BM&FBOVESPAir.bmfbovespa.com.br/enu/568/ItauConferencePresentation...and uncertainties that could...
Transcript of BM&FBOVESPAir.bmfbovespa.com.br/enu/568/ItauConferencePresentation...and uncertainties that could...
Forward Looking Statements
This presentation may contain certain statements that express the management’s 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” 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 cause actual 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-services; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highlycompetitive 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 functionality demanded by BM&F customers; (vi) ability to maintain an ongoing process for introducing competitive new products and ; ( ) y g g p g p pservices, 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 Securities Commission CVM Instruction 400 of 2003, as
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amended.
International ScenarioGroup of 30 (G30)
GROUP OF 30: Financial Report – A Framework for Financial StabilityChairman: Paul VockerVice-chairmans: Armínio Fraga Neto (BM&FBOVESPA Chairman) and Tomaso Padua Schiopa
• Main proposals
“…derivatives markets be held to regulatory, disclosure, and transparency standards at least comparable to those that have historically been applied to the public securities markets.”
“…Financial markets and products must be made more transparent, with better aligned risk and prudential incentives.”
“…problems include trade confirmation backlogs, lack of transparency on transaction reporting and pricing, contract closeout procedures, valuation practices and collateral disputes, and direct and indirect counterparty credit issues.”
“Prominent within that program are efforts to establish a central counterparty clearing (CCP) arrangement…”
“Given the global nature of the markets in which such managers and funds operate, it is imperative that a regulatory framework be applied on an internationally consistent basis.”
“Countries should reevaluate their regulatory structures with a view to eliminating unnecessary
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Countries should reevaluate their regulatory structures with a view to eliminating unnecessary overlaps and gaps in coverage and complexity, removing the potential for regulatory arbitrage, and improving regulatory coordination.”
International ScenarioWhat are the trends for the coming years?
• Some exchanges in both Europe and USA are investing and developing Clearing and
Enhancement of the clearing activity
g p g p g gCCP services
• Nasdaq OMX: will use EMCF – created by Fortis (Nasdaq OMX bought 22% stakein EMCF)
• London Clearinghouse (Clearnet) and Liffe launched a Credit Derivative ClearingService
• CME launched its Clearing service (CDMX) for CDSsSecurities Lending
• Stock-loan platforms race to offer CCP services in US (see Securities Industry News of February 2, 2009)
Fully integrated business with
BM&FBOVESPA in this Scenario
• Fully integrated business with
• Trading, clearing, settlement and depository services (including securities lending)
Risk management at the beneficial owner level
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• Risk management at the beneficial owner level
• Transparency on the trading activity
Fully Integrated Business Model
Services for Issuers andCommodities trading
Trading, Clearing and Depository Activities Other Services
Listing(stocks, bonds, funds,
asset-backed securities, among others)
Trading(stocks, derivatives, corporate and government
bonds, funds, spot US Dollar, among others)
Custody(services provided for
funds, and other marketparticipants)
CommoditiesC tifi ti
Clearing and Settlement(f ll h d )
Market Data
Certification (for all the products)
Indices Licensing
Depository(stocks and corporate bonds)
Software Licensing( d b b k
Securities Lending(stocks and corporate bonds)
(used by brokeragehouses and other
market participants)
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(stocks and corporate bonds)
Brazilian Equity MarketRegulatory Framework
• All trades must be matched at the beneficial owner level (depository, clearing and
Equities Trading
settlement)
• Trades through a brokerage house must be registered in the exchange (internalization of orders at the brokerage level is not allowed)
• In the equities market block-trades are under the same trading rules as normal trades
Settlement
• Clearinghouses settles directly with the Central Bank via an exclusive settlement account
Settlement
• Securities lending (stocks and corporate bonds)
Securities Lending (stocks and corporate bonds)
• Must be carried in a Clearinghouse (CCP) with collaterals requirement
• Settled at the beneficial owner level (the investor takes the decision of lending and is entitled to its returns)
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)
• Naked short selling is not allowed
Equity Market Settlement StructureBrazil compared with USA
BRAZIL US
OTC Dark Pools
Trading BVMF ATS ECN
OTC Dark Pools
Cl i (CCP)
NYSE NASDAQ
Clearing (CCP) BVMF
BVMF
DTCC
DTCC
C l
BVMF DTCC
Central DepositoryBroker Level
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Beneficial Owner Level
Risk Management At the beneficial owner level
• Four Clearinghouses: derivatives, stocks and corporate bonds, FX spot and government bonds
• All of our Clearinghouses acts as CCP and manage the risk at beneficial owner level
• Mark to market (margin variation calls) done on intraday basis (each 15 minutes for derivatives market and ongoing for equity market)
Th b k h ( l i t) i ibl f it i th i li t ’ i k d • The brokerage house (clearing agent) is responsible for monitoring their clients’ risk and “know your customer policies”
• During the day any Clearinghouse can call additional collateral and the clearing agent is responsible for depositingresponsible for depositing
Clearinghouse Clearing Deposited(BRL billions)
Required(BRL billions)
Derivatives 71,4 34,1
ClearingAgent
ClearingAgent
, ,Cash Equities 26,7 16,6FX 3,7 0,8Fixed Income 1,0 0,0Total in BRL 102,7 51,5T t l i USD 49 1 24 6
Investor Investor Investor Investor
RiskManagement
Total in USD 49,1 24,6* On May 15, 2009
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• There is no cross margining among the Clearinghouses
• Clearinghouses integration process: project kick off in 2009
Equity Trading in Brazil (Regulation)
RULES RELATED TO BLOCK TRADING
• Shares listed in exchange markets can be traded only in exchange Shares listed in exchange markets can be traded only in exchange environment
• Absence of OTC market
• Absence of alternative trading system, including dark pools
• Relevant restrictions related to block trading (CVM Instruction No 168)Relevant restrictions related to block trading (CVM Instruction No 168)
• Auction - 1 hour advance announcement: quantity above 10 times the national average volume or in the 1% - 2,99% range of common h i 3% 4 99% f f d hshares or in 3% - 4,99% range of preferred shares
• Auction - 24 hours advance announcement: quantity in the 3% - 6% range of common shares or in the 5% - 20% range of preferred range of common shares or in the 5% 20% range of preferred shares
• Auction - 48 hours advance announcement: quantity higher than 6% f h 20% f f d h
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of common shares or 20% of preferred shares
Equity Trading in Brazil (Regulation)
POSSIBLE CHANGES IN THE EXCHANGES REGULATORY FRAMEWORK
• On April 28th, 2009 CVM gave notice of public hearings of an instruction • On April 28th, 2009 CVM gave notice of public hearings of an instruction draft which, amongst other subjects, deals with best execution rule
• In the justifications section the CVM stated:
• “That measure gains greater importance in an scenario where competition between environments or systems for trading the same security is established. The CVM regulation already allows for security is established. The CVM regulation already allows for simultaneously trading of almost all securities, excepted shares listed in exchange markets, which can be simultaneously traded in another exchange only. Despite of that, it is CVM intention to analyze this last
i i i i ”restriction to competition.”
SOME RULES SHOULD NOT CHANGE
• Obligation of a CCP in all trades at the beneficial owner level
• Prohibition of internalization of orders at the brokerage level
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Equity Trading in Brazil (Regulation)
BRAZILIAN SEC (CVM) RULE FOR EXCHANGE AND CLEARING COMPANIES
• CVM Instruction No 461 provides for the possibility of BVMF s u o o 6 p o d s o poss y oclearinghouse to settle trades matched outside BVMF trading systems
• Art.18 ... The managing entities of organized markets of securities h ld th l th f ll i h i d lshould agree upon themselves the following mechanisms and rules:
• I – ...
• II – that render the clearing and settlement of transactions effected outside their environments and trading systems
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Equity Trading in Brazil (Regulation)
BVMF POSITIONING CONCERNING BLOCK TRADING REGULATION
• The Brazilian market has no efficient block trading mechanism, where The Brazilian market has no efficient block trading mechanism, where quantity discovery is more important than price discovery
• Brazilian ADRs are traded in alternative systems and dark pools in US
• BVMF could launch a platform designed for block trading with post trading services and CCP at the beneficial owner level
• BVMF can offer post trading services to other possible block trading providers
Bl k T di f• Block Trading frame:
• Minimization of the price impact due to large offers execution, making the large lot electronic trading viable and anonymousmaking the large lot electronic trading viable and anonymous
• Development of large lot liquidity in the BVMF system instead of in the brokers and banks trading desks
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Exchanges and Block Trading SystemsBrazilian ADRs: Brazil vs. USA
THERE ARE 37 BRAZILIAN COMPANIES WITH ADRs PROGRAMS (LEVEL 2 AND LEVEL 3)
• Increase on Block Tradings’ share since 2007 while the NYSE share has been decreasing
Apr’09In Traded Value
32.4%
17.2%
27.9%
22.5%
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Operational HighlightsBM&F Segment
ADTV (millions of contracts)
RPC (BRL)
1Q07 2Q07 3Q07 4Q07 1Q08 A‐08 M‐08 J‐08 J‐08 A‐08 S‐08 O‐08 N‐08 D‐08 J‐09 F‐09 M‐09 A‐09 M‐09*
Interest Rates in BRL 1,031 0,988 1,049 1,088 1,102 1,040 1,111 1,051 1,098 1,260 1,510 1,391 1,145 0,865 0,796 0,939 0,923 0,921 0,963
FX Rates 2,226 2,071 1,937 1,847 1,850 1,805 1,738 1,815 1,767 1,867 2,430 3,041 2,586 2,269 2,183 2,397 2,653 2,543 2,114
Stock Indices 1,279 1,521 1,668 2,013 2,132 2,336 2,104 2,801 2,156 2,288 2,039 2,138 1,398 1,630 1,323 1,792 1,564 1,901 1,527Stock Indices 1,279 1,521 1,668 2,013 2,132 2,336 2,104 2,801 2,156 2,288 2,039 2,138 1,398 1,630 1,323 1,792 1,564 1,901 1,527
Interest Rates in USD 1,108 0,964 0,891 1,032 1,078 1,111 1,178 0,894 0,773 0,844 1,250 2,037 1,501 1,678 1,417 1,469 1,790 1,859 2,050
Commodities 2,921 3,266 3,590 3,670 3,283 4,103 3,645 4,008 3,871 3,734 3,829 4,818 2,309 1,867 1,622 2,298 2,344 2,411 2,043
Web Trading 0,034 0,054 0,069 0,105 0,155 0,161 0,160 0,159 0,151 0,161 0,166 0,170 0,167 0,184 0,171 0,189 0,192 0,206 0,192
OTC 2,764 2,239 1,904 2,388 2,057 2,389 2,466 2,110 2,389 2,405 3,348 3,195 2,765 1,807 1,646 2,358 3,175 1,588 0,781
Total RPC 1,302 1,274 1,320 1,416 1,401 1,347 1,398 1,404 1,337 1,567 1,896 2,071 1,732 1,414 1,213 1,484 1,361 1,440 1,373
17* Until May 8, 2009
Operational HighlightsBovespa Segment
ADTV (BRL Billions)
Daily Average Number of Trades (Thousands)
Number of Investors (Thousands) Turnover Velocity** (annualized)
18* Until May 11, 2009 **Relation of the trading value in the cash market and the market cap of the exchange
Operational Highlights
BM&F Segment (Investor’s Participation in Total Volume)
Bovespa Segment (Investor’s Participation in Total Value)
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Bovespa SegmentForeign investment flow
• The 1Q09 net foreign investment flow was BRL 1.3 Billion, the best since the Brazil’s Investment Grade (May’08)
• In Apr’09 the net foreign investment flow was BRL 5.7 Billion, the best month since Apr’08
20* Until May 12, 2009
New IT DevelopmentsSchedule
BOVESPA SEGMENT
• May
• Starting in May we will have completed the implementation of the new version of thesoftware on which the MegaBolsa electronic trading system runs, as developed by NYSEEuronext. The new version (V900) replaces the V837 version implemented in June 2008.It is estimated that the average internal processing time, known as RTT (round timetrip) will decrease to 170 milliseconds from the current 290 milliseconds Subsequentlytrip), will decrease to 170 milliseconds, from the current 290 milliseconds. Subsequently,with the implementation of the new low latency multi-level communication interface (thenew Multi Gateway), scheduled for July 2009, the RTT will drop to 15 milliseconds and itis estimated that it will fall to 8 milliseconds until December 2009
• Reduction in fees charged for orders entered in the MegaBolsa trading system, and notmatched, which drove growth in algorithmic trading
• July
• Authorization to DMA via provider implementation (DMA model 2) in the MegaBolsatrading system (to be approved by Brazilian Securities Exchange Commission - CVM)
• August
• Completion of the project to increase the capacity of the equities clearinghouse(formerly, CBLC) to 1.5 million daily trades
• Offering of co-location services (connectivity to the MegaBolsa system)
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• Thomson Reuters connected to the Exchange’s MegaBolsa system to provide customerswith an international order routing system
Bovespa SegmentTrading system development
User DistributionIntermediary(CM/Broker)
BM&FBOVESPA
BVMF / HP
MEGABOLSA STATIONSCOM, SNEG, SCOT
NYSE Euronext
Access Via Intermediary
NETWORK
SLE
GL Tradey
GLWIN
NETWORK
NSC V837HUB
Traditional DMA
Homebroker
NETWORK NETWORKMulti Gateway
NSC V837HUB
Homebroker
268454299RTT J 09 135
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RTT – Forecast 54 135288 1584
268454299RTT – Jan 09 135
Bovespa SegmentTrading system development
User DistributionIntermediary(CM/Broker)
BM&FBOVESPA
BVMF / HP
MEGABOLSA STATIONSCOM, SNEG, SCOT
NYSE Euronext
Access Via Intermediary
NETWORK
SLE
GL Tradey
GLWIN
NETWORK
HUBNSC V900
Traditional DMA
Homebroker
NETWORK NETWORKMulti Gateway
HUB
Homebroker
268454299RTT J 09 135
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RTT – Forecast 54 10153 584
268454299RTT – Jan 09 135
Bovespa SegmentTrading system development
User DistributionIntermediary(CM/Broker)
BM&FBOVESPA
BVMF / HP
MEGABOLSA STATIONSCOM, SNEG, SCOT
NYSE Euronext
Access Via Intermediary
NETWORK
SLE
GL Tradey
GLWIN
NETWORK
HUBNSC V900
New Multi Gateway
Traditional DMA
Homebroker
NETWORK NETWORK
HUB
Homebroker
268454299RTT J 09 135
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RTT – Forecast 54 10153 584
268454299RTT – Jan 09 135
Bovespa SegmentTrading system development
User DistributionIntermediary(CM/Broker)
BM&FBOVESPA
BVMF / HP
MEGABOLSA STATIONSCOM, SNEG, SCOT
NYSE Euronext
Access Via Intermediary
NETWORK
SLE
GL Tradey
GLWIN
A ISV
NETWORK
HUBNSC V900
New Multi Gateway
Traditional DMA
Homebroker
Any ISV
NETWORK NETWORK
HUB
Via DMA Provider
Bloomberg TradeBook
Thomsom Reuters
Others
Homebroker
NETWORKDMA Provider
Via DMA Co‐location
Remote access – tracking and maintenance
Application of Co‐location (ATS)NETWORK
268454299RTT J 09 135
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RTT – Forecast 1 1016 50
268454299RTT – Jan 09 135
New IT DevelopmentsSchedule
BM&F SEGMENT
• May
• Bloomberg Tradebook connected to the Exchange’s Global Trading System (GTS) to provide customers an international order routing system
• June
• GL Trade (GL Net) connected to the Exchange’s GTS to provide customers an international order routing system
• Offering of co-location services (connectivity to the GTS System)• Offering of co-location services (connectivity to the GTS System)
• Shutdown of the trading floor
BOTH BM&F AND BOVESPA SEGMENTS
• November
• Implementation of the integrated external communication interface for both MegaBolsa and the GTS systems, which will permit market data transmission from either system via a single channel.
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DMA and CME order routing evolution
DMA EVOLUTION
• Trades through DMA represented 6.7% of total BM&F Segment ADTV in Apr’09
ORDER ROUTING AGREEMENT WITH CME Group (GLOBEX)
• Initial flow starting in Mar’09 with an ADTV of 13.6 thousand contracts in Apr’09
ALGOTRADERS IN BM&F SEGMENT
• First algotraders represented 0.45% of overall ADTV in Mar´09 and rose to 0.53% i A ’09 di th FX C t t th ti i ti 1 53% d 1 8% in Apr’09, regarding the FX Contracts the participation was 1.53% and 1.8%, respectively
DMA Evolution
28* Until May 8, 2009.
CME Globex Order Routing Agreement
Routing Order GLOBEX‐GTS – Number of Contracts Traded
30 000
15 000
20.000
25.000
30.000
0
5.000
10.000
15.000
Routing Order GLOBEX‐GTS – Number of Trades
0
800
1.200
1.600
0
400
800
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0
5‐m
ar10
‐mar
13‐m
ar18
‐mar
23‐m
ar26
‐mar
31‐m
ar3‐
abr
8‐ab
r14
‐abr
17‐a
br23
‐abr
28‐a
br27
‐mar
30‐a
br6‐
mai
IT DevelopmentsCo location infrastructure
CO LOCATION AREA RACKS
BM&FBOVESPA WILL BE PREPARED FOR THE CO-LOCATION FOR BM&F SEGMENT IN JUN’09 AND FOR BOVESPA SEGMENT IN THE 3Q09
CO‐LOCATION AREA ‐ RACKS
Rack (40Us) H lf R k (20U ) Racks´lay out at theRack (40Us) Half Rack (20Us)
Unit Hosting
Structure where are installedh i h d )
Racks lay‐out at the co‐location´s area
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the switches and servers)
Globex Routing AgreementGlobex to BM&FBOVESPA flow
US BRAZIL
FCM prop position Investors
CME GroupGlobex
BM&FBOVESPA
GlobexNetwork
position
GTSNetwork
Investors
Investors
Investors
MATCHING
Investors
FCM
Investors
Some FCMs (Futures Commodities Merchant) should offer DMA access to BVMF derivatives to
their clients
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their clients
BM&FBOVESPA is helping the main back‐office system providers to adapt their systems
Trading of Future Ibovespa Contracts by US residents pending to be approved by CFTC
IT DevelopmentsMore suitability for Algotraders
ALGORITHMIC TRADING PROFILE AND OPPORTUNITIES
• Arbitrage (determinist and statistic) - high frequency
• Cash Market versus ETF (Exchange Traded Fund)
• Cash Market versus Futures on Stock Index
D ti Sh ADR• Domestic Shares versus ADRs
• Futures versus Options
• Different s expirations of the same future contractp
• Trading of interest rate slope curve
• Trading with correlated instruments (soya bean BVMF x soya bean CME, coffee BVMF x coffee ICE etc)BVMF x coffee ICE etc)
• Mini contracts versus Standards contracts
• Order book’s depthp
DETERMINANT FACTORS
• Liquidity e volatility
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• Electronic Access and low risk of execution
• Prices charged by the Exchange
1Q09 Highlights versus 1Q08 Pro Forma
EPS: BRL 0.11 compared with BRL 0.11 in 1Q08
N t R d d b 20 1% th i
1Q09 EARNINGS Net Income / Adjusted Net Income* (BRL Millions)
-1.4% 12.2%
Net Revenues: decreased by 20.1% over the prior year
EBITDA margin: 55.8% in 1Q09 (67.5% Adjusted EBITDA) vs. 68.5% in 1Q08
Expense reduction: decreased by 17.4% between 1Q09 and 1Q08 (excluding depreciation, severance and Stock Option Plan costs)
HIGHLIGHTS
EBITDA / Adjusted EBITDA* (BRL Millions)
68.5% 68.5%
DMA development in BM&F Segment: in Apr’09, trades through DMA rose to 6.7% of the total traded volume
Globex and Algotraders: initial flow starting in Mar’09 with
-34.8% -21.3%55.8%
67.5%
an ADTV of 13.6 thousand contracts in Apr’09; in 1Q09, Algo represented 0.3% of Total ADTV and 0.6% of FX contracts
Foreign Investors: positive flow in 1Q09 of R$ 1.3 billion and grew to R$ 5.7 billion in Apr’09, its highest level in one year
Total Expenses / Adjusted Expenses** (BRL Millions)
12.2%grew to R$ 5.7 billion in Apr 09, its highest level in one year
MegaBolsa: new version (V900) launched on April 28 will reduce latency by 41%
Interest on Shareholders’ Equity: BRL 112 million to be paid
-17.4%
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Interest on Shareholders’ Equity: BRL 112 million to be paid in May’09
* Adjusted Net Income and Adjusted EBITDA exclude severance and stock option plan costs.** Adjusted Expenses exclude depreciation, severance and stock option plan costs.
Summary of Income Statement
BRL Million
1Q091Q08
(Pro Forma)Variação
1T09/1T08G O ti l R 351 918 440 919 20 2%Gross Operational Revenues 351,918 440,919 ‐20.2%
Net Operational Revenues 316,548 396,031 ‐20.1%
Operational Expenses (148,760) (132,550) 12.2%
Operating Income 167,788 263,481 ‐36.3%Oper. Margin (variation in p.p) 53.0% 66.5% ‐13,5 p.p.p g ( p p) 53.0% 66.5% 13,5 p.p.
Net Income 226,980 230,273 ‐1.4%Net Margin (variation in p.p) 71.7% 58.1% 13,6 p.p.
EBITDA 176,739 271,258 ‐34.8%EBITDA Margin (variation in p.p) 55.8% 68.5% ‐12,7 p.p.
E i Sh (EPS) 0 113 0 115 1 4%Earnings per Share (EPS) 0.113 0.115 ‐1.4%
Adjusted Net Income 258,340 230,273 12.2%Adjusted Net Margin (variation in p.p.) 81.6% 58.1% 23.5 p.p.
Adjusted EBITDA 213,539 271,258 ‐21.3%Adjusted EBITDAMargin (variation in p p ) 67 5% 68 5% 1 0 p p
• Revenues: 1Q09 versus 1Q08 comparison shows a 20.2% fall in Net Revenues, mainly due to lower volumes in both segments
Adjusted EBITDA Margin (variation in p.p.) 67.5% 68.5% ‐1.0 p.p.
• Adjusted Operating Expenses: reduction by 17.4% in 1Q09 versus 1Q08 due to cost savings from the integration process
• Adjusted Net Income: in 1Q09 the adjustments amounted to BRL 31.4 million due to stock ti l (BRL 18 8 illi ) d l t i ti (R$ 12 6 illi t f t )
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option plan (BRL 18.8 million) and employee terminations (R$ 12.6 million, net of tax)
• Adjusted EBITDA: in 1Q09 the adjustments amounted to R$36.8 million due to stock option plan (BRL 18.8 million) and employee terminations (R$ 18 million)
Revenues
Gross Revenues Composition – 1Q09 1Q091Q08
(Pro Forma)Variation
1Q09/1Q08Gross Operational Revenues 351,918 440,919 ‐20.2%
BM&F Segment 130,547 154,938 ‐15.7%Derivatives ‐ trad. / settlement 121,434 148,664 ‐18 3%/ , , 18.3%Foreign Exchange ‐ trad. / settlement 5,692 4,620 23.2%Securities ‐ trad. / settlement 44 107 ‐58.9%Brazilian Commodities Exchange 1,406 932 50.9%BM&F Bank 1,971 615 220.5%
Bovespa Segment 200,503 270,527 ‐25.9%Trading fees 113 732 164 342 30 8%Trading fees 113,732 164,342 ‐30.8%Clearing fees 44,464 66,044 ‐32.7%Securities Lending 6,127 15,380 ‐60.2%Listing 10,621 7,123 49.1%Depositary and custody 16,084 14,319 12.3%Trading access (Brokers) 9,475 3,319 185.5%
Other Operational Revenues 20,868 15,454 35.0%Vendors 11,521 9,688 18.9%Commodities classification fees 215 171 25.7%Dividends 5,371 ‐ ‐Others 3,761 5,595 ‐32.8%
Net Operational Revenues 316,548 396,031 ‐20.1%
• The revenues from other services (not tied to trading) increased by 16.5% over the prior year to BRL 66.5 million (BRL 57.1 million in 1Q08), mainly from:
• Depository: higher number of investors (mainly individuals): increased by 12 3%• Depository: higher number of investors (mainly individuals): increased by 12.3%
• Listing: new pricing policy: increased by 49.1%
• Trading Access Services: implementation of a policy for brokerage house access in both segments: increased by 185.5%
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• Vendors: higher number of users: increased by 18.9%
• The share of non-trading sources increased to 18.9% of total revenues in 1Q09 versus 13% in 1Q08
Expenses
Adjusted Operational Expenses* – 1Q09 1Q091Q08
(Pro Forma)Variation
1Q09/1Q08Operational Expenses (148,760) (132,550) 12.2%
Personnel (85,462) (54,968) 55.5%( , ) ( , ) 55.5% Data processing (26,683) (35,567) ‐25.0% Deprec. and Amortization (8,951) (7,777) 15.1% Third Party Services (9,119) (9,228) ‐1.2% Maintenance (2,826) (3,243) ‐12.9%Communications (4 991) (4 224) 18 2% Communications (4,991) (4,224) 18.2%
Leases (825) (972) ‐15.1% Supplies (477) (516) ‐7.6% Marketing (2,292) (7,153) ‐68.0% Taxes (495) (1,513) ‐67.3%Board Compensation (1 129) (2 036) 44 5% Board Compensation (1,129) (2,036) ‐44.5%
Other (5,510) (5,353) 2.9%
Adjusted Operational Expenses* (103,009) (124,773) ‐17.4%Adjusted Personel** (48,662) (54,968) ‐11.5%
• The 1Q09 operating expenses (excluding depreciation, severance and stock option plan costs) decreased by 17.4% over the prior year to BRL 103.0 million. The decrease reflects the achievement of planned merger synergies. The principal drivers of the decline in expenses were in the following cost components:
• Personnel (adjusted): decreased by 11.5% due to reduction in headcount
• Data processing: decreased by 25.0%
Marketing: decreased by 68 0%
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• Marketing: decreased by 68.0%
* Excluding depreciation, severance and stock option plan costs.** Excluding severance and stock option plan costs.
Merger and Integration ProcessEvolution
MAIN INITIATIVES FOR COST REDUCTION IN 2009
• Open Outcry: closing in Jun’09
• Infrastructure: reduction in the number of buildings in downtown São Paulo (from 5 to 2)
• Branches: realignment of the remaining branches
• Headcount: through Mar’09 a reduction of almost 30% was achieved in the combined total of • Headcount: through Mar 09, a reduction of almost 30% was achieved in the combined total of employees and outsourced personnel
• Adjusted Operational Expenses (excluding depreciation) in 1Q09 was BRL 103.0 million
G id f O i l E f BRL 450 illi i FY09 ( l di d i i d k • Guidance of Operational Expenses of BRL 450 million in FY09 (excluding depreciation and stock option plan costs)
38* 2007 operating expenses adjusted by inflation.
Capital and Balance Sheet Highlights
• Cash and Cash Equivalent: BRL 3.15 billion held at end of 1Q09 (short + long term)
• Includes cash collateral of BRL 1.14 billion and restricted funds of BRL 610 illimillion
• Goodwill Amortization: BRL 245.5 million in 1Q09 (net tax impact of BRL 79.6 million)
• Effective tax rate of 3.6% in 1Q09
• Payout: BRL 112 million in interest on shareholders’ equity, equivalent to R$0.0559 h hi h t t R$0 0475 t f ithh ldi i tper share, which amounts to R$0.0475 net of withholding income tax
• To be paid on May 29, 2009, based on the position as of May 15, 2009
B b k t 71 3 illi h• Buyback program: up to 71.3 million shares
• Program earlier terminated (Board Meeting on May 12, 2009)
64 1% (45 7 million shares) bought at the average price of BRL 5 85 Total of • 64.1% (45.7 million shares) bought at the average price of BRL 5.85 – Total of BRL 267.2 million
• Stock Option and Leasing Expenses: non-cash charge of BRL 19.0 million taken in 1Q09 to adjust our Financial Statements to the new accounting standards moving
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1Q09 to adjust our Financial Statements to the new accounting standards, moving towards IFRS
Income Statement 1Q09 vs 1Q08 (Pro Forma)
BRL Thousands
1Q091Q08
(Pro Forma)Variation
1Q09/1Q08G O ti l R 351 918 440 919 20 2%Gross Operational Revenues 351,918 440,919 ‐20.2%Trading / Clearing Systems ‐ BM&F 130,547 154,938 ‐15.7%Trading / Clearing Systems‐Bovespa 200,503 270,527 ‐25.9%Other Operational Revenues 20,868 15,454 35.0%
Revenue deductions (35 370) (44 888) ‐21 2%Revenue deductions (35,370) (44,888) 21.2%Net Operational Revenues 316,548 396,031 ‐20.1%Operational Expenses (148,760) (132,550) 12.2%Operating Income 167,788 263,481 ‐36.3%Oper. Margin (variation in p.p) 53 0% 66 5% ‐13 5 p pOper. Margin (variation in p.p) 53.0% 66.5% ‐13.5 p.p.
Financial Income 67,859 77,792 ‐12.8%Income before Taxes 235,647 341,273 ‐31.0%Income Tax and Social Contribution (8,372) (111,363) ‐92.5%Minority Interest (295) 363 ‐181 3%Minority Interest (295) 363 ‐181.3%Net Income 226,980 230,273 ‐1.4%Net Margin (variation in p.p) 71.7% 58.1% 13.6 p.p.
EBITDA 176,739 271,258 ‐34.8%EBITDA Margin (variation in p.p) 55.8% 68.5% ‐12.7 p.p.g ( p p) 55.8% 68.5% 12.7 p.p.
Earnings per Share (EPS) 0.113 0.115 ‐1.4%
Adjusted Net Income 258,340 230,273 12.2%Adjusted Net Margin (variation in p.p.) 81.6% 58.1% 23.5 p.p.
Adj d EBITDA
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Adjusted EBITDA 213,539 271,258 ‐21.3%Adjusted EBITDA Margin (variation in p.p.) 67.5% 68.5% ‐1.0 p.p.
Adjusted Income Reconciliation
R$ million Q109
EBITDA (Corporate) 176.7
ADJUSTED INCOME RECONCILIATION
EBITDA (Corporate) 176.7
(+) AdjustmentsSeverance expenses (18.0)Stock option expenses(2) (18.8)EBITDA (Adj t d) 213 5EBITDA (Adjusted) 213.5
Net Income (Corporate) 227.0
(+) AdjustmentsSeverance expenses(1) (12.6)p ( )Stock option expenses(2) (18.8)Net Income (Adjusted) 258.3(1) This expense generated a tax effect of R$ 16MM in Q109, while the remaining R$ 2MMwere recognized in April Thus for adjusted net income calculation purposes the tax adjustedwere recognized in April. Thus, for adjusted net income calculation purposes, the tax adjusted Q109's share is excluded plus the full portion of the subsequent period, according to the following:
Amount recognized until March 31 th (16.0) ‐ Tax effect ( 34% discount) (10.6)
Amount recognized after March 31 th (2.0)
FULL ADJUSTMENT (12.6)(2) The stock option expense is considered as non‐deductible for tax purposes.For this reason the adjusted net income is calculated by adding back the full expense
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For this reason, the adjusted net income is calculated by adding back the full expense.
Balance Sheet as of 03/31/2009
BRL Thousands
Current assets 2 814 573 Current liabilities 1 677 230
ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY
Current assets 2,814,573 Current liabilities 1,677,230
Cash and cash equivalents 2,592,074 Collateral for transactions 1,135,943
Other credits 222,499 Others 541,287
Long‐term receivables 730,230 Non‐current 47,538
Financial investments 553,643
Other credits 176,587 Minority interest in subsidiaries 15,632
Investments 1,318,279
P d i 246 680 SHAREHOLDERS' EQUITY 19 463 879Property and equipment 246,680 SHAREHOLDERS' EQUITY 19,463,879
Intangible assets 16,094,517
TOTAL ASSETS 21,204,279 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 21,204,279
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Business ModelTrading flow
BM&FBOVESPA SYSTEMS
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44
D
Buyer Seller
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CME Globex Order Routing Agreement
USA BRAZIL
Buy Order for S&P 500 Futures Sell Order for ID1 FuturesBuy Order for S&P 500 Futures Sell Order for ID1 Futures
CME GROUP GLOBEX
BM&FBOVESPA GTS
GLOBEX communication
network
GLOBEX
NETWORK
GTS
NETWORK
MATCHINGMATCHING
Sell Order for S&P 500 Futures Buy Order for ID1 Futures
SETTLED IN USD BY CME´SCLEARINGHOUSE
SETTLED IN BRL BY BM&FBOVESPA´S DERIVATIVES CLEARINGHOUSE
45
CME Globex Order Routing Agreement
USA BRAZIL
Buy Order for an ID1 futuresBuy Order for an ID1 futures contracts
CME GROUP GLOBEX
BM&FBOVESPA GTS
GLOBEX
NETWORK
High speed and high capacity
GTS
NETWORK
Sell order for an ID1 futures contracts
MATCHING
p yinternational link
SETTLED IN BRL BY BM&FBOVESPA´S DERIVATIVES CLEARINGHOUSE, WHICH CAN BE FACILITATED BY BM&F BANK
46
CME Globex Order Routing Agreement
USA BRAZIL
Buy order for S&P 500 Futures
CME GROUP GLOBEX
BM&FBOVESPA GTS
Buy order for S&P 500 Futures
GLOBEX
NETWORK
High speed and high capacity
GTS
NETWORK
Sell order for S&P 500 Futures
MATCHINGinternational high
SETTLED IN USD BY CME ´S CLEARINGHOUSE, WHICH CAN BE FACILITATED BY BM&F BANK
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DMA Development
DMA – BM&F SEGMENT
25
Number of Brokers that offer - DMA
20
25
10
15
0
5
0
Aug
‐08
Sep‐08
Sep‐08
Oct‐08
Oct‐08
Nov
‐08
Nov
‐08
Dec‐08
Dec‐08
Jan‐09
Jan‐09
Feb‐09
Feb‐09
Mar‐09
Mar‐09
Apr‐09
Apr‐09
May‐09
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DMA Development
Trading via DMA in BM&F Segment –Number of Contracts Traded
400.000
200.000
300.000
0
100.000
Trading via DMA in BM&F Segment – Number of Trades
20 000
30.000
40.000
0
10.000
20.000
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0
Aug‐08
Sep‐08
Sep‐08
Oct‐08
Oct‐08
Nov‐08
Nov‐08
Dec‐08
Dec‐08
Jan‐09
Jan‐09
Feb‐09
Feb‐09
Mar‐09
Mar‐09
Apr‐09
Apr‐09
May‐09
New Pricing Policy
• BM&F Trading: implementation of a new price grid for BM&F segment based on volumes aiming at neutrality when compared with Aug’08 framework: February 16th 2009February 16th, 2009
• BOVESPA Trading and Depository Service
di i d i f l i f h d il i• Trading: progressive reduction of clearing fees charged to retail investors and private and public companies in the cash market: beginning on May 4th, 2009
• Progressive reduction: 0.0005% until Oct’09; 0.0010% until Jan’10; 0.0015% from Feb’10 onwards
• Depository: progressive adoption of a percentage charge system based on • Depository: progressive adoption of a percentage charge system based on value under custody with the depository: beginning on May 4th, 2009
• Progressive discounts: 67% until Oct’09; 33% until Jan’10; full new depository fee from Feb’10 onwards depository fee from Feb 10 onwards
• Securities Lending: rebate (5 bps) to the lenders, except for non residents: beginning on May 4th, 2009
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• Market Data: since Apr’09 - closer to international prices
Securities Lending (BTC)
• Specific regulation for securities lending activity
• Must be carried in a Clearinghouse (CCP)
• Trading systems offers registration
• Lending is a investors’ decision and it’s done through a brokerage house
• Settlement agents are responsible by their clients settlement and collateral
• Full disclosure of the open interest positions by company on daily basis
• Corporate actions adjustments
• Risk management at the beneficial owner level with collateral requirement and daily k t k tmark to market
• Position Limit
Investor: the totality of positions cannot exceed 3% of the free floating of the • Investor: the totality of positions cannot exceed 3% of the free floating of the company
• Broker: the totality of positions cannot exceed 6.5% of the free floating of the company
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company
• Market: the totality of positions cannot exceed 20% of the free floating of the company
BM&FBOVESPAOne-stop-shop
Trading, Clearing and Settlement Services
Cash Market Derivatives Market
Equities- Equities
- International Companies (BDR)
- Closed-End Funds
- Exchange Traded Fund (ETF)
Fixed Income- Federal Government
Bonds
- Debentures
- Commercial Papers
M t B k d
Equities- Stock Options
- Stock Index Futures, Options, and Options on Futures
- Futures on Stocks
- Forwards
Fixed Income (Options & Futures)- Interest rate
- Dollar denominated domestic yield curve
- Interest rate x price index
(PPI/CPI) spread- Real-Estate Investment Trust (REIT)
Corporate Governance Levels- Novo Mercado
- Level 2
- Mortgage-Backed Securities
- Asset Backed Securities (FDIC)
- NEW: Corporate Governance Bonds
- Forwards
- Warrants
- POP (Protected and Participative Investment)
Structured Products
- (PPI/CPI) spread
- Price index (PPI/CPI)
- Sovereign debt bond (Global Bond, A Bond, US Treasury)
- CDS (SPOT Market)
Level 2
- Level 1
- BOVESPA MAIS (SMEs)
Indexes (Benchmarks)- IBOVESPA, IBrX100, IBrX50,
Currencies- US Dollar
Commodities- Gold
- Spread Strategies
- Volatility Trading (Stock Index, Interest Rate, Exchange Rate)
- Forward Rate Agreements
OTC
Currencies- US Dollar
- Euro
Commodities (Options & Futures)
IVBX-2
- Sectorial: IEE (Energy), ITEL (Telecom), INDX (Industrial)
- Corporate Governance: IGX, ITAG
- Corporate Sustainability Index
Gold OTC
- SWAPs (Interest Rate, Exchange Rate, Price Index, Stock Index, Gold)
- Flexible Options (Stock Index, Exchange Rate, Interest Rate)
- Metals
- Arabica Coffee - Conillon Coffee
- Sugar - Ethanol
- Cotton - Corn
- Soybean - Live cattle
- Feeder cattle
- Listing - Securities Lending
- Depository and Custody - Settlement Bank
Other Products and Services
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- Market Data - Indices Licensing
- Software Licensing
Operational HighlightsBM&F Segment
Overall ADTV (Thousands) Interest Rates in BRL (Thousands)
FX Rates (Thousands) Indices (Thousands)
53* Until May 8, 2009.
Operational HighlightsBOVESPA Segment
ADTV (BRL Millions) Average Number of Trades (Thousands)
Number of Investors (Thousands) Turnover Velocity** (12 months)
54* Until May 11, 2009.
** Relation of the trading value in the cash market and the market cap of the exchange
Board Members (2009 – 2010)
BOARD MEMBERS
• Armínio Fraga (Chairman)* - Gavea Investimentos
• Claudio Haddad* - Ibmec
• Fabio de Oliveira Barbosa* - Vale (CFO)
• José Roberto Mendonça de Barros* - Economist and Consultant
• Marcelo Fernandes Trindade* - Lawyer
• Rene Marc Kern* - General Atlantic
• Renato Diniz Junqueira – Intercap
• Candido Botelho Bracher – Itau BBA
• Luis Stulhberger – Credit Suisse Hedging-Griffo
• Craig Donohue – CME Group
• Julio Siqueira de Araújo – Bradesco (Vice President)
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* Independents
BM&F Bovespa Investor Relationsp
Web page: www.bmfbovespa.com.br/ri
Phone numbers: 55 11 3119 2007/ 3728 / 3729 / 3734
E-mail: [email protected]
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