BVMF Presentation - November 2015

8/9/2019 BVMF Presentation - November 2015

1/55

1

Public

PublicNovember/2015 X

Investor Relations DepartmentSão Paulo, SP


2/55

2

Forward Looking Statements

This presentation may contain certain statements that express the management’s expectations, beliefs andassumptions about future events or results. Such statements are not historical fact, being based on currentlyavailable competitive, financial and economic data, and on current projections about the industries BM&FBOVESPA

works in.

The verbs “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “plan,” “predict,” “project,” “target” and othersimilar verbs are intended to identify these forward-looking statements, which involve risks and uncertainties thatcould cause actual results to differ materially from those projected in this presentation and do not guarantee anyfuture BM&FBOVESPA performance.

The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&FBOVESPA

services; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitiveindustries BM&FBOVESPA 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 entrantsto the Brazilian markets; (v) ability to keep up with rapid changes in technological environment, including theimplementation of enhanced functionality demanded by BM&FBOVESPA customers; (vi) ability to maintain anongoing process for introducing competitive new products and services, while maintaining the competitiveness ofexisting ones; (vii) ability to attract new customers in domestic and foreign jurisdictions; (viii) ability to expand theoffer of BM&FBOVESPA products in foreign jurisdictions.

All forward-looking statements in this presentation are based on information and data available as of the date theywere made, and BM&FBOVESPA undertakes no obligation to update them in light of new information or futuredevelopment.

This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shallthere be any sale of securities where such offer or sale would be unlawful prior to registration or qualificationunder the securities law. No offering shall be made except by means of a prospectus meeting the requirements ofthe Brazilian Securities Commission CVM Instruction 400 of 2003, as amended.


3/55

3

REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE

Safety, resilience and transparency

BRAZILIAN MARKET OPPORTUNITIESMain growth drivers

MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform

OPERATIONAL PERFORMANCENotable global exchange

FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders

3Q15 RESULTS

APPENDIX

MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer


4/55


5/55

5

“State-of-the-art” trading and post-trading

systems: ~R$1.6 billion invested in resilience,

strength and safety

Solid market position: dominant position in the

domestic market and significant presence in theglobal exchanges industry

Reference in corporate governance

standards: cutting edge in adopting best practices

to the market

High dividend payer¹: +80% of the net incomeand R$5,9 billion on distributed earnings since 2008

Revenue diversification: trading and post-

trading services for stocks, derivatives, fixed incomeand OTC

Constantly seeking operational efficiency:investments in technology and cost growth below

inflation²

Why invest in BM&FBOVESPA? A global exchange

1890:

Foundation of Bolsa

Livre (Bovespa's

predecessor)

Aug 2007:

Bovespa Hld

demutualization

Oct 2007:

Bovespa Hld

IPO (BOVH3)

1967:

Bovespa’s

Mutualization

1986:

Start of

BM&F

activities

Sep 2007: BM&F

demutualizationNov 2007:

BM&F IPO

(BMEF3)

May 2008:

Merger between BM&F and Bovespa

Hld and creation of BM&FBOVESPA

(BVMF3)

¹ Practice of the period and amount distributed from Jan/2008 to Jun/2015;

² Expenses adjusted to Company´s depreciation, stock granting plan – principal and social charges -, stock options plan, tax on dividends from the CME Group, transfer of fines and provisions


6/55

6

Services for the whole chain

Trading Platform: equities, derivatives, government andcorporate bonds, funds, spot FX, among others

Post-trading Platform:

Central counterparty (CCP)

Settlement System (SSS)

Central Depository (CSD)

Services for Issuers and Participants:

Listing

Trading access (brokers)

Securities lending

Custody for clubs and foreign investors (2689)

Market Data (vendors)

Indices Licensing

Software Licensing

OTC (derivatives and fixed income)

COMMODITIES

FXINTEREST

CREDIT

EQUITY

CCP, SSS and CSD

POST-TRADE

CASH

FUTUREOPTIONS

FORWARDSWAP

Multi-asset and vertically integrated model Value gained across most of the chain


7/55


8/558

7% 7%6%

5%

5%

2%

67%

Oppenheimer Funds

Vontobel Asset Management

Capital World Investors

BlackRock Funds

Capital Group International, Inc

Treasury stock

Others

(update in Aug. 2015)

(update in Out. 2015)

Listed in Novo Mercado (voting shares only andother shareholders’ rights, transparency, etc.)

Majority of the Board composed of independentmembers (regulatory requirement)

Chairman is an independent member

Other Board members are linked to market

participants or strategic partner (CME);although considered non-independent, are notconnected to controlling group or management

All Board members are not Company’s executive

Well-defined and solid Board of Directors andBoard’s Committees

Executive compensation system aligned withCompany’s performance and strategicobjectives, as well as with shareholders long-term interests

Solid Governance Practices Broadly Dispersed Shareholder Base

(update in Feb. 2013)

(update in Oct. 2015)


Note: percentage ownership are estimated but may not represent exact figuresdue to different information dates about largest shareholders’ positions

Corporate governance Reference in corporate governance practices




9/55

9

2013-15 Board of Directors Composition

Independent

members

Linked tomarket participant or

strategic partner (CME)

Corporate Governance Profile - Board & Committee Summary

Board

Committees

AuditNomination

and CGComp. Risk

Brokerage

Industry

# Members 10¹ 6 2 3 4 9

Independent Board 6 2 2 2 2 1

Market participant + Board 4¹ - - 1 2 1

Independent Non-Board - 4 - - - -

Market participant Non-Board - - - - - 7

# of meetings (2014) 13 13 3 8 10 7

Average attendance (2014) 90% 85% 100% 100% 83% 93%

Board Member Age

Years

in the

Board

Pedro Pullen Parente

Former Minister of State; Former CEO of Media and

Commodity Conglomerates

62 4

Claudio Luiz da Silva Haddad

Former CEO of Investment Bank; Founder and CEO of

Business School

67 6

Antônio Quintela

Former CEO of CS Brasil and Americas; Portfolio Manager49 -

Luiz Antônio de Sampaio Campos

Former Director of CVM; Lawyer44 -

Luiz Fernando Figueiredo

Former Governor of the Central Bank; Portfolio Manager51 2

Luiz Nelson Guedes De Carvalho

Former Central Bank and Sec. Commission Officer; Member

of IIRC and CPC/IASB; Professor of Accounting

69 2

Denise Pauli Pavarina

Bradesco executive; Chairwoman of Anbima51 -

Eduardo Mazzilli de Vassimon

Director of Itaú e CRO of Itaú Holding57 -

José Berenguer Neto

CEO of JP Morgan Brazil48 2

Charles P. Carey

Former Chairman of CBOT; CME Group Board Member59 3

Highly qualified Board Members and well-functioningBoard’s Committees

Commitment and independence of Board of Directorsand Committees members

Note: in the case of the Advisory Committee for the Securities Intermediation Industry the statisticsregarding number of meetings and attendance considered the previous composition with 6 members,including two Board members. This change was implemented in Feb 2015.

Corporate Governance Multidisciplinary knowledge in conducting business


10/55

10

Board of

Directors

CEO

Edemir Pinto

CFODaniel Sonder COOCícero Vieira CIOLuis Furtado CPOEduardo Guardia

Management (5 Executives + 25MDs)Responsible for implementing the guidelinesestablished by the Board or Directors, executing the

strategic plan, monitoring and executing the Company’soperations

Internal Working Groups (budget, products andservices, projects, others)This internal working groups are important componentsof the Company’s corporate governance, monitoringthe budget process and establishing priorities forproducts, services and projects development, amongother things

Advisory Committees (market and credit risks,corporate risk, sustainability, code of conduct, businesscontinuity, others)Multidisciplinary internal groups that address andmonitor important business and issues of the Company

Advisory Chambers (commodities, listing, equities,fixed income, FX, derivatives, others)Several open channels with investors, marketparticipants and companies which collaborate todevelop and improve products and services, as well asto suggest better practices

HR, Marketing

and EducationCorporate

RiskSustainability

and Press

Internal Audit¹

Management and Internal Governance

Financial, Legal,

IR and Issuer

Regulation

Trading, Risk

Management,

Clearing,

Settlement,

Depository,

BVMF Bank and

Market

Participants

Relationship

Trading, Post-

trading, PMO,

New Products,

Infrastructure,

Mid- Back-Office

Systems

Products and

Business

Development,

Comercial

Relations (issuers

and investors)

and International

Offices

Internal Working Groups Advisory CommitteesMarket Advisory

Chambers

4 MD´s 6 MD´s 6 MD´s 5 MD´s

Corporate Governance Multidisciplinary knowledge in conducting business

¹ The Head of the Audit Department reports functionally to the Board of Directors and the Audit Committee. The Audit Committee may periodically assess the performance of the Head of Audit

Department, after consulting the Executive Board.


11/55

11

BM&FBOVESPA’s Sustainability Policy Sustainability as a long-term driver


12/55

12

REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency

BRAZILIAN MARKET OPPORTUNITIES

Main growth drivers




3Q15 RESULTS

APPENDIX



13/55

13

Growth opportunities in the Brazilian

equities and derivatives markets

Opportunities in the Brazilian market BM&FBOVESPA is ready to capture future growth

EQUITIES MARKET

Portfolio diversification: diversification of institutional investors’ portfolioswith a higher participation of equities

Retail investors: small number of retail investors and growth of the middleclass

Listed companies: low number of listed companies, while important sectorsare not adequately represented on the exchange

DERIVATIVES MARKET

Growth of credit and fixed-rate government debt: higher demand forhedging from financial institutions and institutional investors

Growth of foreign trade: higher demand for hedging through FX contracts

Equities market development: growth in demand for index-based contracts

OTC derivatives: capital requirements (Basel) should benefit OTCtransactions through a CCP


14/55

14

Investors’ exposure to equities is low Investors’ portfolio opportunities shifting to equities

Funds’ AUM evolution. Global average of 40% for equities

Investment Funds’ AUM (in BRL billions)

Number of Custody Accounts (in thousands) Pension Funds’ AUM (in BRL billions)

Number of retail investors represents only 0.3% of thepopulation (lower than global average)

Participation of equities in the portfolio of pension funds

Investors’ portfolios are highly

concentrated in fixed income

• Historically high interest rates

• Low level of sophistication of pension funds andsome asset managers

• Lack of knowledge about the equity market,combined with retail investors’ fixed-incomemindset

Sources: BM&FBOVESPA, ANBIMA and ABRAPP. ¹ Aug/15 and ²May/15.


15/55

15



MAIN GROWTH INITIATIVES

Building an State-of-the-art platform



3Q15 RESULTS

APPENDIX



16/55

16

BM&FBOVESPA IT, Risk and Operating Development Building a state-of-the-art platform to boost market growth

BM&FBOVESPA is investing

more than R$ 1.6 billion (2010 -2016) to build state-of-the-art

IT, Risk and Operating

infrastructure

Capital efficiency for clients

Attract and retain clients andstrengthen relationship withintermediaries

Development of markets andproducts

Operational leverage forBM&FBOVESPA

Innovate and enhance marketrobustness ahead of regulatorydemands

High performance: high availability, sub-milliseconds latency, low standard deviation

Operational leverage: easily scalable capacity

OTC MARKET

Capital efficiency for clients: integratedrisk calculation (OTC and Exchange TradedDerivatives)

Customer relationship: strengthening

relationships and adding revenue withlittle marginal expenses

NEWDATA CENTER

Long-term IT sustainability: significantcapacity to expand co-location and ownsystems

Customer relationship: able to hostparticipants and clients’ infrastructure

Capital efficiency for clients: integratedrisk calculation (equities and derivatives -OTC and listed); and unification ofsettlement windows

Rationalization and standardization ofrules, procedures and requirements

The implementation of IPN/CORE depends the approval of the regulators.

di f


17/55

17

PUMA Trading System - PerformanceEnabling the increase of trades

Successive records broken in recent years, without delays oravailability failure

Development of the number of messages/days (in millions)

Source: BM&FBOVESPA.

l i h ’ i d i k d l( )


18/55

18

Clearinghouses’ Integration and New Risk Model (CORE) Post-trade environment evolution

Organization of the post-tradeenvironment by types of assets/products

4 rulebooks and4 manuals.

4 participant

structures

4 systems /back-office

processes

4 systems /

processes for risk

management

4 pools of

collateral

4 settlement

windows and 4

multilateral

balances

4 distinct

environments /

IT architectures

4 registration

systems for

participants and

clients.

OTC

derivatives

Corporatefixed income

Interbank spot

foreign

exchangeFutures, options,

forwards

Securities

lending

Other products

and assets

Equities, ETFs,BDRs

Rules and Manuals

Structure of market participants

Participants and customer registration

Allocation and transfer

Position control

Clearing and settlement

Risk management

Pool of collateral

Government

Bonds

Organization of the post-tradeenvironment by process

Exchange and marketparticipation cost

reduction

Liquidity managementimprovement

More efficientallocation of capital by

investors

Operational andtechnological risk

reduction

Cl i h ’ I i dN Ri kM d l(CORE)


19/55

19

Clearinghouses’ Integration and New Risk Model (CORE) Post-trade environment evolution

What we did

Aug’14: derivatives phase of the new

BM&FBOVESPA Clearinghouse and ofthe new risk model CORE

What were the challenges

400 employees involved

46 legacy systems were deprecatedand 31 new other were installed

+65 market participants (themajority adopts SINACOR)

11 parallel production cycles

CORE - complexity and sophistication Calculate and process +1.3bn

instrument prices

We have built a dedicatedsimulation environment, meetingdemands from market participants

What is next

4Q15: conclusion of substantially all

the IT development of the equitiesphase

The development will be followedby the certification and parallelproduction processes

Launching will depend on testsresults and regulatory approval

What are the challenges

Integration with the CSD

Settlement of securities(restrictions, failures, integrationwith securities lending system)

Covered options and forwardtransactions

Corporate actions treatment

Settlement window unification

Risk – more risk factors, highervolume of calculations

The achievements

Roughly R$20 billon released incollateral

R$15 billion reduction in requiredcollateral

R$5 billion increase to the value of

deposited collateral R$12 billion withdrawn in the early

days of activity

Almost 6 months since the launching

Very high availability

Serving participants and clients withhigh quality services

Delivering efficiency

I t ti f th Cl i h D i ti (P f )


20/55

20

Integration of the Clearinghouses – Derivatives (Performance)Gains in efficiency, resilience and capacity expansion

In one year...

10 trading records broken

+72MM risk calculations

+1.8MM risk simulations

+61MM trades captured

+126MM allocations

99.9% availability

Development of trade numbers and records (in thousands)

Development of risk simulator use (in thousands)

Source: BM&FBOVESPA.


21/55

21






3Q15 RESULTS

APPENDIX

MAIN GROWTH INITIATIVES

Investments, new products and focus on the customer

P d t d S i D l t


22/55

22

Long-term development of products, markets and services

Products and Services Development Focus on the customers’ demands and needs

Greater liquidity for listed products

Development of infrastructure for expansion of MM and HFT activity

Capital efficiency generated by CORE enables/encourages the realization of new strategies

Development of the securities lending platform

Marketing listed products and attracting new customers

Expanding the retail investor base

Incentive program with market participants

Expanding the portfolio to attend to the investment profile of individuals (Tesouro Direto, ETFs,FIIs ...)

Discussion about tax treatment simplification in the equities market

Capture of institutional investors’ diversification into foreign securities Listing of foreign securities (non-sponsored BDRs and Foreign Index ETF)

Cross-listing of futures contracts

P d t d S i D l t


23/55

23

Long-term development of products, markets and services

Products and Services Development Focus on the customers’ demands and needs

Greater number of listed companies

Discussions with the Government to encourage and facilitate IPOs by SMEs

Law 13.043 grants exemption on capital gains for eligible SME’s investors until 2023

Creation of investment fund with proper structure to invest in SMEs

Reduction of maintenance and public offer cost for listed companies

Include stocks in the roll of restricted public distribution efforts

BNDES support to foster IPOs on BOVESPA MAIS

Fixed Income and OTC markets (product, market and revenue diversification)

Securities registration: (i) marketing of already-available products (CDB, LCA, LCI and COE); ii)new products (CDB - new types, Financial Bills, COE - physical delivery and repos)

OTC Derivatives: (i) benefits of CORE; (ii) SWAPs and Flexible Options migration to the newplatform (flexibility and operational efficiency); and (iii) development of SWAPs with cash flow

Corporate bonds: (i) acceptance of securities with restricted distribution efforts (ICVM 476);and (ii) migration of trading to PUMA

Constant fee structure and incentive improvements

Use of pricing policies and incentives as important tools for the development of products,markets and services, as well as alignment with market participants

Review and monitoring of existing pricing and incentives policies


24/55

24




OPERATIONAL PERFORMANCE

Notable global exchange


3Q15 RESULTS

APPENDIX


BovespaSegment


25/55

25

AVERAGE DAILY TRADING VALUE – ADTV (BRL billion)

AVERAGE ANNUAL MARKET CAP (BRL trillion) TURNOVER VELOCITY ² (12 months average)

1

Bovespa Segment Operational highlights

¹Updated to Oct 31, 2015. ²Ratio of cash market trading volume to the market cap of the exchange.

0.720.94

1.31

1.98 2.031.83

2.33 2.37 2.41 2.41 2.39 2.25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015¹

30.8%

29.4%

37.6%38.7% 42.3%

56.4%

63.2%

66.6%

63.8%

64.2%70.0% 73.4% 72.8%

20012002200320042005 20062007200820092010 20112012201320142015

BM&FSegment


26/55

26

BM&F SegmentOperational highlights

AVERAGE DAILY TRADED VOLUME – ADV (thousands of contracts)

REVENUE PER CONTRACT - RPC (BRL)

¹Updated to Oct 31, 2015.

2007 2008 2009 2010 2011 2012 2013 2014 2015¹ N-14 D-14 J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15

Inte rest rate s i n BRL 0.950 1.141 0.979 0.889 0.918 1.004 1.046 1.120 1.112 1.226 1.192 1.165 1.222 1.172 1.018 1.132 1.032 1.010 1.207 1.136 1.212

FX rates 1.859 2.065 2.161 1.928 1.894 2.205 2.535 2.669 3.467 2.980 3.173 3.007 3.048 3.158 3.569 3.442 3.705 3.554 3.686 3.932 4.436

Stock Indices 1.501 2.145 1.620 1.564 1.614 1.524 1.761 1.774 2.125 1.628 2.119 1.842 2.422 1.994 2.302 1.920 2.420 1.823 2.209 1.833 2.213

Inte rest rate s i n USD 0.965 1.283 1.357 1.142 0.941 1.015 1.231 1.294 1.790 1.078 1.461 1.557 1.645 1.797 1.911 1.747 1.770 1.633 1.768 2.154 2.268

Commodities 3.195 3.587 2.307 2.168 2.029 2.239 2.534 2.390 2.433 2.510 2.631 2.342 2.260 3.020 2.356 2.370 2.300 2.245 2.321 2.811 3.162

Mini contracts 0.054 0.162 0.176 0.128 0.129 0.116 0.119 0.117 0.196 0.120 0.118 0.128 0.150 0.164 0.177 0.173 0.229 0.226 0.235 0.233 0.274

OTC 2.111 2.355 1.655 1.610 1.635 1.769 1.409 2.092 2.396 1.517 2.689 2.286 1.967 3.077 3.928 4.545 1.768 2.465 0.817 1.169 14.879

Total RPC 1.224 1.527 1.365 1.134 1.106 1.191 1.282 1.350 1.454 1.405 1.481 1.417 1.524 1.493 1.436 1.474 1.436 1.341 1.482 1.476 1.671

Investorparticipationinvolumes


27/55

27

Investor participation in volumes Equities and derivatives segments

BM&F SEGMENT (DERIVATIVES)

BOVESPA SEGMENT (EQUITIES)

¹Updated to Oct 31, 2015.


28/55

28





FINANCIAL HIGHLIGHTS

Cost discipline and capital return to shareholders

3Q15 RESULTS

APPENDIX


IncomeStatement


29/55

29

Income Statement History of income statement results (consolidated)

(in BRL thousand) 2009 2010 2011 2012 2013 2014

Net revenue 1,510,569 1,898,742 1,904,684 2,064,750 2,126,638 2,030,433

Expenses (569,832) (633,504) (816,664) (763,080) (790,814) (804,070)

Adjusted expenses (446,677) (543,881) (584,521) (563,487) (575,763) (592,349)

Operating income 940,737 1,265,238 1,088,020 1,301,670 1,335,824 1,226,363

Operating margin 62.3% 66.6% 57.1% 63.0% 62.8% 60.4%

Equity method result - 38,238 219,461 149,270 171,365 212,160

Financial result 245,837 289,039 280,729 208,851 180,695 208,157

Income before taxation of profit 1,186,574 1,592,515 1,588,210 1,659,791 1,687,884 1,646,680

Income tax and social contribution (304,505) (448,029) (539,681) (585,535) (606,588) (660,959)

Net income¹ 881,050 1,144,561 1,047,999 1,074,290 1,080,947 977,053

Adjusted net income 1,223,761 1,586,374 1,545,627 1,612,136 1,609,769 1,478,653

Adjusted EPS (BRL) 0.6104 0.7929 0.7932 0.8351 0.8389 0.8048

¹Attributable to shareholders of BM&FBOVESPA.

Adjusted¹expensesandinvestmentbudget


30/55

30

Focus on expenses control offset most of the inflationary adjustments

over the past years(in BRL million)

ADJUSTED EXPENSES BUDGET

INVESTMENTS BUDGET:

Adjusted expenses and investment budget Focus on cost control and investments phase

The CAPEX program initiated in 2010 renewed the Company's IT,

operations and service platform

2014 vs. 2013: 2.88%IPCA 2014: 6.41%²

2015e vs. 2014: 1.71%4

IPCA (average) 2015e: 9.28%³

CAGR 2010-15e: 2.07%4

IPCA (average) 2010-15e: 6.78%³

Review of 2015 budget: fromR$190 – 220 million to R$200 – 230 million

Update of the timeline and budget

of the Company’s main projects

Capex is expected to decline in2016

2016e: R$165 – 195 million

(in BRL million)

¹ Expenses adjusted to Company´s depreciation, stock granting plan – principal and social charges -, stock options plan, tax on dividends from the CME Group, transfer of fines and provisions. ² IPCA for

2014 released by IBGE ³ IPCA for 2015 based on market expectations released by the Central Bank in Sep. 11, 2015; 4 Considers the mid-point of 2015 budget and high point 2014 budget

Expenses Breakdown


31/55

31

Expenses BreakdownPursuit of greater efficiency and controlling expenses

Prioritization of activities, review of contracts and enhancement ofprocesses has resulted in greater efficiency

¹ Includes personnel expenses and capitalization and excludes stock option and bonus expenses, ² Calculated based on the annual wage increase between 2010 and2014 for personnel expenditure and the IPCA of services accumulated from Jan 2011 to Dec 2014 for the other l ines of expenses

Nominal

ChangeReal Change²

2.8% -4.3%

10.2% 1.8%

-12.8% -19.5%

-26.7%-20.6%

(in R$ millions)

-29.6%-23.8%

Nominal

ChangeReal Change²

48.5% 12.5%

19.7% 1,8%

-17.3% -40.8%

-62.9%-48.2%

(in R$ millions)

-80.9%-73.3%

-14.3%

T o t a l

P e r s o n n e l ¹

D a t a

p r o c e s s i n

g

T h i r d p a r t y

s e r v i c e s

M a r k e t i n

g

C o m m u n i c a t .

T o t a l

P e r s o n n e l ¹

D a t a

p r o c e s s i n

g

T h i r d p a r t y

s e r v i c e s

M a r k e t i n

g

C o m m u n i c a t .

2014 vs. 2013 2014 vs. 2010

AllocationofResults


32/55

32

Distribution of most of the cash generation, reaffirming thecommitment to return capital to shareholders

(Total for Jan/09 through Sep/15, in R$ millions)

Cash Generation after Investment and Interest Payments¹Payout(% of net income)

2009: 80%2010: 100%2011: 87%

2012: 100%2013: 80%2014: 80%9M15: 80%

Share BuybackAbout 15% of free float

repurchased in 7-yearperiod (2H08-9M15)

+

Allocation of ResultsReturn of surplus capital to shareholders

¹Data of BM&FBOVESPA (not consolidated): excludes variation in financial transactions and collateral pledged by participants, proceeds raised in connection with the acquisition of CME Group shares in 2010 andthe 1% sale of the CME total shares in Sep/15.


33/55

33






3Q15 RESULTS

APPENDIX


3Q15Highlights (vs 3Q14)


34/55

34

BM&F segment

ADV: 3.3 MM contracts, +24.3%

RPC: R$1.432, +8.9%

Bovespa segment

ADTV: R$6.5 billion, -10.2%

Margin: 5.246 bps, -0.26 bps

Other business lines (not tied tovolumes)

Sec. lending: average open interestgrew 31.1%

Tesouro Direto: assets under custodywere 45.2% higher

1

Adjusted to (i) depreciation and amortization; (ii) stock grant plan costs – principal and payroll taxes – and stock option plan; (iii) tax on dividends from CME Group; and (iv) transfer of fines and provisions.² Adjusted to (i) deferred taxes related to the goodwill; (ii) stock grant plan costs – principal and payroll taxes –, net of tax deductibility, and stock option plan; (iii) investment in CME Group under the equity

method of accounting, net of taxes related to dividends; (iv) taxes paid overseas to be compensated; (v) tax credits from IoC; (vi) non-recurring impact from the partial divestment in CME Group; and (vii) non-

recurring impact from the discontinuity of the equity method of accounting. ³ Excludes the net impacts of the partial divestment in CME Group and of the discontinuity of the equity method of accounting.

Total revenues: R$662.9 MM, +11.8%

BM&F seg.: R$306.8 MM, +34.2%

Bovespa seg.: R$221.9 MM, -15.8%

Other: R$134.3 MM, +33.1%

Adj. expenses¹: R$163.6 MM, +11,4%

Oper. income: R$380.5 MM, +7.9%

Adj. net income²: R$457.0 MM,

+27.9%

IFRS net income (ex-CME)³: R$393.3MM, +65.0%

Operating highlights

Gain on CME Group partialdivestment (sale of 1% of the totalCME Group shares)

Proceeds: R$1,201.3 million

Gross profit: R$724.0 million

Net profit: R$474.2 million

Discontinuity of the equity method(remaining 4% of the total CMEGroup Shares)

Balance sheet: from Investment in

associate to available for sale(marked-to-market)

Income statement: non-recurring /non-cash pre-tax income ofR$1,734.9 MM (net R$1,145.0 MM)

Non-recurring impacts

related to CME GroupOperating income andnet income growth

3Q15 Highlights (vs. 3Q14)Solid operating performance; non-recurring impacts related to CME Group investments

StrategicDevelopments –RecentUpdates


35/55

35

Strategic Developments Recent UpdatesDelivering on the strategic plan

Building a world-class IT andoperations infrastructure

Clearing BM&FBOVESPA

Equities phase: conclusion of substantially all ITdevelopment in Oct’15. Start integrated test phaseand certification with market participants(launching date will depend on tests results andregulatory approval)

Derivatives phase (implemented in Aug’14): averagenumber of trades per day grew 61.8% from 2014 to2015¹

PUMA Trading System

Resilience: 851 days² without any interruption

Performance: 2015¹ average number of messages

per day grew 325.6% compared to 2010

iBalcão

Following the migration of NDF and Swaps in 1H15,Flex Options, with and without CCP, migrated to thenew OTC derivatives platform in 3Q15

Greater liquidity for listed products

Continuous efforts to expand the number of marketmakers for the equities and derivatives, 22 active programs

Efforts to attract more lenders to the securities lendingplatform (local pension funds and foreign investors)

Development of Inflation futures contracts (4 contracts re-

launched in Jun’15)

Enhancements to pricing and incentives

Implemented in 1Q15: DMA; securities lending; issuers;and options on equity-based indices futures

Implemented in 2Q15: mini contracts; Int. Rate in BRL feerebalancing; and depositary

Implementation in 3Q15: market data; and OTC derivatives

Corporate Governance for State-Owned Companies

Provides framework for listed companies to improvedisclosure, board and management selection, internalcontrols and compliance

Products/markets developmentand revenue diversification

¹ Updated until October, 2015. ² Until November 12, 2015

3Q15RevenueBreakdown¹


36/55

36

3Q15 Revenue BreakdownBusiness model resilience and revenues growth

TOP LINE GROWTH DRIVEN BY REVENUES FROM FINANCIAL AND COMMODITIES DERIVATIVES ANDINCREASED NON-VOLUME RELATED REVENUES

Total

Revenues

R$662.9 MM

1

The revenue breakdown considers the revenue lines “others” of the Bovespa segment and “foreign exchange” and “securities” of the BM&F segment, as reported in the financialstatements note 20 within the other revenues not tied to volumes. ²Trading and post-trading.

(in R$ millions)

USD-linked revenuesrepresented 26% of the total

DerivativesMarket¹


37/55

37

Contracts 3Q14 3Q15 YoY

Interest rates in BRL 1.51 1.79 19.0%

FX rates 0.48 0.47 -2.1%

Interest rates in USD 0.22 0.32 46.0%

Commodities 0.01 0.01 -13.6%

Mini contracts 0.32 0.60 88.5%

Stock indices 0.12 0.10 -15.8%

OTC 0.02 0.03 77.5%

TOTAL 2.67 3.32 24.3%

Derivatives MarketHigher volumes and FX depreciation pushed revenues up

REVENUE (in R$ millions)

Contracts priced in USD² represented ~24% of derivativesADV and ~52% of derivatives revenues in 3Q15

¹ Revenue does not consider the revenue lines “foreign exchange” and “securities” of the BM&F segment, as reported in the financial statements note 20, which totaled R$5.8million in the 3Q15. ² Most of the fees charged on FX, Interest rates in USD and Commodities are referred in USD. The average BRL/USD rate decreased 33.9% from 3Q14 to 3Q15.

ADV (in millions)

RPC: R$1.432 per contract, +8.9% year-over-year

Depreciation of BRL versus USD

Mix effect (higher participation of Interest rates in BRL and Mini contracts)

RATE PER CONTRACT (RPC)

EquitiesMarket¹


38/55

38

REVENUE² (in R$ millions)

TRADING AND POST-TRADING MARGINS (in basis point)

ADTV² (in R$ millions)

Average market capitalization fell 14.5% to R$2.2

trillion in the 3Q15, which was partially offset by ahigher turnover velocity of 70.8%

Market 3Q14 3Q15 3Q15/3Q14

Stocks and Equity Derivatives 5.501 5.247 -0.25 bps

Cash Market 5.061 4.939 -0.12 bps

Derivatives 13.115 13.110 -0.01 bps

Options Market 13.145 13.157 0.01 bps

Forward Market 12.999 12.999 0.00 bps

TOTAL 5.502 5.246 -0.26 bps

Trading and post-trading margins drop 4.7%year-over-year

Equities MarketRevenues impacted by lower market capitalization of listed companies

¹ Revenue does not considers the revenue line “others” of the Bovespa segment, as reported in the financial statements note 20, which totaled R$2.1 million in the 3Q15. ²Excludesfixed income line.

Markets 3Q14 3Q15 YoY

Cash Equities 6,890.0 6,293.4 -8.7%

Equities Derivatives 398.3 246.2 -38.2%

TOTAL 7,288.3 6,539.6 -10.3%

BusinessLinesnotRelatedtoVolumes


39/55

39

Business Lines not Related to VolumesSolid growth in revenues not tied to volumes

3Q15 REVENUE BREAKDOWN¹ (in R$ millions)

¹ Revenue as reported in the financial statements note 20.

+33.1%

Y-o-Y

3Q15AdjustedExpenses¹


40/55

40

3Q15 Adjusted ExpensesContinued focus through diligent expense management

¹ Expenses adjusted to Company’s (i) depreciation and amortization; (ii) costs from stock grant plan – principal and payroll taxes – and stock option plan; (iii) tax on dividends from the CMEGroup; and (iv) transfer of fines and provisions.² IPCA last 12 months until Sep’15 (Source IBGE). ³ Excluding the impact of stock grant/option expenses. 4Include expenses with

maintenance, board and committee members compensation and others.

Adjusted

personnel³ (+4.2%): grew

less than

annual wage

adjustment

Dataprocessing (+7.5%): higher

maintenanceexpensesconnected tothe derivativesphase of thenew integratedBM&FBOVESPAClearinghouse

Third partyservices(+47.3%):professional

servicesrelated toprojects

Others4 (+36.1%):write-off ofR$6.4 MM,provisions andenergy costs

3Q15 ADJUSTED EXPENSES GREW 11.4% Y-O-Y

IN THE NINE MONTHS PERIOD THE GROWTH WAS SIGNIFICANTLY BELOW INFLATION (6.3% VERSUS AVERAGE

INFLATION OF 9.5%²)

3Q15 87.0 (53%) 30.4 (19%) 12.6 (8%) 1.0 (1%) 4.7 (3%) 27.9 (17%)

3Q14 83.5 (57%) 28.3 (19%) 8.6 (6%) 3.1 (2%) 2.9 (2%) 20.5 (14%)

Marketing(+61.4%):expensesconnected toFinancial

MarketsConference

Commun.(-66.4%):reduction ofmailing

expenses ofcustodystatements

(in R$ millions)

(in R$ millions and % of total adjusted expenses)

CMEGroupPartialDivestmentImpacts


41/55

41

CME Group Partial Divestment ImpactsReducing Company’s exposure to FX rates and CME Group share price

Impacts from sale of 1%

Transaction: divestment of 20% of the stake in CMEGroup (equivalent of 1% of the total shares)

Reason: reduce risks exposure to FX and CME Groupshare price

Divestment of CME Group shares

Investment in CME Group over time

Source: Bloomberg e BM&FBOVESPA. ¹09/08/15 (before sale), ²09/09/15 (after sale), ³End of eachyear and Jun/15.

Tax due to be compensated against tax lossesgenerated by Interest on Capital distribution (nocash impact)

Balance sheet

Income statement EBT: R$724.0 MM

Income tax and social contribution: R$249.8 MM

Net income: R$474.2 MM

Assets

Financial investment:

R$1,201.3 MM

Liabilities

Tax provision:

R$249.8 MM


42/55

Adjusted Net Income


43/55

43

jReconciliation of net income – ex-CME and adj. net income

3Q15 – NET INCOME

IFRS ( in R$ millions ) 3Q15 3Q14 Var.

IFRS net income 2,012.5 238.4 744.2%

(-) Discontinuity of the equity method (1,145.0) - -

(-) Gain on disposal of investment in affiliate (474.2) - -IFRS net income ex-CME impact 393.3 238.4 65.0%

(+) Stock Grant/Option 12.8 7.3 74.5%

(+) Deferred Liability (goodwill) 137.5 138.6 -0.8%

(-) Equity in results of investee (37.6) (43.7) -13.9%

(+) Recoverable taxes paid overseas - 16.7 -

(-) IOC adjustment (49.0) - -

Adjusted net income 457.0 357.4 27.9%

Financial Highlights


44/55

44

g gSolid and liquid financial profile

Third party cash and financial investments

Market participants cash collateral and others

include R$2,749.2 million related to a

transaction settled on Oct 1, 2015

Company’s cash and financial investments

Unrestricted cash (available funds) includes

R$1,201.3 million from the partial divestment

in the CME Group

CASH AND FINANCIAL INVESTMENTS (in R$ millions)

¹ Includes earnings and rights on securities in custody. ² Includes BM&FBOVESPA Bank clients’ deposits. ³ For 3Q15, does not include investment in CME Group(R$5,004.3 million) and in Bolsa de Comercio de Santiago (R$50.4 million), booked as a financial investment.

Ratings above the sovereign

S&P: BBB- (counterparty credit rating) / A-3 (issuer)

Moody’s: Baa2 (global scale issuer / global notes)

3Q158,165

2Q15

4,033

1Q154,355

4Q14

3,856

3Q14

3,841

Third party Available Total³ Restricted

Financial Highlights


45/55

45

g gInvestments and returning cash to shareholders

PAYOUT

R$314.6 MM in Interest on Capital (80% of the IFRS netincome ex-CME in 3Q15)

Payment on Dec 04, 2015

CAPEX

R$47.5 MM in 3Q15 and R$166.5 MM in 9M15

Capex budget ranges reaffirmed:

2015: R$200 – R$230 MM

2016: R$165 – R$195 MM


46/55

Financial Statements


47/55

47

3Q15 3Q14Change

3Q15/3Q142Q15

Change

3Q15/2Q159M15 9M14

Change

9M15/9M14

Total Expenses 217.8 192.0 13.4% 198.0 10.0% 637.3 553.7 15.1%

Depreciation (26.1) (29.5) -11.3% (28.1) -7.0% (84.8) (87.0) -2.5%

Stock Grant/Option (19.4) (7.3) 164.4% (22.1) -12.2% (84.9) (21.8) 289.5%

Tax on dividends from the CME Group - (5.8) - - - - (16.6) -

Provisions (8.7) (4.3) 103.4% (6.1) 42.2% (23.6) (15.1) 56.0%

BBM impact - 1.7 - - - - 4.3 -

Adjusted Expenses 163.6 146.8 11.4% 141.7 15.5% 443.9 417.4 6.3%

Net income and adjusted expenses reconciliations

ADJUSTED NET INCOME RECONCILIATION (in R$ millions)

ADJUSTED EXPENSES RECONCILIATION (in R$ millions)

* Attributable to BM&FBOVESPA’s shareholders.

3Q15 3Q14Change

3Q15/3Q14

2Q15Change

3Q15/2Q15

9M15 9M14Change

9M15/9M14IRFS net income* 2,012.5 238.4 744.2% 318.0 532.9% 2,610.0 744.6 250.5%

Stock Grant/Option (recurring net of tax) 12.8 7.3 74.5% 12.7 1.1% 37.6 21.8 72.6%

Deferred tax liabilities 137.5 138.6 -0.8% 137.5 0.0% 412.6 415.9 -0.8%

Equity in income of investee s (net of taxes ) (37.6) (43.7) -13.9% (31.4) 19.8% (106.8) (128.1) -16.6%

Recoverable taxes paid overseas - 16.7 - - - - 51.2 -

IoC Adjustments (49.0) - - - - (49.0) - -

Discontinuity of the equity method (net of taxes) (1,14 5.0 ) - - - - (1 ,1 45 .0) - -

Results from the selling of the CME Group (net of taxes ) (474.2) - - - - (474.2) - -

Adjusted net income 457.0 357.4 27.9% 436.8 4.6% 1,285.1 1,105.4 16.3%


48/55


49/55

49






3Q15 RESULTS

APPENDIX


Bovespa Segment


50/55

50

Raising Capital

PUBLIC OFFERINGS (BRL billion)

PIPELINE: OFFERINGS ANNOUNCED SO FAR TO THE MARKET

IRB Brasil Resseguros

Caixa Seguridade Participações

¹Excludes the portion acquired by the Brazilian government in the Petrobras offering, via the transfer of rights in barrels (BRL 74.8 billion).

Trading in ADRs of Brazilian companies


51/55

51

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total

IPOs - 1 - 7 9 26 64 4 6 11 11 3 10 1 1 154

Follow ons 14 5 8 8 10 16 12 8 18 11 11 9 7 1 1 139

Total 14 6 8 15 19 42 76 12 24 22 22 12 17 2 2 293

Dual Listings - - - 2 1 1 - - 1 - - - - - - 5

Sarbanes-Oxley Act

(Jul. 2002)

Novo Mercado

Launch

(Dec. 2000)

End of IOF Tax (2%) for

foreign investors

(Dec. 2011)

End of CPMF

(Financial

Transaction Tax)

Liquidity migration process interrupted

Sep’15

Source: Bloomberg (in USD

traded value of 35 companies

with ADRs programs )

PUBLIC OFFERINGS IN NUMBER OF COMPANIES

38.4%

29.1%

9.1%

23.4%

32.5%

67.5%

Bovespa Segment


52/55

52

Foreign investment flow

MONTHLY NET FLOW OF FOREGIN INVESTMENTS (in BRL billons)

Includes public offering (primary market) and regular trades (secondary market).

¹Updated to October 31, 2015

Products and Markets Development


53/55

53

Creation of value and stimulus for the development of products and markets

Organizational

Structure for Fee

Structure

Equities Market

Fee Structure

Rebalancing

Trading/post-trade

Fee Structure of

OTC Products

Prices p/ volume

Tiers in Derivatives

Price policy for

Mkt Data

Readjustment of

Issuers’ annual fee

Review of prices and

incentives: BTC, DMA,

Market Data, Issuers and

Depository

Fee structure of

interest rate

derivatives

OTC derivatives

fee structure

Transfers fee

structure at CSD

2008 2009 2010 2011 2012 2013 2014 2015

Charge (BPs) on

amount in

depository

Enhancement of Price and Incentives Policies

Clearinghouses’ Integration and New Risk Model (CORE)


54/55

54

Benefits from Clearinghouse integration

1. DETERMINING

THE CLOSEOUT

STRATEGY

T+0 T+1 T+2 T+3 T+4 T+N ...

Defines the portfolio closeout strategy which,respecting the settlement restrictions of the

portfolio of assets/markets, should minimize

the risk of a loss associated with the closeout

process, preserving existing hedge strategies

2. RISK EVALUATION

T+0 T+1 T+2 T+3 T+4 T+N ...

Defines the (stress) scenarios associated with

the dynamics of each risk factor relevant to

the portfolio. All assets and contracts are

reevaluated considering the scenarios defined

in this step ( full valuation).

3. POTENTIAL P&L

CALCULATION

T+0 T+1 T+2 T+3 T+4 T+N

...

Calculates and aggregates intertemporally P&L

associated with each scenario, considering the

defined closeout strategy

CLOSEOUT RISKResult: Two risk measures—market and

liquidity—that are estimated both jointly and

consistentlyPERMANENT LOSS TRANSIENT LOSS

OVERVIEW: CLOSEOUT RISK CALCULATION IN THREE STEPS


55/55

Contato

www.bmfbovespa.com.br

55 11 2565-4729 / 4418 / 4207/4834/7938

ri@bmfbovespa com br

BVMF Presentation - November 2015

Documents

Transcript of BVMF Presentation - November 2015