bvmf presentation - july 2010
TRANSCRIPT
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July 2010
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Forward Looking Statements
This presentation may contain certain statements that express the managements expectations, beliefs and assumptions
about future events or results. Such statements are not historical fact, being based on currently available competitive,
financial and economic data, and on current projections about the industries BM&F Bovespa works in.
The verbs anticipate, believe, estimate, expect, forecast, plan, predict, project, target and other similar
verbs are intended to identify these forward-looking statements, which involve risks and uncertainties that could causeactual results to differ materially from those projected in this presentation and do not guarantee any future BM&F Bovespa
performance.
The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&F services; (ii)
volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitive industries BM&F
Bovespa operates in; (iii) changes in (a) domestic and foreign legislation and taxation and (b) government policies related to
the financial and securities markets; (iv) increasing competition from new entrants to the Brazilian markets; (v) ability to
keep up with rapid changes in technological environment, including the implementation of enhanced functionalitydemanded by BM&F customers; (vi) ability to maintain an ongoing process for introducing competitive new products and
services, while maintaining the competitiveness of existing ones; (vii) ability to attract new customers in domestic and
foreign jurisdictions; (viii) ability to expand the offer of BM&F Bovespa products in foreign jurisdictions.
All forward-looking statements in this presentation are based on information and data available as of the date they were
made, and BM&F Bovespa undertakes no obligation to update them in light of new information or future development.
This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be
any sale of securities where such offer or sale would be unlawful prior to registration or qualification under the securities
law. No offering shall be made except by means of a prospectus meeting the requirements of the Brazilian SecuritiesCommission CVM Instruction 400 of 2003, as amended.
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Business Model:
A Source of Competitive Strength
3
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Fully Integrated Business Model
Listing(stocks, bonds, funds,
asset-backed securities,
among others)
Commodities
Certification
Trading(stocks, derivatives, corporate and government
bonds, funds, spot US Dollar, among others)
Central Counterparty (CCP)
Clearing and Settlement(for all the products)
Services for Issuers and
Commodities tradingTrading, Clearing and Depository Activities
Central Depository
(stocks and corporate bonds)
Securities Lending
(stocks and corporate bonds)
Custody
(services provided for
funds, and other market
participants)
Market Data
Indices Licensing
Software Licensing
(used by brokeragehouses and other
market participants)
Other Services
OTC Derivatives
Registration and
Collateral Management
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Diversified and Integrated
Exchanges
Integrated Derivatives
Exchanges
* Do not provide post-trading services for the equity market
Diversified but Not
Integrated Exchanges*
Listed Exchanges Business Model
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18.3 17.715.1 13.7
7.8 7.6 6.0 4.5 4.1 2.8 2.2 2.1
71.3%
80.2%
64.9%
51.9%
62.7%
43.1%
60.8%
74.3%
48.7%44.5%
66.5%
56.7%
0,0
10,
20,
30,
40,
50,
60,
70,
80,
CME HKEx BVMF Deutsche
Boerse
ICE Nyse
Euronext
SGX ASX Nasdaq LSE BME TMX
EBITDA Margin 2009
Date: 07/30/2010
Diversified and integrated Derivatives Diversified but not integrated
Market Capitalization (US$ billions) and 2009 EBITDA Margin (%)
Business Model enhances Margins and Market Cap
Majority of Integrated Exchanges above 60% EBITDA Margin
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Excellence in IT Solutions and Post-Trading ServicesBusiness Model, regulation and competition
7
Brokers &
Investors
Trading
Post-Trading
Regulation prohibits internalization of orders, dark pools
and ATS/MTFs, stocks trading in both exchange and OTC
simultaneously
Settlement and clearing of stocks trading must be done
through a CCP
Settlement and clearing at the beneficial owner level
make the Brazilian market safer and more resilient
Under the regulation in place, potential competitorswould be obliged to provide the same integrated
solution, with the same rules and transparency
The final investor pays the exchange fee
Other exchanges have been seeking integrated models
(self clearing models)
Naked access is not allowed
Naked short selling is not possible
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Excellence in IT Solutions and Post-Trading ServicesBusiness Model, regulation and competition
8
CHANGE IN REGULATION: POTENTIAL IMPACTS
Internalization of orders
Brokers and other market participants should adapt
their structure (the US prime brokers model does not
exist in Brazil)
Investors will face the broker risk
Regulators: potential increase in systemic risk
Adoption of the best execution practice in various
venues
Adoption would be difficult due to the size and
liquidity concentration (potential inefficiency in the
price discovery)
Brazilian equity market size is ~1% of the US market
Regulatory debate favors OTC transactions being
centrally cleared
Brokers &
Investors
Trading
Post-Trading
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Excellence in IT Solutions and Post-Trading ServicesBusiness Model, regulation and competition
9
CHANGE IN TRADING REGULATION: POTENTIAL IMPACTS
Allowing simultaneous Exchange and OTC trading
Potential inefficiency in the price discovery, risk of pricemanipulation and split of liquidity
Are there incentives for this change?
No cost reduction in the Sell side: investors pay the exchange
fee (no incentive for MTF venues)
Regulator: potential increase in market risk (inefficiency in pricediscovering and potential market manipulation)
Global competitors: the Brazilian market structure would be a
limitation and, besides, they would need to develop or hire post-
trading services
A NEW CLEARING?
Buy side: higher costs (no cross margining or collaterals)
Sell side: increase in OPEX and CAPEX due to new back-office IT
solutions necessities
Regulator: the BACEN considers the four clearinghouses operated
by BM&FBOVESPA as systemically important (BM&FBOVESPA plays
a key role in the Brazilian payment system)
Brokers &
Investors
Trading
Post-Trading
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Stock Market Trading Rules: efficient price discovery
General characteristics
The trading rules are applied to all exchange listed stocks (a stock cannot be traded
simultaneously in both Exchange and OTC markets)Main trading rules (auctions) established by CVM Instruction 168
There are maximum fluctuation limits for stock prices (automatically frozen by the
trading system):
For the most liquid stocks 3% oscillation is enough to trigger an auction procedure
For the less liquid stocks the limit for oscillation is 10%
An auction can take from 5 minutes to 1 hour
Also, there are limits regarding the size of the trade (automatically frozen by the
trading system):
The auction can take from 5 minutes (quantity above 5 times the average of the last
30 trading sections) to 48 hours advanced announcement (quantity higher than 6%of common shares or 20% of preferred shares)
Also, there are other intermediary auction rules
Pre-trade limit analysis
For DMA access, before the order get in the matching engine, there is a tool (MegaLine
/ GTSLine) that analyze if the order is under the limits established by the broker10
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Brazilians Stock Trading Breakdown
28.4%
25.1%
14.6%
31.9%
Jul10
Source: Bloomberg (in USD traded value of 35 companies with ADRs programs )
End of CPMF
(Financial
Transaction Tax)Sarbanes-Oxley Act
(SOX)
*Updated until 08/12/2010
46.5%
53.5%
Novo Mercado
Launching
11
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* TotalIPOs - 1 - 7 9 26 64 4 6 8 125Follow ons 14 5 8 8 10 16 12 8 18 7 106Total 14 6 8 15 19 42 76 12 24 15 231
Dual Listings - - - 2 1 1 - - 1 - 5
Public Offerings in Number of Companies
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Othe r USA Ve nue s - B razi li an ADRs NYSE - Brazi li an ADRs BM& FBOVESPA - c ompani es wi th ADRs BM& FBOVESPA (e xce pt compani es wi th ADRs)
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- 3 months holding period- Brazilian Investment fund trade
- 1.5 Bp Broker Fee- Securities lending not considered
All in trading cost in Bovespa Segment
12
28.6% 27.2% 28.3%
36.3% 34.4% 35.9%
11.5% 10.9% 11.3%
23.7% 27.6% 24.4%
(Avg. ADR price) (Most expensive share price in Brazil) (Avg. share price in Brazil)
US$ 28 - Stock Price US$ 94 - Stock Price US$ 14 - Stock Price
USD 0.015 USD 0.050 USD 0.008
Broker trading Fee Exchange Trading fee Exchange Clearing fee Exchange Depository fee
1.5 Bp
1.9 Bp
0.6 Bp
1.3 Bp
Exchange Cost3.8 Bps
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New Pricing Policy
Released in June/10
Bovespa Segment
Discounts from 10% to 50% only for trading fee (cash and options), according to the
volume
Only for day traders / HFTs
BM&F Segment
Discounts up to 75%, according to the volume
Termination of the 70% flat discount for HFTs
New policy for day traders / HFTs
Both Segments discounts will need to be prior approved by a committee
Implementation: November, 2010
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Regulation and Taxation: IOF
IOF
October 20th: 2% charge on foreign capital inflow
November 19th: 1.5% charge on issuance of new DRs
Consequences
Equity trading declined by 5 to 7%, mainly due to the ADRs arbitrage
Reduction in non resident participation in Cash Market from 33-37% to 27-30% with
increased use of TRS (Swaps)
Increase in IOF unlikely
Brazilian capital market has become a very important source of funding to companies
like Petrobras, Banco do Brasil, Eletrobrs, government owned.
Massive investments will be needed in coming years to support growth
World Cup / Olympics / Pre Salt / Infrastructure
Government is not hostile to foreigners
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Excellence in IT Solutions and Post-Trading ServicesIT Developments
Post
Trading
Market
Access
Co-location Capacity: phase II implemented in Jul10
Co-location in Bovespa Segment: to be implemented in Sep10
ISVs: Trading Technology (TT) will provide screens for BM&F segment in
1Q11
Globex Technology: derivatives trading system: 1Q11
Capacity: phased in until Oct/10
BOVESPA Seg.: from 1.5 million to 3 million trades/day (Oct/10)
BM&F Seg.: from 200K to 300K trades / day (Aug 10)
from 300K to 400K trades / day (Oct/10)
Performance: improving performance in both systems (one digit latency)
Sungard/GMI Project (back office for FCMs): to be implemented in 3Q10
New Sinacor+ (back office for brokers): new version will be fully
implemented by the end of 2010
Clearing Integration: to be implemented in the end of 2011
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Business and Service Center (Single Gateway)
Central
Counterparty
Clearing
Facility
CentralDepository
Cross margining for Equities, Derivatives, Spot FX and Fixed Income
Single Settlement window
Greater capital efficiency
18
Post-Trading Services - Integration and Opportunities
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Market Makers (MMs) for Options:
Players: locals (only FI) and non-residents(all) - Implementation: Option on IBOVESPA and other securities - by the end
of 2010.
Non-Sponsored BDR Level 1
Product: issued by a Brazilian depository institution
Authorized investors: Financial institutions, mutual funds, Portfolio managers and Consultants for securities authorized
by the CVM, in relation to their own funds
Implementation: 3Q - 10 big stocks listed in the US (DB)
+ 10 granted to Citibank
ETFs and Indexes
New ETFs to be launched - New Indexes: Financial Index
7 ETFs trading around BRL30 million per day
Launched of a Competitive Model to select new ETFs issuers
New Products Pipeline
19
Products
Order Book in Foreign Currencies
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Order Book in Foreign Currencies
(Brazil Easy Investing)
20
BM&FBOVESPA and Chi-X Global Term Sheet for joint development ofsoftware
Trading system of stocks listed in Brazil with simultaneous FX execution -allows non residents to match stocks in US$ and other currencies
Legal requirements to invest in Brazil keep unchanged (2689 Account)
Facilitates the foreign investor access to Brazilian market, especially retail
Order Book in Foreign Currencies
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BVMF
BROKERAGEHOUSE
BROKERBVMF
Other Countries
Brazil
Chi-FXBrazil
BROKER
BVMF
BROKER
BVMF
BROKER
BVMF
INVESTOR2689
INVESTOR2689
INVESTOR2689NET
,
NETTradingSystem
INVESTOR2689
FinancialInstitution
thatprovides FXtransaction
2Buy BVMF3at US$ 8.00
CompradeBVMF3US$
8.00
3US$ FX Sell at R$
1.80
3Sell BVMF3at R$ 14.4
3Buy BVMF3at R$ 14.4
1BVMF3 Price at US$8.00
Order Book in Foreign Currencies
(Brazil Easy Investing)
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447520
30
2009 2010e
REVIEWED OPEX AND CAPEX BUDGETS
22
Actual
Reviewed Budget
Budget Reduction
Opex (5.4% reduction)
Capex (10% reduction)
In R$ millions
96
272
30
2009 2010e
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Round Trip Time, in milliseconds 2007 2008 2009 2010e
Equity Market 450 300 10 One digit
Derivatives Market 70 25 10 One digit
*Includes outsourced services** Related to May/2008
*** Updated until 07/30/2010
Throughput in thousands of trades
Equity Market
Average Capacity 390 770 1,500 3,000e
Daily Average 153 245 332 416***
Market peaks 343 414 591 634
Derivatives Market Average Capacity 55 200 200 400e
Daily Average 23 29 39 68***
Market peaks 42 49 76 152
Number of employees* 1,828** 1,487 1,306 1,471
Network Carrier RCCF`s Sole Provider 8 Networks (RCB)
Improving the IT capacity and performance
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OPERATIONAL PERFORMANCE
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Daily Average Number of Trades (Thousands)
Average Daily Traded Value - ADTV (BRL Billions)
Number of Custody Accounts (Thousands) Turnover Velocity** (12 months average)
**Relation of the trading value in the cash market and the market cap of the exchange*Updated until: July 30th, 2010
Bovespa Segment: Operational Highlights
25
30.8% 29.4%36.8% 37.6% 38.7%
42.3%
56.4% 63.2%
66.6%
66.6%
2001 2002 2003 2004 2005 2006 2007 2008 2009
508540 551
559 548 543 538576 581 580
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
1.21.6
2.4
4.95.5 5.3
6.5 6.8 6.6 6.56.9 7.3
5.85.4
2004 2005 2006 2007 2008 2009 YTD* Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10
54 6287
153
245
332
416 424 409 393 405
489
399 395
2004 2005 2006 2007 2008 2009 YTD* Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10
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Preliminary DataUpdated until August 2nd
Public Offerings (BRL billions)
Public Offerings in 2009/2010
24 public offerings in 2009 (6 IPOs and 18 Follow-Ons), raised more than BRL 46.0 bi
15 public offerings in 2010 (8 IPOs and 7 Follow-Ons), raised BRL 23.5 bi*
Pipeline
Also, there are 7 additional offerings in the pipeline
IPOs (6): WTORRE Empreendimentos Imobilirios, Sonae Sierra Brasil S/A, Norskan Offshore
S.A, Multiner, Autometal and Brasil Insurance
Follow-Ons (1): Petrobras
BOVESPA Segment: Capital Raised Activity
26
BOVESPA Segment: Capital Raised Activity
2004 2005 2006 2007 2008 2009 2010*
4.5 5.415.4
55.6
7.5
23.87.44.3
8.5
15.1
14.5
26.8
22.2
16.1
IPO Follow-On
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422 501 711
988 789 843
1.6941,135 1,255
2,270 2,171
1,483 1,278
2,121
110 168266
473535 447
579
525642
603 611
670530
477
8674
68
11288 80
90
78106
75 96
106
96
75
187109
124
167162 150
180
168181
170 176
220
159
189
2004 2005 2006 2007 2008 2009 YTD* Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10
BRL Int. Rate (Thousands) FX (Thousands) Index (Thousands) Others (Thousands)
BM&F Segment: Operational Highlights
Average Daily Traded Volume - ADTV (thousands of contracts)
Rate per Contract - RPC (BRL)
*Updated until: July 30th, 2010
27
2,063
805852
1,167
1,740
1,573
2,544
1,9062,184
3,117 3,054
2,479
1,521
2,863
2004 2005 2006 2007 2008 2009 YTD* J-10 F-10 M-10 A-10 M-10 J-10 J-10
Interest rates in BRL 0,887 0,962 0,906 0,950 1,141 0,979 0,876 0,971 0,977 0,722 0,780 0,961 1,044 0,893
FX rates 4,002 2,858 2,244 1,859 2,065 2,161 1,894 1,968 2,005 1,837 1,872 1,752 1,908 1,983
Stock Indices 1,561 1,688 1,419 1,501 2,145 1,620 1,503 1,466 1,716 1,372 1,616 1,313 1,643 1,372
Interest rates in USD 1,999 1,385 1,094 0,965 1,283 1,357 1,173 1,104 1,319 1,239 1,203 1,145 1,137 1,086
Commodities 7,159 5,693 4,749 3,195 3,587 2,307 1,992 1,711 2,029 1,934 2,281 1,890 2,216 2,021
Mini contracts - 0,038 0,034 0,054 0,162 0,176 0,130 0,133 0,139 0,129 0,136 0,122 0,133 0,124
OTC 1,199 1,703 1,571 2,111 2,355 1,655 1,639 1,588 1,408 1,626 1,790 1,646 1,895 1,684
Total RPC 1,620 1,467 1,247 1,224 1,527 1,365 1,127 1,254 1,308 0,961 1,031 1,171 1,274 1,084
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BM&F Segment Open Interest
28
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10
Interest Rates in BRL
Total Open Interest
Derivatives Open Interest (in millions of contracts)
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10.5%
26.6%
59.4%
0%
10%
20%
30%
40%
50%
60%
70%
FX contracts I nde x- based contracts Mini contracts
4 2041 50 69
155118
226
118 92
05
1844
41
5047
62
4240
4
722
5377
93
72
120
8485
0.3%1.0%
2.8%
4.8%3.8%
6.0%
4.2%
8.9%
6.3%4.0%
-0,5%
0,5%
1,5%
2,5%
3,5%
4,5%
5,5%
6,5%
7,5%
8,5%
9,5%
-
50
100
150
200
250
300
350
400
450
500
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Apr-10 May-10 Jun-10 Jul-10
FX Equities Mini contracts % in Overall Volume
157 195 197 216327 380
451 416276 367
4 30 71129
156 148161 214
7048
5192
176 223279 204
189254
203
13
21138
84 164
162
151
5.5%7.5%
11.3%14.4%
13.9%
17.6%16.0% 20.1%
16.9%13.5%
0%
4%
8%
12%
16%
20%
-100
100
300
500
700
900
1100
Tra di tiona l DMA CME Globex DMA Provider CoLoca tion % of DMA in overa ll ADTV
CME-Globex ADTV in thousands of contractsDMA ADTV in thousands of contracts
High Frequency Traders
ADTV in thousand of contracts Participation per type of contract
22 active participants in Jul10
BM&F Segment: DMA and CME Order Routing Evolution
29* Updated until July 30, 2010
420 33
42 5883 81
126
4327
5
16
3939
29 37
39
129
62
45
59 3543
49
15
110.1%
0.9%
2.5%
4.1%
3.2% 2.9%2.6%
4.3%
1.7%0.8%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
5,0%
5,5%
(20)
10
40
70
100
130
160
190
220
250
280
FX Equities Mini contracts % in Overall Volume
D i f BM&F d BOVESPA S HFT
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30
Drivers for BM&F and BOVESPA Segments: HFT
Colocation (Jul10)
33 half racks hired
45 units in the pipeline:
13 units for the BovespaSegment,
32 units for both Segments.
Average Daily Traded Volume via Co-location
(thousands of contracts)
Seven active investors
* Updated until July 30, 2010
0 1 3 712 15 13 17 20
25
84
164 162151
1.4%
3.3%
-0,5%
0,5%
1,5%
2,5%
3,5%
4,5%
5,5%
6,5%
-
20
40
60
80
100
120
140
160
180 2.6%3.2%
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APPENDIX
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BRAZIL USA
BVMF
BVMF
BVMF
DTCC
DTCC
NYSE Nasdaq
BATS Direct Edge
TRF Dark Pools
Beneficial Owner Level
Broker Level
All the trades
must be
matched on an
exchange
environment
Brokers can internalize
orders
Central Depository
Clearing (CCP)
Trading on the Exchange
Broker
Equity Market Settlement Structure: Brazil compared with USA
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Managed growth to support retail and high frequency trading
DMA Implementation (Direct Market Access)
Trading Systems: reduce latency and increase capacity
RCB Development (new BM&FBOVESPA Communication Network)
Via DMACo-location
TraditionalDMA
Via DMAProvider
DirectConnection
NET
NET
NET
NET
Remote accesstracking and maintenance
Application ofCo-location
NET
Providerof DMA
Excellence in IT Solutions and Post-Trading Services
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BRAIN Brazil Investments & Business
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Foundation Members
BRAiN seeks to articulate, with the public
and private sectors, projects in various areas:
Brazils image abroad
Business infrastructure
Institutional connections International trade
Education and talents
Financial products, services and channels
Regulation, taxation, and bureaucracy
BRAIN Brazil Investments & Business
Mission
Reinforcing Brazils position as an international investment and business hub
with regional focus and global connections, contributing to the sustainable
economic and social development of Brazil and Latin America.
35
Turn Brazil into the business hub for Latin Americ
Develop global projection and links
Develop local market strengthening
Brazilian ecosystem competitiveness
Strategic Objectives
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1Q10 EARNINGS
36
Highlights of 1Q10 x 1Q09
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227.0 282.6 245.7
403.2
1Q09 1Q10 1Q09 1Q10
176.7
334.6
1Q09 1Q10
55.8%
72.9%
BM&F segment all time high Trading Volume: 2.4 million contracts per day in
1Q10 and 3.1 million in Mar10
Colocation and High Frequency Traders (HFT): Colocation and HFT from BM&F
Segment in Apr10 hit new record highs, ADTV of 84K and 244K (buy + sell),respectively
New Pricing Policy for HFT: market hearing launched in Apr10
Products: Market Maker on Options, Non Sponsored BDR Level 1, Hydrous
Ethanol Futures and Options and Foreign NDFs / Futures
HIGHLIGHTS
Net Income (BRL Millions)EPS (GAAP): BRL 0.14 in 1Q10 and Adjusted EPS: BRL 0.20 compared with BRL
0.12 in 1Q09
Adjusted Net Income (adjusted by non-cash items)*: 64.1% higher than 1Q09
EBITDA Margin: 72.9% in 1Q10 versus 55.8% in 1Q09 and 65.1% in 4Q09
Adjusted Operating Expenses*: increase by 12.1% vs 1Q09 and 13.1% lower
than 4Q09
Guidance: both BRL550 million OPEX (adjusted) and BRL302 million CAPEX
budgets will be revised downwards
Interest on Capital: BRL227 MM (BRL90 MM previously paid and BRL137 MM,
BRL 0.068 per share, to be paid), equivalent to 80% payout on GAAP net
income
Adjusted net income in 1Q10 excludes stock options plan and impacts from deferred liabilities tax and in1Q09, excludes stock options plan. Adjusted expenses in 1Q10 excludes depreciation and stock options plancosts and in 1Q09 excludes depreciation, stock options plan and severance costs
GAAP Adjusted
1Q10 EARNINGS
EBITDA (BRL Millions) / EBITDA Margin (%)
Operating Expenses (BRL Millions)
37
Highlights of 1Q10 x 1Q09
Summary of Financial Statements
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Summary of Financial Statements
In BRL (thousands) 1Q10 1Q09% Change
1Q10/ 1Q094Q09
% Change
1Q10 / 4Q09
Gross Operating Revenues 510,660 351,918 45.1% 473,890 7.8%
Net operating revenues 459,128 316,548 45.0% 424,759 8.1%Operating expenses (136,632) (148,760) -8.2% (160,372) -14.8%
Operating income 322,496 167,788 92.2% 264,387 22.0%
Income before Taxes 390,192 235,647 65.6% 338,491 15.3%
Income Tax and Social Contribution (107,843) (8,372) 1,188.1% (118,371) -8.9%
Net Income 282,601 226,980 24.5% 220,174 28.4%
Net margin 61.6% 71.7% -10.2 pp 51.8% 9.7 pp
EBITDA 334,626 176,739 89.3% 276,399 21.1%EBITDA margin 72.9% 55.8% 17.0 pp 65.1% 7.8 pp
Adjusted net income 403,248 245,739 64.1% 315,313 27.9%
Adjusted Operating Expenses (115,502) (103,050) 12.1% (132,866) -13.1%
Adjusted EBITDA 343,626 195,498 75.8% 291,893 17.7%
Adjusted EBITDA margin 74.8% 61.8% 13.1 pp 68.7% 6.1 pp
Adjusted earnings per share 0.200885 0.122869 63.5% 0.157282 27.7%
In 1Q10, the net impact from the adjustments on the bottom line
amounted to BRL 120.6 million, composed by 2 non-cash items:
BRL 111.6 million added Recognition of deferred liabilities
related to the goodwill amortization in 1Q10;
BRL 9.0 million - Stock Options Plan;
In 1Q09, the net income was adjusted by the Stock Option Plan inBRL 18.8 million
38
NET INCOME RECONCILIATION
BRL Millions 1Q10 1Q09Var.
1Q10/1Q09
Adjusted Net Income 403.2 245.7 64.1%
Adjustments
Deferred Tax Liabi li ties 111.6
Stock Options Plan 9.0 18.8
Corporate Net Income 282.6 227.0 24.5%
Revenues Breakdown
Revenues Breakdown
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33%
51%
16%
Trading / Clearing Systems - BM&F
Trading / Clearing Systems-Bovespa
Other Operational Revenues
In BRL (thousands) 1Q10 1Q09% Change
1Q10/ 1Q09
Operating Revenues 510,660 351,918 45.1%
Trading / Clearing Systems - BM&F 170,935 127,170 34.4%
Trading / Clearing Systems-Bovespa 259,835 158,196 64.2%
Other Operating Revenues 79,890 66,552 20.0%
Depository and custody 20,436 16,084 27.1%
Vendors 15,941 11,521 38.4%
Trading access (Brokers) 12,521 9,475 32.1%
Listing 11,511 10,621 8.4%
Securities Lending 10,520 6,127 71.7%
Bolsa Brasileira de Mercadorias 1,114 1,406 -20.8%
Bank 1,899 1,971 -3.7%
Others 3,513 3,976 -11.6%
Dividends (CME) 2,435 5,371 -54.7%
Revenues Breakdown
1Q09
1Q10
39
Revenues Breakdown
36%
45%
19%
Revenues Breakdown
Operational performance by Segment 1Q10 1Q09Change
1Q10/1Q09
BM&F ADTV - in millions of contracts 2,453.6 1,471.7 66.7%
BM&F RPC - in BRL 1.126 1.345 -16.3%
BOVESPA ADTV - in BRL millions 6,599.6 3,908.1 68.9%
BOVESPA Margin - in bps 6.56 6.64 -1.1%
Others Revenues
Other Revenues: 1Q10x1Q09
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555 581
1Q09 1Q10
Others Revenues
Vendors: +38.4%Due to the new pricing policy (Apr09) and the
growth of the average number of users (+16.6%)
Securities Lending: +71.7%
Depository and Custody: +27.1%Extra fee after April 2009
Trading Access (Brokers): +32.1%The market recovery lead brokers to migrate to
more expensive bandwidth
40
Other Revenues: 1Q10x1Q09
9.812.9
16.5 15.819.4
53.958.6 63.8 61.1 69.6
-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
-
5,0
10,0
15,0
20,0
25,0
1Q09 2Q09 3Q09 4Q09 1Q10
u
berofTrades
OpenInterest
Open Interest (BRL billions) Monthly Average Number of Trades (thousands)
Securities Lending - BTC
Number of Accounts (Average) in thousands
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Expenses Breakdown
Expenses Breakdown
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130120
103 105 109
133115
3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10
Adjusted Operational Expenses* (BRL millions) Synergies associated with 2007 expenses** (BRL millions)
* In 1Q10 excludes depreciation and stock options expenses and in 1Q09 excludes depreciation, stock options and severance expenses
** 2007 Operational expenses as adjusted for inflation and OPEX budget excludes depreciation and stock options
42
Expenses Breakdown
Adjusted Operational Expenses: 12.1% higher than 1Q09
Adjusted Personnel Expenses: 12.4% higher than 1Q09
IT: 20.3% reduction vs. 1Q09 due to projects that are being revised and costs reduction related to equipments
maintenance
Marketing: 132.5% growth in comparison with 1Q09 (low base) showing the efforts in the financial educationcampaign
Others: CAPEX write off (BRL 3.7 million) and provisions of litigation (BRL 1.9 million)
Adjusted Operational Expenses*: BRL 115 million in 1Q10
Guidance: Both BRL550 million OPEX (adjusted) and BRL302 million in CAPEX budgets will be revised downwards
Expenses Breakdown
Financial Highlights
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Cash and Cash Equivalents
43
Financial Highlights
CAPEX
BRL26.4 million, (BRL23.6 million in IT and BRL2.8
million in other projects)
4Q09 - BRL 31.5 million
2009 BRL 95.6 million
Financial Income
BRL 67 million in 1Q10 and in 1Q09
Cash distributions BRL227 million Interest on Capital in 1Q10,
representing 80% of GAAP net income, as follow:
BRL90 million already paid during the 1Q10; and
BRL137 million, equivalent to BRL 0.068 per share,
to be paid on May 27th, based on the ownership
structure prevailing as of May 12th, 2010
In BRL billions
1.2
0.5
2.2
Mar10: BRL 4 billion
Collateral Clearings safeguard structure Own Cash
Balance Sheet
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In BRL thousands
ASSETSMar'10 Dec'09
LIABILITIES AND SHAREHOLDERS'
EQUITY Mar'10 Dec'09
Current Assets 3,532,520 2,778,968 Current Liabilities 1,645,579 1,162,075
Cash and cash equivalents 48,238 50,779 Collateral for transactions 1,171,426 810,317
Financial investments 3,320,428 2,599,784 Others 474,153 351,758
Others 163,854 128,405 Non-current Liabilities 424,727 313,002
Non-current Assets 18,469,670 18,422,215 Financing 163 2,495
Long-term receivables 749,176 715,951 Deferred Inc. Tax and Social Contrib. 372,784 261,060
Financial investments 616,412 585,648 Others 51,780 49,447
Others 132,764 130,303 Minority interest in subsidiaries 16,378 16,357
Investments 1,319,386 1,319,439
Shareholders' Equity 19,915,506 19,709,749
Property and equipment 278,277 268,895 Capital 2,540,239 2,540,239
Capital reserve 16,675,489 16,666,489
Intangible assets 16,122,831 16,117,930 Others 699,778 503,021
TOTAL ASSETS22,002,190 21,201,183 TOTAL LIAB. AND SHAREHOLDERS' EQUITY 22,002,190 21,201,183
44
Balance Sheet
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APPENDIX
Operational data
45
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Performance of BOVESPA Segment: Individuals Investors
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0
100
200
300
400
500
600
700
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Performance of BOVESPA Segment: Individuals Investors
47
Jul10
628 k
Investors Account
1.51.8
2.1 2.32.4 2.3 2.1 2.1 2.3
1Q09 2Q09 3Q09 4Q09 1Q10 Apr10 May10 Jun10 Jul10
Market Capitalization (BRL trillions)
Bovespa Segment: Foreign investment flow
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Bovespa Segment: Foreign investment flow
*Includes regular trades and public offering; updated until July 30th, 2010.
48
Monthly Net Flow of Foreign Investments* (in BRL billions)
-1.0
0.9
-0.6
6.0
2.9
-2.8
-7.3
5.3
-1.8
-4.7
-1.2-0.4-0.6
0.51.4
5.7 6.1
4.2
5.5
2.5
5.2
9.1
2.11.4
-2.1
0.7
5.8
1.5
-1.5
-0.1
7.3
Operational Highlights: Investors Participation in Total Volume
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Operational Highlights: Investor s Participation in Total Volume
BM&F Segment (Investors Participation in Total Volume)
Bovespa Segment (Investors Participation in Total Value)
49
56% 51% 49% 48% 45% 43% 43% 42% 44% 43% 40% 41%
24%25%
23% 23% 24% 27% 26% 30% 26% 25% 29% 32%
12% 15%17%
19%20% 22% 23%
22% 24% 26% 25%22%
7% 7% 9% 8% 8%5% 5% 3% 4% 4% 4% 3%
2% 2% 2% 3% 3% 2% 3% 2% 2% 2% 1% 1%
2005 2006 2007 2008 2009 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10Central Bank Companies Individuals Foreign Investors Institutional Investors Financial Institutions
25% 25% 23% 27% 31% 31% 32% 31% 25% 27% 26% 28%
27% 27% 30% 27%26% 29% 29% 30% 35% 34% 35% 36%
33% 36% 35% 35% 34%28% 28% 27% 28% 30% 28% 28%
12% 10% 10% 8% 7% 9% 9% 9% 9% 7% 8% 7%2% 2% 2% 3% 2% 2% 2% 2% 2% 2% 2% 2%
2005 2006 2007 2008 2009 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10
Individuals Institutional Investors Foreign Investors Financial Insitutions Companies Others
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Institutional investors will broaden their participation incapital markets : Investments Funds
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55% 52%63% 54% 47% 48% 44%
44%
28% 29%
17%23% 24% 23%
24% 23%
10% 11%
12%
13%14%
16%
18% 18%
8% 8%
8%10%
15%12%
15%15%
2003 2004 2005 2006 2007 2008 2009 May/10
Fixed Income Multimarkets Others* Equities
768.8724.8
914.81,119.9
1,279.5
1,150.0
1,458.5 1,497,0
51
capital markets : Investments Funds
Investments Funds: Portfolio Breakdown (in BRL billions )
Investments Funds: Multimarket and Equities Funds Evolution (in BRL billions)
* Brazilian Hedge Funds
* Others include: Asset backed securities, real estate, FX, off-shore and retirement funds
Source: Anbima
281 286 285 308320 332 338
338 346 339 340 340 345351
165 174 171 178180 190 195 205 214 213 211 215 210 204
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10
Multimarkets Funds* Equities Funds
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Capital Markets in Brazil:
A Story of Growth
52
Modest exposure of Investment Funds
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Number of investoraccounts in
investment funds
270 million(~60% of population)
USA
BRAZIL
10.2 million
(5% of population)
USA (Apr/10) World(Dec/09) Brazil (May/10)
% in Equities
53%39%
14%
Source: ICI- Investment Companies Institute and Anbima
Modest exposure of Investment Funds
53
Brazilian Capital Market Indicators are still Incipient whenCompared to World Benchmarks
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Nasdaq KEx Shanghai DB Borsa
Italiana
NYSE BME Tokyo LSE AUX TSX NSEI HKEx SGX BVMF
1,027%
243%229%
171% 162% 161%146% 129% 107% 98% 96% 88% 84% 67% 67%
Brazil places 28th in the WFE ranking, with 386 listed companies in Dec/09
High potentialfor growth
Source: WFE
446%
Shenzhen
Compared to World Benchmarks
Turnover Velocity (2009)
54
Modest Development in Fixed-Income and AgriculturalCommodity Derivatives
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Real Estate Credit to GDP Ratio
Agricultural commodityderivatives to total
exchange industry*:
World 5.3%Brazil 0.7%* Jan-Sept/200944%
15%11%
3%
62%
USA Spain Chile Mexico Brazil
Source: FIA
Source: CDES Social and Economic Development Board and World Bank
Commodity Derivatives
55
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