
e Futuros
Quarterly Information (ITR) atSeptember 30, 2012and Report on Review ofQuarterly Information
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BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros
Report on Review of Quarterly Information
To the Board of Directors and ShareholdersBM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Introduction
We have reviewed the accompanying parent company and consolidated interim accountinginformation of BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros, included in theQuarterly Information Form (ITR) for the quarter ended September 30, 2012, comprising the
balance sheet at September 30, 2012 and the statements of income and comprehensive income forthe quarter and nine-month period then ended and of changes in equity and cash flows for thenine-months period then ended, and a summary of significant accounting policies and otherexplanatory information.
Management is responsible for the preparation of the parent company interim accountinginformation in accordance with the accounting standard CPC 21, Interim Financial Reporting, ofthe Brazilian Accounting Pronouncements Committee (CPC) and of the consolidated interimaccounting information in accordance with CPC 21 and International Accounting Standard (IAS) 34- Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as
well as the presentation of this information in accordance with the standards issued by theBrazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information(ITR). Our responsibility is to express a conclusion on this interim accounting information basedon our review.
Scope of review
We conducted our review in accordance with Brazilian and International Standards on Reviews ofInterim Financial Information (NBC TR 2410 Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity and ISRE 2410 Review of Interim FinancialInformation Performed by the Independent Auditor of the Entity, respectively). A review of interiminformation consists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantiallyless in scope than an audit conducted in accordance with Brazilian and International Standards on
Auditing and consequently does not enable us to obtain assurance that we would become aware ofall significant matters that might be identified in an audit. Accordingly, we do not express an auditopinion.
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Conclusion on the parentcompany interim information
Based on our review, nothing has come to our attention that causes us to believe that theaccompanying parent company interim accounting information included in the quarterlyinformation referred to above has not been prepared, in all material respects, in accordance withCPC 21 applicable to the preparation of the Quarterly Information, and presented in accordance
with the standards issued by the CVM.
Conclusion on the consolidatedinterim information
Based on our review, nothing has come to our attention that causes us to believe that theaccompanying consolidated interim accounting information included in the quarterly informationreferred to above has not been prepared, in all material respects, in accordance with CPC 21 andIAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance
with the standards issued by the CVM.
Other matters
Statement of value added
We have also reviewed the parent company and consolidated statements of value added for thenine-months period ended September 30, 2012. These statements are the responsibility of theCompany's management, and are required to be presented in accordance with standards issued bythe CVM applicable to the preparation of Quarterly Information and are considered supplementaryinformation under IFRS, which do not require the presentation of the statement of value added.These statements have been submitted to the same review procedures described above and, basedon our review, nothing has come to our attention that causes us to believe that they have not been
prepared, in all material respects, in a manner consistent with the parent company andconsolidated interim accounting information taken as a whole.
So Paulo, November 6, 2012
PricewaterhouseCoopersAuditores IndependentesCRC 2SP000160/O-5
Luiz Antonio Fossa
Contador CRC 1SP196161/O-8
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Balance Sheetat September 30, 2012 and December 31, 2011(In thousands of reais) (A free translation of the original in Portuguese)
Assets Notes 09/30/2012 12/31/2011 09/30/2012 12/31/2011
Current 3,462,462 3,348,607 3,693,866 2,401,134
Cash and cash equivalents 4 (a) 45,583 63,716 46,276 64,648
Financial investments 4 (b) 3,198,697 3,080,853 3,425,721 2,128,705
Accounts receivable 5 56,523 45,061 58,482 46,514
Other receivables 6 11,619 11,491 13,211 11,767
Taxes recoverable and prepaid 130,792 130,093 130,809 132,058
Prepaid expenses 19,248 17,393 19,367 17,442
Non-current 20,354,118 20,035,052 20,439,689 21,188,788
Long-term receivables 563,288 542,883 727,560 1,767,411
Financial investments 4 (b) 364,992 367,600 526,843 1,589,058
Deferred income tax and social contribution 19 103,474 80,550 103,474 80,550
Judicial deposits 14 (g) 94,822 94,178 95,044 95,048
Other receivables 6 - 555 2,199 2,755
Investments 3,029,188 2,785,455 2,946,036 2,710,086
Interest in associates 7 (a) 2,910,470 2,673,386 2,910,470 2,673,386
Interest in subsidiaries 7 (a) 118,718 112,069 - -
Investment property 7 (b) - - 35,566 36,700
Property and equipment 8 324,249 352,590 328,700 357,164
Intangible assets 9 16,437,393 16,354,124 16,437,393 16,354,127
Goodwill 16,064,309 16,064,309 16,064,309 16,064,309
Software and projects 373,084 289,815 373,084 289,818
Total assets 23,816,580 23,383,659 24,133,555 23,589,922
BM&FBOVESPA Consolidated
The accompanying notes are an integral part of these Financial Statements.
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Balance Sheetat September 30, 2012 and December 31, 2011(In thousands of reais) (continued)
Liabilities and equity Notes 09/30/2012 12/31/2011 09/30/2012 12/31/2011
Current 1,314,609 1,745,088 1,610,382 1,929,946
Collateral for tra nsactions 1 7 1,110,89 5 1,501,022 1,110,895 1,501,022
Ea rn ings and rights on securities in cus tody 1 0 43,4 88 39,038 43,488 39,038
Suppliers 18,387 56,038 18,907 56,409
Salaries and social charges 65,282 59,310 66,222 59,995
Prov ision for ta xes and contributions payable 1 1 24,5 98 31,008 25,377 31,814
Income tax and social contribution 2,698 - 4,864 4,486
Interest payable on debt issued abroad and loans 12 16,537 33,566 16,537 33,566
Dividends and interest on own capital payable 3,530 4,177 3,530 4,177
Other liabilities 13 29,194 20,929 320,562 199,439
Non-current 2,893,741 2,397,571 2,898,757 2,402,485
Debt issued abroad and loans 12 1,234,067 1,138,659 1,234,067 1,138,659
Deferred income tax and social contribution 19 1,605,870 1,204,582 1,605,870 1,204,582
Prov is ion f or con tingenc ies and lega l obli ga ti ons 14 53,804 54,330 58,820 59,244
Equity 15 19,608,230 19,241,000 19,624,416 19,257,491
Capital and reserves attributable to shareholders of BM&FBOVESPA
Capital 2,540,239 2,540,239 2,540,239 2,540,239
Capital reserve 16,031,606 16,033,895 16,031,606 16,033,895
Revaluation reserves 22,093 22,532 22,093 22,532
Revenue reserves 577,298 804,025 577,298 804,025
Treasury shares (490,855) (521,553) (490,855) (521,553)
Carrying value adjustments - other comprehensive income 294,767 128,257 294,767 128,257
Additional dividend proposed 240,065 233,605 240,065 233,605
Retained Earnings 393,017 - 393,017 -
19,608,230 19,241,000 19,608,230 19,241,000
Non-controlling interest - - 16,186 16,491
Total liabilities and equity 23,816,580 23,383,659 24,133,555 23,589,922
ConsolidatedBM&FBOVESPA
The accompanying notes are an integral part of these Financial Statements.
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Periods ended September 30, 2012 and 2011(In thousands of reais)
2012 2011
3r
quarter Accumulated 3r
quarter Accumulated
Profit for the period 276,476 856,984 292,006 856,933
Valuation adjustments 5,665 166,510 290,393 192,591
Exchange variation on investment in foreign associate 13,369 222,376 407,844 264,818
Hedge of net investment in foreign operation (5,692) (94,738) (179,500) (115,179)
Tax effects on hedge of net investment in a foreign operation 1,935 32,211 61,030 39,161
Exchange variation on investment in foreign associate (3,930) 6,642 1,019 3,791
Mark to market of financial assets available for sale (17) 19 - -
Total comprehensive income for the period 282,141 1,023,494 582,399 1,049,524
Attributable to: 282,141 1,023,494 582,399 1,049,524
Shareholders of BM&FBOVESPA 282,141 1,023,494 582,399 1,049,524
Statement of Comprehensive Income
BM&FBOVESPA
The accompanying notes are an integral part of these Financial Statements.
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Period ended September 30, 2011
(In thousands of reais) (A free translation of the original in Portuguese)
Revaluation Treasury Aditional
Capital reserve Statutory shares Valuation dividends Retained Non-controlling Total
Capital reserve (Note 15(c)) Legal (Note 15(e)) (Note 15(b)) Adjustments proposed earnings Total interests equity
At December 31, 2010 2,540,239 16,662,480 22,971 3,453 844,205 (613,903) (88,680) 32,000 - 19,402,765 16,283 19,419,048
Effect of ownership increase - - - - - - - - - - (321) (321)
Exchange variation on foreign investment - - - - - - 264,818 - - 264,818 - 264,818
Hedge of investment, net of taxes - - - - - - (76,018) - - (76,018) - (76,018)
Other Comprehensive income of foreign associate - - - - - - 3,791 - - 3,791 - 3,791
Total Comprehensive income - - - - - - 192,591 - - 192,591 - 192,591
Realization of revaluation reserve - subsidiaries - - (293) - - - - - - (293) - (293)
Repurchase of shares - - - - - (584,962) - - - (584,962) - (584,962)
Disposal of treasury shares - exercised options - (25,964) - - - 39,780 - - - 13,816 - 13,816
Recognition of stock option plan - 43,211 - - - - - - - 43,211 - 43,211
Approval/payment of aditional proposed dividends - - - - (406,086) - - (32,000) - (438,086) - (438,086)
Net income for the period - - - - - - - - 856,933 856,933 480 857,413
Appropriation of net income:
Dividends - - - - - - - 235,336 (301,941) (66,605) - (66,605)
Interest on own capital - - - - - - - - (150,000) (150,000) - (150,000)
At September 30, 2011 2,540,239 16,679,727 22,678 3,453 438,119 (1,159,085) 103,911 235,336 404,992 19,269,370 16,442 19,285,812
Attributable to the shareholders of BM&FBOVESPA
Revenue reserves
Statement of Changes in Shareholders Equity
The accompanying notes are an integral part of these Financial Statements.
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Statement of Value Added - Supplementary InformationPeriods ended September 30, 2012 and 2011(In thousands of reais) (A free translation of the original in Portuguese)
BM&FBOVESPA Consolidated
Accumulated 2012 Accumulated 2011 Accumulated 2012 Accumulated 2011
1 - Revenues 1,720,572 1,567,989 1,744,970 1,593,941
Trading and/or settlement system 1,456,041 1,323,972 1,456,041 1,323,972
Other operating revenues 264,531 244,017 288,929 269,969
2 Goods and services acquired from third parties 165,004 181,360 169,647 189,557
Expenses (a) 165,004 181,360 169,647 189,557
3 Gross value added (1-2) 1,555,568 1,386,629 1,575,323 1,404,384
4 - Retentions 68,664 51,748 69,977 53,081
Depreciation and amortization 68,664 51,748 69,977 53,081
5 Net value added produced (3-4) 1,486,904 1,334,881 1,505,346 1,351,303
6 Value added transferred from others 353,057 359,512 348,617 359,401
Equity in results of investees 123,530 91,919 117,100 87,933
Finance income 229,527 267,593 231,517 271,468
7 Total value added to be distributed (5+6) 1,839,961 1,694,393 1,853,963 1,710,704
8 - Distribution of value added 1,839,961 1,694,393 1,853,963 1,710,704
Personnel and payroll charges 230,949 257,310 239,803 266,575
Board and committee members compensation 4,974 4,603 4,974 4,603
Income tax,rates and contributions (b)
Federal 660,044 504,467 664,396 509,407
Municipal 21,494 17,455 21,941 17,900
Finance costs 65,516 53,625 65,777 54,806
Interest on own capital and dividends 464,406 451,941 464,406 451,941
Profit retained 392,578 404,992 392,666 405,472
(a) Operating expenses (excludes personnel, board compensation, depreciation and taxes and fees)
(b) Including: taxes and rates, PIS, COFINS, ISS and income tax and social contribution (current and deferred).
The accompanying notes are an integral part of this Financial Statements.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Notes to the Quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
1 OperationsBM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros (BM&FBOVESPA) is a publicly-traded corporation whose objective is to carry out or invest in companies engaged in, the followingactivities:
Management of organized securities markets, promoting for the organization, operation anddevelopment of free and open markets for the trading of any types of securities or contracts, thathave as reference or objective financial assets, indices, indicators, rates, goods, currencies, energy,transportation, commodities and other assets or rights directly or indirectly related to thereto, forspot or future settlement;
Maintenance of appropriate environments or systems for carrying out purchases, sales, auctionsand special operations involving securities, notes, rights and assets, in the stock exchange marketand in the organized over-the-counter market;
Rendering services of registration, clearing and settlement, both physical and financial, internally
or through a company especially incorporated for this purpose, assuming or not the position ofcentral counterparty and guarantor of the definite settlement, under the terms of applicablelegislation and its own regulations;
Rendering services of central depository and custody of fungible and non-fungible goods,marketable securities and any other physical and financial assets;
Providing services of standardization, classification, analysis, quotations, statistics, professionaleducation, preparation of studies, publications, information, libraries and software on matters ofinterest to BM&FBOVESPA and the participants in the markets directly or indirectly managed byit;
Providing technical, administrative and managerial support for market development, as well ascarrying out educational, promotional and publishing activities related to its objective and to themarkets managed by it;
Performance of other similar or related activities authorized by the Brazilian SecuritiesCommission (CVM); and
Investment in the capital of other companies or associations, headquartered in Brazil or abroad, asa partner, shareholder or member pursuant to the pertinent regulations.
BM&FBOVESPA organizes, develops and provides for the operation of free and open securities
markets, for spot and future settlement. Its activities are carried out through its trading systems and
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Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
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clearinghouses and include transactions with securities, interbank foreign exchange and securitiesunder custody in the Special System for Settlement and Custody (Selic).
BM&FBOVESPA develops technology solutions and maintains high performance systems, providingits customers with security, agility, innovation and cost effectiveness. The success of its activitiesdepends on the ongoing improvement, enhancement and integration of its trading and settlementplatforms and its ability to develop and license leading-edge technologies required for the goodperformance of its operations.
The subsidiary Bolsa Brasileira de Mercadorias is engaged in the registration and settlement of spot,forward and options transactions involving commodities, assets and services for physical delivery, aswell as securities representing these products, in the primary and secondary markets.
With the objective of responding to the needs of customers and the specific requirements of themarket, its wholly-owned subsidiary Banco BM&F de Servios de Liquidao e Custdia S.A.provides its members and its clearinghouses with a centralized custody service for the assets pledgedas margin for transactions.
The subsidiaries BM&FBOVESPA UK Ltd. located in London and BM&F USA Inc., located in thecity of New York (USA), and a representative office in Shanghai (China) representBM&FBOVESPA abroad through relationships with other exchanges and regulators, as well asassisting in the procurement of new clients for the market.
2 Preparation and Presentation of the quarterly financial informationThis quarterly financial information was approved by the Board of Directors of BM&FBOVESPA onNovember 6, 2012.
The quarterly financial information (ITR) was prepared and is presented in accordance withaccounting practices adopted in Brazil, in compliance with the provisions contained in the BrazilianCorporate Law, and embodies the changes introduced through Law 11,638/07 and 11,941/09,complemented by new pronouncements, interpretations and guidelines of the AccountingPronouncements Committee (CPC), approved by resolutions of the Federal Accounting Council(CFC) and rules of Brazilian Securities Commission (CVM). Additionally the quarterly informationcontemplates the disclosure requirements established by CPC 21 Interim Financial Reporting, aswell as other information deemed relevant.
The preparation of quarterly financial information requires the use of critical accounting estimatesand also the exercise of judgment by management in the process of applying the accounting policiesof BM&FBOVESPA. Those areas that require higher degrees of judgment and have greater
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BM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
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3 Significant Accounting Practicesa. Consolidation
The following accounting policies are applied in preparing the consolidated quarterly financial
information.
Subsidiaries
Subsidiaries are all entities over which BM&FBOVESPA has the power to govern the financialand operating policies, generally accompanied by a participation of more than half of the votingrights (voting capital). The existence and effect of potential voting rights currently exercisable orconvertible are considered when assessing whether BM&FBOVESPA controls another entity.Subsidiaries are fully consolidated from the date on which control is transferred toBM&FBOVESPA. Consolidation is discontinued from the date on which control ends.
Intercompany transactions, balances and unrealized gains on transactions between group
companies are eliminated. Unrealized losses are also eliminated unless the transaction providesevidence of impairment of the assets transferred. The accounting policies of subsidiaries arealtered where necessary to ensure consistency with the practices adopted by BM&FBOVESPA.
Associates
Associates are all entities over which BM&FBOVESPA has significant influence but not control.Investments in associates are recorded on the equity method and are initially recognized at the costof each purchase. BM&FBOVESPA's investment in associates includes goodwill identified onacquisition, net of any accumulated impairment.
The share of BM&FBOVESPA in the post-acquisition profits or losses of associates is recognized
in the statement of income and its share in post-acquisition changes in other comprehensiveincome recognized in other comprehensive income. The cumulative post-acquisition changes areadjusted against the carrying value of the investment. When the share of BM&FBOVESPA in thelosses of an associate equals or exceeds its investment in the associate, including any otherreceivables, BM&FBOVESPA does not recognize further losses, unless it has incurred obligationsor made payments on behalf of the associate.
Unrealized gains arising from transactions between BM&FBOVESPA and its associates areeliminated to the extent of the participation of BM&FBOVESPA in the associates. Unrealizedlosses are also eliminated unless the transaction provides evidence of impairment of the assetstransferred. The accounting policies of associates have been altered where necessary to ensureconsistency with the practices adopted by BM&FBOVESPA.
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BM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
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b. Revenue recognitionRevenues from the trading and settlement systems are recognized upon the completion of thetransactions or the provision of the service, under the accrual method of accounting. The amounts
received as annual fees, as in the cases of listing of securities and certain contracts for sale ofmarket information, are recognized pro rata monthly over the contractual term.
c. Cash and cash equivalentsThe balances of cash and cash equivalents for cash flow statement purposes comprise cash andbank deposits.
d. Financial instruments(i) Classification and measurement
BM&FBOVESPA classifies its financial assets in the following categories: at fair value throughprofit or loss, loans and receivables and available for sale. The classification depends on thepurpose for which the financial assets were acquired. Management determines the classification ofthe financial assets when they are first recorded.
Considering the nature and objective of BM&FBOVESPA and its financial investment portfolio,these are classified as financial assets at fair value through profit or loss, designated at inception.
Financial assets measured at fair value through profit or loss
Financial assets measured at fair value through profit or loss are financial assets held for active
and frequent trading (derivative financial instruments classified as current assets) or assetsdesignated by the entity, at inception as measured at fair value through profit or loss at inception(other financial instruments (Note 4)). Gains or losses arising from the changes in fair value offinancial instruments are recorded in the statement of income in "financial results" for the periodin which they occur.
Loans and receivables
These comprise loans granted and receivables which are non-derivative financial assets with fixedor determinable payments, not quoted in an active market. Loans and receivables are included incurrent assets, except for those with maturity of more than 12 months after the balance sheet date(which are classified as non-current assets). The loans and receivables of BM&FBOVESPA
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BM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
24
q. Employee benefits(i) Pension obligations
BM&FBOVESPA maintains a defined contribution plan of retirement plan, with voluntary
participation open to all employees. The participant's monthly contribution is 3.60% of salary.The sponsor's monthly contribution is also 3.60%, calculated on the total wages of theparticipants and allocated to participants through apportionment. The company has no obligationsto make additional payments as a sponsor. The regular contributions are included in personnelcosts. In the event of termination of employment prior to the date of retirement, the participantmay keep the plan within the rules established by the regulation or request cancellation of theregistration, and in this case, may choose for: (i) the transfer 100% of the reserve constituted bythe participants contributions and according to the time of participation in the plan, up to 100%of the balance of the reserves constituted by the contributions of the sponsor, or (ii) theredemption of 100% of the reserve constituted of the participant's contributions, without anyportion of the reserve balance constituted by the contributions of the sponsor. In any of the aboveoptions there is no additional cost to the BM&FBOVESPA.
(ii) Share-based remuneration (stock options)
BM&FBOVESPA maintains a long-term remuneration plan, structured by options granted topurchase the Companys shares under the Stock Option Plan. The objective is to give to theemployees of BM&FBOVESPA and its subsidiaries the opportunity to become shareholders ofBM&FBOVESPA, obtaining a greater alignment between their interests and the shareholders'interests as well as allow BM&FBOVESPA and its subsidiaries to attract and keep theirmanagement and employees. The fair value of options granted is recognized as an expenseduring the vesting period (the period during which the specific vesting conditions must be met),which typically is the period in which the service is provided. At the balance sheet date,BM&FBOVESPA reviews its estimates of the number of options that will vest based on the
established conditions. BM&FBOVESPA recognizes the impact of any changes to the originalestimates, if any, in the income statement, with a counter-entry to a capital reserve inshareholders' equity.
(iii) Profit sharing
BM&FBOVESPA has semi-annual variable remuneration, organized and paid in cash throughthe Profit Sharing Program (PLR). The program defines the potential multiple of monthly salary,based on individual performance indicators, which consider factors specific to each function (joblevel), and indicators of the overall performance of BM&FBOVESPA, aiming to align theremuneration of employees with the short and medium-term results of the Company. Theprovision for the related expense is recognized in income on an accrual basis.
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BM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
26
Income tax and social contribution deferred taxes are calculated on tax losses for income tax, thenegative basis of social contribution and the r temporary differences between the bases ofcalculation of tax assets and liabilities and the carrying amounts in the quarterly financialinformation.
Deferred tax assets are recognized to the extent that it is probable sufficient future taxable profitwill be available to offset temporary differences and/or tax losses, considering projections offuture income prepared based on internal assumptions and future economic scenarios whichmay, accordingly, not materialize as expected.
Deferred tax liabilities are recognized in relation to all temporary differences that will result inamounts to be added in the calculation of taxable income for future years, when the value of theasset or liability is recovered or settled.
The deferred income tax and social contribution are determined using tax rates (and tax laws)enacted, or substantively enacted, at the balance sheet date, and should be applied when thedeferred tax asset is realized or when the deferred tax liability is settled.
The amounts of Income tax and social contribution assets and liabilities are offset only whenthere is a legally enforceable right to offset current tax assets against current tax liabilities and/orwhen the income tax and social contribution assets and liabilities relate to the income tax andsocial contribution levied by the same tax authority on the taxable entity or different taxableentities where there is an intention to settle the balances on a net basis.
(ii) Other Taxes
The other taxes charged over trading, clearing and settlement fees and other services werecalculated at the rates of 1.65% for PIS and 7.60% for Cofins, and are recorded as an adjustmentto revenue in the income statement.
Banco BM&FBOVESPA calculates the contributions to PIS and to COFINS at the rates of0.65% and 4%, respectively, and CSLL at 15%.
The subsidiaries Bolsa Brasileira de Mercadorias and BVRJ are not-for-profit entities and paycontribution to PIS at the rate of 1% on payroll.
BM&FBOVESPA and its subsidiaries pay ISS over the services rendered at rates ranging from2% to 5% depending on the nature of the service.
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BM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
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u. Earnings per shareFor purposes of disclosure of earnings per share, basic earnings per share is calculated bydividing the profit attributable to shareholders of BM&FBOVESPA by the average number ofoutstanding during the period. Diluted earnings per share is calculated similarly, except that thequantity of outstanding shares is adjusted to reflect the outstanding shares with potentiallydilutive effects, under the stock option plan (Note 15(h)).
v. Distribution of dividends and interest on capitalThe distribution of dividends and interest on capital to shareholders of BM&FBOVESPA isrecognized as a liability in the financial statements at year end, based on the bylaws. Anyamount above the minimum is accrued only on the date it is approved by the shareholders at aGeneral Meeting. The tax benefit over the interest on own capital is recorded in the incomestatement.
w. Segment information presentationOperating segments are presented in a manner consistent with the internal reports provided to theExecutive Board, which is responsible for the main operational and strategic decisions ofBM&FBOVESPA.
x. Critical accounting estimates and judgmentsi. Equity method of accounting
BM&FBOVESPA applies the equity method for its investments when it has the ability toexercise significant influence. The judgment of BM&FBOVESPA regarding the level ofinfluence over the investment takes into account key factors such as the percentage of interest,representation on the Board of Directors, participation in defining policies and businessstrategies and material transactions between the companies. With respect to the investment inCME Group, its financial statements are originally prepared in accordance with the accountingprinciples generally accepted in the United States and are adjusted to the Brazilian accountingpractices before applying the equity method.
ii. ImpairmentBM&FBOVESPA performs, annually or when required, tests of impairment, specifically relatedto goodwill and other non-financial/non-current assets, according to the accounting policydescribed in Note 3(o). See Notes 7 and 9 for sensitivity analysis.
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BM&FBOVESPA S.A.Bolsa de Valores, Mercadorias e Futuros
Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
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iii. Classification of financial instrumentsBM&FBOVESPA classifies in financial assets in the categories of (i) measured at fair valuethrough profit or loss and (ii) available for sale. The classification depends on the purpose forwhich the financial assets were acquired. Management determines the classification of financialassets at initial recognition. The basis for the original classification of financial instruments isdescribed in Note 3(d).
iv. Stock option planBM&FBOVESPA offers a stock option plan to its management and employees and serviceproviders. The fair value of these options is recognized as an expense over the period in whichthe right is acquired. Management reviews the estimated amount of options that will achieve theconditions for vesting and subsequently recognizes the impact of changes in initial estimates, ifany, in the statement of income, and in equity, as shown in Note 3(q).
4 Cash and Cash Equivalents and Financial Investmentsa. Cash and cash equivalents
BM&FBOVESPA
Details 9/30/2012 12/31/2011
Banks - deposits in domestic currency 69 113Banks - deposits in foreign currency 45,514 63,603
Total 45,583 63,716
Consolidated
Details 9/30/2012 12/31/2011
Banks - deposits in domestic currency 192 363
Banks - deposits in foreign currency 46,084 64,285
Total 46,276 64,648
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Notes to the quarterly financial informationat September 30, 2012(All amounts in thousands of reais, unless otherwise stated)
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Cash and cash equivalents are held with top tier financial institutions in Brazil or abroad. Deposits inforeign currency are primarily in U.S. dollars.
b. Financial InvestmentsThe breakdown of financial investments by category, nature and time to maturity is as follows:
BM&FBOVESPA
Withoutmaturity
Up to 3months
More than 3and up to 12
months
More than12 months
and up to 5years 9/30/2012 12/31/2011
DetailsMore than 5
years
Financial assets measured at fair value through profit or loss
Financial investment funds (1) 2,720,736 - - - - 2,720,736 3,025,217
Securities purchased under resell agreements (2) - 883 - - - 883 2,423Federal Government Securities
Financial Treasury Bills - - 371,236 364,889 27 736,162 408,508
National Treasury Bills - - 86,950 18 - 86,968 -
National Treasury Notes - - - 48 - 48 -
Other investments 11,655 6,563 674 - - 18,892 12,305
Total financial investments 2,732,391 7,446 458,860 364,965 27 3,563,689 3,448,453
Short term 3,198,697 3,080,853
Long term 364,992 367,600
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CONSOLIDATED
Withoutmaturity
Up to 3months
More than 3and up to 12
months
More than12 months
and up to 5years
More than 5years 9/30/2012 12/31/2011
Details
Financial assets measured at fair value through profit or loss
Financial investment funds (3) 214,540 - - - - 214,540 207,890
Securities purchased under resell agreements (2) - 2,419,913 27,530 - - 2,447,443 1,810,960
Federal Government Securities
Financial Treasury Bills - - 613,719 491,938 13,333 1,118,990 1,538,559
National Treasury Bills - - 88,423 9,123 - 97,546 85,812
National Treasury Notes - - - 48 - 48 -
Other investments 11,679 7,547 674 - - 19,900 13,798
226,219 2,427,460 730,346 501,109 13,333 3,898,467 3,657,019
Financial assets available for sale
Federal Government Securities
Financial Treasury Bills - - 41,144 7,033 - 48,177 58,370
National Treasury Bills - 552 - 874 - 1,426 2,374
National Treasury Notes - - - 1,135 3,359 2,374 -
- 552 41,144 9,042 3,359 54,097 60,744
Total financial investments 226,219 2,428,012 771,490 510,151 16,692 3,952,564 3,717,763
Short term 3,425,721 2,128,705
Long term 526,843 1,589,058
(1) Investments in funds that invest in units of other financial investment funds (fund of funds), the portfoliosof which mainly comprise investments in federal government bonds, securities purchased under agreementsto resell and have the CDI as their profitability benchmark. The consolidated balances of investment fundsare presented according to the nature and maturity of the portfolio in proportion of the net assets.
The net assets of the investment funds included in the consolidation are: (i) Bradesco FI MultimercadoLetters - R$1,975,060 (R$2,245,045 at December 31, 2011); (ii) BB Pau Brasil FI Renda Fixa R$193,392 (R$176,081 at December 31,2011); (iii) HSBC FI Renda Fixa Longo Prazo Eucalipto R$ 105,918(R$100,284 at December 31, 2011); (iv) Araucria Renda Fixa FI R$ 252,838 (R$215,312 at December31, 2011); (v) Megainvest FICFI Renda FixaR$256,145 at December 31, 2011.
(2)Issued by first-tier banks and backed by Brazilian government bonds;
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(3)The non-exclusive investment fund (not consolidated is Bradesco Empresas FICFI Referenciado DI Federal,in the amount of R$ 213,526 (R$207,890 at December 31, 2011).
The government bonds are held in custody at the Special System for Settlement and Custody(SELIC), the units of investment funds are held in custody with their respective managers and theshares are in the custody of BM&FBOVESPAs Equity and Corporate Debt Clearinghouse.
There was no reclassification of financial instruments between categories during the year.
Fair value
BM&FBOVESPA applies CPC40/IFRS7 for financial instruments measured at fair value, whichrequires disclosure of fair value measurements by level for the following hierarchy:
Quoted prices (unadjusted) in active markets for similar assets or liabilities (level 1);
Derived from quoted prices included in Level 1, either directly (as prices) or indirectly (level 2);
Valuations that are not based on market data (unobservable) (level 3);
The fair value of the main financial instruments is calculated as follows:
Investment funds based on the value of the unit determined on the last business day prior to thebalance sheet date, as disclosed by the corresponding fund Manager.
Federal government securities based on the amounts and prices disclosed by the BrazilianAssociation of Financial and Capital Market Institutions (ANBIMA) or, when these are unavailable,on the price defined by management which best reflects the sales value, determined based oninformation obtained from other institutions.
Securities purchased under agreements to resell are recorded daily in accordance with the marketprice of the security.
Financial assets at fair value through profit and loss and derivative financial instruments are classifiedas level 1, ie, have quoted prices (unadjusted) in active markets.
During the three months period there was no impairment recorded on the financial assets availablefor sale.
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Derivative financial instruments
Derivative financial instruments comprise future interest rate contracts (DI1) and are stated at theirmarket values, These contracts are included in the fund portfolios which were consolidated (Note2(a)) and are used to cover fixed interest rate exposures, swapping fixed interest rate for floating(CDI). Even though these derivatives are designed to provide protection, management has opted notto apply hedge accounting in respect to them.
The net result between the derivative transactions and the related financial instrument refers to theshort position in future interest rate contracts, with market value of R$3.514 (R$394 at December31,2011), and are presented as part of the finance result Finance income/(expenses), The amountsrelated to the positive/negative daily adjustments are presented in Other receivables/liabilities,respectively.
The DI1 contracts have the same maturity dates as the fixed interest rate contracts to which theyrelate.
Financial risk management policy
BM&FBOVESPAs policy for cash investments favors alternatives with very low risk, highly liquidand with sovereign risk, whose overall performance is tied to the Selic rate / CDI, resulting in asignificant proportion of federal government securities in its portfolio, purchased directly, viarepurchase agreements backed by government bonds and also through exclusive and non-exclusivefunds.
Sensitivity analysis
The table below presents the net exposure of all financial instruments (assets and liabilities) bymarket risk factors, classified in accordance with its rates:
Exposure to Risk Factors (Consolidated)
09/30/2012 12/31/2011
Risk factor Risk Percentual Percentual
Floating Interest Rate Lower CDI rate 96.83% 99.29%Fixed interest rate Higher fixed rate 2.32% 0.07%Foreign exchange Higher dollar exchange rate 0.45% 0.38%Gold price Lower gold price 0.29% 0.26%
Inflation Lower inflation rate 0.11% 0.00%
100.00% 100.00%
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Interest rate risk
This risk arises from the possibility that fluctuations in future interest rates for the correspondingmaturities could affect the fair value of BM&FBOVESPAs transactions.
Floating-rate position
As a financial investment policy and considering the need for immediate liquidity with the leastpossible impact from interest rate fluctuations, BM&FBOVESPA maintains its financial assets andliabilities indexed to floating interest rates.
We present in the table below the possible impacts in the profit or loss of a change of 25% and 50%from the probable scenario for the CDI rate, for the next three months.
Effect on profit or loss
Scenario Scenario Probable Scenario Scenario
Risk factor -50% -25% Scenario 25% 50%
Financial Investments CDI/Selic 30,384 45,283 59,993 74,522 88,873
Index rates CDI/Selic 3.56% 5.35% 7.13% 8.91% 10.69%
Fixed-rate position
Part of BM&FBOVESPAs financial investments earn fixed interest rates and this results in a netexposure to such rates. However, in terms of percentage, in view of the amounts involved, the effectson the portfolio are not considered material.
Exchange rate risk
This arises from the possibility that fluctuations in exchange rates in connection with the acquisitionof services, product sales and financial instruments could have an impact on the related domesticcurrency amounts.
In addition to the amounts payable and receivable in foreign currencies, including interest paymentson the senior unsecured notes in the next six month period, BM&FBOVESPA has third-partydeposits in foreign currency to guarantee the settlement of transactions by foreign investors and alsoown funds in foreign currency abroad, At September 30, 2012 the net foreign currency exposureamounted to R$16,882 negative (R$4,938 at December 31, 2011), The effects on the portfolio are notconsidered material.
Liquidity risk
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The following table shows the main financial liabilities of BM&FBOVESPA by maturity, representedin its entirety by non-derivative financial liabilities, on an undiscounted cash flows basis:
Withoutmaturity
Less than1 year
From 1to 2
years
From 2to 5
years
Morethan 5years
1,110,895 - - - -Collateral for transactionsIssuance of debt abroad (1) - 69,679 69,299 208,088 1,470,561
(1)Values converted into R$ using closing the rate of R$/USD
Credit Risk and capital management
BM&FBOVESPA prefers very low risk investments, where more than 99% of the allocation of assetsis linked to government securities with ratings set by Standard & Poor's and Moody's of "a-" and"Baa2", respectively, for long-term issues in local currency and characterized as investment grade, inorder to obtain high liquidity and sovereign risk, with overall performance linked to the Brazilian
prime rate (interbank interest rate).
The issue of Senior Notes (Note 12) was linked to increasing our participation in CME and thecreation of a strategic partnership between the companies, In addition, it serves as a natural hedge forthe USD exposure generated by the increased investment in CME Group.
5 Accounts ReceivableThe breakdown of accounts receivable is as follows:
BM&FBOVESPA
Details 9/30/2012 12/31/2011
Trading, other fees receivable 19,385 11,068
Annuity 4,667 4,732
VendorsSignal broadcast 11,699 9,385
Trustee and custodial fees 14,700 16,010
Other accounts receivable 13,462 10,181
Provision for doubtful accounts (7,390) (6,315)
Total 56,523 45,061
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Consolidated
Details 9/30/2012 12/31/2011
Trading, other fees receivable 20,636 11,850
Annuity 4,667 4,732VendorsSignal broadcast 11,699 9,385
Trustee and custodial fees 14,700 16,010
Other accounts receivable 14,170 10,852
Provision for doubtful accounts (7,390) (6,315)
Total 58,482 46,514
The amounts presented above are primarily denominated in Brazilian reais, Approximately 90% is of
the receivables fall due within 90 days,At September 30, 2012, the amounts overdue for more than90 days totaled R$ 7,576 (R$6,838 at December 31, 2011).
The provisioning methodology, as approved by the management, is based on the analysis of thehistorical behavior of incurred losses.
Therefore, on the overdue amount for defined ranges of days past due, according to the historicalbehavior, an estimated loss percentage has been assigned, which is intended to reflect incurred losses.
Changes in the provision for impairment are as follows:
BM&FBOVESPAand Consolidated
At December 31, 2011 6,315
Aditions 1,934Reversals (504)Write-off (355)
At September 30, 2012 7,390
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6 Other ReceivablesOther receivables comprise the following:
BM&FBOVESPA9/30/2012 12/31/2011Current
Advances to employees (1) 6,050 1,572Amounts receivable - related parties (note 16) 3,622 7,794Warehouse 1,107 1,378Other 840 747
Total 11,619 11,491
Non-current
Other - 555
Total - 555
Consolidated
9/30/2012 12/31/2011
Current
Advances to employees (1) 6,137 1,672
Amounts receivable - related parties (note 16) 3,043 7,169Warehouse 1,107 1,378
Foreign Exchange transactions (Banco BM&FBOVESPA) 1,459 -Other 1,465 1,548
Total 13,211 11,767
Non-current
Brokers in liquidation (2) 2,199 2,200
Other - 555
Total 2,199 2,755
(1)Primarily the payment in advance of the first part of the 13th salary, made on June 30, 2012.
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Summary of key financial information of subsidiaries and associates:
Details
Banco
BM&FBOVESPA
BolsaBrasileira de
Mercadorias
Bolsa de Valoresdo Rio de
Janeiro - BVRJ
BM&F
USA Inc,
BM&FBOVESPA
UK Ltd,
CMEGroup,
Inc,
Assets 347,686 19,065 68,191 934 1,277 80,935,655
Liabilities 293,581 2,694 5,620 44 311 36,692,536
Revenue 10,645 2,523 4,004 1,391 854 4,576,363
Changes in Investments:
Subsidiaries Affiliate
InvestimentsBanco
BM&F
BolsaBrasileira
deMercador
ias
Bolsa deValoresdo Rio
deJaneiro- BVRJ
BM&FUSA Inc
BM&FBOVESPA UK Ltd,
CMEGroup, Inc, Total
At December 31,2011 49,628 8,720 52,059 646 1,016 2,673,386 2,785,455
Equity 4,459 (369) 2,346 160 (166) 72,065 78,495
Exchange rate (3) - - - 84 116 222,175 222,375
Reflex effect onaffiliate 19 - - - - 6,642 6,661
Dividends Received - - - - - (63,798) (63,798)
At September 30,2012 54,106 8,351 54,405 890 966 2,910,470 3,029,188
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At June 30, 2012 52,649 8,296 53,769 747 1,005 2,893,443 3,009,909
Equity 1,474 55 636 140 (71) 23,095 25,329
Exchange rate (3) - - - 3 32 13,333 13,368
Reflex effect onaffiliate (17) - - - - (3,931) (3,948)
Dividends Received - - - - - (15,470) (15,470)
At September 30,2012 54,106 8,351 54,405 890 966 2,910,470 3,029,188
(1) As from July 2010, with the acquisition of a 3,2% interest in CME Group for the amount ofR$1,075,119, increasing the ownership interest from 1,8% to 5%, BM&FBOVESPA began torecognize the investment on the equity method in accordance with CPC 18/IAS 28, becausemanagement understands that the qualitative aspects of the relationship between the twocompanies indicate the existence of significant influence of BM&FBOVESPA over CME Group.
On September 30, 2012, the fair value of the investment, based on the market price of the shares,is R$1,975,070. The test, based on an appraisal report using the method of value in use did notreveal the existence of impairment at June 30, 2012. In the third quarter of 2012, managementreviewed the internal and external indicators and concluded that the assumptions and sensitivityanalyzes considered in the evaluation June 2012 remain adequate, not revealing the need forrecording impairment.
(2) Refers to recoverable tax paid by the foreign affiliate, according to Law 9,249/95 and NormativeInstruction 213/02 of the Federal Revenue Secretariat of Brazil.
(3) In July 2010, BM&FBOVESPA issued debt abroad to protect part of the translation risk on theinvestment in CME (hedge of net investment) through the designation of a non-derivativefinancial instrument (debt issuance abroad) as a hedge, as presented in Note 12, We present belowthe sensitivity analysis to exchange rate variations for the non-hedged portion of the investmentin CME Group:
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BM&FBOVESPA
Buildings
Furniture and
fixtures
Computer-related
equipment Facilities
Telephone
system Other
Construction inprogress Total
At December 31,
2011 116,975 16,010 117,588 47,036 1,478 31,699 21,804 352,590
Aditions - 465 10,077 624 9 1,023 6,716 18,914
Disposal - (33) (347) - - (490) - (870)
Transfer (Note 9) - - (251) 18 - - (624) 391
Reclassification - 587 1,451 1,604 114 178 (3,934) -
Depreciation (2,455) (2,072) (35,248) (4,478) (349) (2,174) - (46,776)At September 30,2012 114,520 14,957 93,270 44,804 1,252 30,236 25,210 324,249
Cost 217,367 44,575 343,358 66,923 4,466 73,257 25,210 775,156AccumulatedDepreciation (102,847) (29,618) (250,088) (22,119) (3,214) (43,021) - (450,907)
Net amount 114,520 14,957 93,270 44,804 1,252 30,236 25,210 324,249
Consolidated
Buildings
Furniture and
fixtures
Computer-related
equipment Facilities
Telephone
system Other
Construction in
progress Total
At December 31,2011 118,499 16,101 117,672 47,463 1,478 34,147 21,804 357,164
Aditions - 482 10,100 624 9 1,089 6,716 19,020
Disposal - (49) (366) - - (508) - (923)
Transfer (Note 9) - - (252) 18 - - (625) (391)
Reclassification - 587 1,452 1,604 114 178 (3,935) -
Depreciation (2,519) (2,101) (35,272) (4,531) (349) (2,180) - (46,952)At September 30,2012 115,980 15,020 93,334 45,178 1,252 32,726 25,210 328,700
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The updated balance of the borrowing on September 30, 2012 is R$1,250,604 (R$1,172,225 atDecember 31, 2011), which includes the amount of R$16,537 (R$33,566 at December 31,2011) ofaccrued interest, The proceeds from the offering were used to purchase shares of the CME Group atthat same date.
The notes have an early partial or total redemption clause, at the option of BM&FBOVESPA, for thegreater of: (i) principal plus interest accrued to date and (ii) interest accrued to date plus the presentvalue of the remaining cash flows, discounted at the rate applicable to U,S, Treasuries for theremaining term plus 0,40% per annum, (40 basis points).
These notes have been designated as a hedging instrument for the part equivalent of US$612 million(notional) of the investment in CME Group Inc, (Note 7), in order to hedge the foreign exchange risk,Thus, the BM&FBOVESPA has adopted hedge accounting for net investment in accordance with theprovisions of CPC 38/IAS 39.
Accordingly, BM&FBOVESPA prepared the formal designation of the hedges by documenting: (i)the objective of the hedge, (ii) type of hedge, (iii) the nature of the risk being hedged, (iv) the hedged
item, (v) the hedging instrument, (vi) the correlation of the hedge and the hedged item (retrospectiveeffectiveness test) and (vii) the prospective test.
The application of the effectiveness tests described in Note 3 (d) (iv) did not reveal ineffectivenessduring the period ended at September 30, 2012.
The fair value of the debt, calculated using market data, is R$1,410,036 at September 30, 2012 (R$1,190,534 at December 31, 2011) (Source: Bloomberg).
13 Other liabilitiesBM&FBOVESPA
Details 9/30/2012 12/31/2011
Deferred income - Annuity 5,954 -Custody agents 5,061 4,848Amounts payable - related parties (Note 16) 230 358Third parties services 10,537 7,931Payable preferred shares 1,839 1,839Payable for redemption of preferred shares 1,973 -Electricity, water and telephone 758 717Other 2,842 5,236
Total 29,194 20,929
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Consolidated
Details 9/30/2012 12/31/2011
Deferred income - Annuity 5,954 -Custody agents 5,061 4,848Demand deposits (1) 91,757 59,165
Liabilities for securities purchased under resell agreements(2) 197,199 118,350Outsourced services 10,731 8,138Payable preferred shares 1,839 1,839Payable for redemption of preferred shares 1,973 -Electricity, water and telephone 758 717Foreign exchange transactions (Banco BM&F) 706 -Other 4,584 6,382
Total 320,562 199,439
(1) Refer to deposits held by corporations at Banco BM&FBOVESPA with the sole purpose for settlement ofclearing operations held within the BM&FBOVESPA and Selic - Special System for Settlement andCustody pursuant to Central Bank Circular Letter No, 3196 of July 21, 2005.
(2) Refers to repurchase agreements of Banco BM&FBOVESPA, maturing at October 1, 2012 (12/31/2011 January 02, 2012) and backed by Financial Treasury Bills (LFT) and National Treasury Bills (LTN).
14 Provisions and contingent liabilities and assetsa. Contingent assets
BM&FBOVESPA has no contingent assets recognized in its balance sheet, and at present nolawsuits which are expected to give rise to future gains.
b. Contingent liabilitiesBM&FBOVESPA and its subsidiaries are defendantsin a number of labor, tax and civil lawsuitsin the course of their normal operating activities.
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The lawsuits are classified by their pr