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BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
The Brazilian Securities, Commodities and Futures Exchange
2010 Financial Statements
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1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - 2010
Dear Shareholders,
BM&FBOVESPA S.A.
­
Bolsa de Valores, Mercadorias e Futuros (BM&FBOVESPA,
Exchange or Company) is pleased to present you with
the Managements Discussion
and Analysis of Financial Condition and Results of Operations for 2010.
FOREWORD
The Brazilian economy consolidated in 2010 the recovery started in earlier, in the
aftermath of the global economic downturn triggered by the international financial crisis
of 2008. While other countries still wrestled with the downturn longer-term effects and
European policy makers tackled market mistrust trying to prevent a sovereign-debt
collapse triggered by the additional economic difficulties faced by certain eurozone
countries, in particular Greece, Ireland, Portugal and Spain, the Brazilian economy was
visibly coming around. Evidencing the recovery, the Brazilian economy grew, credit
availability and domestic consumption increased, and the Brazilian currency registered
strong appreciation against the U.S. dollar.
This economic environment has positively impacted on our financial and operating
performance. Volumes traded in 2010 hit unprecedented record highs in both the stock
market (Bovespa segment) and the derivatives markets (BM&F segment).
The average daily volume traded soared 64.7% in the BM&F segment, whereas having
climbed 22.7% in the Bovespa segment when compared to 2009. This strong operating
performance translated into 25.7% rise in gross revenues, a 29.9% jump in net income
1
and 34.9% increase in EBITDA
2
, which shot EBITDA Margin to 69.6% from 64.9%
previously.
In addition, we implemented over the year a number of strategic actions spanning
areas as diverse as technology, financial education and development of new products,
which are designed to build a new cycle of growth and strengthen our relations with
international exchanges, the highlight being our global preferred strategic partnership
with the CME Group. This discussion tackles these matters in further detail below.
Stock performance. Our shares have appreciated 11.4% over the year, ranking fifth
most actively traded stock by average daily volume traded at 10.7 thousand daily
trades worth R$167.0 million.
Set forth below is a discussion of the evolution of the economic landscape and our
operating and overall performance.
MACROECONOMIC AND MARKET CONDITIONS
Consolidation of the economic recovery over the course of 2010 clearly pushed the
volume of business transacted on our markets.
In the Bovespa segment, where for months market overhang sparked by uncertainties
around the nearing Petrobras offering had slowed trading volumes significantly, the
volume of trading sprang back promptly after the offering closed.
In addition, the rebound in market prices for stocks had a positive impact on volumes
traded. While at year-end the Ibovespa, or Bovespa Index, the primary index of the
1
Net income attributable to BM&FBOVESPA shareholders.
2
EBITDA is Earnings before interest, taxes, depreciation and amortization.
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2
Brazilian stock market, had climbed just 1.0% year on year, the average Ibovespa
3
rose 27.8% over the 2009 average.
In the BM&F segment, the average daily volume traded in the top most actively traded
group of contracts, i.e., Brazilian-interest rate futures contracts, rose nearly 100%,
primarily as a result of the increase in credit availability and of volatility correlated with
expectations about the Central Bank
s
decisions on the direction and size of the Selic
rate, which is the Brazilian base interest rate.
Underpinning the active trading in Brazilian-interest rate futures contracts and forex
contracts and the recaptured volumes in the BM&F segment is a combination of growth
in credit availability, including non-directional credit, which presented repeated jumps in
the last few years, and growth of the foreign trade account as the volumes of both
exports and imports increased 36.6% year on year in the wake of economic recovery.
Evolution in credit availability (in R$ billions) Total exports and imports (in US$ billions)
(Source: Central Bank of Brazil)
Further denoting the economic recovery is the rebound seen in the equity offering
market, where IPOs, follow-on and seasoned offerings made for our best year on
record, placing the Brazilian equity offering market as the third largest worldwide by
gross proceeds from offerings, in no small part due to the largest ever equity offering
across the world conducted by Brazils oil and gas giant Petrobras
.
However, while not having affected the fundamentals of the Brazilian economy, the
international economic environment did impact on our markets, particularly the stock
market, as the eurozone crisis sparked by the sovereign debt crisis deepened leading
to uncertainties about the future of the Euro, to negative market sentiment and high
volatility. In addition, the October 2010 changes in IOF taxation (tax on financial
transactions), which the Brazilian government adopted in an exercise designed to curb
the appreciation of the Brazilian real against the U.S. dollar, also affected volume by
containing market sentiment on account of uncertainties about additional future
measures towards the same end.
These market movements and our investments in technology, including in our order
routing systems and in enhancing throughput capacity and the overall performance of
our trading systems, have combined to significantly boost our yearly revenues.
Having completed our initial efforts to consolidate the integration of BM&F and
Bovespa, the two former independent exchanges, 2010 marked a shift in our strategy,
now focused on pursuing new growth opportunities in Brazil and elsewhere, increasing
the number of listings, developing new products, and realizing our clear objective of
investing in financial education and forming an investment-minded middle class so as
to widen capital markets penetration. Moreover, we have been investing heavily on our
3
Because the average Ibovespa provides an indication of the average market prices of stocks traded on the Brazilian stock market
and of the market capitalization of all listed issuers, the performance of the average Ibovespa closely correlates with the financial
value traded on the stock market and, therefore, correlates also with our revenues from trading fees charged as a rate of financial
value traded.
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
jan/06
jan/07
jan/08
jan/09
jan/10
Non earmarked
Total
1,704
882
229.2
281.3
370.9
280.7
383.6
2006
2007
2008
2009
2010
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3
technology infrastructure and in strengthening our strategic partnership with the CME
Group in order to establish a solid foundation on which to accomplish our strategic
growth plan and build our future.
We believe the prospective outlook for the medium to long-term horizon to be quite
promising for both the country and our Company on account of the expected build up of
investments in and around major sports events (the 2014 FIFA World Cup and the
2016 Olympic Games), coupled with the upcoming start of operations to put in place
the infrastructure required for exploration of pre-salt oil fields off the coast of Brazil and
the pressing need for wide improvements
to Brazils
infrastructure should positively
impact on the economy, in addition to expected increases in the average income of the
population, in particular the lower and middle-income classes.
Moreover, these two large movements (investment build up and middle class growth)
coupled with continuing increases in credit availability should push deeper changes in
the Brazilian economy and create new growth opportunities for our Company, in
particular in terms of the equity offering market, with new listings of companies seeking
long-term funding for their projects, and in terms of the larger and stronger middle
class, amongst whom prospective retail investors whose savings these new entrants
are likely to pursue.
DISCUSSION AND ANALYSIS OF OPERATING PERFORMANCE
Bovespa segment
The ADTV (average daily traded value in the case of Bovespa Segment and average
daily traded volume in the case of BM&F Segment) of R$6.5 billion for 2010 accounts
of a record high volume traded and 22.7% year-over-year growth. An analysis of
average daily traded value for the last five-year period shows compounded annual
growth rate (CAGR) of 27.8%
Bovespa segment
­
ADTV evolution
(in R$ billions)
A comparison of average daily traded value for the quarters to December and
September 2010 (4Q10 versus 3Q10) shows 15.0% quarter on quarter increase,
whereas the comparison of the quarters to December 2010 and 2009 (4Q10 versus
2.4
4.9
5.5
5.3
6.5
6.8
6.6
6.7
5.9
6.8
2006
2007
2008
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
CAGR: 27.8%
: 22.7%
: -0.7%
: 15.0%
Markets
2006 2007 2008 2009 2010
CAGR
(2006-10)
Var.
2010/2009
4Q09 1Q10 2Q10 3Q10 4Q10
Var.
4Q10/4Q09
Var.
4Q10/3Q10
Cash
2.3
4.6
5.2
4.9
6.0
27.9%
22.0%
6.4
6.1
6.2
5.5
6.4
-0.2%
15.6%
Forward
0.1
0.2
0.2
0.1
0.1
16.0%
52.7%
0.1
0.2
0.1
0.1
0.2
23.1%
25.8%
Options
0.1
0.2
0.2
0.2
0.3
34.2%
25.7%
0.3
0.3
0.4
0.3
0.3
-20.7%
-1.7%
Total
2.4
4.9
5.5
5.3
6.5
27.8%
22.7%
6.8
6.6
6.7
5.9
6.8
-0.7%
15.0%
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4
4Q09) points to a 0.7% year over year drop in the daily average. The increase is due
primarily to the effects of the Petrobras offering, which closed in late September after a
delayed market overhang which slowed trading activities significantly, in particular in
the third quarter, since routinely Petrobras stocks are very actively traded (for example,
the daily average in July 2010 was R$0.4 billion versus averages between R$0.8 billion
and R$0.9 billion earlier in the year). After the offering placement, overall volumes
bounced back to peak in October 2010 at the historical record daily average of R$7.8
billion.
In addition, the number of matches surged 29.6% from the same period in 2009, and
the five-year compounded annual growth rate hit 48.9%.
The average financial value by trade over the last few years fell to R$15.1 thousand in
2010 from R$15.9 thousand in the prior year and R$27.8 thousand in 2006. This drop
is due mainly to more active trading activities by retail investors and the sophisticated
strategies used by certain investors, which are facilitated by wider electronification of
the means for access to our trading platforms.
Bovespa segment
­
Evolution in number of trades
(in thousands)
In another unprecedented record the exchange market capitalization, i.e. the total
market capitalization of all listed issuers, reached annual average of R$2.3 trillion,
surging 27.8% from one year ago. In the quarter to December 2010 this average hit
R$2.5 trillion. These climbs are explained by the higher market prices at which stocks
have been trading, as denoted by 27.8% year over year rise of the average Bovespa
Index. In addition, the gross proceeds from primary equity offerings carried out in the
year to December 2010 totaled R$138.5 billion, which also contributed to raise the
exchange market capitalization.
Bovespa segment
­
Exchange average market capitalization
and turnover velocity
Turnover velocity dropped to 63.8% in 2010 from 66.6% the prior year, with the largest
drop having been registered in the quarter to September 2010 on account of market
Markets 2006 2007 2008 2009 2010
CAGR
(2006-10)
Var.
2010/2009
4Q09 1Q10 2Q10 3Q10 4Q10
Var.
4Q10/4Q09
Var.
4Q10/3Q10
Cash
59.7
113.6
195.1
270.6
349.8
55.6%
29.2% 318.9
326.7
348.1
338.5
385.9
21.0%
14.0%
Forward
1.1
1.8
2.2
1.3
1.6
8.7%
18.4%
1.8
1.9
1.5
1.4
1.5
-18.1%
7.3%
Options
26.7
37.5
47.8
60.4
79.3
31.3%
31.3%
71.1
77.8
81.5
76.8
81.0
13.9%
5.4%
Total
87.5
152.9
245.1
332.3
430.6
48.9%
29.6% 391.8
406.4
431.1
416.7
468.4
19.6%
12.4%
1.3
2.0
2.0
1.8
2.3
2.2
2.3
2.2
2.3
2.5
42.3%
56.4%
63.2%
66.6%
63.8%
70.1%
64.7%
69.2%
60.1%
61.8%
0,0%
20,0%
40,0%
60,0%
80,0%
-
1,0
2,0
3,0
4,0
2006
2007
2008
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
Average Market Capitalization (BRL trillions)
Turnover Velocity (%)
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5
overhang related to the Petrobras offering, which also justifies a slight recoup in the
fourth quarter of 2010, when turnover velocity rose to 61.8%.
Exchange-traded funds. The daily value traded in shares of the seven ETFs currently
listed on our equities market ranged between R$22 and R$33 million over the course of
2010, underlining a 231% year on year surge in number of trades. Moreover, in August
2010 we announced another ETF, which will track the Financial Services Index, or
IFNC.
ADTV of ETF
(in R$ millions)
In another highlight of the year, the equity offering market rebounded to reach record
high gross proceeds from IPOs, follow-on and seasoned offerings, totaling R$74.4
billion, above the R$70.1 billion famously grossed in 2007. If we were to include the oil
reserves assignment the Brazilian government and Petrobras have agreed, the total
gross proceeds from offering would rise to R$149.2 billion.
Bovespa segment
­
Equity offerings
(in R$ billions)

The equity offering market is a significant driver of volume growth for the stock market,
as it increases the number of stocks in the market. A total of 22 offerings have been
completed over the year, 11 of them IPOs, the remainder consisting of follow-on and
seasoned offerings. Moreover, as of February 9, 2011, already 6 offerings came to the
market, four of which IPOs and two follow-on offerings. In addition, this market rebound
sends a strong signal of renewed market confidence, in particular by foreign investors
who typically account for most of the sales in any offering.
The net flow of foreign investments in both equity offerings and secondary market
trading hit R$28.3 billion in 2010. Interestingly, in the second quarter of 2010, as
worries over the Euro crisis spread for fear contagion would bring the Euro down, we
registered negative flow of foreign investments, a by-product of heightened risk
aversion. In contrast, the solid flow of foreign investments registered in the third quarter
(R$16.7 billion) related closely with completion of the Petrobras offering.
8.5
21.9
23.3
20.3
24.9
28.9
28.2
32.1
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
4.5
5.4
15.4
55.6
7.5
23.8
11.2
4.3
8.5
15.1
14.5
26.8
22.2
63.2
2004
2005
2006
2007
2008
2009
2010
IPOs
Follow on
8.8
13.9
30.4
70.1
34.3
45.9
74.4
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6
Bovespa segment
­
Net flow of foreign investments
(in R$ billions)
Additionally, Bovespa markets saw broad-based growth across the categories of
investors, each group having accounted for a relatively even share of the overall
volume for the segment (domestic institutional investors at 33%; foreign investors at
30%; retail investors at 26%). The group consisting of domestic institutional investors
presented higher year-over-year growth rate, with average daily traded value rising to
R$2.2 billion from R$1.4 billion one year ago.
Bovespa segment
­
ADTV evolution by investor category
(in R$ billions)

Lastly, we should highlight the September 2010 launch of three other DMA connection
models (DMA via Provider, via Direct Connection and via Co-Location Arrangements,
which we call models 2, 3 and 4). And in November the implementation of our new
pricing policy for high frequency traders gave another push towards boosting high
frequency trading on our equities markets. As a result of these initiatives (further
discussed elsewhere herein), the high frequency volume climbed to account for 4.5%
and 4.0% of the overall volume in November and December 2010, with daily averages
(buy and sell sides) of R$0.6 billion and R$0.5billion, respectively.
BM&F segment
The 2010 average daily traded volume soared 64.7% year on year to hit 2.5 million
trades in futures contracts and other derivatives, the highest on record for the Brazilian
derivatives markets. An analysis of average daily traded volume for the most recent
five-year period shows compounded annual growth rate (CAGR) of 21.4%.
(15.5)
43.2
28.3
12.6
4.5
(0.1)
16.7
7.3
2008
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
0.6
1.1
1.5
1.6
1.7
2.0
2.1
1.7
1.5
1.5
0.7
1.5
1.5
1.4
2.2
1.9
2.0
2.3
2.1
2.2
0.9
1.7
2.0
1.8
1.9
2.2
1.8
1.9
1.7
2.3
0.3
0.5
0.4
0.4
0.5
0.7
0.6
0.6
0.4
0.6
0.1
0.1
0.2
0.1
0.1
0.1
0.2
0.1
0.1
0.2
2006
2007
2008
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
Individuals
Institutional Investors
Foreign Investors
Financial Insitutions
Companies
Others
2.4
4.9
5.5
5.3
6.5
6.8
6.6
6.7
5.9
6.8
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7
BM&F segment
­
ADTV and average rate per contract (RPC)
(volume by number of contracts)
­
(RPC in Brazilian reais)
The average daily traded volume sustained higher levels (above 2.0 million contracts)
throughout 2010 when compared to 2009. In the quarterly analysis, ADTV for 4Q10
climbed 7.8% on a quarter-on-quarter basis, having soared 67.8% on a year-on-year
basis. This improved performance correlates mainly with the average volume of trading
in Brazilian-interest rate contracts, which increased by whapping 99.6% year-over-year
and by 128.8% in the quarter to December 2010 from the same quarter one year ago.
BM&F segment
­
ADTV
(in thousands of contracts)
The heightened volume of trading in Brazilian-interest rate contracts is due not only to
structural growth of the domestic market, but also to deepening volatility and
uncertainty about a possible uptrend in the Selic rate (base rate), and expectations
about the Central Banks decision on the matter.
Market structural growth is evidenced by widespread increase in exposure to fixed
rates, whether under private loans and financing arrangements or the Brazilian
governments public
debt, which requires lenders and market participants holding debt
securities to hedge exposure to fluctuations in interest rates in an attempt at mitigating
1.2
1.7
1.6
1.5
2.5
1.6
2.5
2.5
2.4
2.6
1.247 1.224
1.522
1.365
1.134
1.333
1.126 1.145 1.167 1.099
-
0,200
0,400
0,600
0,800
1,000
1,200
1,400
1,600
-
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
2006
2007
2008
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
ADTV (millions)
RPC (BRL)
2006
2007
2008
2009
2010
CAGR
2006-2010
Var.
2010/2009
Interest Rates in BRL
710.8
988.1
788.7
843.5
1,683.6
24.1%
99.6%
FX Rates
265.7
473.0
534.9
447.1
540.6
19.4%
20.9%
Stock Indices
53.9
112.0
87.6
80.0
89.4
13.5%
11.7%
Interest Rates in USD
64.4
87.9
94.3
78.3
89.7
8.7%
14.6%
Commodities
5.9
10.1
14.9
10.2
12.9
21.4%
26.0%
Mini Contracts
35.8
57.8
40.5
52.6
75.6
20.5%
43.6%
OTC
16.2
11.5
12.4
9.3
12.9
-5.6%
38.7%
Total
1,152.7
1,740.3
1,573.3
1,521.0
2,504.7
21.4%
64.7%
4Q09
1Q10
2Q10
3Q10
4Q10
Var.
4Q10/4Q09
Var.
4Q10/3Q10
Interest Rates in BRL
800.8
1,605.8
1,635.7
1,661.0
1,832.6
128.8%
10.3%
FX Rates
494.1
589.8
603.5
481.3
490.6
-0.7%
1.9%
Stock Indices
98.4
85.2
99.3
84.4
88.8
-9.8%
5.2%
Interest Rates in USD
83.2
77.9
84.5
95.8
100.3
20.6%
4.7%
Commodities
11.3
11.5
10.1
15.0
14.9
32.4%
-0.2%
Mini Contracts
57.6
68.2
79.5
76.5
78.0
35.3%
1.9%
OTC
13.8
15.3
10.8
14.1
11.3
-17.8%
-20.0%
Total
1,559.2
2,453.6
2,523.4
2,428.1
2,616.5
67.8%
7.8%
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8
risk that interest rates or
the fixed rates
implied volatility will change. According to data
compiled by the Central Bank, at December 31, 2010, the overall volume of fixed-rate
loans had climbed 26.7% year-over-year, to R$623.6 billion from R$492.2 billion one
year ago, whereas in the same period the portion of national debt paying fixed interest
rate had grown 29.0%, to R$608.4 billion from R$471.5 billion previously.
The other component that explains the heightened volume of trading in Brazilian-
interest rate contracts correlates with volatility triggered by the diversity of opinions and
expectations of market participants about the direction of the base rate and, as a result,
of other interest rates. Over the course of the year the Central Bank has changed the
base rate three times, in April, June and July. A monthly analysis of average daily
traded volumes shows these volumes peaked in the months in which the Selic rate
changed, preceded by a build-up process in the months leading up to these rate
moves. The analysis also indicates a substantial build-up in the months of November
and December, which we believe is substantially attributable to expectations about
additional rate moves, which materialized in January 2011.
BM&F segment
­
ADTV for Brazilian-interest rate contracts, by maturity
(in thousands of contracts)
In addition, in peak months the volumes traded in Brazilian-interest rate contracts
largely concentrate in short-term contracts (first and second maturity dates), as
speculative moves and bets
on the Central Banks decisions
tend to focus on these
maturity dates. A natural effect of this, given that our pricing policy does take maturity
date into account, is the negative impact of volume concentration on our yearly
average rate per contract for Brazilian-interest rate contracts, which in 2010 fell 9.1%
year-over-year, and quarterly average, which in 4Q10 dropped 17.0% from the same
quarter one year earlier and 9.6% quarter-on-quarter.
BM&F segment
­
average rate per contract
(in Brazilian reais)
-
200
400
600
800
1.000
1.200
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
1st. Maturity
2nd. Maturity
3rd Maturity
4th. Maturity
5th Maturity
Changes in the Selic rate
Increase in the uncertainty and speculation on the Central Bank
2006
2007
2008
2009
2010
Var.
2010/2009
Interest Rates in BRL
0.906
0.950
1.141
0.979
0.889
-9.1%
FX Rates
2.244
1.859
2.062
2.161
1.928
-10.8%
Stock Indices
1.419
1.501
2.143
1.619
1.564
-3.4%
Interest Rates in USD
1.094
0.965
1.211
1.357
1.142
-15.8%
Commodities
4.749
3.195
3.571
2.307
2.168
-6.0%
Mini Contracts
0.034
0.054
0.162
0.176
0.128
-26.9%
OTC
1.571
2.111
2.342
1.655
1.610
-2.7%
Total
1.247
1.224
1.522
1.365
1.134
-16.9%
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9
The average RPC has dropped across derivatives markets influenced also by the
heightened volume concentration on Brazilian-interest rate contracts, which accounted
for 67.2% of the overall volume for 2010 (versus 55.5% in the prior year) and for 70.0%
of the overall volume in the quarter to December 2010.
Forex contracts were the second group more actively traded over the year. The
average daily traded volume rose by 20.9% year-over-year, again the highest on
record. This performance was particularly positive in the first half of the year, a period
of heightened volatility in the foreign exchange market.
Highlights among the commodities derivatives include live-cattle futures contracts
whose average volume for 2010 surged 50.3% year on year, at 5.5 thousand daily
contracts versus 3.6 thousand one year ago, followed by cash-settled corn futures
whose 2010 average daily volume soared 72.8% year on year, at 2.0 thousand daily
contracts.
In addition, products we launched over the year include cash-settled ethanol fuel
futures contracts and cash-settled soybean futures (and put and call options on these
futures), which started trading in May 2010 and January 2011, respectively.
Moreover, BM&F markets saw broad-based growth across categories of investors, in
whose volumes doubled from the prior year, with the group formed by financial
institutions still accounting for the larger share of the overall volume traded on
derivatives markets due to intensive trading in Brazilian-interest rate contracts.
BM&F segment
­
ADTV by investor category (buy + sell sides)
(in millions of contracts)

As a percentage of the overall volume, the share contributed by institutional investors
increased to 29.6% in 2010 from 24.3% one year ago, having climbed to 33.0% in the
quarter to December 2010 from 30.1% in the prior quarter. The share foreign investors
contributed to the overall yearly volume rose to 22.4% from 20.0% in the earlier year,
despite a fourth quarter drop to 19.7% versus 22.4% in the prior quarter.
4Q09
1Q10
2Q10
3Q10
4Q10
Var.
4Q10/4Q09
Var.
4Q10/3Q10
Interest Rates in BRL
1.037
0.838
0.905
0.951
0.860
-17.0%
-9.6%
FX Rates
1.927
1.929
1.838
1.989
1.978
2.6%
-0.5%
Stock Indices
1.577
1.527
1.515
1.499
1.719
9.0%
14.6%
Interest Rates in USD
1.017
1.218
1.163
1.076
1.134
11.5%
5.4%
Commodities
2.349
1.878
2.106
2.181
2.416
2.8%
10.8%
Mini Contracts
0.150
0.134
0.129
0.125
0.126
-15.7%
1.0%
OTC
1.508
1.526
1.772
1.687
1.462
-3.0%
-13.3%
Total
1.333
1.126
1.145
1.167
1.099
-17.6%
-5.8%
1.1
1.7
1.4
1.3
2.0
1.3
2.0
2.1
2.0
2.1
0.5
0.8
0.7
0.7
1.4
0.7
1.3
1.3
1.4
1.6
0.3
0.6
0.6
0.6
1.1
0.7
1.0
1.2
1.0
1.0
0.2
0.3
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.2
0.0
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
2006
2007
2008
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
Financial Institutions
Institutional Investors
Foreign Investors
Individuals
Companies
Central Bank
background image
10
In addition, the introduction of new IOF levies, which the Brazilian government adopted
to contain hot money inflows in an effort to curb the appreciation of the Brazilian real
against the U.S. dollar, had relatively low impact on the volumes traded on derivatives
markets. While we did observe a 5.2% fall in average daily volumes traded by foreign
investors between the third and fourth quarters, we cannot state this was due to the
new levies. However, as the volumes traded by foreign investors failed to go up in line
with the volumes attributable to other investor groups, this may be indication that the
new levies do affect the potential for growth in foreign investor volumes, and therefore
affects the derivatives markets as a whole.
We continue to implement our plans towards enhancing the electronification of trading
processes, in particular by broadening direct market access (DMA) alternatives. The
volume of trades executed via DMA has been increasing consistently as new access
models are launched. In 2010, trading via any of our DMA models has increased to
16.2% of the overall volume, as compared to 9.7% in 2009. While implemented
relatively recently, DMA provided pursuant to co-location arrangements is considered
highly efficient, a window into the evolution and technology changes which can be
expected for the derivatives markets, and was the best performing model in terms of
volume growth, having accounted for 3.1% of the overall volume for 4Q10, as
compared to 0.4% for the same quarter one year ago.
The better example of this transformation is high frequency trading. High frequency
traders began to do business on our markets in 2009, a year in which the HFT flow
accounted for 2.2% of the overall volume, while in 2010 it accounted for 4.8% of the
total. The peak HFT volume occurred in 2Q10, particularly in May 2010, when volatility
in forex contracts surged, an environment in which HFT strategies typically thrive. The
HFT volume in May 2010 accounted for 18.3% of the volume traded in forex contracts
and 8.9% of the overall volume traded on derivatives markets.
BM&F segment
­
HFT average daily volumes (buy + sell)
(in thousands of contracts)
While forex contracts, stock index futures and mini-sized forex and stock index futures
contracts remain the most actively traded derivatives, there are signs high frequency
traders may have been looking for opportunities provided by other contracts, in
particular Brazilian-interest rate contracts and commodities derivatives. While high
frequency traders still account for a relatively small share of total volume traded in
contracts within this contract group, the fourth quarter trading volume implies positive
suggestion that the HFT flows could be further drawn to these contracts.
29
94
50
69
155
74
77
17
43
44
41
50
43
38
21
88
53
77
93
90
93
13
42
2.2%
4.8%
4.8%
3.8%
6.0%
4.4%
4.8%
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
FX
Equities
Mini contracts
Interest Rates
% in Overall Volume
background image
11
BM&F segment
­
share of the HFT volume by contract group
Securities lending
The financial value of 971 thousand securities lending transactions carried out on our
markets in 2010 hit record high R$465.6 billion, soaring 80% from one year ago.
The average volume of open interest positions for 2010 climbed 61.5% year on year,
whereas average of R$22.4 billion for 4Q10 was up 43.0% from the same quarter in
the prior year.
Securities lending
­
open interest positions and number of lending transactions
This growth is evidenced by a 36.5% year on year increase in monthly average number
of transactions, to 81.0 thousand in 2010 from 59.3 previously, and correlates closely
with the uptrend in stock prices, which typically contributes to market participants
undertaking heightened exposure in the securities lending market.
Central securities depository (CSD), custody and back-office services
The number of active investors trading on Bovespa segment markets went up 11.2%
year on year, to a total of 640 thousand custody accounts at December 31, 2010,
where 95.4% (611 thousand accounts) are held by retail investors. This increase in
number of retail investors reflects the good performance shown by the stock market
and is in line with our decision to deepen our ongoing financial education efforts.
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
Mini contracts
Equities
FX
Interest Rates
Commodities
54.7%
20.7%
8.1%
1.3%
1.5%
6.6
18.5
16.9
12.7
20.5
15.7
19.0
19.9
20.8
22.4
22.6
47.4
52.3
59.3
81.0
61.1
69.6
83.0
86.3
84.9
-
20,0
40,0
60,0
80,0
100,0
-
5,0
10,0
15,0
20,0
25,0
2006
2007
2008
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
N
u
m
b
er

o
f
t
r
a
d
es
O
p
en

i
n
t
er
es
t
Average Open Interest (BRL billions)
Monthly Average Number of Trades (thousands)
background image
12
CSD
­
financial value of assets held in custody and number of custody accounts
The financial value of stocks held in custody at year-end totaled R$1,239.8 billion, a
42.1% year on year climb primarily due to the increase in the market prices of stocks.
An analysis of the last five-year period shows CAGR of 14.2%.
DISCUSSION AND ANALYSIS OF FINANCIAL PERFORMANCE

Our annual financial statements have been prepared and are presented in accordance
with accounting practices adopted in Brazil, pursuant to guidelines provided under Law
No. 11,638/07, complemented by the framework, accounting standards,
implementation guidance and interpretations issued by the Brazilian Accounting
Standards Board (Comitê de Pronunciamentos Contábeis), or CPC, and approved for
promulgation by the Brazilian Securities Commission (Comissão de Valores
Mobiliários
), or CVM, whose primary objective is the convergence between the
accounting practices previously adopted in Brazil and the International Financial
Reporting Standards, or IFRS, adopted by the International Accounting Standards
Board, or IASB.
As a result of these changes in accounting practices, we have, for comparability
purposes, adjusted our financial information for the prior year (balance sheet statement
and statement of income) and are presenting retrospective financial statements as of
and for December 31, 2009, revised for adoption of such accounting standards,
guidance and interpretations.
Operating revenues
Gross operating revenues of R$2,102.6 million in 2010 were up 25.7% from R$1,672.9
million in 2009 primarily due to the recovery in volumes traded on both stock and
derivatives markets.
Revenues from trading and settlement fees derived in the Bovespa segment climbed
25.3% year on year and amounted to R$1,049.3 million (accounting for 49.9% of total
gross revenues), thus reflecting the 22.7% surge in total value traded in the year, in
addition to the increase in number of equity offerings, from which we derived settlement
revenues of R$47.4 million (versus R$14.2 million one year ago). However, as
measured in basis points, the margins dropped to 6.11 bps from 6.25 bps in the before
year, as a result of a change in the mix types of investors more actively trading in the
period, including increase in trading activities by domestic institutional investors, from
whom we charge lower average fee rates.
Revenues from trading and settlement fees derived in the BM&F segment soared
35.2% year on year and amounted to R$722.1 million (accounting for 34.3% of total
729.8
1,123.3
650.4
872.6
1,239.8
233.7
477.9
558.6
575.7
640.2
-
100,0
200,0
300,0
400,0
500,0
600,0
700,0
-
600,0
1.200,0
1.800,0
2.400,0
2006
2007
2008
2009
2010
Value under custody (BRL billions)
# of accounts (thousands)
background image
13
gross revenues) due primarily to a 64.7% year on year upsurge in volumes traded,
which tough was not captured in full due to a 16.9% drop in average rate per contract
(RPC).
Revenues unrelated to trading and settlement activities rose 9.9% year on year to
R$331.2 million (15.8% of total gross revenues) from R$301.4 million (18.0% of the
total) one year earlier. The more significant business lines unrelated to trading and
settlement activities were the following:
Vendors - market data sales: revenues of R$67.6 million (3.2% of total
revenues), up 4.6% year on year due mainly to a 4.0% growth in number of
customer terminals.
Market participant access fees: revenues of R$48.2 million (2.3% of total
revenues), up 4.7% year on year from R$46.1 million previously, mainly as a
result of the increase in volumes traded.
Depository, custody services: this line item climbed 22.3% year on year, to
R$88.3 million (4.2% of total revenues) from R$72.2 million in the earlier year.
Revenues derived solely from the activities of central securities depository rose
18.4% year on year, to R$69.2 million from R$58.4 million previously, primarily
on account of a 10.3% rise in average number of custody accounts (610.8
thousand in 2010 versus 553.7 thousand one year ago) and 25.8% lift in
average financial value of assets under custody (to R$472.6 billion from
R$375,6 billion in the year before), not including custody of ADRs and custody
services provided to foreign investors.
Securities lending: revenues of R$49.4 million (2.4% of total revenues) were up
49.9% year on year due mainly to a 61.5% upsurge in the average financial
value of open interest positions (to R$20.5 billion from R$12.7 billion one year
earlier).
Listing fees: revenues of R$44.4 million (2.1% of total revenues) were up 12.2%
year on year due mainly to the revenues from offering registration application
fees, which soared 83.6% year on year, the revenues from listing annuities,
which went up 7.5% from the prior year; and a reduction in discounts previously
granted on listing annuities.
Operating expenses
Operating expenses totaled R$633.5 million, climbing 11.2% year on year. The
adjusted operating expenses
4
totaled R$543.9 million, representing a 21.8% year on
year rise. The principal changes in expense line items were the following:
Personnel: expenses of R$290.1 million, virtually unchanged from the prior year (0.1%
year on year rise). This movement is explained by the following factors:
the August 2010 salary increase required under the existing collective
bargaining agreement, which represented a 6% increase in payroll; and
the headcount climbed 12.3%
5
year on year, in line with our growth strategy,
such that most new hirings occurred in technology areas and the business
development department.
year on year drop of 48.1% in expenses with the stock options plan, to R$30.9
million from R$59.6 million one year ago. After eliminating expenses with the
4
Operating expenses adjusted to eliminate expenses related to depreciation, allowance for doubtful accounts, stock options plan
and taxes related to equity pickup (equity method of accounting). The purpose of these adjustments is to measure operating
expenses by eliminating those with no impact on cash flow and those over which management has no control.
5
Includes the internalization of 143 previously outsourced IT personnel with R$8.0 million impact on payroll (personnel expenses
line).
background image
14
stock options plan, adjusted personnel expenses amounted to R$259.2 million,
up 12.6% from the prior year. In addition, in 2009, personnel expenses were
impacted by severance payments in the aggregate of R$18.0 million due to
terminations over the course of that year on account of the functional
restructuring process.
The table below sets forth the headcount data, including outsourced personnel.
Headcount
2009
2010
Employees
1,079
1,384
Outsourced IT personnel
6
315
175
Total
1,394
1,559
Data processing: expenses totaling R$101.7 million were substantially steady (0.9%
drop), with a note to rent payments started in July 2010 for the premises at which our
new backup data center is located, which were counterbalanced by the previously
mentioned internalization of outsourced IT personnel partially, in addition to an
increase in time billed by outsourced providers in connection with certain capital
expenditure projects, which costs are allocated to the relevant projects.
Marketing and promotion: marketing expenses reached R$42.4 million, having soared
116.7% year on year primarily as a result of our redoubled financial education
initiatives and enhanced and marketing campaigns, in particular those that aim to
attract prospective retail investors.
Outsourced services: expenses with outsourced services went up 5.7% year on year,
to R$48.1 million, primarily as a result of legal services related to international
partnership agreements we entered into over the year.
Other expenses: sundry expenses totaling R$36.3 million rose 61.8% from R$22.4
million one year ago, substantially explained by intangibles written off in connection
with projects started in earlier years (R$4.9 million); the provision for accounts payable
by BVRJ out of its guarantee fund in connection with certain litigated claims (R$1.9
million); and increases in gifts and contributions (a R$4.2 million year on year rise); and
in travelling expenses (which climbed R$2.1 million).
In December 2010 we announced the 2011 Budget contemplating adjusted operating
expenses and capital expenditures, as follows:
The budget for adjusted operating expenses is set at R$625 million, allowing for
a R$10 million upward or downward variance; and
The capital expenditure budget is set at an interval between R$235 million and
R$255 million.
Interest income, net
Net interest income for the year hit R$298.0 million and was up 17.4% year on year.
Interest revenues climbed to R$354.8 million from R$289.7 million one year ago,
influenced by the increase in interest rates earned on financial investments and the
higher average cash invested. Net interest income was influenced by an increase in
interest expenses which were up to R$56.8 million from R$35.8 million in the prior year
due to the bond offering we completed in July 2010.
6
The expenses with outsourced IT services are registered in under the `data processing' line item.
background image
15
Income tax and social contribution
Income before taxes totaled R$1,592.5 million, as compared to R$1,186.6 million one
year ago, a 34.2% year on year increase due primarily to our improved operating and
financial performance.
The line item comprising income tax and social contribution plus deferred income tax
and social contribution totaled R$448.0 million, where R$442.6 million have been
deferred as follows:
deferred tax liabilities of R$445.2 million related to temporary differences from
amortization of goodwill for tax purposes, with no impact on cash flow; and
recognition of tax credits amounting to R$2.6 million related to other temporary
provisions.
As a result, the actual tax rate for 2010 was 28.1% of earnings before tax.
EBITDA and net income
EBITDA for 2010 amounted to R$1,315.0 million, or a 34.9% rise over 2009 EBITDA,
which amounted to R$975.1 million. EBITDA Margin was 69.6%.
Net income for the year ended December 31, 2010 amounted to R$1,144.6 million,
29.9% higher than R$881.1 million one year ago. This increase in net income is
attributable to our improved operating and financial performance and the equity
accounting of the investment in the CME Group.
The table below set forth our calculation of EBITDA.
R$ mil
2009
2010
Net income
881,050
1,144,561
(-) Minority interest
(1,019)
75
(-) Income tax and social contribution
(304,505)
(448,029)
(-) Financial income
253,862
298,024
(-) Depreciation and amortization
(42,396)
(54,818)
(-) Equity accounting
-
38,238
(-) Tax related to the equity accounting
-
(3,975)
EBITDA
975,108
1,315,046
Main lines items under Assets
Total assets
As determined in our consolidated audited balance sheet statement as of December
31, 2010, total assets increased 8.6% year on year to R$22,634.0 million.
Cash and cash equivalents; financial investments
Cash and cash equivalents, including short- and long-term financial investments totaled
R$3,435.3 million and accounted for 15.2% of total assets.
Noncurrent assets
Non-current assets totaled R$20,086.4 million, where long-term receivables (including
long-term financial investments) amount to R$1,216.8 million, equity method
investments amount to R$2,286.5 million, property and equipment amount to R$367.1
million and intangible assets amount to R$16,215.9 million.
Intangible assets consist primarily of goodwill correlated with expectations of future
profitability related to the acquisition of Bovespa Holding. Goodwill has been tested for
background image
16
impairment in December 2010, based on the valuation report prepared by a specialist
firm, and has not resulted in need for adjustments to carrying value.
Interest in affiliates totaling R$2,248.3 million comprise our 5.0% ownership interest in
shares of the CME Group, where our Company is the largest individual shareholder
7
.
Main lines items under Liabilities and Shareholders' Equity
Current liabilities
Current liabilities of R$1,416.2 million accounted for 6.3% of total liabilities, a 24.0%
rise from R$1,142.1 one year ago when it accounted for 5.5% of total liabilities. This
increase is due primarily to a climb in cash collateral pledged by market participants
(R$954.6 million versus R$810.3 million in the prior year), and a ris
e in the ,,other
liabilities line item
(R$216.1 million versus R$196.7 million previously).
Noncurrent liabilities
Noncurrent liabilities closed the year at R$1,798.7 million, a 409.7% year on year
increase due mainly to the following:
Bond offering: On July 16, 2010 we carried out a US$612 million issuance of 6,120
global senior unsecured notes. The notes pay coupons every six months, in January
and July, at the annual rate of 5.50%. The principal matures on July 16, 2020. As of
December 31, 2010, the outstanding balance under the Notes was R$1,040.2
million;
Deferred income tax and social contribution, and the provision for contingencies and
legal obligations.
Shareholders' equity
Shareholders equity of R$19,419.0 million
went up 0.4% year on year, essentially
comprising capital stock of R$2,540.2 million and capital reserves of R$16,662.5
million.

Distributions (Dividends
and Interest on Shareholders' Equity)
Based on 2010 results, our board of directors approved over the year distributions of
dividends and interest on shareholders equity amounting to an aggregate of R$7
38.5
million. Moreover, we are set to submit to shareholders a proposal for yet another
distribution based on 2010 earnings.
Share Buyback Program
On August 12, 2010, our board approved a share buyback program permitting the
repurchase of no more than 31 million shares through to December 31, 2010.
However, the program was subsequently amended to authorize total buyback of 60
million shares for an extended period ending June 30, 2011.
At December 31, 2010, we had repurchased 31.95 million shares at an average price
of R$13.60 per shares and aggregate price of R$434.5 million. In addition, in January
2011, we repurchased additional 16.57 million shares at an average price of R$12.33
per shares. In all thus far, we have repurchased 48.52 million shares at an average
price of R$13.17 per shares and aggregate price of R$638.9 million.
7
Source: Thomson Reuters
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17
Performance by BVMF3 Stocks
BM&FBOVESPA shares were the fifth most actively traded stocks in the equities
market, with 10.7 thousand average daily number of trades and R$167.0 million
average daily financial value traded. Turnover velocity for BVMF3 shares was 159.0%,
a very high turnover for the domestic market standards. BVMF3 shares appreciated
11.4% over the year (as adjusted for distributions), whereas the Bovespa Index
rose1.0% year on year.
In addition, BVMF3 stocks integrates a number of stock index portfolios, and as of
December 31, 2010 had been allocated the following theoretical individual participation
in index portfolios:
Bovespa Index - Ibovespa (3.8% participation
­
ranks 3
rd
)
Brazil 50 Index - IBrX50 (3.2% participation
­
ranks 9
th
)
Brazil Index - IBrX (2.7% participation
­
ranks 9
th
)
Corporate Governance Stock Index - IGC (4.7% participation
­
ranks 5
th
)
Special Tag Along Stock Index - ITAG (4.4% participation
­
ranks 4
th
)
Mid-Large Cap Index - MLCX (2.8% participation
­
ranks 9
th
)
Financial Index
­
IFCN (13.0% participation
­
ranks 4
th
).
OTHER HIGHLIGHTS
Pricing policy
With the aim of fine-tuning and adapting our general pricing policy in line with our new
strategy and in response to market trends, and furthermore in order to boost trading
activities, we have changed some of our fees.
High Frequency Traders. Pursuant to our policy for high frequency traders,
effective from November 1, 2010, high frequency traders hold HFT registration
accounts and are granted progressive discounts based on intraday trading volume
bands.
Central Securities Depository. In June 2010 we announced the last stage of our
pricing policy for custody services, according to which fee rates are charged on the
value of securities held under custody at the central depository.
Unexecuted Order Fee. In March 2010 we announced a reduction in the fee we
charge for unexecuted orders and by-minute offers which are entered in our
systems in excess of certain thresholds. For this purpose, we have raised the
threshold for unexecuted orders (orders-by-trade ratio rose to eight from six
earlier) and the fee per offer in excess of the threshold is now down to R$0.03 from
R$0.04 previously;
Home Broker and Technology Package. As part of our actions to increase the
retail investor base, effective from August 2010 we have reduced the price for
access to the Home Broker system, and adopted a new pricing policy for the
technology package provided to market participants.

Credit Ratings
Moody's. On May 27, 2010, Moody's Investors Service assigned a local currency issuer
ratings of A1 on the global scale and Aaa.br on the Brazilian national scale to
BM&FBOVESPA. The outlook on the ratings is stable. In addition, on July 12, 2010, it
assigned a Baa2 long-term foreign currency debt rating to the notes issued by us, with
a positive rating outlook.
background image
18
Standard & Poor's
: Dated June 22, 2010, Standard & Poor's Ratings Services
assigned its 'BBB+ (long-
term) and ,,A
-2 (short-term)' counterparty credit ratings to
BM&FBOVESPA. The outlook on the ratings is stable.
MAIN DEVELOPMENTS
New products
We focus great attention on developing new products that anticipate or capture market
requirements and trends. In 2010 we launched a number of new products for the
Bovespa segment, in particular new ETFs and non ponsored BDRs, and for the BM&F
segment, with a special note for a number of currency futures contracts and certain
cash-settled commodities contracts, including cash-settled ethanol fuel futures
contracts. Moreover, in 2011, additionally to certain products now being developed, we
will be focusing on the stock options market, regarding which we have plans for a
market maker program, and on products for the real estate market and the
commodities markets.
Technology developments
BM&FBOVESPA aims to offer prime information technology resources and services to
customer market participants and investors. To this end, we invested in 2010 an
aggregate of R$219.3 million, in a number of projects. The discussion below highlights
the main projects on whose implementation we have been working:
New trading platform. In the first half of 2010, consistent with our partnership
agreement with the CME Group, we have started the joint development of a multi-asset
class trading platform for the trading of equities, derivatives, fixed income securities
and other exchange-traded or OTC-traded assets, which is set for phased
implementation over the course of the coming year, as it will ultimately replace the four
existing trading systems.
New data centers. As a result of the 2008 exchange integration process that combined
BM&F and Bovespa we absorbed four data centers, meaning the primary and backup
centers of each exchange. We are now in the process of reorganizing and streamlining
our technology infrastructure, for which purpose we have planned two new data
centers that will be more efficient, provide heightened security features and offer
greater capacity than the existing ones they are set to replace, and should thus better
support our strategic growth plan. Construction of our new primary data center will
begin in 2011 and is scheduled to end in the second half of 2012, whereas since June
2010 our new backup data center is located at a leased hosting facility.
New DMA models for the Bovespa segment. In August 2010 the CVM authorized, and
in September 2010 we launched three other Direct Market Access connection models,
i.e., DMA via Provider, via Direct Connection and via Co-Location Arrangements (which
we call DMA models 2, 3 and 4), which for their efficiency should attract more
sophisticated investors to the Brazilian equities markets.
Expansion of throughput capacity. High throughput capacity and scalability to support
market growth and expansion in trading activities are key competitive strengths which
require us to invest continually in technology improvements. In the third quarter we
completed the expansion of throughput capacity in the BM&F segment (which climbed
to 400 thousand daily trades from 200 thousand previously), and in the fourth quarter
completed the implementation for the Bovespa segment, where throughput went up to
3.0 million daily trades from 1.5 million earlier.
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19
Partnership with Trading Technologies. As announced in April 2010, we agreed a
partnership with Trading Technologies International (TT), an independent software
vendor that develops high-performance trading software, including the
X-TRADER®
platform and front-end screen, their flagship order entry product. TT will have a server
connected to our data center under a co-location arrangement and the ability to
connect their customers to our trading systems.
Internationalization
Dated June 22, 2010, BM&FBOVESPA and the CME Group, Inc. executed the
transaction documents contemplated in a February 11 Term Sheet, which implement
our mutual global preferred strategic partnership. These documents include (i) a Share
Purchase Agreement whereby we will increase to 5% (from 1.8%) our ownership
interest in CME shares; (ii) a Technology Agreement contemplating the joint
development of a multi-asset class electronic trading platform; and (iii) a Preferred
Strategic Partnership Agreement whereby we agree to cooperate in identifying
strategic co-investment opportunities, including commercial partnerships with other
international exchanges, which operate equities and derivatives markets.
This partnership is entirely consistent with our internationalization strategy, which we
continue to pursue by seeking to attract new business to our markets through
additional agreements and partnerships, in addition to having restructured our
international representation offices and subsidiaries for this purpose.
Latin America. In December 2010 we entered into an agreement with the Santiago
Stock Exchange (Bolsa de Comercio de Santiago) contemplating our joint cooperation
in developing business, including a bilateral order routing arrangement, which we
expect to develop in 2011 and joint development of new markets and products.
Asia. Also in December 2010 we entered into a protocol of intent with the Hong Kong
Stock Exchange (Hong Kong Exchanges and Clearing Limited) contemplating a
partnership to allow for dual listing arrangements and facilitate access to both markets
by investors based in each of our countries.
2011 Projects
We should underline some of our highlight projects set to launch in 2011. One, named
Brazil Easy Investing, is a data feed and order routing software system developed in
partnership with Chi-X Global, a company specializing in electronic trading systems,
which software system is designed to convert stock quotes into different foreign
currencies in real time, and give foreign investors the ability to transmit orders to the
Brazilian exchange in their local currencies.
Two other projects under development stem from our partnership with the CME Group
and relate to listings of mini-sized futures contracts, including cash-settled soybean
futures contract and E-mini S&P 500 futures contract, whose final cash settlement
prices would be based on similar derivatives traded on the Chicago Mercantile
Exchange (CME). While further consideration still has to be given to these projects and
related details, they aim to give local investors the ability to bet on the Chicago price of
commodities and other derivatives that are regarded as global benchmarks for the
underlying.
Yet another project aims to develop the Bovespa Mais listing segment, which was
conceived especially to capture listings of small- and middle-sized companies and
could be quite an important stepping stone for these companies, in addition to
performing a meaningful role in our strategy to attract new listings to our markets.
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20
Integration of clearing facilities
We have taken during the year the first steps of a large project designed to integrate
our four clearing houses into a single clearing facility (equities, derivatives, spot FX and
fixed-income securities). Important milestones have already been reached, with the
unification of the operating codes of clearing members and of the collateral acceptance
system, creation of a single allocation system (permitting brokers to identify the
customer through a single system, regardless of market or type of transaction), which
we are set to implement in the first half of 2011, and finally the consolidation of our
customer information system, as the Investor E-Channel (Canal Eletrônico do
Investidor
), or CEI, will provide investors with information on both stocks and
derivatives. Implementation is set to be completed by 2012.
Operating Qualification Program, or PQO
In 2005 the Company established a quality certification program for brokerage firms
that operate in BM&F markets, which includes training and guidance on market
standards with the aim of strengthening their position as brokerage firms and market
participants, whereas ensuring sound market practices. Under the program, brokerage
firms are classed under any of five broker categories, as follows: "Web Broker," "Retail
Broker", "Agro Broker," "Carrying Broker"
and "Execution Broker." Each of these
categories implies adoption of a particular strategic approach to business. We grant
c
ertification seals to these brokerage firms based on our audits of a firms adherence to
both general and special quality standards. Brokerage firms are permitted to seek
qualification seals in any number of certification categories.
Now, this program has been extended also to securities brokerage firms that operate in
the stock market (Bovespa segment), with the aim of further developing skills and
standards, as these are the primary distributors of our products and services. Moving
forward we will thus be granting certification under a Bovespa Seal as well.
At December 31, 2010, we had granted certification to 90 brokerage firms that operate
in the BM&F segment, 10 of them under the
"Web Broker" seal, 19 under the "Retail
Broker" seal, 15 under the "Agro Broker" seal, 14 under the "Carrying Broker" seal
and
32 under the "Execution Broker" seal.
CORPORATE GOVERNANCE
We believe having an efficient corporate governance structure is a key factor of
BM&FBOVESPA
s success
and perpetuity as a market operator. Given that control is
widespread and the ownership structure comprises over 80 thousand local and foreign
shareholders, the largest of whom holds a 5.1% ownership interest in our shares of
stock, we believe it is crucial for us to have a corporate governance structure befitting
this diversified shareholder base, and capable of providing high standards of
transparency and accountability.
In addition, given our role as self-regulatory organization, charged also with exercising
market and participant oversight, we believe it is pivotal we ensure fairness is the
underpinning hallmark of our relations with all stakeholders. Moreover, in our role as
market managers and operators of clearing facilities, we are deeply concerned with
fulfilling our responsibility of properly managing systemic risk, for which purpose it is
essential that we keep sophisticated internal controls and efficient risk management
practices.
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21
Our corporate governance structure comprises a board of directors and management.
The board of directors is composed of a maximum of eleven directors. Our current
board, whose term of office is set to terminate by the time we hold our 2011 annual
shareholders meeting, is
made up of well-recognized and experienced professionals
highly knowledgeable of the markets in which we operate and the industry as a whole.
In addition, management is under responsibility of a board of five executive officers led
by the chief executive officer.
These two layers of management and corporate governance, as supported by advisory
committees and our internal departments, ensure our adopted principles of good
corporate governance and better recommended practices prevail.
Additionally, a number of specialist advisory committees assist the board of directors
and management in decision-making processes. Four specialist board advisory
committees have been established, i.e., an Audit Committee, a Nominations and
Corporate Governance Committee, a Compensation Committee, and a Risk
Committee. Moreover, we have established specialist advisory committees whose
responsibility is to assist the CEO and upper management, and market consulting
committees, which are composed of representatives of market participants and other
capital market entities.
Furthermore, BM&FBOVESPA shares trade on the Novo Mercado listing segment
(under ticker symbol BVMF3). Novo Mercado is the listing segment which adopts more
stringent corporate governance standards, including a requirement for issuance of
common shares only, and full tag along rights for all shares.
Internal Audit Department
Our internal audit team has the mission of providing our board, the audit committee and
management with independent, objective, impartial and timely assessment of the
effectiveness of our risk management practices, suitability of our internal controls and
level of compliance with rules and regulations applicable to our operations and those of
our subsidiaries, for this purpose adopting a systematic and disciplined approach. In
addition, as part of their responsibilities, the internal audit team monitors our
implementation of projects and action plans with the aim of continually improving our
processes and controls.
In 2010, based on a work plan approved by the Audit Committee, the internal audit
department carried out thorough assessments of our IT general controls system and
processes, and of our financial and accounting controls, central counterparty risk
controls, and those of the BM&F settlement bank. Going forward, the internal audit
department is set to perform an active role in the implementation of our new multi-asset
class trading platform, developed jointly with the CME Group, and will be crucial in
testing IT controls and assessing potentially ensuing risks for the organization.
Moreover, the audit office monitors employee activities to ensure compliance with our
policy for trading in BM&FBOVESPA securities and with our Code of Conduct,
reporting its findings to the Code of Conduct Committee.
Corporate Risk Department
With the aim of further improving the corporate governance structure, in July 2010 we
established a corporate risk department whose responsibilities encompass oversight of
internal activities. The corporate risk team reports to the risk committee (a board
advisory committee), which ensures the independence of functions related to corporate
risk management. This department analyzes, monitors and assesses risks intrinsic to
trading, information technology and strategic processes, evaluating the internal controls
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22
system from the standpoint of corporate risk, and continually monitors and measures
the quality of our risk management practices.
One of the primary projects in which the new department will be engaged over the
course of 2011 is the implementation of an integrated tool system for management of
corporate risk and auditing processes, which will provide us with automated generation
of measures and indicators from the interaction of our data base, reports and control
panels in their multiple dimensions.
Audit indicators
Supporting each of the internal audit and corporate risk departments, we created a
measurements department which is responsible for defining, developing, testing and
calculating performance indicators specifically for use in internal audit processes and
the auditing of market participants within the scope of our Operating Qualification
Program, or PQO. The adoption of the indicators should make for more streamlined
process and assessments on a rolling-period basis. Moving forward, the
measurements department will consolidate and widen use of this management tool.
OPERATIONAL RISK MANAGEMENT E INTERNAL CONTROLS
Information security policy
Consistent with the new information security management model implemented in 2009,
which adopted multiple controls, over the year the information security team
consolidated and improved on special workflow and automation tools adopted in
connection with these controls, including access privilege controls and security
monitoring within computer environments.
In addition, we implemented an information security awareness campaign and
implemented special training sessions for new employees, provided as part of their
integration process.
Improvements to internal controls
­
financial reports
Improvements to internal controls planned for 2010 were part of an action plan
designed within the scope of the exchange integration to ensure the efficiency and
reliability of financial processes conducted by the Company and subsidiaries.
Additional initiatives were also implemented to enhance internal controls and for
identification and review of information and process flows for proper integration to the
ERP system, in addition to an ERP workflow module for all purchases, hirings and
payments; new Budget and Management Information system, which provides more
detailed information through a more streamlined process; and the first stages of a
Costing by Activity system, which will provide us with information on contribution
margin by product.
Both implemented and ongoing projects aim for a quality internal controls structure,
which spurs gains in efficiency and provide increased assurance as to the accuracy of
both internal processes and those conducted with our customers and providers.
Central Counterparty risk
­
risk management
BM&FBOVESPA manages the following central counterparty clearing facilities
absorbed during the exchange integration process of BM&F and Bovespa: (i) equities
clearing house (formerly CBLC), (ii) derivatives clearing house, (ii) FX clearing house;
and (iii) clearing house for government bonds and debt securities. The Central Bank
considers these clearing facilities perform systemically material roles. They act as
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23
central counterparty (CPP) for the equities markets (including cash, forward options,
futures and securities lending markets), as well as for the derivatives market (including
futures, forward, options and swap markets), the spot forex market, the government
bonds markets (cash, forward and repo) and the private fixed-income securities market
(cash and securities lending markets).
The central counterparty clearing facilities are responsible for providing efficiency and
stability to the market by ensuring trades are properly cleared and settled. A CCP
interposes itself between counterparties to financial transactions, becoming the buyer
to the sellers and the seller to the buyers. Acting in the capacity of central counterparty,
our clearing houses absorb the risks of the counterparties in-between a trade
transaction and its clearing and settlement, carrying out multilateral activities for
financial settlement and clearing of securities and financial assets, in the event of
default resorting to certain safeguard mechanisms, or in extreme situations resorting to
our own net assets. In modeling and managing CCP risks, we focus on calculation,
controls and mitigation of credit risk intrinsic to clearing participants.
For proper risk mitigation, each clearing house has its own risk management system
and safeguard structure. These structures comprise the universe of mechanisms and
remedies a clearing house may resort to in order to cover losses from a participants
failed settlement. The key components of these safeguard structures include collaterals
deposited by market participants, often in the form of margin, plus special funds
intended to cover possible losses due to default and, in addition, co-liability undertaken
by broker and clearing agents regarding transactions they intermediate or clear.
Models adopted for margin calculation are stress-test based, meaning they are
designed to assess market risk taking into account not only recent historical volatility in
market prices, but also the possibility that unexpected events would imply behavioral
change in price movements or lead to atypical market moves.
The primary parameters we use in calculating margin are stress scenarios the Market
Risk Committee defines for risk factors that affect the prices of securities, futures
contracts and financial instruments traded on BM&FBOVESPA markets. Key risk
factors for stress testing include, among other things, the Brazilian real exchange rate,
the forward structure of the Brazilian fixed interest rate yield curve; the forward
structure of the Dollar-
denominated Brazilian yield curve ("
cupom cambial
"), the
Bovespa index and the cash market prices of stocks.
As of December 31, 2010, pledged collaterals amounted to an aggregate of
R$143,087.7 million, a 40.8% year on year increase from R$101,641.1 million
registered one year ago, which is due mainly to a 44.4% climb in collaterals for
transactions carried out within the scope of our derivatives clearing house, and
correlates with the upsurge volumes traded and in open positions of market
participants.
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24
Pledged collaterals
December 2010
December 2009
Clearing houses
(in R$ millions)
Equities clearing house
(1)
50,702.5
36,437.4
Stocks
25,809.8
17,208.3
Government bonds
22,749.9
15,665.7
Other collateral
(2)
2,142.7
3,563.3
Derivatives clearing house
87,534.7
60,605.5
Government bonds
76,979.3
53,754.9
Sureties and bank letters of guarantee
3,538.5
1,479.3
Other collateral
(2)
7,016.9
5,371.3
FX clearing house
3,921.7
3,766.1
Securities clearing house
(3)
928.8
832.1
Total collaterals
143,087.7
101,641.1
(1)
Clearing facility for stocks and private debt securities.
(2)
,,
Other collateral
includes private debt and international securities, fund shares, bank letters of guarantee and
sureties, gold and cash
.
(3)
Clearing facility for government bonds.
HUMAN RESOURCES
At end-2010, after 542 new hirings (468 employees and 74 interns), we had 1,384
employees and 78 interns. We adopt a multi-dimensional human resources
management model to assist us in creating an integrated process for contracting new
roles, developing new competencies and improving value-adding practices and
processes across our company. Key initiatives adopted in 2010 in support of this model
include action programs as (i) performance management, in line with our commitment
to meritocracy and personal development. The performance management process sets
the foundation for rewarding excellence; (ii) training and cross-training, as we believe
excellence entails an ongoing process of personal growth, the highlight being our
Leadership Journey program, which focuses on developing and strengthening job
mastery, professional development and leadership skills. In 2011 this program will
focus on transferring knowledge related to our new multi-asset class trading platform,
developed jointly with the CME Group; (iii) wellness and quality of life, as we believe
these issues impact on employee turnover. Our program aims to raise awareness to
the benefits of fitness, wellness and healthy work/life options, and to promote better
quality of life practices in all its dimensions, including leisure and entertainment, helping
employees manage the challenges of a career, achieve emotional balance and a
balanced way of life; and (iv) building and strengthening the BM&FBOVESPA culture,
as we believe that engaging both internal and external audiences in our vision, mission
and values will heighten and reinforce our leadership and imprint our particular brand of
attributes and ethical standards amongst the investing public and the Brazilian capital
markets.
OMBUDSMAN
Consistent with our original goal of enhancing the credibility and transparency of the
Brazilian capital markets, in 2010 the role of the Ombudsman took on a more proactive
and encompassing quality, and is performed in direct contact with audiences as diverse
as our shareholders and brokerage firms, regulatory entities and the investing public,
and all other stakeholders. In addition, moving forward the Ombudsman will be
appointed for two-year terms, and may be reappointed twice at most. In addition, in
2010 our Ombudsman service was awarded ISO 9001 quality certification.
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25
Call center service
A survey conducted by us to measure satisfaction with the quality of our call center
services representing 24.8% of the user universe, resulted in a 97.7% satisfaction rate.
MARKET POPULARIZATION - INVESTOR EDUCATION PROGRAMS
In September 2010 we launched our market popularization campaign named "Quer ser
sócio?
" ("Wanna be a partner?"), starred by former soccer champion Pelé, which
focuses primarily on educating future and potential retail investors through mass media
initiatives (including paid TV channels, free-to-air television and radio broadcasts, and
the Internet) designed to illustrate the dynamics of investing in the stock market
(www.quersersocio.com.br).
For support to our financial education and market popularization campaigns and
programs, we have developed a financial education infrastructure based on which the
following primary programs are ongoing:
Brazil's
National Financial Education Strategy (Estratégia Nacional de Educação
Financeira), or ENEF. Based on our sponsorship of this Brazilian government
program, we will be printing teaching material for distribution to 900 schools in a
variety of Brazilian states;
The Exchange Crowd (Turma da Bolsa). This is a program designed to provide
financial education to over 6.8 thousand enrolled children, whose website
registered over 91 thousand accesses;
BM&FBOVESPA Challenge (Desafio BM&FBOVESPA). This is a student contest
initiative aimed to educate young adult students about the capital markets and
build a savings and investment culture. Over 270 schools in the state of São Paulo
participate in this program. In addition, we recently launched a web version of the
contest, permitting students across Brazil to participate and access other financial
education programs.
Financial Education TV Show. This is a partnership with Cultura, a São Paulo
state-owned TV channel, which broadcasts TV shows for popularization of
concepts and principles on economics, management of personal finances,
investments and investment planning. According to a poll conducted by Ibope (a
media research and statistical organization) an audience of approximately 85
thousand households in the state of São Paulo and in excess of 95 thousand
viewers watch this financial education show. In addition, previous program episodes
are accessible online at the program website (www.tveducacaofinanceira.com.br),
which in the year was accessed by nearly 135 thousand persons;
Investment simulators. We have developed stock market and derivatives market
simulators for average citizens to test their knowledge of these markets
(http://www.bmfbovespa.com.br/pt-br/educacional/simuladores). The website has
registered over 895 thousand accesses;
BM&FBOVESPA Goes to You (BM&FBOVESPA Vai Até Você). This is a
program that seeks to reach its audience wherever it may be (in the corporate
environment, or in schools, universities, professional or commercial associations,
unions, and so forth) delivering to prospective retail investors targeted lectures on
investment alternatives offered by the Exchange. A total of 67 events have been
organized for audiences totaling 50 thousand persons.
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26
SUSTAINABILITY; Socially and Environmentally Responsible Investments
Our commitment towards sustainability is underpinned by the realization that our
Company has the key mission of
"
inducing, promoting and practicing socially and
environmentally responsible principles and investments, designed to promote
sustainable development.
" Our
2010 actions towards realizing these aspirations and
ensuring these values are built into our approach to business include the following:
The principal projects and programs we implemented over 2010 include:
Our first inventory of greenhouse gas emissions and energy use data, in
response to the Carbon Disclosure Project (natural resources dimension);
Application of our Corporate Sustainability Index (ISE) questionnaire, for an
internal sustainability diagnosis;
Adherence to the United Nations Principles for Responsible Investment and
participation in the PRI Brazil corporate engagement workgroup (corporate
governance and close relationships dimensions);
Launch of the Carbon Efficient Index (ICO2) (products and services
dimensions).

Private social investment
Over the year, in addition to restructuring our BM&FBOVESPA Institute, which going
forward will concentrate our work around established social actions originally initiated
by BM&F and Bovespa, we also created (in October 2010) an internal volunteer
program built around our Volunteer Gateway (
www.bvmfemacao.com.br
), in a
partnership with the V2V (Volunteer to Volunteer) social network. By year-end, 199
employees had adhered to the program and 32 take part in
the programs
steering
committee.

Programs and projects
Our social investing initiatives, developed through the BM&FBOVESPA Institute,
include the following:
BVS&A Socially Responsible Investment Exchange (Bolsa de Valores Sociais e
Ambientais)
. This is a pioneering program inspired in the operating model of a stock
exchange, which works as a hub for investors interested in making and advancing
socially and environmentally responsible investments, in particular through education
and community projects in search of sponsors and financing. In 2010 the program
raised R$643 thousand to finance 18 community-oriented and environmental projects.
Sports and Cultural Space (Espaço Esportivo e Cultural). Located in Paraisópolis, a
poor and overpopulated district in the city of São Paulo, this is a center for the practice
of sports and cultural and artistic activities by children and teenagers of the region. The
Space also offers a library with a catalog comprising over four thousand books. In
2010, 800 youngsters were enrolled in sports classes, cultural activities and
supplementary learning classes.
Job Training Association (Associação Profissionalizante BM&FBOVESPA). The
Association is committed to promoting social inclusion by investing in education actions
targeting lower income communities in São Paulo and Rio de Janeiro, so young adults
are given an opportunity to build on their capabilities and skills for a better future.
Programs offered by the Association include Building Employability Skills (Capacitação
para Empregabilidade
), Handyman (Faz Tudo) and Beauty Space (Espaço Beleza).
Over 250 young adults were benefited by these programs in São Paulo and Rio de
Janeiro in the year to December 2010.
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27
Philanthropy. Contributions made over the year to 69 nonprofit and anchor institutions
active in different sectors of the community totaled R$1.35 million.
BM&FBOVESPA Athletic Club
.
Our Company actively supports sports as a means of
social inclusion and for development and sponsorship of high-performance athletes, in
particular track and field athletes. Track and field athletics is very popular, permit us to
sponsor a number of athletes that otherwise might not have the opportunity, and have
positive impact on lower income communities. In addition, athletes the Club sponsors
include Marílson Gomes dos Santos two-time winner of the New York City Marathon
and three-time winner of the São Silvestre Street Run, as well as world No.1 pole
vaulter and Diamond League winner Fabiana Murer. In all, we sponsor a team of 111
track and field athletes. In 2011, the team won the Brazil Trophy, the Jogos Abertos do
Interior
(open track and field games), the Regional Track and Field Games, and the
Youth Olympic Games track and field silver medal.
BM&FBOVESPA Market Surveillance (BSM)
BSM is a not-for-profit and financially autonomous functional entity responsible for
performing market surveillance and oversight activities relative to the securities market,
ensuring market integrity. It has been organized and exists in accordance with the
principles and standards set forth in CVM Instruction 461/07, which governs regulated
securities markets. Accordingly, BSM performs activities that are supplementary to the
surveillance and oversight activities performed by the Brazilian Securities Commission,
or CVM.
Over the year BSM continued to pursue plans for enhanced market surveillance, more
streamlined processes and improvements to the regulatory and self-regulatory
instruments, for which purpose it has been working in close cooperation with regulatory
agencies and entities. The discussion below highlights some of these initiatives.
BSM has implemented a new surveillance method which uses statistical tools for
enhanced and more comprehensive analysis of transactions carried out in
BM&FBOVESPA
s trading systems
, issuing warnings on detecting signs of irregularity.
This has brought greater efficiency to
BSMs particular
analysis of certain transactions,
as our team now has the ability to better focus on inquiries and investigations.
BSM audits market participants. Started in 2010, our new audit plan includes important
improvements oriented towards verifying compliance with anti-money laundering and
concealment of assets law and regulations.
INDEPENDENT AUDITORS
Our Company and subsidiaries have retained PricewaterhouseCoopers to audit the
financial statements
The policy that governs the engagement of external audit services by us and our
subsidiaries is based on internationally accepted accounting principles, which preserve
service independence and include the following practices: (i) the auditors cannot hold
executive or managerial positions in the Company or its subsidiaries; (ii) the auditors
cannot perform operating activities in the Company or its subsidiaries which could
compromise the auditing function; and (iii) the auditors must be impartial in order to
avoid conflicts of interest and loss of independence, and must be objective in their
opinions and reports about the financial statements.
In the year to December 2010, the independent auditors and their related parties have
provided no audit-unrelated services to us.
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28
ARBITRATION COMMITMENT
The Company, its shareholders, directors, officers and fiscal council members (where
active) are required to settle by arbitration any and all disputes arising among them, or
related to, or arising from the application, validity, effectiveness, interpretation, violation
and effects of violation of the provisions of our Bylaws, the Brazilian Corporate Law
(Law No. 6.404/76, as amended), the rules issued by the Brazilian National Monetary
Council, the Central Bank of Brazil and the Brazilian Securities Commission (CVM), in
addition to other rules and regulations regarding the operation of the Brazilian capital
markets, including the Novo Mercado Listing Regulation, the Agreement for
Participation in the Novo Mercado, the Arbitration Regulation of the Market Arbitration
Chamber established by BM&FBOVESPA. Any such arbitration proceedings will be
conducted before an arbitration tribunal established in accordance with the Arbitration
Regulation of the Market Arbitration Chamber.
MANAGEMENT'S REPRESE
NTATION
Pursuant to the requirements set forth in CVM Instruction 480, Management represents
to have discussed, reviewed and agreed with the financial statements as of and for the
year ended December 31, 2010 and with the opinions expressed in the independent
auditors report
.
ADDITIONAL INFORMATION
This report focuses on a discussion and analysis of our 2010 operating and financial
performance, in addition to the main developments occurring over the year, and the
principal programs and actions implemented in the period. For additional information
about our Company and the markets we operate, you should read our Reference Form,
a CVM filing which is accessible through our website and that of the Brazilian
Securities Commission (CVM).
ACKNOWLEDGEMENTS
Finally, we wish to express our gratitude to employees for their commitment and
dedication throughout the year, and to providers, shareholders, market participants,
financial institutions and other stakeholders for their support over 2010.





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BM&FBOVESPA S.A. ­
Bolsa de Valores, Mercadorias
e Futuros
Parent Company BR GAAP and
Consolidated IFRS and BR GAAP
Independent Auditor's Report
on the Financial Statements at
December 31, 2010
(A free translation of the original in Portuguese)
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2
Independent Auditor's Report
on the Financial Statements
To the Board of Directors and Shareholders
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
We have audited the accompanying financial statements
1
of BM&FBOVESPA S.A. ­ Bolsa de Valores,
Mercadorias e Futuros ("Parent Company"), which comprise the balance sheet as at December 31, 2010
and the statements of income, comprehensive income, changes in equity and cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory information.
We have also audited the accompanying consolidated financial statements of BM&FBOVESPA S.A. ­ Bolsa
de Valores, Mercadorias e Futuros ("Consolidated"), which comprise the consolidated balance sheet as at
December 31, 2010 and the consolidated statements of income, comprehensive income, changes in equity
and cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory information.
Management's responsibility
for the financial statements
Management is responsible for the preparation and fair presentation of the Parent Company financial
statements in accordance with accounting practices adopted in Brazil, and for the Consolidated financial
statements in accordance with the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) and accounting practices adopted in Brazil, and for
such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with Brazilian and International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
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BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
3
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion on the Parent Company
financial statements
In our opinion, the Parent Company financial statements present fairly, in all material respects, the
financial position of BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros as at December 31,
2010, and its financial performance and cash flows for the year then ended in accordance with accounting
practices adopted in Brazil.
Opinion on the Consolidated
financial statements
In our opinion, the Consolidated financial statements present fairly, in all material respects, the financial
position of BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros and its subsidiaries as at
December 31, 2010, and their financial performance and cash flows for the year then ended in accordance
with the International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board (IASB) and accounting practices adopted in Brazil.
Emphasis of matter
As discussed in Note 2 to these financial statements, the Parent Company financial statements have been
prepared in accordance with accounting practices adopted in Brazil. In the case of BM&FBOVESPA S.A. ­
Bolsa de Valores, Mercadorias e Futuros, these practices differ from IFRS applicable to separate financial
statements only in relation to the measurement of investments in subsidiaries and affiliate based on equity
accounting, while IFRS requires measurement based on cost or fair value.
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BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
4
Other matters
Statements of value added
We also have audited the Parent Company and Consolidated statements of value added for the year ended
December 31, 2010, the presentation of which is required by the Brazilian corporate legislation for listed
companies, but is considered supplementary information for IFRS. These statements were subject to the
same audit procedures described above and, in our opinion, are fairly presented, in all material respects,
in relation to the financial statements taken as a whole.
São Paulo, February 17, 2011
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/O-5
Edison Arisa Pereira
Contador CRC 1SP127241/O-0
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BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros
Balance Sheet
(In thousands of reais)
(A free translation of the original in Portuguese)
Assets
Notes
12/31/2010
12/31/2009
1/1/2009
12/31/2010
12/31/2009
1/1/2009
Current assets
3,010,770
3,424,607
2,432,611
2,547,589
3,468,852
2,493,995
Cash and cash equivalents
4 (a)
103,148
46,746
40,921
104,017
50,779
40,227
Financial investments
4 (b)
2,731,324
3,257,365
2,263,590
2,264,408
3,295,356
2,322,515
Accounts receivable
5
50,052
39,042
104,481
51,399
40,205
105,169
Other receivables
6
12,253
21,598
5,955
12,917
22,656
8,419
Taxes recoverable and prepaid
104,997
51,143
9,539
105,843
51,143
9,540
Prepaid expenses
8,996
8,713
8,125
9,005
8,713
8,125
Non-current
19,410,211
17,212,509
17,333,713
20,086,386
17,368,987
17,455,485
Long-term receivables
478,878
746,476
927,406
1,216,812
958,993
1,094,616
Financial investments
4 (b)
331,676
378,537
468,892
1,066,920
585,648
629,945
Other receivables - net
6
626
626
6,647
2,827
4,626
11,432
Deferred income tax and social contribution
19
54,687
283,824
359,354
54,687
283,824
359,354
Judicial deposits
14 (g)
91,889
83,489
92,513
92,378
84,895
93,885
Investments
2,353,046
100,791
92,063
2,286,537
39,723
41,235
Interest in affiliates
7 (a)
2,248,325
-
-
2,248,325
-
-
Interest in subsidiaries
7 (a)
104,721
100,791
92,063
Investment property
7 (b)
-
-
-
38,212
39,723
41,235
Property and equipment
8
362,400
236,941
224,657
367,134
241,939
230,001
Intangible assets
9
16,215,887
16,128,301
16,089,587
16,215,903
16,128,332
16,089,633
Goodwill
16,064,309
16,064,309
16,064,309
16,064,309
16,064,309
16,064,309
Software and projects
151,578
63,992
25,278
151,594
64,023
25,324
Total assets
22,420,981
20,637,116
19,766,324
22,633,975
20,837,839
19,949,480
at December 31, 2010 and 2009
BM&FBOVESPA
Consolidated
The accompanying notes are an integral part of this Financial Statements.
4
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BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros
Balance Sheet
(In thousands of reais)
(A free translation of the original in Portuguese)
Liabilities and shareholders' equity
Notes
12/31/2010
12/31/2009
1/1/2009
12/31/2010
12/31/2009
1/1/2009
Current
1,220,283
958,946
709,931
1,416,204
1,142,074
876,297
Collateral for transactions
17
954,605
810,317
585,963
954,605
810,317
585,963
Earnings and rights on securities in custody
10
34,791
31,897
36,020
34,791
31,897
36,020
Suppliers
80,775
21,318
18,392
80,828
21,444
18,442
Salaries and social charges
63,177
42,525
20,288
64,351
43,237
20,806
Provision for taxes and contributions payable
11
23,683
24,404
21,091
23,981
24,616
21,280
Income tax and social contribution
2,586
886
-
5,576
3,697
2,652
Financing
Interest payable on debt issued abroad and loans
12
33,154
9,295
4,087
33,154
9,295
4,087
Dividends and interest on own capital payable
2,773
839
13,957
2,773
839
13,957
Other liabilities
13
24,739
17,465
10,133
216,145
196,732
173,090
Non-current
1,797,933
351,635
45,278
1,798,723
352,872
46,729
Debt issued abroad and loans
12
1,010,059
2,495
-
1,010,059
2,495
-
Deferred income tax and social contribution
19
732,074
300,930
-
732,074
300,930
-
Provision for contingencies and legal obligations
14
55,800
48,210
43,657
56,590
49,447
46,160
Other liabilities
13
-
-
1,621
-
-
569
Shareholders' equity
15
19,402,765
19,326,535
19,011,115
19,419,048
19,342,893
19,026,454
Capital and reserves attributable to shareholders of the parent
Capital
2,540,239
2,540,239
2,540,239
2,540,239
2,540,239
2,540,239
Capital reserve
16,662,480
16,492,260
16,432,624
16,662,480
16,492,260
16,432,624
Revaluation reserves
22,971
23,551
24,131
22,971
23,551
24,131
Statutory reserves
Revenue reserves
847,658
403,191
-
847,658
403,191
-
Treasury shares
(613,903)
(230,102)
(185,880)
(613,903)
(230,102)
(185,880)
Valuation adjustments
(88,680)
77,396
-
(88,680)
77,396
-
Additional Dividend proposed
32,000
20,000
200,001
32,000
20,000
200,001
19,402,765
19,326,535
19,011,115
19,402,765
19,326,535
19,011,115
Interest of non-controlling shareholders
-
-
-
16,283
16,358
15,339
Total liabilities and shareholders' equity
22,420,981
20,637,116
19,766,324
22,633,975
20,837,839
19,949,480
Consolidated
at December 31, 2010 and 2009
BM&FBOVESPA
The accompanying notes are an integral part of this Financial Statements.
5
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BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros
Statement of Income
Periods ended December 31, 2010 and 2009
(In thousands of reais, unless otherwise stated)
(A free translation of the original in Portuguese)
Notes
2010
2009
2010
2009
Gross operating revenues
2,082,349
1,651,002
2,102,554
1,672,894
Trading and/or settlement system - BM&F
722,065
534,189
722,065
534,189
Derivatives
701,545
513,185
701,545
513,185
Foreign exchange
20,427
20,849
20,427
20,849
Assets
93
155
93
155
Trading and/or settlement system - Bovespa
1,049,300
837,326
1,049,300
837,326
Negotiation ­ trading fees
737,074
605,244
737,074
605,244
Transactions ­ clearing and settlement
254,904
207,914
254,904
207,914
Other
20
57,322
24,168
57,322
24,168
Other operating revenues
310,984
279,487
331,189
301,379
Loans of marketable securities
49,443
32,989
49,443
32,989
Listing of marketable securities
44,392
39,549
44,392
39,549
Depository, custody and back office
88,263
72,167
88,263
72,167
Trading participant access
48,234
46,051
48,234
46,051
Vendors ­ quotations and market information
67,629
64,650
67,629
64,650
Commodity classification fee
3,898
4,304
3,898
4,304
Bolsa Brasileira de Mercadorias - trading fees and contributions
-
-
5,669
7,146
Banco BM&F - banking fees
-
-
8,043
8,290
Other
21
9,125
19,777
15,618
26,233
Deductions of revenue
(211,126)
(168,610)
(212,797)
(170,350)
PIS and COFINS taxes
(187,516)
(149,668)
(188,754)
(150,786)
Taxes on services
(23,610)
(18,942)
(24,043)
(19,564)
Net operating revenue
1,871,223
1,482,392
1,889,757
1,502,544
Operating expenses
(608,526)
(550,959)
(633,504)
(569,832)
Administrative and general
Personnel and related charges
(279,060)
(284,231)
(290,107)
(289,806)
Data processing
(98,074)
(98,672)
(101,690)
(102,596)
Depreciation and amortization
(53,010)
(40,598)
(54,818)
(42,396)
Outsourced services
(45,533)
(42,145)
(48,102)
(45,495)
Maintenance in general
(9,619)
(10,067)
(10,219)
(11,007)
Communications
(25,588)
(23,204)
(25,819)
(23,428)
Rents
(2,226)
(2,464)
(2,753)
(3,032)
Supplies
(2,619)
(2,409)
(2,690)
(2,510)
Promotion and publicity
(41,756)
(18,850)
(42,376)
(19,555)
Taxes
(12,413)
(1,940)
(12,784)
(2,323)
Board and committee members' compensation
(5,841)
(5,252)
(5,841)
(5,252)
Sundry
22
(32,787)
(21,127)
(36,305)
(22,432)
Equity in the results of subsidiaries
7
39,665
6,374
38,238
-
Financial results
23
287,406
245,216
298,024
253,862
Financial income
326,057
260,251
354,806
289,686
Financial expenses
(38,651)
(15,035)
(56,782)
(35,824)
Income before taxation of profit
1,589,768
1,183,023
1,592,515
1,186,574
Income tax and social contribution
19 (c)
(445,207)
(301,973)
(448,029)
(304,505)
Current
(2,586)
34,616
(5,408)
32,085
Deferred
(442,621)
(336,589)
(442,621)
(336,590)
Net income for the period
1,144,561
881,050
1,144,486
882,069
Attributable to:
Shareholders of the parent
1,144,561
881,050
1,144,561
882,069
Non-controlling interest
-
-
(75)
1,019
(1) Information relating to earnings per share are presented in Note 15(g)
BM&FBOVESPA
Consolidated
The accompanying notes are an integral part of this Financial Statements.
6
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BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros
Periods ended December 31, 2010 and 2009
(In thousands of reais)
(A free translation of the original in Portuguese)
BM&FBOVESPA
Consolidated
2010
2009
2010
2009
Net income for the quarter
1,144,561
881,050
1,144,486
882,069
Valuation adjustments
(166,076)
77,396
(166,076)
77,396
Mark to market of financial assets available for sale
(117,266)
117,266
(117,266)
117,266
Tax effects on mark to market of financial assets available for sale
39,870
(39,870)
39,870
(39,870)
Exchange variation on foreign investment in associate
(133,238)
-
(133,238)
-
Hedge of net investment abroad
59,547
-
59,547
-
Tax effects on hedge of net investment in a foreign operation
(20,246)
-
(20,246)
-
Reflex effect on other comprehensive income from overseas subsidiary
5,257
-
5,257
-
Total comprehensive income for the quarter
978,485
958,446
978,410
959,465
Attributable to:
978,485
958,446
978,410
959,465
Shareholders of the parent
978,485
958,446
978,485
958,446
Non-controlling interest
-
(75)
1,019
Statement of Comprehensive Income
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BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros
Statement of Changes in Shareholders' Equity
Periods ended December 31, 2010 and 2009
(In thousands of reais)
Revaluation
Statutory
Treasury
Aditional
Capital
reserve
Legal
reserves
shares
Valuation
Dividends
Retained
Non-controlling
Total
Notes
Capital
reserve
(Note 15(c))
reserve
(Note 15(d))
(Note 15(b))
Adjustments
Proposed
earnings
Total
interest
Equity
At January 1, 2009
2,540,239
16,432,624
24,131
-
-
(185,880)
-
200,001
-
19,011,115
15,339
19,026,454
Mark to market adjustment of financial assets available for sale
-
-
-
-
-
-
77,396
-
-
77,396
77,396
Realization of revaluation reserve - subsidiaries
-
-
(580)
-
-
-
-
-
-
(580)
(580)
-
Repurchase of shares
-
-
-
-
-
(75,125)
-
-
-
(75,125)
(75,125)
-
Disposal of treasury shares - exercised options
18
-
-
-
-
-
30,903
-
-
(20,859)
10,044
10,044
-
Recognition of stock option plan
-
59,636
-
-
-
-
-
-
-
59,636
59,636
-
Approval/Payment of additional dividends proposed
-
-
-
-
-
-
-
(200,001)
-
(200,001)
(200,001)
Net income for the period
-
-
-
-
-
-
-
-
881,050
881,050
1,019
882,069
-
-
Appropriation of net income:
-
-
Dividends
15(f)
-
-
-
-
-
-
-
-
(183,500)
(183,500)
-
(183,500)
Interest on own capital
15(f)
-
-
-
-
-
-
-
20,000
(273,500)
(253,500)
-
(253,500)
Constitution of statutory reserves
-
-
-
-
403,191
-
-
-
(403,191)
-
-
-
At December 31, 2009
2,540,239
16,492,260
23,551
-
403,191
(230,102)
77,396
20,000
-
19,326,535
16,358
19,342,893
Mark to market adjustment of financial assets available for sale
-
-
-
-
-
-
(77,396)
-
-
(77,396)
(77,396)
Exchange variation on foreign investment
-
-
-
-
-
-
(133,238)
-
-
(133,238)
(133,238)
Hedge of net investment
-
-
-
-
-
-
39,301
-
-
39,301
39,301
Reflex effect on comprehensive income related to overseas subsidiaries
-
-
-
-
-
-
5,257
-
-
5,257
5,257
Total other comprehensive income
-
-
-
-
-
-
(166,076)
-
-
(166,076)
(166,076)
Realization of revaluation reserve - subsidiaries
-
-
(580)
-
-
-
-
-
-
(580)
(580)
-
Repurchase of shares
-
-
-
-
-
(435,115)
-
-
-
(435,115)
(435,115)
-
Disposal of treasury shares - exercised options
18
-
(34,930)
-
-
-
51,314
-
-
-
16,384
16,384
-
Recognition of stock option plan
18
-
30,921
-
-
-
-
-
-
-
30,921
30,921
Approval/Payment of additional dividends proposed
15(f)
-
-
-
-
-
-
-
(20,000)
-
(20,000)
(20,000)
Effect of impairment reversal , net of tax
26
-
-
-
-
-
-
-
-
460,610
460,610
460,610
Restatement of reserves by reversal of AFS devaluation reserves
26
-
174,229
-
3,453
282,928
-
-
-
(460,610)
-
-
Net income for the period
-
-
-
-
-
-
-
-
1,144,561
1,144,561
(75)
1,144,486
-
Appropriation of net income:
-
Dividends
15(f)
-
-
-
-
(248,000)
-
-
-
(434,475)
(682,475)
(682,475)
Interest on own capital
15(f)
-
-
-
-
-
-
-
32,000
(304,000)
(272,000)
-
(272,000)
Constitution of statutory reserves
-
-
-
-
406,086
-
-
-
(406,086)
-
-
At December 31, 2010
2,540,239
16,662,480
22,971
3,453
844,205
(613,903)
(88,680)
32,000
-
19,402,765
16,283
19,419,048
Atributable to shareholders of the parent
Revenue reserves
background image
BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros
Periods ended December 31, 2010 and 2009
(In thousands of reais)
(A free translation of the original in Portuguese)
BM&FBOVESPA
BM&FBOVESPA
2010
2009
2010
2009
Cash flows from operating activities
Net income for the period
1,144,561
881,050
1,144,486
882,069
Adjustments for:
Depreciation and amortization
53,010
40,598
54,818
42,396
Profit on sale of property and equipment
(183)
382
(183)
382
Softwares and projects write off
4,802
-
4,802
-
Deferred income tax and social contribution
442,621
336,589
442,621
336,590
Equity in results of subsidiaries
(39,665)
(6,374)
(38,238)
-
Expenses related to the stock option plan
30,921
59,636
30,921
59,636
Interest expense
30,641
562
30,641
562
Variation in financial investments and collateral for transactions
21,617
(561,939)
(1,609)
(587,064)
Variation in taxes recoverable and prepaid
(53,854)
(41,604)
(54,699)
(41,603)
Variation in accounts receivable
(11,010)
65,439
(11,194)
64,964
Variation in other receivables
2,482
(26,701)
4,118
(25,457)
Variation in prepaid expenses
(283)
(588)
(293)
(588)
Variation in judicial deposits
(8,400)
9,024
(7,484)
8,990
Variation in earnings and rights on securities in custody
2,894
(4,123)
2,894
(4,123)
Variation in suppliers
59,457
2,926
59,386
3,001
Variation in provision for taxes and contributions payable
(721)
(15,661)
(635)
(15,638)
Variation in provisions for income tax and social contribution
1,700
886
1,879
1,045
Varition in salaries and social charges
20,652
22,237
21,114
22,431
Variation in other liabilities
7,324
8,004
19,461
25,922
Variation in provision for contingencies
7,590
4,553
7,143
3,287
Net cash provided by operating activities
1,716,156
774,896
1,709,949
776,802
Cash flows from investing activities
Receipt on sale of property and equipment
965
3,363
966
3,363
Payment for purchase of property and equipment
(164,508)
(66,280)
(164,548)
(66,393)
Payment by the acquisition of investments
(1,075,119)
-
(1,075,119)
-
Dividends received
20,112
7,969
20,112
7,969
Receipt on sale of assets held for sale
-
8,981
-
8,981
Capital increase in subsidiaries
(3,082)
(2,934)
-
-
Acquisition of softwares and projects
(107,180)
(28,792)
(107,180)
(28,792)
Net cash (used in) provided by investing activities
(1,328,812)
(77,693)
(1,325,769)
(74,872)
Cash flows from financing activities
Disposal of treasury shares - stock options exercised
16,384
10,044
16,384
10,044
Repurchase of shares
(435,115)
(75,125)
(435,115)
(75,125)
Variation in financing
(9,076)
7,141
(9,076)
7,141
Debt issued
1,069,406
-
1,069,406
-
Redemption of preferred shares
-
(2,293)
-
(2,293)
Payment of dividends and interest on own capital
(972,541)
(631,145)
(972,541)
(631,145)
Net cash used in financing activities
(330,942)
(691,378)
(330,942)
(691,378)
Net increase in cash and cash equivalents
56,402
5,825
53,238
10,552
Cash and cash equivalents at the beginning of the period
46,746
40,921
50,779
40,227
Cash and cash equivalents at the end of the period
103,148
46,746
104,017
50,779
-
Statement of Cash Flows
The accompanying notes are an integral part of this Financial Statements.
9
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BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros
Statement of Value Added
Periods ended December 31, 2010 and 2009
(In thousands of reais)
(A free translation of the original in Portuguese)
BM&FBOVESPA
Consolidated
2010
2009
2010
2009
1 - Revenues
2,082,349
1,651,002
2,102,554
1,672,894
Trading and/or settlement system
1,771,365
1,371,515
1,771,365
1,371,515
Other operating revenues
310,984
279,487
331,189
301,379
2 ­ Goods and services acquired from third parties
255,976
216,474
267,201
227,023
Operating expenses (a)
255,976
216,474
267,201
227,023
3 ­ Gross value added (1-2)
1,826,373
1,434,528
1,835,353
1,445,871
4 - Retentions
53,010
40,598
54,818
42,396
Depreciation and amortization
53,010
40,598
54,818
42,396
5 ­ Net value added produced by the company (3-4)
1,773,363
1,393,930
1,780,535
1,403,475
6 ­ Value added transferred from others
365,722
266,625
393,044
289,686
Equity in results of subsidiaries
39,665
6,374
38,238
-
Financial income
326,057
260,251
354,806
289,686
7 ­ Total value added to be distributed (5+6)
2,139,085
1,660,555
2,173,579
1,693,161
8 - Distribution of Value Added
2,139,085
1,660,555
2,173,579
1,693,161
Personnel and related charges
279,060
284,231
290,107
289,806
Board and committee members' compensation
5,841
5,252
5,841
5,252
Income tax, taxes and contributions (b)
Federal
644,947
453,425
649,378
457,458
Municipal
23,799
19,098
24,232
19,720
Interest and rents (c)
40,877
17,499
59,535
38,856
Interest on own capital and dividends
738,475
457,000
738,475
457,000
Constitution of statutory reserves
406,086
424,050
406,011
425,069
(b) Including: taxes, PIS, COFINS, ISS and income tax and social contribution (current and deferred).
(c) Including: rents and financial expenses.
-
-
(a) Operating expenses (excludes personnel, Board and committee members' compensation, depreciation, rents and taxes).
The accompanying notes are an integral part of this Financial Statements.
11
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13
(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
1
Operations
BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros (BM&FBOVESPA) is a publicly
traded corporation whose main objective is to invest in companies engaged in the following activities:
Management of organized markets of marketable securities, providing for the organization,
performance and development of free and open markets for the negotiation of any types of
securities or contracts, that have as reference or objective financial assets, indices, indicators,
rates, goods, currencies, energy, transportation, commodities and other assets or rights directly or
indirectly related to such assets, for spot or future delivery;
Maintenance of proper environments or systems for carrying out purchases, sales, auctions and
special operations involving marketable securities, securities, rights and assets, in the stock
exchange market and in the organized over-the-counter market;
Rendering services of registration, offset and settlement, both physical and financial, through an
internal agency or a company especially incorporated for this purpose, assuming or not the
position of central counterparty and guarantor of the definite settlement, under the terms of the
legislation in force and its own regulations;
Rendering services of central depository and fungible and custody of non-fungible goods,
marketable securities and any other physical and financial assets;
Providing services of standardization, classification, analysis, quotations, statistics, professional
education, preparation of studies, publications, information, libraries and software on matters of
interest to the Company and the participants of markets directly or indirectly managed by it;
Providing technical, administrative and managerial support for market development, as well as
carrying out educational, promotional and publishing activities related to its objective and to the
markets managed by it;
Performance of other similar or correlated activities explicitly authorized by the Brazilian
Securities Commission (CVM); and
Investment in the capital of other companies or associations, headquartered in Brazil or abroad, as
a partner, shareholder or member pursuant to the regulations in force.
BM&FBOVESPA organizes, develops and provides for the operation of free and open securities
markets, for spot and future delivery. Its activities are organized through its trading systems and
clearinghouses and include transactions with securities, interbank foreign exchange and securities
under custody in the Special System for Settlement and Custody (Selic) markets.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
14
BM&FBOVESPA develops technology solutions and maintains high performance systems, providing
its customers with security, agility, innovation and cost efficiency. The success of its activities
depends on the ongoing improvement, enhancement and integration of its trading and settlement
platforms and its capacity to develop and license leading-edge technologies required for the proper
performance of its operations.
Its subsidiary Bolsa Brasileira de Mercadorias is involved in the registration and settlement of spot,
forward and options transactions involving commodities, assets and services for physical delivery, as
well as the securities representing these products, in the primary and secondary markets.
With the objective of responding to the needs of clients and the specific requirements of its markets,
its wholly-owned subsidiary Banco BM&F de Serviços de Liquidação e Custódia S.A. provides its
members and its clearinghouses with a centralized custody service for the assets pledged as collateral
for transactions.
BM&F USA Inc., a wholly-owned subsidiary located in the city of New York (USA), with a
representative office in Shanghai (China) and a wholly-owned subsidiary in London
(BM&FBOVESPA (UK) Ltd. ­ constituted in the last quarter of 2009), represents BM&FBOVESPA
abroad through relationships with other exchanges and regulatory agents, as well as assisting in the
procurement of new clients.
2
Preparation and Presentation of the financial statements
This financial statements were approved by the Board of Directors of BM&FBOVESPA on February
17, 2011.
The financial statements have been prepared considering the historical cost basis and have been
adjusted to reflect financial assets classified as available for sale and financial assets (including
derivative instruments) measured at fair value through profit and loss.
The preparation of financial statements requires the use of critical accounting estimates and also the
exercise of judgment by management in the process of applying the accounting policies of
BM&FBOVESPA. Those areas that require higher degrees of judgment and have greater complexity,
as well as areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in Note 3 (v).
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
15
(a) Consolidated financial statements
The consolidated financial statements have been prepared and presented in accordance with
accounting practices adopted in Brazil, complemented by pronouncements, interpretations and
guidelines of the Accounting Pronouncements Committee (CPCs).
The consolidated financial statements were also prepared and are presented in accordance with
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board.
These are the first financial statements prepared in accordance with IFRS and CPCs by
BM&FBOVESPA. The main differences between accounting practices previously adopted in Brazil
(old BR GAAP) and CPCs / IFRS, including the reconciliations of equity and the statement income,
are described in Note 26.
The consolidated financial statements include the balances of BM&FBOVESPA and its subsidiaries,
as well as the special purpose entities, comprising the exclusive investment funds (CVM Instruction
408/2004), as presented below:
Stake %
Subsidiaries and controlled entities
Banco BM&F de Liquidação e Custódia S.A. ("Banco BM&F")
100.00
Bolsa Brasileira de Mercadorias
50.12
Bolsa de Valores do Rio de Janeiro ­ BVRJ ("BVRJ")
86.09
BM&F USA Inc.
100.00
Exclusive investment funds
Supremo Renda Fixa ­ Fundo de Investimento em Cotas de Fundos de Investimento
Bradesco Fundo de Investimento Multimercado Letters
(b) Individual financial statements
The individual financial statements of the parent have been prepared under accounting practices
adopted in Brazil issued by the Accounting Pronouncements Commitee (CPC) and are published
together with the consolidated financial statements.
In the individual financial statements (BM&FBOVESPA), the subsidiaries are recorded on the equity
method. The same adjustments are made both in the individual financial statements and consolidated
financial statements to achieve the same result and net assets attributable to controlling shareholders.
Accounting practices adopted in Brazil applicable to individual financial statements differ from IFRS
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
16
applicable to separate financial statements, only with respect to the valuation of investments in
subsidiaries and affiliates on the equity method, while IFRS would require cost or fair value.
3
Significant Accounting Practices
a. Consolidation
The following accounting policies are applied in preparing the consolidated financial statements.
Subsidiaries
Subsidiaries are all entities (including special purpose entities) in which BM&FBOVESPA has the
power to govern the financial and operating policies, generally accompanied by a participation of
more than half of the voting rights (voting capital). The existence and effect of potential voting
rights currently exercisable or convertible are considered when assessing whether
BM&FBOVESPA controls another entity. Subsidiaries are fully consolidated from the date on
which control is transferred to BM&FBOVESPA. Consolidation is discontinued from the date on
which control ends.
Intercompany transactions, balances and unrealized gains on transactions between group
companies are eliminated. Unrealized losses are also eliminated unless the transaction provides
evidence of impairment of transferred assets. The accounting policies of subsidiaries are altered
where necessary to ensure consistency with the practices adopted by BM&FBOVESPA.
Affiliates
Affiliates are all entities over which BM&FBOVESPA has significant influence but not control.
Investments in associates are recorded on the equity method and are initially recognized at the cost
of each purchase. BM&FBOVESPA's investment in associates includes goodwill identified on
acquisition, net of any accumulated impairment loss.
The share of BM&FBOVESPA in the post-acquisition profits or losses of associates is recognized
in the statement of income and its share in post-acquisition reserves changes is recognized in
reserves. The cumulative post-acquisition changes are adjusted against the carrying value of the
investment. When the share of BM&FBOVESPA in the losses of an associate equals or exceeds
its share in the associate, including any other receivables, BM&FBOVESPA does not recognize
further losses, unless it has incurred obligations or made payments on behalf of the associate.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
17
Unrealized gains arising from transactions between BM&FBOVESPA and its associates are
eliminated to the extent of the participation of BM&FBOVESPA in the affiliates. Unrealized
losses are also eliminated unless the transaction provides evidence of impairment of assets
transferred. The accounting policies of associates have been altered where necessary to ensure
consistency with the practices adopted by BM&FBOVESPA.
b. Revenue Recognition
Revenues from the Trading and/or settlement system are recognized upon the completion of the
transactions or the provision of service, under the accrual method of accounting. The amounts
received as annual fees, as in the cases of listing of securities and certain contracts of sale of
market information, are recognized pro rata on monthly over the contractual term.
c. Cash and cash equivalents
The balances of cash and cash equivalents for cash flow statement purposes comprise cash and
bank deposits.
d. Financial instruments
(i) Classification and calculation
The Company classifies its financial assets in the following categories: recorded at market value
through profit or loss, loans and receivables, held to maturity and available for sale. The
classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of the financial assets when they are first recorded.
Financial assets recorded at fair value through profit or loss
The financial assets recorded at fair value through profit or loss are financial assets held for active
and frequent trading or assets designated by the entity, when first recorded, as measurable at fair
value through profit or loss. Derivatives are also classified as held for trading and accordingly, are
recorded in this category. The assets in this category held for trading are classified as current
assets. Gains or losses arising from the fair value variations of financial assets recorded at fair
value through profit or loss are recorded in the statement of income in "financial results" for the
period in which they occur.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
18
Loans and receivables
These comprise loans granted and receivables which are non-derivative financial assets with fixed
or determinable payments, not quoted in an active market. Loans and receivables are included in
current assets, except for those with maturity of more than 12 months after the balance sheet date
(which are classified as non-current assets). The Company's loans and receivables comprise trade
accounts receivable and other accounts receivable. Loans and receivables are recorded at
amortized cost, based on the effective interest rate method.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives which are classified in this category or not
classified in any other. They are included in non-current assets, unless the management intends to
sell the investment within 12 months subsequent to the balance sheet date. Available-for-sale
financial assets are recorded at fair value. Interest on available-for-sale securities, calculated based
on the effective interest rate method, is recognized in the statement of income as financial income.
The amount relating to the fair value variation is recorded in shareholders' equity, in the Carrying
value adjustments account, and is realized in net income when the asset is sold or becomes
impaired.
Fair value
Fair values of investments with public quotations are based on current market prices. For financial
assets without an active market or public quotation, the Company determines fair value through
valuation techniques, such as option pricing models.
The Company evaluates, at the balance sheet date, if there is objective evidence that a financial
asset or a group of financial assets is deteriorated.
(ii) Derivative instruments and hedge activities
Initially, the derivatives are recognized at fair value on the date on which the derivative
agreement is signed and, subsequently, they are recalculated at their fair value, with the fair value
variations recorded in income, except when the derivative is recorded as a cash flow hedge.
(iii) Hedge of net investments
Any gain or loss on the hedging instrument related to the effective portion of the hedge is
recognized in equity. The gain or loss related to the ineffective portion is recognized immediately
in income as "other gains (losses), net".
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
19
Gains and losses accumulated in equity are included in the income statement when the foreign
operation is partially disposed of or sold.
e. Accounts receivable, other receivables and allowance for doubtful accounts
Accounts receivable are the amounts receivable for services in the normal course of activities of
the BM&FBOVESPA. If the deadline for receipt is equivalent to one year or less (or another
period that meets the normal cycle of BM&FBOVESPA), the accounts receivable are classified
as current assets. Otherwise, they are presented as noncurrent assets.
Accounts receivable are initially recognized at fair value less provision for doubtful debts
(PDD). In practice they are usually recognized at the invoice amount, adjusted for a provision if
necessary.
f. Prepaid expenses
Prepaid expenses mainly recognize amounts related to software maintenance contracts and
insurance premiums, which are amortized based on the terms of the contracts in force.
g. Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance, such as
goodwill.
Goodwill
Goodwill represents the positive difference between the amount paid and / or payable for the
acquisition of a business and the net fair value of assets and liabilities of the acquired subsidiary.
Goodwill from acquisitions of subsidiaries is recorded in "intangible assets". If the difference is
negative, representing a discount to fair value, it must record the amount as a gain in income at
the date of acquisition. Goodwill is tested annually for impairment. Goodwill is stated cost value
less accumulated impairment losses. Recognized impairment losses on goodwill are not reversed.
Goodwill is allocated to Cash Generating Units (CGUs) for purposes of impairment testing. The
allocation is made to the Cash Generating Units that should benefit from the business
combination from which the goodwill arose, and are identified according to the operating
segment.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
20
Software and projects
Software licenses acquired are capitalized and amortized over their estimated useful life, at the
rates described in Note 9.
Costs of software development or maintenance are expensed as incurred. Expenditures directly
associated with identifiable and unique software, controlled by the Company and which will
probably generate economic benefits greater than the costs for more than one year, are recognized
as intangible assets. Direct expenditures include remuneration of the software development team.
Expenditures for development of software recognized as assets are amortized using the straight-
line method over their useful lives, at the rates described in Note 9.
h. Step Acquisition of affiliate
The cost of an affiliate acquired in steps is measured by the total amount paid in each transaction.
The gains or losses previously recognized in comprehensive income, while classified as available
for sale, are reversed against the investment account to recompose the cost.
Goodwill is calculated at each step of acquisition as the difference between the acquisition cost
and the fair value of net assets in proportion to the interest acquired
.
The total book value of the investment is tested for identification of potential reduction in the
recoverable value, by comparing the carrying value with its recoverable amount (proceeds from
sale, net of sale cost or value in use, whichever is greater) when the requirements of the CPC
38/IAS 39 indicate that the investment can be affected, in other words, indicate some loss of
reduction to its recoverable amount.
i. Property and equipment
Recorded at cost of acquisition or construction. Depreciation is calculated on the straight-line
method and takes into consideration the useful economic life of the assets, at the rates listed.
Subsequent costs are included in the carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits will flow to the item and that
the cost of the item can be measured reliably. All other repairs and maintenance are recorded in
income, when incurred.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
21
j. Contingent assets and liabilities and legal obligations
The recognition, measurement, and disclosure of contingent assets and liabilities and legal
obligations comply with the criteria defined in CPC 25/IAS 37.
Contingent assets - These are not recorded, except when management has full control over
their realization or when there are secured guarantees or favorable decisions to which no
further appeals are applicable, such that the gain is almost certain. Contingent assets with
realization considered probable, where applicable, are only disclosed in the financial
statements.
Contingent liabilities - These are recognized based on a number of factors including: the
opinion of legal advisors; the nature of the lawsuits; similarity to precedents; the complexity
of the proceedings; and prior court decisions. They are recognized whenever the loss is
evaluated as probable, since this would give rise to a probable outflow of resources for the
settlement of the obligations, and the sums involved are measurable with sufficient reliability.
The contingent liabilities classified as possible losses are not recorded and are only disclosed
in the notes to the financial statements, and those classified as remote are neither recognized
nor disclosed.
Legal obligations ­ These result from tax lawsuits in which the Company is discussing the
validity or constitutionality of certain taxes and charges. These are fully recognized in the
financial statements, regardless of the assessment of their probability of success.
Other Provisions - Provisions are recognized when BM&FBOVESPA has a present
obligation, legal or constructive, as a result of past events, it is probable that an outflow of
resources is required to settle the obligation, and a reliable estimate of the amount can be
made.
k. Judicial deposits
Judicial deposits are monetarily restated and presented in non-current assets.
l. Other assets and liabilities
These are stated at their known and realizable/settlement amounts plus, where applicable, related
earnings and charges and monetary and/or exchange rate variations up to the balance sheet date.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
22
m. Impairment of assets
Assets that have an indefinite life, such as goodwill, are not subject to amortization and are tested
annually for impairment. The assets subject to amortization are reviewed for verification of
impairment whenever events or changes in circumstances indicate that the carrying value may not
be recoverable. An impairment loss is recognized by at the amount by which the asset's carrying
amount exceeds its recoverable amount. This latter amount is the higher of the fair value of an
asset less selling costs and the value in use. For purposes of evaluation of impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (Cash
Generating Units (CGU)). The non-financial assets, except goodwill, which has suffered
impairment are reviewed subsequently to analyze a possible reversal of the impairment at the date
of the report.
n. Leases
Leases of property and equipment in which the Company substantially assumes all ownership
risks and benefits are classified as financial leases. These financial leases are recorded as a
financed purchase, recognizing at the beginning of the lease a property and equipment item and a
financing liability (lease). Property and equipment acquired in finance leases are depreciated at
the rates defined in Note 8.
A lease in which a significant portion of the ownership risks and benefits remains with the lessor
is classified as an operating lease. Operating lease payments (net of all incentives received from
the lessor) are charged directly to results.
o. Employee benefits
(i) Pension obligations
The Company has no defined benefit plans. The Company offers its employees a defined
contribution plan and pays contributions on contractual or voluntary bases. Once the
contributions have been made, the Company has no obligations related to additional payments.
The regular contributions comprise net periodic costs for the period in which they are payable
and, therefore, are included in the personnel costs.
(ii) Share-based remuneration (stock options)
The Company offers to its employees and executives share-based remuneration plans, to be
settled in Company stock, according to which the Company receives services in consideration for
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
23
stock options. The fair value of options granted related to services to be provided is recognized as
an expense during the period in which the right is obtained, i.e., the period during which specific
vesting conditions must be met. On the date of the balance sheet, the Company revises the
estimated number of options which will vest and subsequently, recognizes the impact of the
change on initial estimates, if any, in the statement of income, with a contra-entry to the capital
reserve in shareholders' equity on a prospective basis.
(iii) Profit sharing
The provision is recorded as an accrual basis in accordance with the remuneration policy of the
BM&FBOVESPA
BM&FBOVESPA recognizes a liability and an expense for profit sharing based on a formula that
takes into account the profit attributable to shareholders after certain adjustments.
BM&FBOVESPA recognizes a provision where contractually obliged or where there is a past
practice that has created a constructive obligation.
p. Financing and Borrowing
Financing and borrowing are initially recognized at fair value, upon receipt of the funds, net of
transaction costs. Subsequently, the financing is presented at amortized cost, that is, plus charges
and interest in proportion to the period incurred ("pro rata temporis"). Any difference between the
funds raised (net of transaction costs) and the redemption value is recognized in the income
statement over the period of the loans, using the effective interest rate method.
q. Foreign currency translation
The items included in financial statements for each of the consolidated companies of
BM&FBOVESPA are measured using the currency of the primary economic environment in
which the company operates ("functional currency"). The quarterly information is presented in
Brazilian reais, which is the functional currency of BM&FBOVESPA.
The transactions with foreign currencies are translated into the functional currency, using the
exchange rates prevailing on the transaction dates or evaluation dates. The foreign exchange
gains and losses arising from the settlement of these transactions and of the translation, at the
exchange rates at the end of period, of assets and liabilities in foreign currencies, are recognized
in the income statement, except when deferred in equity as part of a hedge of net investment
abroad.
In the case of exchange variation of investments abroad, which have a functional currency
different from tha of BM&FBOVESPA, variations in the value of an investment arising solely
from exchange rate changes are recorded under "Asset Valuation Adjustment" in comprehensive
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
24
income of BM&FBOVESPA, and are only taken to income when the investment is sold or written
off. When applying the equity method, unrealized gains on transactions with subsidiaries and
associated companies are eliminated.
The exchange gains and losses on non-monetary financial assets related to shares of CME Group,
classified as available for sale until July 2010, are included in comprehensive income. After July
2010, the investment in CME Group was recorded on the equity method (Note 7) and the currency
effects are recognized in comprehensive income.
r. Taxes
The expenses of income tax and social contribution of the period comprise current and deferred
taxes. The income taxes are recognized in the income statement, except to the extent that they
relate to items recognized directly in equity or comprehensive income. In this case, the tax is also
recognized in equity or comprehensive income.
BM&FBOVESPA is a for-profit business corporation and accordingly its income is subject to
certain taxes and other contributions which are listed below.
Provisions for income tax, social contribution and other taxes are calculated at the rates presented
below:
Income tax
15.00%
Additional income tax
10.00%
CSLL
9.00%
PIS
1.65%
COFINS
7.60%
Banco BM&F de Serviços de Liquidação e Custódia S.A. calculates the contributions to PIS and
to COFINS at the rates of 0.65% and 4%, respectively, and CSLL at 15%.
The subsidiaries Bolsa Brasileira de Mercadorias and BVRJ are not-for-profit entities and
calculate the contribution to PIS at the rate of 1% on payroll.
Deferred taxes are calculated on income tax and social contribution losses and the temporary
differences between the tax calculation bases of assets and liabilities and the respective book
values in the financial statements.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
25
Deferred tax assets are recognized to the extent that it is probable sufficient future taxable profit
will be available to be offset by temporary differences and/or tax losses, considering projections
of future income prepared based on internal assumptions and future economic scenarios which
may, accordingly, undergo change.
Deferred tax liabilities are recognized in relation to all taxable temporary differences, that is,
differences that will result in taxable amounts in determining taxable profit (tax loss) of future
periods when the carrying amount of the asset or liability is recovered or settled.
Deferred income tax and social contribution are not recorded if it results from the initial
recognition of an asset or liability in a transaction other than a business combination, which, at
the time of the transaction does not affect the net income or the taxable income (tax loss). The
deferred income tax and social contribution are determined using tax rates (and tax laws) enacted,
or substantially enacted, at the balance sheet date, and should be applied when its deferred tax
asset is realized or when the deferred tax liability is settled.
s. Net income per share
For purposes of disclosure of earnings per share, the basic earnings per share is calculated by
dividing the net profit attributable to shareholders of the parent by the average number of
outstanding during the period. The diluted earnings per share is calculated similarly, except that
the quantities of outstanding shares are adjusted to reflect the additional outstanding shares with
potentially dilutive effects, due to the stock option plan (Note 16g), had been issued during the
respective periods.
t. Distribution of dividends and interest on capital
The distribution of dividends and interest on capital to shareholders of the Company is
recognized as a liability in the financial statements at year end, based on the Company's Bylaws.
Any amount above the minimum required is only accrued on the date it is approved by
shareholders at the General Assembly
u. Segment Report presentation
The report by operating segments is presented in a consistent manner with the internal report
provided to the management, which is responsible for the main operational and strategic
decisions of the Company.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
26
v. Critical accounting estimates and judgments
i.
Equity method of accounting
BM&FBOVESPA applies the equity method for its investments when it has the ability to
exercise significant influence over the operations and financial policies of the investee. The
consolidated net income includes our proportionate interest in the net income of the CME Group
(note 7). The judgment of BM&FBOVESPA regarding the level of influence over the
investment takes into account key factors such as the percentage of interest, representation on the
Board of Directors, participation in defining policies and business settings and material
transactions between the companies.
ii.
Impairment
Annually, BM&FBOVESPA performs tests of impairment, specifically related to goodwill and
fixed assets, according to the accounting policy described in note 3.l.
iiii.
Classification of financial instruments
BM&FBOVESPA classifies the financial assets in the categories of (i) measured at fair value
through profit or loss and (ii) available for sale. The classification depends on the purpose for
which the financial assets were acquired. Management determines the classification of financial
assets at initial recognition. The record of financial assets, starting with its original classification,
is described in Note 3.c.
ivi. Stock option plan
BM&FBOVESPA offers a stock option plan to its employees and executives. The fair value of
these options is recognized as expense over the period in which the right is acquired.
Management reviews the estimated amount of options that will achieve the conditions for
vesting and subsequently recognizes the impact of changes in initial estimates, if any, in the
statement of income, with an offset to the reserve account in equity, as shown in note 3(o).
4
Cash and Cash Equivalents and Financial Investments
a.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the following balances are being considered as
cash and cash equivalents:
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
27
BM&FBOVESPA
Details
12/31/2010
12/31/2009
01/01/2009
Banks - deposits in domestic currency
3,277
62
23,178
Banks - deposits in foreign currency
99,871
46,684
17,743
Total
103,148
46,746
40,921
Consolidated
Details
12/31/2010
12/31/2009
01/01/2009
Banks - deposits in domestic currency
3,622
160
21,824
Banks - deposits in foreign currency
100,395
50,619
18,403
Total
104,017
50,779
40,227
Cash and cash equivalents are held in domestic or outside first class financial institutions. Deposits in
foreign currency are primarily in U.S. dollars.
b.
Financial Investments
The breakdown of financial investments by nature and time to maturity is as follows:
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
28
BM&FBOVESPA
Details
Without
maturity
Up to 3
months
More
than 3
and up
to 12
months
More
than 12
months
and up
to 5
years
More
than 5
years 12/31/2010
12/31/2009
01/01/2009
Measured at fair value through profit and loss (3)
Financial investment funds (1)
1,676,725
­
­
­
­
1,676,725
1,518,855
1,260,807
Offshore deposits ­ interest-bearing
­
­
­
­
­
­
­
181,317
Securities purchased under resell agreements
­
­
935,617
­
­
935,617
1,015,439
292,321
Financial Treasury Bills
­
90
94,433 331,045
­
425,568
383,353
373,593
Shares
15,603
­
­
­
­
15,603
11,604
126
Other investments
8,230
586
40
631
­
9,487
11,079
46,012
1,700,558
676 1,030,090 331,676
-
3,063,000
2,940,330
2,154,176
Available for sale
CME Group Shares (2)
­
­
­
­
­
-
695,572
578,306
Total financial investments
1,720,558
676 1,030,090 331,676
-
3,063,000
3,635,902
2,732,482
Short term
2,731,324
3,257,365
2,263,590
Long term
331,676
378,537
468,892
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
29
CONSOLIDATED
Details
Without
maturity
Up to 3
months
More than 3
and up to 12
months
More than
12 months
and up to 5
years
More than 5
years 12/31/2010
12/31/2009
01/01/2009
Measured at fair value through profit and loss
Financial investment funds (1)
204,740
­
­
­
­
204,740
977,428
881,734
Offshore deposits ­ interest-
bearing
­
­
­
­
­
­
­
181,317
Securities purchased under
resell agreements
­
898,570
953,520
­
­
1,852,090
1,488,578
486,327
Financial Treasury Bills
­
4,901
171,819
1,057,798
1,011
1,235,529
644,407
736,442
National Treasury Bills
­
2,808
1,330
­
­
4,138
40,333
63,018
Shares
17,838
­
­
­
­
17,838
13,126
126
Other investments
8,256
586
40
8,111
­
16,993
21,560
25,190
230,834
906,865
1,126,709
1,065,909
1,011
3,331,328
3,185,432
2,374,154
Available for sale
CME Group Shares
­
­
­
­
­
-
695,572
578,306
Total financial investments
230,834
906,865
1,126,709
1,065,909
1,011
3,331,328
3,881,004
2,952,460
Short term
2,264,408
3,295,356
2,322,515
Long term
1,066,920
585,648
629,945
(1) Investments in funds that invest in quotas of other financial investment funds, the
portfolios of which mainly comprise investments in federal government bonds, securities purchased
under resell agreements and bank certificates of deposit and have the CDI as their profitability
benchmark. The balances presented in the table of BM&FBOVESPA also include the exclusive
investment funds which were consolidated in the financial statements according to the nature of the
portfolio.
The net assets of the exclusive investment funds included in the process of consolidation of the
quarterly information are: (i) Supremo Renda Fixa - FICFI - R$258,625 (R$ 364,792 at December 31,
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
30
2009; R$ 378,303 at January 1
th
2009), (ii) Bradesco FI Multimercado Letters - R$ 723,402 (R$
176,550 at December 31, 2009; R$ 1,154 at January 1
th
2009); (iii) Megainvest FIC FI Renda Fixa -
R$ 629,049.
The main investment funds that were not consolidated are detailed in the table below:
BM&FBOVESPA and
Consolidated
Fund
Bank
Details
31/12/2010
31/12/2009 01/01/2009
FIC Megainvest
Santander Exclusive fund that invests in
quotas of retail funds;
-
642,020
624,629
FIC Referenciado DI
Federal
Bradesco Retail fund that invests in quotas
of other investment funds;
204,669
335,177
151,890
FIC Bradesco 777
Bradesco Exclusive fund that invests in
quotas of other investment
funds;
-
-
104,735
(2) As from July 2010, the shares of CME Group started to be recorded on the equity method with the
reversal of the impairment, net of taxes, recorded against retained earnings (Note 7).
(3) The government bonds are held in custody at the Special System for Settlement and Custody
(SELIC), the quotas of investment funds are held in custody with their respective managers and the
shares are in the custody of BM&FBOVESPA's Equity and Corporate Debt Clearinghouse.
Classification
Considering the nature and objective of the Company and its financial investments, these are
classified as financial assets recorded at fair value through profit or loss, designated by management
when they are first recorded.
Fair value
The fair value of the main financial investments is calculated as follows:
Quotas of investment funds ­ fair value calculated based on the amount of the quota determined on
the last business day prior to the balance sheet date, as disclosed by the corresponding Manager.
Federal government securities ­ calculated based on the amounts and prices disclosed by the
Brazilian Association of Financial and Capital Market Institutions (ANBIMA) or, when these are
unavailable, on the price defined by management which best reflects the sales price, determined
based on information gathered from other institutions.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
31
Bank certificates of deposit (CDB) and securities purchased under resell agreements (guaranteed by
Federal Government Bonds) ­ calculated at amounts adjusted to the balance sheet date, based on
contractual interest, indexed to the CDI/Selic rate.
As directed by CPC40/IFRS7, financial assets at fair value through profit and loss, financial assets
available for sale and derivative financial instruments are classified as level 1, ie, have quoted prices
(unadjusted) in active markets.
Derivative financial instruments
The derivative financial instruments comprise One-Day Interbank Deposit Futures Contracts (DI1)
and are stated at their market values. These contracts are included in the exclusive fund portfolios
which were consolidated (Note 2) and are used to cover the fixed interest rate exposure, swapping the
interest rate to floating (CDI). Even though these derivatives are designed to provide protection,
hedge accounting is not adopted.
The net result from derivative transactions and the related financial instrument refers to the short
position contracts for future interest rates, with market value R$ 686 (R$ 396 on December 31,2009)
The DI1 contracts have the same maturity dates as the
preset position that
(fixed interest rate) to
which they are related.
Financial risk management policy
The Company's investment
policy
for the cash balance that favors alternatives with very low risk,
which translates into significant proportion of federal government securities in its portfolio, being
purchased directly, via repurchase agreements backed by government bonds and also through
exclusive and non-exclusive funds. Thus, in general, the BM&FBOVESPA has on principle directing
most of its applications in conservative financial assets, high liquidity and with sovereign risk, whose
overall performance is tied to the Selic rate / CDI
Sensitivity analysis
The table below presents a summary of the financial instruments' exposure classified by market risk
factors:
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
32
Risk Factors (Consolidated)
12/31/2010
12/31/2009
01/01/2009
Risk factor
Risk
Percentual
Percentual
Percentual
CDI
Falling CDI
99.35%
98.03%
98.68%
Fixed interest rate
Rising fixed rate
0.35%
1.27%
1.78%
USD
Falling dollar
0.05%
0.50%
1.37%
Gold price
Falling gold
0.25%
0.20%
0.20%
100.00%
100.00%
100.00%
Interest Rate Risk
This risk arises from the possibility that fluctuations in future interest rates for the corresponding
maturities could affect the fair value of the Company's transactions.
Floating-rate Position
As a financial investment policy and considering the need for immediate liquidity with the least
possible impact from interest rate fluctuations, the Company maintains its financial assets and
liabilities indexed to floating interest rates.
We present in the table below, as required by the CVM, the impacts of a range of 25% and 50% from
the likely scenario of the CDI rate, because it is the risk factor with greater exposure.
Effect on the Income Statement (scenario for 3 months)
Likely
Risk factor
-50%
-25%
Cenario
25%
50%
Financial
Investments
CDI/Selic
44,497
66,094
87,282
108,079
128,502
Index rates
CDI/Selic
5.51%
8.27%
11.03%
13.79%
16.54%
Fixed-rate Position
The Company has a portion of its financial investments bearing fixed interest rates with results in a
net exposure to fixed interest rates. However, in terms of percentage, considering the amounts
involved as presented in the table of Risk Factors (Consolidated), the effects on the portfolio are not
considered material.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
33
Exchange rate risk
This arises from the possibility that fluctuations in the exchange rates for the acquisition of services,
product sales and the contracting of financial instruments could have an impact on the related
domestic currency amounts.
In addition to the amounts payable and receivable in foreign currencies, the Company has third-party
deposits in foreign currency to guarantee the settlement of transactions by foreign investors and also
own funds in currency abroad. At December 31, 2010 the Company's net foreign currency exposure
amounted to R$1,820 (R$16,930 at December 31, 2009; R$ 30,165 at January 1
th
2009). Considering
the amounts involved, as presented in percentage terms in the table of Risk Factors (Consolidated),
the effects on the portfolio are not considered material.
Inflation index and gold position
Considering the amounts and percentages involved, as detailed in the table of Risk Factors
(Consolidated), the effects on the portfolio are not considered material.
5
Accounts Receivable
The breakdown of accounts receivable is as follows:
BM&FBOVESPA
Details
12/31/2010
12/31/2009
01/01/2009
Trading, other fees receivable
16,312
10,979
66,654
Annuity
4,477
2,719
1,746
Vendors ­ Signal broadcast
10,599
9,657
5,768
Trustee and custodial fees
17,585
10,383
4,184
Other accounts receivable
6,971
11,288
28,988
Provision for doubtful accounts
(5,892)
(5,984)
(2,859)
Total
50,052
39,042
104,481
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
34
Consolidated
Details
12/31/2010
12/31/2009
01/01/2009
Trading, other fees receivable
17,069
11,632
66,924
Annuity
4,477
2,719
1,746
Vendors ­ Signal broadcast
10,599
9,657
5,768
Trustee and custodial fees
17,585
10,383
4,184
Other accounts receivable
7,561
11,798
29,406
Provision for doubtful accounts
(5,892)
(5,984)
(2,859)
Total
51,399
40,205
105,169
The amounts presented above are primarily denominated in Brazilian reais, approximately 90% is
represented by receivables falling due within 60 days. On December 31, 2010, and the amounts over
90 days amounted to R$ 5,709.
Changes in allowance for credit losses:
2010
2009
Balance at January 1
th
5,984
2,859
Additions
2,701
4,552
Reversal
(2,793)
1,427
Balance at December 31
5,892
5,984
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
35
6
Other Receivables
Other receivables comprise the following:
BM&FBOVESPA
12/31/2010
12/31/2009
01/01/2009
Current
Advances to employees
1,457
959
203
Amounts receivable - related parties (note 16)
8,134
13,859
4,752
Receivable Dividends CME Group
-
3,333
-
Warehouse
1,527
1,293
-
Other
1,135
2,154
1,000
Total
12,253
21,598
5,955
Non-current
Receivable Sale of Property
-
-
4,045
Other
626
626
2,602
Total
626
626
6,647
Consolidated
12/31/2010
12/31/2009
01/01/2009
Current
Advances to employees
1,523
970
228
Linked Credits
557
1,776
1,778
Amounts receivable - related parties (note 16)
7,448
11,674
4,295
Receivable Dividends CME Group
-
3,333
-
Warehouse
1,527
1,293
-
Other
1,862
3,610
2,118
Total
12,917
22,656
8,419
Non-current
Brokers in liquidation
2,200
4,000
4,000
Receivable Sale of Property
-
-
4,045
Other
627
626
3,387
Total
2,827
4,626
11,432
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
36
(1) Balance of accounts receivable from brokers in liquidation, which considers the equity certificates
pledged by the debtor as collateral.
7
Investments
a. Investments in subsidiaries
Investments in subsidiaries comprise the following:
BM&F BOVESPA
Subsidiaries and
controlled entities
Adjusted
shareholders'
equity
Total comon
shares
Adjusted
net
income
% Stake
Investment
12/31/2010
Investment
12/31/2009
Investment
01/01/2009
Equity in
income
Accumulated
2010
Equity in
income
Accumulated
2009
Subsidiaries
Banco BM&F de
Liquidação e Custódia
S.A.
44,935
24,000
4,980
100
44,935
39,955
34,680
4,980
5,275
Bolsa Brasileira de
Mercadorias
15,983
405
-4
50.12
8,011
8,013
7,934
-2
79
Bolsa de Valores do Rio
de Janeiro -BVRJ
59,736
115
153
86.09
51,427
51,875
48,381
132
4,074
BM&F USA Inc.
348
1,000
-3,683
100
348
948
1,068
-3,683
-3,054
Affiliate
CME Group, Inc. (1)
33,424,138
66,793,000
699,126
5.08
2,248,325
-
-
38,238
-
Total
2,353,046
100,791
92,063
39,665
6,374
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
37
Summary of key financial information of subsidiaries and affiliates:
Description
Banco BM&F
Bolsa
Brasileira de
Mercadorias
Bolsa de Valores
do Rio de
Janeiro - BVRJ
BM&F USA
Inc
CME
Group, Inc.
Assets
241,183
17,849
61,109
758
58,391,812
Liabilities
196,248
1,865
1,372
410
24,969,613
Revenue
33,794
7,322
7,758
-
5,005,265
Changes in Investments:
Investiments
Banco BM&F
Bolsa Brasileira
de Mercadorias
Bolsa de Valores
do Rio de Janeiro -
BVRJ
BM&F
USA Inc
CME
Group, Inc.
Total
At January 1th 2009
34,680
7,934
48,381
1,068
-
92,063
Equity in results
5,275
79
4,074
(3,054)
-
6,374
Realization of the revaluation
reserve
-
-
(580)
-
-
(580)
Capital increase
-
-
-
2,934
-
2,934
At December 31, 2009
39,955
8,013
51,875
948
-
100,791
Acquisition of shares (1)
-
-
-
-
2,351,319
2,351,319
Equity
4,980
(2)
132
(3,683)
38,238
39,655
Exchange rate (2)
-
-
-
-
(133,238)
(132,238)
Reflex effect on affiliate
-
-
-
-
5,227
5,227
Realization of the revaluation
reserve
-
-
(580)
-
-
(580)
Capital increase
-
-
-
3,083
-
3,083
Dividends received
-
-
-
-
(13,251)
(13,251)
At December 31, 2010
44,935
8,011
51,427
348
2,248,325
2,353,046
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
38
(1)
As from July 2010, with the acquisition of a 3.2% interest in CME Group for the amount
of R$ 1,075,119, increasing the ownership interest from 1.78% to 5%, BM&FBOVESPA
began to recognize the investment on the equity method, because management
understands that the qualitative aspects of the relationship between the two companies
indicate the existence of significant influence of BM&FBOVESPA on CME Group. The
fair value of the investment at December 31, 2010, based on the market price of shares is
R$ 1,820,351. Additionally, the evaluation of the possibility of impairment by the method
of value in use has not indicated the existence of such losses
(2)
From July 2010, the BM & FBOVESPA conducted an operation to protect (hedge of net
investment) part of the exchange risk through the designation of a non-derivative
financial instrument (debt issuance abroad), as presented in Note 12
b. Investment Property
This category comprises by properties owned by the subsidiary BVRJ - Bolsa de Valores do Rio de
Janeiro and leased to others, which are depreciated according to the estimated useful lives of the
asset, in 50 years.
Consolidated
2010
2009
Balance at January 1th
39,723
41,235
Depreciation
(1,511)
(1,512)
Account Balance
38,212
39,723
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
39
8
Property and Equipment
BM&FBOVESPA
Buildings
Furniture
and fixtures
Apparatus
and
equipment Facilities
Telephone
system
Other
Construction
in progress
Total
At January 1
2009
Cost
174,663
27,392
190,486
25,064
18,006
41,923
26,560
504,094
Accumulated
depreciation
(86,920)
(15,001)
(128,470)
(13,681)
(16,479)
(18,886)
-
(279,437)
Net ammount
87,743
12,391
62,016
11,383
1,527
23,037
26,560
224,657
At December
31, 2009
Opening balance
87,743
12,391
62,016
11,383
1,527
23,037
26,560
224,657
Aditions
-
771
46,611
11,067
959
6,872
-
66,280
Disposal
-
(39)
(260)
(862)
(144)
(2,058)
-
(3,363)
Reclassification
32,407
8,406
(31,364)
(6,193)
(14,889)
17,845
(26,560)
(20,348)
Accumulated
Depreciation
(12,616)
(9,029)
(7,885)
3,628
14,453
(18,836)
-
(30,285)
Net Amount
107,534
12,500
69,118
19,023
1,906
26,860
-
236,941
At December
31, 2009
Cost
207,070
36,530
205,473
29,076
3,932
64,582
-
546,663
Accumulated
Depreciation
(99,536)
(24,030)
(136,355)
(10,053)
(2,026)
(37,722)
-
(309,722)
Net Amount
107,534
12,500
69,118
19,023
1,906
26,860
-
236,941
At December
31, 2010
Opening balance
107,534
12,500
69,118
19,023
1,906
26,860
-
236,941
Aditions
13,046
4,111
107,036
25,007
187
4,073
12,737
166,197
Disposal
(965)
-
-
-
-
-
-
(965)
Accumulated
Depreciation
422
(1,992)
(32,246)
(2,882)
(526)
(2,549)
-
(39,773)
Net Amount
120,037
14,619
143,908
41,148
1,567
28,384
12,737
362,400
At December
31, 2010
Cost
219,151
40,641
312,509
54,083
4,119
68,655
12,737
711,895
Accumulated
Depreciation
(99,114)
(26,022)
(168,601)
(12,935)
(2,552)
(40,271)
-
(349,495)
Net Amount
120,037
14,619
143,908
41,148
1,567
28,384
12,737
362,400
background image
(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
40
Consolidated
Buildings
Furniture
and fixtures
Apparatus
and
equipment
Facilities
Telephone
system
Other
Construction
in progress
Total
At January 1, 2009
Cost
177,000
27,874
191,301
26,095
18,006
44,534
26,561
511,371
Accumulated depreciation
(87,471)
(15,287)
(129,167)
(14,014)
(16,479) (18,952)
(281,370)
Net ammount
89,529
12,587
62,134
12,081
1,527
25,582
26,561
230,001
At December 31, 2009
Opening balance
89,529
12,587
62,134
12,081
1,527
25,582
26,561
230,001
Aditions
-
811
46,686
11,067
959
6,870
-
66,393
Disposal
-
(39)
(260)
(862)
(144)
(2,058)
-
(3,363)
Reclassification
32,407
8,406
(31,367)
(6,193)
(14,889)
17,661
(26,561)
(20,536)
Accumulated
Depreciation
(12,704)
(9,081)
(7,917)
3,525
14,453 (18,832)
-
(30,556)
Net Amount
109,232
12,684
69,276
19,618
1,906
29,223
-
241,939
At December 31, 2009
Cost
209,407
37,052
206,360
30,107
3,932
67,007
-
553,865
Accumulated
Depreciation
(100,175)
(24,368)
(137,084)
(10,489)
(2,026) (37,784)
- (311,926)
Net Amount
109,232
12,684
69,276
19,618
1,906
29,223
-
241,939
At December 31, 2010
Opening balance
109,232
12,684
69,276
19,618
1,906
29,223
-
241,939
Aditions
13,046
4,112
107,043
25,007
187
4,084
12,737
166,216
Disposal
(965)
(5)
9
(1)
-
(4)
-
(966)
Accumulated
Depreciation
336
(2,031)
(32,301)
(2,984)
(526)
(2,549)
-
(34,087)
Net Amount
121,649
14,760
144,027
41,640
1,567
30,754
12,737
373,102
At December 31, 2010
Cost
221,488
41,159
313,412
55,113
4,119
71,087
12,737
719,115
Accumulated
Depreciation
(99,839)
(26,399)
(169,385)
(13,473)
(2,552) (40,333)
- (351,981)
Net Amount
121,649
14,760
144,027
41,640
1,567
30,754
12,737
367,134
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
41
The review of the rates of useful lives of depreciation ICPC Technical Interpretation 10, was
performed for all property included in fixed assets in accordance with prospective effect as from
January
1
, 2010
.
The useful lives of assets were evaluated by a specialized company and in line with the Brazilian
Institute of Evaluations and Expert Engineering (IBAPE) and the ASA - American Society of
Appraisers
.
The table below represents the changes in annual rates of depreciation of fixed assets classified as
:
Previous
Actual
Buildings
4%
2.50%
Furniture and fixtures
10%
10%
Computer Related-Equipment
10 a 20%
10 a 25%
Facilities
10%
10%
Telephone System
10%
20%
Other
10% a 20%
11% a 33%
9
Intangible Assets
Goodwill
The goodwill of R$ 16,064,309 is based on expectations of future income and supported by an
economic of the appraisal and financial investment. The goodwill attributed to expected future
profitability is annually tested for impairment. The test, based on an appraisal report prepared by
experts, has not indicated the need for adjustments to the value of goodwill at December 31, 2010.
The assumptions adopted for the projection of future cash flows of BM&FBOVESPA, the
BOVESPA segment (cash-generating unit - CGU), were based on analysis of its performance in
recent years, the analysis and expectations of growth in its market, as well as expectations and
strategies of Directors.
The projected values are reported in nominal terms, that is considering future effects of inflation, and
operating cash flows were projected for the period December 1, 2010 through December 31, 2019.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
42
To calculate the residual value, we considered the present value of the perpetuity of cash flows of the
last projected year plus a constant nominal growth rate constant, equal to the expected growth of
Brazilian GDP, plus the inflation forecast.
The discount rate used to calculate the present value of projected cash flow, was 15.80% per year.
The macroeconomic assumptions used in the projections were from the Central Bank:
Macroeconomic assumptions
2010
2011
2012
2013
2014
GDP
7.54%
4.51%
4.50%
4.50%
4.50%
Inflation
(IPCA)
5.76%
5.20%
4.50%
4.50%
4.50%
Source: BACEN ­ Mediana at 11/30/2010.
Software and projects
The balance comprises costs for the acquisition and development of software and systems, with
amortization rates of 20% to 33% per year, and expenditures for the implementation and development
in progress of new systems and software.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
43
Consolidated
Goodwill
Cost of
software
development
Concluded
software
development
Software
Total
At January 1, 2009
Cost
16,388,730
22,800
-
80,548
16,492,078
Accumulated
Amortization
(324,412)
-
-
(78,024)
(402,436)
Net amount
16,064,318
22,800
-
2,524
16,089,642
At December 31, 2009
Opening balance
16,064,309
22,800
-
2,524
16,089,633
Additions
-
20,831
-
7,961
28,792
Reclassification
-
-
-
19,688
19,688
Amortization
-
-
-
(10,328)
(10,328)
Other
-
-
-
547
547
Net Amount
16,064,309
43,631
-
20,392
16,128,332
At December 31, 2009
Cost
16,388,730
43,631
-
108,744
16,541,105
Accumulated
Amortization
(324,421)
-
-
(88,352)
(412,773)
Net Amount
16,064,309
43,631
-
20,392
16,128,332
At December 31, 2010
Opening balance
16,064,309
43,631
-
20,392
16,128,332
Additions
-
38,721
-
68,459
107,180
Disposal
-
(4,802)
-
-
(4,802)
Amortization
-
(617)
(12,635)
(13,252)
Other
-
(13,619)
10,199
1,865
(1,555)
Net Amount
16,064,309
63,931
9,582
78,081
16,215,903
At December 31, 2010
Cost
16,388,730
63,931
10,199
179,068
16,641,928
Accumulated
Amortization
(324,421)
-
(617)
(100,987)
(426,025)
Net Amount
16,064,309
63,931
9,582
78,081
16,215,903
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
44
10 Earnings and Rights on Securities in Custody
These comprise dividends and interest on capital received on behalf of the owners of securities from
listed companies, which will be transferred to the custody agents and subsequently to their clients,
who are the owners of the shares.
11 Provision for Taxes and Contributions Payable
At December 31, 2010 and December 31, 2009, the breakdown of this balance was as follows:
BM&FBOVESPA
Details
12/31/2010
12/31/2009
01/01/2009
Withholding taxes and contributions payable
6,066
7,783
10,652
PIS/Cofins
15,490
14,471
8,904
ISS (Municipal service tax)
2,127
2,150
1,535
Total
23,683
24,404
21,091
Consolidated
Details
12/31/2010
12/31/2009
01/01/2009
Withholding taxes and contributions payable
6,209
7,838
10,700
PIS/Cofins
15,607
14,596
9,014
ISS (Municipal service tax)
2,165
2,182
1,566
Total
23,981
24,616
21,280
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
45
12 Issuance of Debt Abroad and Financing
On July 16, 2010 BM&FBOVESPA concluded the issuance of senior unsecured notes, with face
value of US$ 612 million, priced at 99.635% of nominal value, resulting in a net inflow of US$ 609
million (equivalent at the time to R$ 1,075,323). The interest rate is 5.50% pa, payable half-yearly in
January and July, and with the principal amount due on July 16, 2020. The effective rate was 5.64%
pa, which includes the issue discount and other costs related to issuance. The updated balance of the
borrowing on December 31, 2010 is R$ 1,041,025. The proceeds from the offering were used to
purchase shares of CME Group at that date.
The notes have an early partial or total redemption clause, at the Company´s option, at the greater of:
(i) principal plus interest accrued to date and (ii) interest accrued to date plus the present value of the
remaining cash flows, discounted by the rate applicable to U.S. Treasuries for the remaining term
plus 0.40% pa (40 basis points per annum).
As from the issue date, exchange rate effects on the principal amount of the debt will be considered as
a hedging instrument, in order to protect exchange rate risk on the portion equal to US$ 612 million
(notional) of the investment in CME Group Inc. (Note 7). Accordingly, the Company adopted net
investment hedge accounting in accordance with the provisions of CPC 38, preparing a formal
designation of the hedge documenting: (i) objective of the hedge, (ii) type of hedge, (iii) the nature of
the risk to be hedged, (iv) identification of the hedged item, (v) identification of the hedging
instrument, (vi) test of the correlation of the hedge and the hedged item (retrospective effectiveness
test) and (vii) the prospective effectiveness test.
For the retrospective effectiveness test, the company adopts the method of the ratio of accumulated
gains or losses on the debt to the gains or losses on net investment (Dollar Offset method on a
cumulative and spot basis). For prospective tests, the Company uses stress scenarios applied to the
hedged variable. The application of such effectiveness tests revealed no ineffectiveness on December
31,2010.
The fair value of debt, calculated with market data, is R$1,037,774 at December 31, 2010 (Source:
Bloomberg).
Additionally, the Company has financial leases of computer equipment. The balance at December 31,
2010 is R$ 2,975 (R$ 11,790 at December 31, 2009; at January 01, 2009 - R$ 4,087), maturing in
April 2011.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
46
13 Other liabilities
BM&FBOVESPA
Details
12/31/2010
12/31/2009
01/01/2009
Custody agents
4,413
4,108
3,825
Payable for repurchase of shares
6,470
-
-
Amounts payable - related parties (Note 16)
2,652
4,946
2,262
Third parties services
2,081
1,398
578
Preferred shares to settle (1)
1,839
1,839
4,132
Other
7,284
5,174
957
Total
24,739
17,465
11,754
Current
24,739
17,465
10,133
Non-current
-
-
1,621
Consolidated
Details
12/31/2010
12/31/2009
01/01/2009
Custody agents
4,413
4,108
3,825
Payable for repurchase of shares
6,470
-
-
Demand deposits (2)
50,373
35,468
30,619
Liabilities for securities purchased under resell
agreements (2)
141,988
144,513
130,608
Amounts payable - related parties (Note 16)
-
3,264
-
Outsourced services
2,239
1,398
512
Preferred shares to settle (1)
1,839
1,839
4,132
Other
8,823
6,142
3,963
Total
216,145
196,732
173,659
Current
216,145
196,732
173,090
Non-current
-
-
569
(1) Refers to the balance of the redemption of preferred shares and corresponds basically to amounts
outstanding of foreign investors.
(2)
Ammounts related to operations with Banco BM&F.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
47
14 Provisions and liabilities e contingent assets
a. Contingent assets
BM&FBOVESPA has no contingent assets recognized in its balance sheet, and at present no
lawsuits which are expected to give rise to future gains.
b. Contingent liabilities
BM&FBOVESPA and its subsidiaries are defendants in a number of labor, tax and civil lawsuits
which have arisen during their normal operating activities.
The lawsuits are classified by their probability of loss (probable, possible or remote), based on an
evaluation by the Company and its legal advisors, using parameters such as previous judgments
and the history of loss in similar suits.
The lawsuits in which the loss is evaluated as probable mainly comprise the following:
Labor claims mainly filed by employees of outsourced service providers, on account of
alleged noncompliance with labor legislation. There are also claims filed by former BVRJ
employees, specifically as regards to noncompliance with rules related to collective
bargaining agreements;
Civil proceedings, mainly consisting of matters pertaining to civil liability for losses and
damages.
Tax claims are mainly related to the incidence of PIS and Cofins on (i) the Company's
revenues and (ii) receipt of interest on equity.
c. Legal obligations
These are almost entirely proceedings in which BM&FBOVESPA seeks exemption from social
security additional contributions on payroll and payments to self-employed professionals, as well
as discussions over the legality of Labor Accident Insurance (SAT).
A provision for the amounts related to legal obligations is recorded in full.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
48
d. Changes in balances
The activity in provisions for contingencies and legal obligations may be summarized as follows:
BM&FBOVESPA
Civil
Labor
Legal
obligations
Tax
Total
At January 1, 2009
3,333
3,802
25,635
10,887
43,657
New provisions
-
502
2,802
-
3,304
Use of provisions
(9)
(100)
-
-
(109)
Reversals
-
(379)
-
-
(379)
Reassessment of contingent risks
(4)
(160)
(76)
(43)
(283)
Price-level restatement
351
443
247
979
2,020
At December 31, 2009
3,671
4,108
28,608
11,823
48,210
New provisions
64
1,428
3,163
-
4,655
Reversals
(25)
(463)
-
-
(488)
Reassessment of contingent risks
51
160
-
-
211
Price-level restatement
441
562
1,252
957
3,212
AtDecember31,2010
4,202
5,795
33,023
12,780
55,800
Consolidated
Civil
Labor
Legalobligations
Tax
Total
At January 1, 2009
3,900
5,421
25,635
11,204
46,160
New provisions
-
552
2,802
-
3,354
Use of provisions
(140)
(76)
-
-
(216)
Reversals
-
(379)
-
-
(379)
Reassessment of contingent risks
56
(1,542)
(76)
(43)
(1,605)
Price-level restatement
411
482
247
993
2,133
At December 31, 2009
4,227
4,458
28,608
12,154
49,447
New provisions
105
1,538
3,163
-
4,806
Reversals
(36)
(490)
-
-
(526)
Reassessment of contingent risks
(500)
80
-
-
(420)
Price-level restatement
449
610
1,252
972
3,283
At December 31 ,2010
4,245
6,196
33,023
13,126
56,590
According to the characteristic of provisions there is no cash disbursement forecast.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
49
e. Possible losses
The proceedings classified as a "possible loss" are so classified as a result of uncertainties
surrounding their outcome. They are lawsuits for which jurisprudence has not yet been defined or
which still depend on verification and analysis of the facts, or even involve specific aspects that
reduce the chances of loss.
BM&FBOVESPA and its subsidiaries have tax, civil and labor lawsuits involving risks of loss
classified by management as possible, based on the evaluation of their legal advisors, for which
no provision has been recorded. These proceedings comprise mainly the following:
Labor proceedings, mainly claims filed by employees of outsourced service providers, on
account of alleged noncompliance with labor legislation. The amounts related to the lawsuits
classified as possible at December 31,2010 are R$32,749 in the parent company (R$ 21,534
at December 31, 2009; R$ 6,926 at January 1, 2009) and R$34,609 on a consolidated basis
(R$ 23,047 at December 31, 2009; R$ 8,065 at January 1, 2009);
Civil proceedings mainly consist of matters pertaining to civil liability for losses and
damages. The total amount involved in the lawsuits classified as possible at December 31,
2010 is R$74,386 in the parent company and on a consolidated basis (R$ 64,474 at December
31, 2009; R$ 1,341 at January 1, 2009).
The majority of this amount is related to a possibility of the Company being required to
deliver shares of BM&FBOVESPA (surviving company of the merger with BM&F S.A.), in
an amount corresponding to the shares resulting from the conversion of the shares of a
commodities broker in the former BM&F, or indemnify the corresponding amount, if the
cancellation of the shares in the former BM&F is found to be illegal, as alleged by a
commodities broker in bankruptcy;
The tax proceedings of BM&FBOVESPA and its subsidiaries mainly involve a dispute over
the classification of exchanges as subject to the payment of social contributions. Most of
these amounts are related to two lawsuits filed by BM&FBOVESPA against the Federal
Government arguing that the Company was not subject to the payment of social contributions
prior to the 1999 fiscal year. The amount involved in the aforementioned proceedings as of
December 31, 2010 is R$ 45,085 (R$42,393 at December 31, 2009; R$55,797 at January 1,
2009). The total amount involved in tax proceedings classified as possible is R$70,141 in the
parent company and on a consolidated basis (R$65,388 at December 31, 2009; R$77,170 at
January 1, 2009).
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
50
f. Remote losses
BM&FBOVESPA, as successor of the former BOVESPA, and the subsidiary BVRJ are
defendants in an action for material damages and pain and suffering filed by Mr. Naji Robert
Nahas, Selecta Participações e Serviços SC Ltda. and Cobrasol - Companhia Brasileira de Óleos
e Derivados, on the grounds of alleged losses in the stock market sustained in June 1989. The
amount attributed to the cause by the plaintiffs is R$10 billion. In relation to the material
damages and pain and suffering claimed, the plaintiffs ask that BVRJ and BM&FBOVESPA be
sentenced in proportion to their responsibilities. On December 18, 2009, a sentence was
published in which the claims made by the plaintiffs were considered completely unfounded.
The Company and its legal advisors consider that the chances of loss in this lawsuit are remote.
BM&FBOVESPA received on November 29, 2010, an assessment notice from the Internal
Revenue Service of Brazil ("RFB"), demanding the payment of income tax (R$301,686 of
principal, plus fines and interest) and social contribution (R$108,525 of principal, plus fines and
interest) representing the amount of those taxes that, in the view of the RFB, BM&FBOVESPA
would have stopped collecting in the years 2008 and 2009 with respect to the amortization for tax
purposes of the goodwill generated upon the merger into the company of Bovespa Holding SA,
adopted at the General Assembly of May 8, 2008. BM&FBOVESPA had questioned the
assessment notice within the statutory period, and is awaiting judgment in the administrative
level. Based on the advice of his lawyers, BM&FBOVESPA considers that the risk of loss
associated with this procedure is remote and will continue to amortize, for tax purposes, this
goodwill, as provided by law.
g. Judicial deposits
BM&FBOVESPA
Consolidated
Details
12/31/2010
12/31/2009
01/01/2009
12/31/2010
12/31/2009
01/01/2009
Legal
obligations
33,023
28,563
25,635
33,370
28,563
25,635
Tax
54,103
50,673
62,854
54,103
51,005
63,171
Civil
2,096
1,949
1,872
2,095
1,949
1,872
Labor
2,667
2,304
2,152
2,810
3,378
3,207
Total
91,889
83,489
92,513
92,378
84,895
93,885
Of the total judicial deposits, R$33,099 (R$ 30,731 at December 31, 2009; R$ 44,485 at January
1, 2009) relates to one of the processes involving a dispute over the classification of exchanges as
subject to the payment of social contributions, classified as possible by management, as described
in "e" above. Given the existence of judicial deposits related to tax processes classified as of
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
51
possible loss, the amount of tax contingencies and legal obligations is lower than the total
deposits related to tax claims.
h. Law 11,941/09
In November 2009, the Company enrolled in the Tax Recovery Program, instituted by Law
11,941/09 and Provisional Measure (MP) 470/09, aimed at cash payment of the amount of R$
2,365, related to a portion of the amount disputed in the COFINS court case, and the amount is
deposited in escrow and constituted as probable liability contingency. The value of R$ 2,151 will
be converted to government revenue and R$214 will be recorded in favor of the Company,
representing a discount of 45% of arrears interest, as permitted by those laws. The provision
remains in effect until the approval of the request to cancel part of the application of the lawsuit,
because it is a condition for further discharge of the debt pursuant to the Tax Recovery Program.
15 Shareholders' equity
a. Capital
BM&FBOVESPA's capital is R$2,540,239, comprising 2,044,014,295 nominative common
shares with voting rights and no par value, of which 1,979,921,193 outstanding ordinary shares at
December 31, 2010 (2,004,766,312 at December 31, 2009.)
The Company is authorized to increase its capital up to the limit of 2,500,000,000 (two billion,
five hundred million) common shares, through a resolution of the Board, regardless statutory
amendment.
b. Treasury Shares
Share buyback program
In a meeting held on August 12, 2010, the Board of Directors approved a new Share Buyback
Program, aiming to maximize value creation for shareholders through an efficient management
of the capital structure
.
On December 16, 2010, the Board approved the extension of the Repurchase Program, which
now has the final date of June 30, 2011. The maximum amount of shares to be purchased is
60,000,000 common shares, representing 3.03% of total shares outstanding.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
52
The shares acquired under the Share Buyback Program will be canceled or used to fulfill the
exercise of the stock options by the beneficiaries of the Stock Option Plan of the
BM&FBOVESPA..
BM&FBOVESPA purchased shares between August 18, 2010 and February 1, 2011 respecting
the period of restrictions on trading as determined by CVM Instruction 358. During this period
the Company repurchased 48,520,000 shares, 31,950,000 in 2010 and 16,570,000 in 2011,
representing 80.87 % of the total in the program.
We present below the activity of treasury shares during the year:
12/31/2010
12/31/2009
01/01/2009
Opening balance
39,247,983
33,024,204
-
Shares acquired from dissident shareholders
-
-
4
Acquisition of Shares - Share Buyback Program 31,950,000
11,494,800
34,191,200
Sold shares ­ stock options(Note19)
(7,104,881)
(5,271,021)
(1,167,000)
Ending balance
64,093,102
39,247,983
33,024,204
Average cost of treasury shares (R$)
9,578
5,863
5,628
Value of treasury shares
613,903
230,102
185,880
Market value of treasury shares
841,542
480,788
198,806
c. Revaluation reserves
Revaluation reserves were established as a result of the revaluation of works of art in
BM&FBOVESPA and of the property of the subsidiary BVRJ on August 31, 2007, based on
independent experts' appraisal reports.
d. Statutory reserves
Their purpose is to form funds and safeguard mechanisms required for the adequate development
of the activities of BM&FBOVESPA, assuring the proper settlement and reimbursement of losses
arising from the intermediation of transactions carried out in its auction systems and/or registered
in any of its trading, registration, clearing and settlement systems, and from custody services.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
53
e. Valuation adjustments
Have the purpose of recording the effects of (i) currency translation adjustments of the
investment in the CME Group, (ii) hedge accounting on net foreign investment, (iii) equity in
other comprehensive income of an affiliate and (iv) until June 30, 2010, effects of mark-to-
market adjustments of the shares of CME Group (Note 2b).
f. Dividends and interest on own capital
Pursuant to the bylaws, the shareholders are guaranteed interest on own capital or dividends,
based on the net income of the Company, adjusted under the terms of corporate law, at a
minimum percentage of 25%.
2010
2009
Net income
1,144,561
881,050
Legal Reserve(1)
-
-
Dividends calculation
1,144,561
881,050
Dividends
434,475
431,500
Interest on own capital
304,000
273,500
Deliberated during the year
738,475
705,000
Percentage of net income
64.5%
80.0%
1. Legal reserve not required on the basis of the aggregate value of capital reserves exceeds 30% of
the capital.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
54
Interest on own capital and dividends distributed are detailed below:
Description
Deliberation
pershare(gross)
(R$)
Totalamount
(gross)
Interest on own capital
RCABVMF - 05/12/2009
0.055931
112,000
Interest on own capital
RCABVMF - 08/11/2009
0.070653
141,500
Dividends
RCABVMF - 08/11/2009
0.016727
33,500
Dividends
RCABVMF - 11/10/2009
0.074888
150,000
Interest on own capital (1)
RCABVMF - 12/17/2009
0.009976
20,000
Dividends (2)
RCABVMF - 02/23/2010
0.123516
248,000
Total proposed/ deliberated during 2009
705,000
Interest on own capital
RCABVMF - 02/23/2010
0.014951
30,000
Interest on own capital
RCABVMF - 03/25/2010
0.029890
60,000
Interest on own capital
RCABVMF - 05/11/2010
0.068231
137,000
Interest on own capital
RCABVMF - 08/12/2010
0.022422
45,000
Dividends
RCABVMF - 08/12/2010
0.098957
198,600
Dividends
RCABVMF - 11/09/2010
0.119101
235,875
Interest on own capital (1)
RCABVMF - 12/16/2010
0.016156
32,000
Total proposed/ deliberated during 2010
738.475
1. In December 2010, the BM&FBOVESPA deliberated R$32,000 as interest on capital in excess of the
minimum required, which was paid on January 19, 2011 (December 2009 - $ 20,000 paid on January
8, 2010).
2. At the Annual General Assembly held on April 20, 2010, the shareholders approved the proposal for
payment in the amount of R$248,000, as a supplement to dividends for the year ended December 31,
2009.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
55
g. Earnings per share
BM&FBOVESPA
Basic
2010
2009
Numerator
Net income available to shareholders
1,144,561
881,050
Denominator
Weighted average of shares in circulation
2,000,777,767
2,002,462,000
Basic weighted earnings per share (in R$)
0.572058
0.439983
Consolidated
Diluted
2010
2009
Numerator
Net income available to shareholders
1,144,561
881,050
Denominator
Weighted average of shares in circulation
adjusted for the effects of stock option plans
2,014,463,310
2,019,853,324
Diluted weighted earnings per share (in R$)
0.568172
0.436195
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
56
16 Related Party Transactions
a. Transactions and balances with related parties
Assets/
(Liabilities)
Revenue/
(Expenses)
Descrição
12/31/2010
12/31/2009
01/01/2009
2010
2009
Bolsa de Valores do Rio de Janeiro - BVRJ
-
Accounts payable
(2,315)
(1,839)
(1,361)
Contribution on membership certificates
(475)
(475)
Banco BM&F de Serviços de Liquidação e
Custódia S,A,
Cash and cash equivalents
17
9
2,760
Accounts receivable
527
543
457
Foreign exchange operations
-
-
(831)
Recovery of expenses
153
3,549
-
5,402
5,898
Bolsa Brasileira de Mercadorias
Accounts receivable
Accounts payable
5
88
-
Minimum contribution on membership certificates
(337)
(157)
(70)
Recovery of expenses
(1,319)
(669)
115
295
BM&FBOVESPA Supervisão de Mercados
Accounts receivable
Recovery of expenses
452
1,257
-
2,570
2,419
CME Group
Expenditure operations
106
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
57
(Continnuing)
Assets/
(Liabilities)
Revenue/
(Expenses)
BM&FBOVESPA
12/31/2010
12/31/2009
01/01/2009
2010
2009
Mechanism of reimbursment of
losses
Accounts receivable
23
9
-
Accounts payable
-
(2,907)
-
Instituto BM&FBOVESPA
Accounts receivable
1
1,501
-
Accounts payable
-
(9)
-
Associação BM&F
Accounts receivable
6,947
6,901
4,295
Accounts payable
-
(9)
-
Other companies
Accounts receivable
25
11
-
Accounts payable
-
(25)
-
The main transactions with related parties are listed below and were carried out under the
following conditions:
BM&FBOVESPA pays a minimum fee to BVRJ and Bolsa Brasileira de Mercadorias as a
member of these associations.
BM&FBOVESPA, by request of Banco BM&F, Bolsa Brasileira de Mercadorias and
Associação BM&F, contracts companies specialized in providing information technology
services designed to support the activities of these entities and transfers the respective costs
incurred, in full, to the first two entities.
Banco BM&F entered into an agreement with BM&FBOVESPA which, in addition to granting
occupancy of a building owned by the latter, also establishes the utilization of its technology
infrastructure and also its personnel, with transfer of the corresponding costs.
BSM has entered into an agreement with BM&FBOVESPA for the transfer and recovery of
costs which establishes the reimbursement to BM&FBOVESPA of the net amount paid monthly
for expenses incurred in contracting resources and for the infrastructure made available to BSM
to assist in the performance of its supervisory activities.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
58
b. Remuneration of key management personnel
Key management personnel include Members of the Board, Executive Officers, the Head of
Internal Audit, the Director of Banco BM&F and the Director of Human Resources.
2010
2009
Management benefits
Short-term benefits (salaries, participation in results, etc,)
25,211
15,808
Post-employment benefits
12
49
Employment contract rescission benefits
614
10,228
Sharebased remuneration (1)
8,307
14,878
(1) Represents the expense calculated for the period in relation to the stock options granted to key
management personnel, which was recognized in accordance with the criteria described in Note 18.
17 Safeguard Structure
a.
Risk management
Credit risk - Performance of BM&FBOVESPA as a central counterparty (CCP) guarantor of
markets (Clearing)
BM&FBOVESPA manages four clearinghouses considered systematically important by the
Central Bank of Brazil, i.e. the Derivatives, Foreign Exchange and Securities Clearinghouses and
the Equity and Corporate Debt Clearinghouse (CBLC).
The activities carried out by the clearinghouses of BM&FBOVESPA are governed by Law
10,214, of March 27, 2001, which authorizes the multilateral clearing of obligations, establishes
the central counterparty role of the systemically important clearinghouses and permits the
utilization of the collateral obtained from the defaulting participants to settle their obligations in
the clearinghouse environment, including in cases of civil insolvency, composition with creditors,
intervention, bankruptcy and out-of-court liquidation.
Through these Clearinghouses, BM&FBOVESPA acts as a CCP in the derivatives market
(futures, forwards, options and swaps), in the equity market (spot, forwards, options, futures and
securities loans), the foreign exchange market (spot US dollar), the federal government bond
market (spot and forward transactions and securities loans) and private debt securities (spot and
securities loans). In other words, by assuming the role of a central counterparty,
BM&FBOVESPA becomes responsible for the proper settlement of trades carried out and/or
registered in its systems, as established in the regulations in force.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
59
The performance of BM&FBOVESPA as a central counterparty exposes it to the credit risk of
the participants that utilize its settlement systems. If a participant fails to make the payments due,
or to deliver the assets, securities and/or commodities due, it will be incumbent upon
BM&FBOVESPA to resort to its safeguard mechanisms, in order to ensure the proper settlement
of the transactions in the established time frame and manner. In the event of a failure or
insufficiency of the safeguard mechanisms of its Clearinghouses, BM&F BOVESPA might have
to use its own equity, as a last resort, to ensure the proper settlement of trades.
The BM&FBOVESPA Clearinghouses are not directly exposed to market risk, as they do not
hold net long or net short positions in the various contracts traded. However, the increase of price
volatility can affect the magnitude of amounts settled by the various market participants, and can
also heighten the probability of default by these participants. Furthermore, as already
emphasized, the Clearinghouses are responsible for the settlement of the trades of a defaulting
participant, which could result in losses for BM&FBOVESPA if the amounts due surpass the
amount of collateral available. Accordingly, despite the fact that there is no direct exposure to
market risk, this risk can impact and increase the credit risks assumed.
To mitigate the risks assumed, each BM&FBOVESPA Clearinghouse has its own risk
management system and safeguard structure. The safeguard structure of a Clearinghouse
represents the set of resources and mechanisms that it can utilize to cover losses relating to the
settlement failure of one or more participants. These systems and structures are described in
detail in the regulations and manuals of each Clearinghouse, and have been tested and ratified by
the Central Bank of Brazil, in accordance with National Monetary Council (CMN) Resolution
2,882/01 and BACEN Circular 3,057/01.
The main components of the safeguard structure of the Derivatives Clearinghouse are described
below:
Collateral deposited by derivatives market participants;
Joint responsibility for trade settlement by the brokerage house and clearing member which
acted as intermediaries, as well as the collateral deposited by these participants;
Operational Performance Fund, in the amount of R$1,162,122 (R$1,126,126 at December 31,
2009; R$1,145,908 at January 1
th
, 2009), formed by resources transferred by holders of
settlement rights at the Derivatives Clearinghouse (clearing members) and holders of full
trading rights, for the exclusive purpose of guaranteeing the operations;
Agricultural Market Trading Fund, in the amount of R$50,000 at December 31, 2010 and
2009, intended to hold resources of BM&FBOVESPA allocated to guarantee the proper
settlement of transactions involving agricultural commodity contracts;
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
60
Special Clearing Member Fund, in the amount of R$40,000 at December 31, 2010 and 2009,
formed by a capital transfer from BM&FBOVESPA., intended to hold BM&FBOVESPA
resources allocated to guarantee the proper settlement of transactions, regardless of the type
of contract;
Clearing Fund, in the amount of R$408,509 (R$378,113 at December 31, 2009; R$387,235at
January 1
th
, 2009), formed by collateral transferred by clearing members, intended to
guarantee the proper settlement of transactions after the resources of the two previous funds
have been used;
Special equity, in the amount of R$34,807 (R$31,678 at December 31, 2009; R$28.808
January 1
th
, 2009), in compliance with the provisions of Article 5 of Law 10,214, of March
27, 2001 and of Article 19 of Circular 3,057 of the Brazilian Central Bank, of August 31,
2001.
The main components of the safeguard structure of the Foreign Exchange Clearinghouse are
described below:
Collateral pledged by foreign exchange market participants;
Participation fund, in the amount of R$162,235 (R$154,056 at December 31, 2009;
R$140.584 January 1
th
, 2009), formed by collateral transferred by Clearinghouse participants,
intended to guarantee the proper settlement of transactions;
Operational Fund of the Foreign Exchange Clearinghouse, in the amount of R$50,000 at
December 31, 2010 and 2009, with the purpose of maintaining funds of BM&FBOVESPA to
cover losses resulting from operating or administrative failures;
Special equity, in the amount of R$34,848 (R$31,714 at December 31, 2009; R$28,808
January 1
th
, 2009), in compliance with the provisions of Article 5 of Law 10,214, of March
27, 2001 and of Article 19 of Circular 3,057 of the Brazilian Central Bank, of August 31,
2001.
The main components of the safeguard structure of the Securities Clearinghouse are described
below:
Collateral deposited by federal government bond market participants;
Operational Fund of the Securities Clearinghouse, in the amount of R$40,000 at December
31, 2010 and 2009, with the purpose of maintaining funds of BM&FBOVESPA to cover
losses resulting from operating or administrative failures of participants;
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
61
Special equity, in the amount of R$24,536 (R$22,373 at December 31, 2009; R$20,277
January 1
th
, 2009), in compliance with the provisions of Article 5 of Law 10,214, of March
27, 2001 and of Article 19 of Circular 3,057 of the Brazilian Central Bank, of August 31,
2001.
The main components of the safeguard structure of the Equity and Corporate Debt Clearinghouse
(CBLC) are described below:
Collateral deposited by CBLC's market participants;
Joint responsibility for trade settlement by the brokerage house and clearing member that
acted as intermediaries, as well as the collateral deposited by these participants;
Settlement Fund, in the amount of R$485,409 (R$322,268 at December 31, 2009; R$350.210
at January 1
th
, 2009), formed by collateral transferred by clearing members, intended to
guarantee the proper settlement of transactions;
Special equity, in the amount of R$37,210 (R$33.877 at December 31, 2009; R$30.374 at
January 1
th
, 2009), in compliance with the provisions of Article 5 of Law 10,214, of March
27, 2001 and of Article 19 of Circular 3,057 of the Brazilian Central Bank, of August 31,
2001.
The risk management policy adopted by the Clearinghouses is established by the
BM&FBOVESPA Market Risk Committee, in which BM&FBOVESPA officers participate,
including the Clearinghouses' Chief Officers, the Depositary Chief Officer and the Risk Chief
Officer, the Operations and IT Chief Officers, the Products Chief Officer, as well as the Risk
Management Officer and the Settlement Officer, among others. The main duties of the
Committee are (i) the evaluation of the macroeconomic and political environment and of its
impacts on the markets managed by BM&FBOVESPA. (ii) the determination of the models
utilized for calculation of collateral and for control of the intraday risk of the transactions
performed, (iii) the definition of parameters utilized by these models, especially the stress
scenarios referring to each type of risk factor, (iv) the assets accepted as collateral, their form of
valuation, maximum limits of use and applicable haircut factors, and (v) other studies and
analyses.
In view of the amounts involved, the collateral pledged by the participants who carry out the
transactions represents the most significant component of the Clearinghouse's safeguard
structures.
For most of the contracts, the amount required as collateral is calculated so as to cover the market
risk of the transaction, i.e. its price volatility, during the time frame of two days, which is the
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
62
maximum time expected for the settlement of the positions of a defaulting participant. This time
frame may vary depending on the nature of the contracts and assets negotiated.
The models utilized in the margin requirement calculation are based on stress testing, a
methodology that seeks to gauge market risk considering not only the recent historical price
volatility, but also the possibility of unexpected events that could modify the historical patterns of
prices and of the market in general.
The main parameters utilized by the margin calculation models are the stress scenarios, defined
by the Risk Committee for the risk factors that affect the prices of contracts and securities traded
at BM&FBOVESPA. Among the main risk factors are the Brazilian real/US dollar exchange rate,
the term structure of the local fixed interest rate, the term structure of the US dollar interest rate,
the Bovespa Index and the cash prices of shares, among others.
In the definition of stress scenarios, the Risk Committee utilizes a combination of quantitative
and qualitative analyses. The quantitative analysis is conducted with the support of statistical
models of risk estimation, such as the Extreme Value Theory (EVT), estimation of implied
volatilities, and GARCH family models, besides historical simulations. The qualitative analysis,
in turn, considers aspects related to the domestic and international economic and political
environments, and their possible impacts on the markets managed by BM&FBOVESPA.
Market risk - Investment of cash funds
Considering the importance of BM&FBOVESPA's equity as a last resource available in the
safeguard structure of its Clearinghouses, its investment policy emphasizes low risk cash
alternatives, normally federal government bonds, including exposure through exclusive and retail
investment funds. As a result, in general, there is a significant proportion of federal securities in
the portfolio of applications of BM&FBOVESPA, being purchased directly, via repurchase
agreements backed by government bonds and also through exclusive and non-exclusive
investment funds. Thus, in general, the BM&FBOVESPA has on principle directing most of its
applications in conservative financial assets, high liquidity and with sovereign risk, whose overall
performance is tied to the Selic rate / CDI
b.
Collateral for transactions
Transactions performed in the BM&FBOVESPA markets are backed by cash margin deposits,
government bonds and corporate securities, letters of credit and other financial instruments. At
December 31, 2010, the pledged collateral totaled R$143,087,657 (R$101,640,805 at December
31, 2009; R$125.676.805 at January 1
th
, 2009), as follows:
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
63
12/31/2010
12/31/2009
01/01/2009
Derivatives
Clearinghouse
Federal government
bonds
76,979,261
53,754,858
89,760,722
Letters of credit
3,538,492
1,479,341
3,690,835
Equities
4,934,328
3,351,593
2,678,991
Bank certificates of
deposit (CDBs)
1,150,998
1,307,762
2,161,736
Gold
105,958
60,865
319,831
Cash(1)
652,290
555,106
327,644
Other
173,340
95,938
108,008
Subtotal
87,534,667
60,605,463
99,047,767
Foreign Exchange
Clearinghouse
Federal government
bonds
3,855,147
3,766,090
3,550,223
Cash (1)
66,520
-
174,060
Subtotal
3,921,667
3,766,090
3,724,283
Securities
Clearinghouse
Federal government
bonds
928,786
832,125
1,423,484
Equity and Corporate
Debt Clearinghouse-
CBLC
Federal government
bonds
22,749,941
15,665,732
10,185,946
Equities
25,809,847
17,208,344
9,101,835
International bonds (2)
736,905
1,944,896
1,219,499
Bank certificates of
deposit(CDBs)
580,066
997,944
467,649
Letters of credit
448,054
296,442
239,625
Cash (1)
235,806
247,230
101,927
Other
141,918
76,539
164,790
Subtotal
50,702,537
36,437,127
21,481,271
Total
143,087,657
101,640,805
125,676,805
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
64
(1) The balance of collateral recorded in current liabilities refers to deposits in currency. The availability
of these funds is managed, and their utilization is dependent on the fluctuation of the required margin
balance.
(2) US and German federal government bonds, as well as ADRs (American Depositary Receipt).
c. Other information - Clearing Fund (Derivatives Clearinghouse)
This is formed by funds invested by the clearing members, with the exclusive purpose of
guaranteeing transactions, and may include bank letters of credit, government bonds and
corporate securities, cash, gold and other assets, at the sole discretion of BM&FBOVESPA.
Collateral represented by securities and other assets depends on prior approval from
BM&FBOVESPA.
The liability of each clearing member is joint and limited, individually. The Clearing Fund was
comprised as follows:
Composition
12/31/2010
12/31/2009
01/01/2009
Federal government bonds
354,256
314,304
324,980
Letters of credit
35,012
33,000
30,000
Bank certificates of deposit (CDBs)
14,700
20,200
18,560
Equities
4,541
6,634
7,763
Gold
-
2,925
1,928
Cash(1)
-
1,050
4,005
Amounts deposited
408,509
378,113
387,236
Amounts that ensure clearing member/trader
participation
(313,000)
(319,500)
(333,500)
Excess collateral
95,509
58,613
53,736
(1) The balance of collateral recorded in current liabilities refers to deposits in currency. The availability
of these funds is managed, and their utilization is dependent on the fluctuation of the required margin
balance.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
65
The minimum contribution for each clearing member is R$2,000, R$3,000 and R$4,000,
depending on whether this member is the holder of a type 1, type 2 or type 3 settlement right,
respectively, in the Derivatives Clearinghouse. In addition, each clearing member must contribute
R$500 per participant entitled to trade under their responsibility. The total amount deposited in
the Clearing Fund is R$408,509 (R$378,113 at December 31, 2009; R$387,236 at 1th January,
2009), while the remainder refers to the surplus of non-enforceable deposited collateral.
d. Operational Performance Fund (Derivatives Clearinghouse)
This fund is formed by resources transferred by holders of settlement rights in the Derivatives
Clearinghouse (clearing members) and holders of full trading rights, with the exclusive purpose
of guaranteeing transactions. These resources can take the form of bank letters of credit,
government bonds and corporate securities, cash, gold and other assets, at the sole discretion of
BM&FBOVESPA. Collateral represented by securities and other assets depend on prior approval
from BM&FBOVESPA.
The Operational Performance Fund presents the following position:
Composition
12/31/2010
12/31/2009
01/01/2009
Federal government bonds
921,678
859,804
863,451
Letters of credit
172,210
156,200
160,730
Bank certificates of deposit (CDBs)
52,801
81,310
98,683
Equities
15,358
20,098
17,647
FICBancoBM&F
-
1,781
4,177
Other
-
582
-
Cash (1)
75
6,351
1,220
Amounts deposited
1,162,122
1,126,126
1,145,908
(989,200)
(1,009,500)
(1,026,700)
Excess collateral
172,922
116,626
119,208
(1) The balance of collateral recorded in current liabilities refers to deposits in currency. The availability
of these funds is managed and their utilization is dependent on the fluctuation of the required margin
balance.
The minimum contribution for each clearing member is R$5,500, R$6,500 and R$7,500,
depending on whether this member is the holder of a type 1, type 2 or type 3 settlement right,
respectively, in the Derivatives Clearinghouse.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
66
The minimum contribution for each commodities broker is R$6,000 for holders of full trading
rights. The minimum contribution of the holders of full trading rights of interest rates, exchange
rates and Ibovespa is R$4,000. The minimum contribution for the holders of the trading rights of
other contracts settled in the Derivatives Clearinghouse is R$3,000.
The minimum contribution for each special operator is R$1,600 for the holders of full trading
rights and restricted trading rights of interest rates, exchange rates and Ibovespa. For the holders
of trading rights of other contracts settled in the Derivatives Clearinghouse, the minimum
required contribution is R$1,000.
e. Participation fund (Foreign Exchange Clearinghouse)
Formed by deposits, in assets and currencies, required for the authorization of participants in the
Foreign Exchange Clearinghouse. Their purpose is to guarantee performance of the obligations
assumed by them.
The Participation Fund presents the following position:
Composition
12/31/2010
12/31/2009
01/01/2009
Federal Government Bonds
162,235
154,056
140,584
f. Liquidation Fund of the of the clearing of stocks and fixed income (CBLC)
It consists of funds provided by the clearing agents CBLC, with the sole purpose of covering
losses arising from any default by the participants.
The Guarantor Fund presented the following position:
Composition
12/31/2010
12/31/2009
01/01/2009
Federal government bonds
485,409
322,261
190,629
Investments in exclusive funds, bonds and
repo transactions
-
-
159,580
Cash (1)
-
7
-
Amounts deposited
485,409
322,268
350,209
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
67
(1) The balance of collateral recorded in current liabilities refers to deposits in currency. The availability
of these funds is managed and their utilization is dependent on the fluctuation of the required margin
balance.
g. Guarantee funds and Mechanism for reimbursement
BM&FBOVESPA maintains a Guarantee Fund, in the form of a statutory reserve, in the amount
of R$92,342 for the sole purpose of assuring its clients that hold trading and settlement rights the
reimbursement of certain losses provided for in the regulations.
The subsidiaries Bolsa Brasileira de Mercadorias and Bolsa de Valores do Rio de Janeiro
(BVRJ) also maintain Guarantee Funds, special purpose entities without a legal status. The
maximum liability of these Guarantee Funds is limited to the sum of their net assets.
BSM also manages a Mechanism for Reimbursement of Losses, the sole purpose of which is to
assure reimbursement of loss to clients of brokerage firms that trade in BM&FBOVESPA upon
the occurrence of events determined in the regulation. The purpose of these funds is to assure
that their members' clients are refunded for losses resulting from errors in the execution of
orders accepted and from inadequate or irregular use of funds belonging to clients, under the
terms of CVM Instruction 461/07.
We present below a summary of the main accounting balances of these mechanisms:
12/31/2010
12/31/2009
01/01/2009
Guarantee Fund ­ Bolsa Brasileira de Mercadorias
792
735
681
Guarantee Fund ­ Bolsa de Valores do Rio de Janeiro
(2,468)
(1,358)
(2,276)
Mechanism for Reimbursement of Losses
280,447
255,700
176,875
18 Employee Benefits
Stock options ­ BM&F S.A. (Transferred to BM&FBOVESPA)
At the AGE held on September 20, 2007, approval was given for an option plan for shares issued by
BM&F S.A. for the purpose of "granting purchase rights on a number of shares, for recognition and
retention of the employees of BM&F S.A. and, subsequently, of the Company, after May 8, 2008, up
to a limit of 3% of the Company's capital stock".
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
68
The stock options granted under the stock option purchase plan of the extinct BM&F were assumed
by BM&FBOVESPA, as decided at the AGE of May 8, 2008.
On December 18, 2007, 27,056,316 stock options were granted under the plan with a fixed exercise
price of R$1.00 per share. Subsequent to this date, no further stock options were granted or vesting
conditions changed under this plan. During the period, some employees acquired the rights to
exercise their options as a result of their dismissal. The number of stock options that have not yet
vested at December 31, 2010 totaled 3,670,546 options which did not acquire the condition of vesting
yet.
The Plan was mainly devised to provide managers and employees of the former BM&F (i) with
consideration for services carried out by the beneficiaries during the period prior to the
demutualization process and also (ii) to retain professionals for a period of four years subsequent to
the approval of the Plan and IPO.
The main items used as a basis for acknowledging these services and for allocating the options
granted were:
(i)
Exercise price fixed at R$1.00;
(ii)
Right to exercise options even if the beneficiary is dismissed by the Company, as well as
on retirement, dismissal as a result of disability or death of the beneficiary;
(iii)
Number of years of service of each beneficiary;
(iv)
Different period for each exercise of options.
The Company recognized the expenses related to the stock options of employees that have not yet
vested, recognizing a total expense of R$19,843 during the period (R$35.134 at 2009). The Company
considered in this calculation an estimated turnover of 5%, i.e. the estimated number of options which
will not vest due to employees who opt to leave the Company.
Stock options ­ BM&FBOVESPA's Plan
On May 8, 2008, at the AGE of BM&FBOVESPA, approval was given to institute a stock option
plan within the authorized limit of 2.5% of the Company's capital, having as its main objective to
align the interests of shareholders with those of directors, managers, employees and service providers
who are considered strategic, and employees considered as talents of BM&FBOVESPA and its
subsidiaries.
On December 19, 2008, the first series of options was granted at an exercise price of R$5.174 per
share, corresponding to the average closing price of trading in the 20 days that preceded the date on
which the options were granted, observing the vesting periods for exercising the options. 4,531,850
stock options were granted, distributed equally on four vesting dates over a four-year period.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
69
Some employees that had stock options related to the series granted in 2008, acquired the rights to
exercise their options as a result of their dismissal. As a result of the acceleration of vesting in the
cases of dismissal, the Company recognized, during the period, the total expenses related to 962,050
stock options of the employees dismissed that otherwise would have been recognized in future
periods. At December 31, 2010, there are 1,618,694 stock options granted in 2008 that have not yet
vested.
On January 20, 2009, the Board of Directors approved the 2009 stock option program ("2009
Program"), which set the date of grant on March 1, 2009. The exercise price of $ 6.60 per share
corresponds to the average closing price of 20 trading days preceding the date of the grant program in
2009, as established in the plan approved in the shareholders General Assembly on 8 May 2008.
The 2009 program refers to the period from January 1, 2009 to December 31, 2009, the base period
for the performance assessments of the program beneficiaries.
At the meeting on December 17, 2009, the Board confirmed the allocation of individual stock options
within the 2009 program, according to the performance assessment of the Company and the
beneficiaries, in the total amount of 9,947,000 stock options, divided into four qualifying dates
(vesting).
Some employees who had stock options related to the series granted in 2009 had the right to exercise
their options at the time of their dismissal. As a result of the acceleration of the vesting period in the
cases of dismissal, BM&FBOVESPA recognized in the period all the costs related to 117,500 stock
options of terminated employees that would have been recognized in future periods. On December
31, 2010 there are 4,644,000 stock options granted in 2009 that have not yet vested.
As a result, the Company recognized expenses in the statement of income related to both grants of
this plan in the total amount of R$11,078 during the period (R$24,502 at 2009), with a counter-entry
to capital reserves in shareholders' equity. The Company considered in this calculation an estimated
turnover of 5%, i.e. the estimated number of options which will not vest due to employees who opt to
leave the Company or whose employment is terminated by the Company before achieving vested
rights to exercise the options.
Considering both programs, the Company has granted stock options corresponding to 0.67% of the
Company's capital (0.22% and 0.45%, respectively). The remainder 1.83% of the authorized limit
will be used to grant new series of stock options for the following years.
As the options are exercised by the employees, the Company will issue new shares, increasing its
capital, or use treasury shares.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
70
Granted Options
Plan
Grant
date
Vesting period up
to
Exercise
price (in
reais)
Granted
Exercised
during
previous
periods
Canceled
Exercised
during 2010
Ongoing
contracts in
12/31/2010
Fair value of
options on
grant date (in
reais)
BM&F S.A.
12/18/2007
12/18/2009
1.00
6,652,596
(4,077,396)
-
(2,506,200)
69,000
21,81
BM&F S.A.
12/18/2007
12/18/2010
1.00
6,329,396
(2,216,750)
-
(2,390,646)
1,722,000
21,54
BM&F S.A.
12/18/2007
12/18/2011
1.00
6,244,396
(2,216,750)
-
(357,100)
3,670,546
21,32
19,226,388
(8,510,896)
-
(5,253,946)
5,461,546
BM&FBOVESPA 12/19/2008
6/30/2009
5.174
1,132,966
(540,500)
-
(291,428)
301,038
3,71
BM&FBOVESPA 12/19/2008
6/30/2010
5.174
1,132,966
(233,675)
(28,225)
(441,887)
429,179
3,71
BM&FBOVESPA 12/19/2008
6/30/2011
5.174
1,132,959
(233,675)
(40,237)
(13,950)
845,097
3,71
BM&FBOVESPA 12/19/2008
6/30/2012
5.174
1,132,959
(233,675)
(40,237)
(13,950)
845,097
3,71
4,531,850
(1,241,525)
(108,699)
(761,215)
2,420,411
BM&FBOVESPA
3/1/2009
12/31/2009
6.60
2,486,750
-
-
(1,044,720)
1,442,030
2,93
BM&FBOVESPA
3/1/2009
12/31/2010
6.60
2,486,750
-
(79,500)
(30,000)
2,377,250
2,93
BM&FBOVESPA
3/1/2009
12/31/2011
6.60
2,486,750
-
(167,000)
(15,000)
2,304,750
2,93
BM&FBOVESPA
3/1/2009
12/31/2012
6.60
2,486,750
-
(182,000)
-
2,304,750
2,93
9,947,000
-
(428,500)
(1,089,720)
8,428,780
Total
33,705,238
(9,752,421)
(537,199)
(7,104,881)
16,310,737
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
71
Total options exercised during the period
As regards the plan transferred to BM&FBOVESPA, 5,253,946 options were exercised during the
period as follows:
BMF
Exercise Month
Average Market
Price (R$)
Quantity carried
January
13.17
1,168,600
February
12.51
424,600
March
11.84
680,500
April
11.78
261,300
May
11.55
211,000
June
11.85
1,500
July
11.76
7,500
August
13.18
306,900
September
14.13
24,000
October
14.14
131,500
November
-
-
December
12.80
2,036,546
Options exercised 2010
5,253,946
Options exercised 2009
4,127,596
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
72
As regards BM&FBOVESPA's plan, 1,850,935 options were exercised during the period as follows:
BM&FBOVESPA
Exercise Month
Average Market
Price (R$)
Quantity carried
January
13,07
90,213
February
12,51
108,252
March
11,76
122,748
April
11,82
213,195
May
11,55
143,750
June
11,97
80,000
July
11,94
245,119
August
12,99
207,101
September
13,84
323,205
October
14,37
176,026
November
13,65
29,376
December
12,90
111,950
Options exercised 2010
1,850,935
Options exercised 2009
1,143,425
Consolidated activity during the year
12/31/2010
12/31/2009
01/01/2009
Opening balance
23,952,817
19,374,938
19,226,388
Granted Options
-
9,947,000
4,531,850
Exercised Options
(7,104,881)
(5,271,021)
(4,383,300)
Canceled Optons
(537,199)
(98,100)
-
Ending balance
16,310,737
23,952,817
19,374,938
The percentage of capital dilution to which the current shareholders could be subject in the event that
all the options outstanding at December 31, 2010 are exercised is near to 0.82% (2009 ­ 1.16%).
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
73
Effects arising from the exercise of the options
Descripion
2010
2009
Amount received on share sales-Exercised Options
16,384
10,044
(-)Cost of treasury shares old
(51,314)
(30,903)
Effect on disposal of shares
(34,930)
(20,859)
Option Pricing Model
To determine the fair value of the options granted, the Company has taken into account the following
aspects:
a) The stock options that were granted by the Company allow the exercise in advance as from a
specific future date (vesting date) which is situated between the grant date and the option
expiry date;
b) The shares pay dividends between the grant date and the option expiry date.
Accordingly, these options present characteristics from the European model (exercise in advance is
not allowed) until the vesting date and characteristics from the American model (possibility of
exercise in advance) between the vesting date and the option expiry date. These options are known as
Bermuda or Mid-Atlantic type and their price must be between the price of a European option and the
price of an American option with similar characteristics. In relation to the dividend payment, there
are two impacts on the price of the option that should be taken into account: (i) the fall in share prices
after the dates on which they become ex-dividend and (ii) the influence of such payments on the
decision to exercise the option in advance.
Considering the aspects above, the Binomial method was used to determine the fair value of the
options granted. This method produces results which are equivalent to the results of the Black &
Scholes model for non-complex European options, having the advantage of being able to incorporate
the characteristics of an exercise in advance and the payment of dividends in relation to the stock
options considered.
The main assumptions considered in the options' fair value determination were:
a) The options were evaluated based on the market parameters effective on each of the grant
dates of the different plans;
b) To estimate the risk-free interest rate, the Company used the future interest contracts
negotiated for the maximum exercise period of each option;
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
74
c) The liquidity of the stock options, comprising the respective programs, was low on the grant
dates and accordingly the implied volatilities in these contracts are atypical and it would not
be feasible to use them for estimating volatility. In addition, since the Company was a
recently listed entity at the time the plans were granted, historical volatility does not provide
sufficient information on share volatility, considering the contractual term for exercising the
options. As a result, the Company used as a basis for estimating the volatility of its shares the
implied volatility of similar entities (international stock exchanges) over periods in which
liquidity was sufficient to guarantee the quality of the data gathered;
d) The share prices were adjusted in order to take into account the impact of dividend payments;
and
e) The maximum period for exercising the options granted was used to determine the maturity
of the options.
The remaining usual assumptions related to option pricing models, such as inexistence of arbitrage
opportunities and constant volatility over the period, were also considered in the calculation.
Pension plan
The private pension fund "Fundo de Pensão Multipatrocinado das Instituições do Mercado Financeiro
e de Capitais (MERCAPREV)" is structured as a defined contribution retirement plan and is
sponsored by the following entities: Adeval, Ancor, BM&FBOVESPA, Sindival and the brokerage
firms Theca, Souza Barros and Talarico. Contributions to the pension plan for the period ended
December 31, 2010 amounted to R$3,166 (2009 - R$2,830) by BM&FBOVESPA and for the
consolidated.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
75
19 Income Tax and Social contribution on Net Income
(a)
Deferred income tax and social contribution
The balance of deferred tax assets and liabilities is as follows:
BM&FBOVESPA
and Consolidated
Details
12/31/2010
12/31/2009
01/01/2009
Tax ,labor and civil contingencies
5,795
4,742
4,177
Tax loss carryforwards
34,125
35,285
35,036
Reduction in recoverable value of
investment shares in CMEGroup (2)
-
237,283
237,283
Goodwill amortisation(1)
-
-
76,702
Other Temporary differences
14,767
6,514
6,156
Total deferred tax assets
54,687
283,824
359,354
Goodwill amortization(1)
(702,371)
(257,216)
-
Exchange variation on foreign debt
issuance
(20,246)
-
-
Mark to Market on available for sale
-
(39,870)
-
Other
(9,457)
(3,844)
-
Total deferred tax liabilities
(732,074)
(300,930)
-
(1) Deferred tax assets recorded in December 2008 related to the impairment loss (R$ 697,893) derived
from the shares of CME Group classified as available for sale, as described in Note 26(a). After the
acquisition of an additional interest in the CME Group in July 2010, the impairment loss and its related
deferred charges were fully reversed against retained earnings, considering the reclassification to non
current assets (investment in associated company).
(2) Deferred income tax and social contribution liabilities arising from temporary differences between the
tax basis of goodwill and its carrying value on the balance sheet, considering that goodwill is still
amortized for tax purposes, but is no longer amortized as from January 1, 2009 in the accounting
records, resulting in a tax base smaller than the carrying value of goodwill. This temporary difference
may result in amounts to be added when calculating the taxable income of future periods, when the
carrying amount of the asset will be reduced or liquidated, thereby requiring the establishment of a
deferred tax liability
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
76
BM&FBOVESPA
and Consolidated
Deferred tax assets
Temporary
differences
Tax loss
Reduction in
recoverable value
- CME Group
Goodwill
amortization
and
contingencies
Total
At January 1, 2009
(6,156)
(35,036)
(237,283)
(80,879)
(359,354)
Transfer to liability
-
-
-
76,702
76,702
Debit(credit) on statement of Income
(358)
(249)
-
(565)
(1,172)
At December 31, 2009
(6,514)
(35,285)
(237,283)
(4,742)
(283,824)
Debit(credit) on statement of Income
(8,253)
1,160
-
(1,053)
(8,146)
Debit(credit) on statement of Changes in
Shareholders' Equity
-
-
237,283
-
237,283
At December 31, 2010
(14,767)
(34,125)
-
(5,795)
(54,687)
BM&FBOVESPA and
Consolidated
Deferred tax liability
Goodwill
amortization
Exchange
variation
on foreign
debt
issuance
Mark to
Market on
available for
sale assets
Other
Total
At January 1, 2009
-
-
-
-
-
Transfer from asset
(76,702)
(76,702)
Debit(credit) on statement of Income
333,918
-
-
3,844
337,762
Debit(credit) on statement of comprehensive income
-
-
-
-
Debit(credit) on statement of Changes in Shareholders'
Equity
-
-
39,870
-
39,870
At December 31, 2009
257,216
-
39,870
3,844
300,930
Debit(credit) on statement of Income
445,155
-
-
5,613
450,768
Debit(credit) on statement of comprehensive income
-
-
-
-
-
Debit(credit) on statement of Changes in Shareholders'
Equity
-
20,246
(39,870)
-
(19,624)
At December 31, 2010
702,371
20,246
-
9,457
732,074
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
77
(b)
Estimated realization period
The deferred income tax and social contribution assets arising from temporary differences are
recorded in the books taking into consideration the probable realization of these tax assets, based on
projections of future results prepared in accordance with and supported by internal assumptions and
future economic scenarios that may, accordingly, undergo change.
It is expected that deferred tax assets will be realized as follows: R$31,648 (2011), R$ 2,477 (2012) e
R$20,563 (2015). At December 31, 2010, the present value of the deferred tax assets amounts to
R$43,027.
As the income tax and social contribution taxable bases arise not only from the profit that may be
generated, but also from the existence of non-taxable income, non-deductible expenses, tax incentives
and other variables, there is no immediate correlation between the Company's net income and the
income subject to income tax and social contribution. Therefore, the expectation of the use of
deferred tax assets should not be used as the only indicator of future income of the Company.
The goodwill amount deductible in the income tax and social contribution calculation for tax
purposes amounts to R$11,092,942 at December 31, 2010.
The realization of the deferred tax liability will occur as the difference between the tax base of
goodwill and its carrying amount is reversed, that is, once the carrying value of goodwill in the
balance sheet is either reduced or liquidated.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
78
(c)
Reconciliation of the income tax and social contribution expense
The income tax and social contribution amounts presented in the parent company and consolidated
statements of income at nominal rates are reconciled as follows:
BM&FBOVESPA
2010
2009
Net income before income tax and social contribution
1,589,768
1,183,023
Income tax and social contribution before additions and exclusions
(540,521)
(402,228)
Additions:
(21,652)
(30,445)
Adjustments from Law 11,638/07
(10,513)
(20,276)
Non-deductible expenses
(11,139)
(10,169)
Exclusions:
116,846
95,157
Equity
13,486
2,167
Interest on own capital
103,360
92,990
Other(1)
120
35,543
Income tax and social contribution
(445,207)
(301,973)
Consolidated
2010
2009
Net income before income tax and social contribution
1,592,515
1,186,574
Income tax and social contribution before additions and exclusions
(541,455)
(403,436)
Additions:
(22,087)
(30,852)
Adjustments from Law 11,638/07
(10,513)
(20,276)
Non-deductible expenses
(11,574)
(10,576)
Exclusions:
116,361
92,990
Equity
13,001
-
Interest on onwn capital
103,360
92,990
Other(1)
(848)
36,793
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
79
Income tax and social contribution
(448,029)
(304,505)
(1) During the second quarter of 2009 there were recognized tax credits for income tax and social
contribution of R$35,503 relating to tax losses and negative basis of social contribution of the former
Bovespa Holding, untapped at the time of the merger on grounds of alleged limitation to use only 30%
of net income, The Company has reassessed this procedure during the second quarter of 2009 along
with its legal counsel, based on the understanding that this limitation would not apply to cases of
incorporation of the legal entity, because in these cases there is no continuity of the Company and
therefore does not exist limitations for the entire existing tax loss, Accordingly, the Company made the
recording of tax credits,
(d)
Transitional Tax System
Provisional Measure 449/08, converted into Law 11,941/09, introduced the Transitional Tax System
(RTT) for taxable income determination purposes, addressing the tax adjustments arising from the
new methods and accounting criteria introduced by Law 11,638/07, The Company declared its option
for the RTT when filing the Corporate Income Tax Return (DIPJ) for 2008, As a result of the option
to use the RTT, the income tax (IRPJ) and social contribution on net income (CSLL) payable for the
two-year period 2008-2009 will continue to be determined based on the provisions of Brazilian
Corporation Law in force at December 31, 2007, From 2010, the RTT is now mandatory and
consistent with the practices adopted in 2008 and 2009
20 Other income - Trading system and/or settlement - Bovespa
Refers mainly to revenues from settlement fees on public offerings.
21 Other operating revenues
Details
BM&FBOVESPA
2010
2009
Dividends from equity interests
4,920
12,592
Other recoveries
1,482
892
Profit on sale of assets
-
4,383
Sundry
2,723
1,910
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
80
Total
9,125
19,777
Consolidated
Details
2010
2009
Dividends from equity interests
4,920
12,592
Property rents
6,174
5,446
Other recoveries
1,702
779
Subscriptions Congress-Capital
Markets
-
4,383
Sundry
2,822
3,033
Total
15,618
26,233
22 Sundry Expenses
BM&FBOVESPA
Details
2010
2009
Contributions and donations
7,135
2,958
Electricity, water and sewage
7,664
7,022
Travel
5,209
3,190
Sundry provisions
2,095
3,778
Intangible loss
4,802
-
Insurance
1,113
677
Legal and Judicial expenses
532
430
Other
4,237
3,072
Total
32,787
21,127
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
81
Consolidated
Details
2010
2009
Contributions and donations
7,420
2,953
Electricity, water and sewage
7,859
7,238
Travel
5,745
3,596
Sundry provisions
6,186
4,052
Intangible loss
4,864
-
Insurance
1,115
678
Legal and Judicial expenses
548
445
Other
2,568
3,470
Total
36,305
22,432
23 Financial results
BM&FBOVESPA
Financial income
2010
2009
Revenue from financial assets measured at fair value
314,935
249,468
Exchange variation
2,808
270
Other financial income
8,314
10,513
Total financial income
326,057
260,251
Financial expenses
Interest on overseas debt and loans
32,750
562
Exchange variation
3,266
10,819
Other financial expenses
2,635
3,654
Total financial expenses
38,651
15,035
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
82
Consolidado
Financial income
2010
2009
Revenue from financial assets measured at fair value
341,068
276,253
Exchange variation
2,808
270
Other financial income
10,930
13,163
Total financial income
354,806
289,686
Financial expenses
Interest on overseas debt and loans
32,750
562
Settlement and custody expenses (1)
15,612
18,289
Exchange variation
4,395
11,833
Other financial expenses
4,025
5,140
Total financial expenses
56,782
35,824
(1) Amounts related to Banco BM&F
24
Information about business segments
We present below consolidated information based on reports used by management for
making decisions, with the segments comprising Bovespa, BM&F, Corporate products and
Institutional.
Bovespa Segment
Offers various mechanisms and tools for trading of fixed and variable income securities, on
stock markets and Over the Counter (OTC), It is responsible for managing the only national
stock market and OTC market for trading of variable income securities, including stocks,
stock receipts, Brazilian Depository Receipts, stock derivatives, subscription bonuses, various
types of closed investment funds, shares representing audiovisual investment certificates,
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
83
non-standard options (warrants) to purchase and sell securities and other securities authorized
by the CVM,
BM&F Segment
The BM&F Segment covers the main steps of the cycles of trading and settlement of
securities and contracts, i,e,: (i) trading systems in an environment of electronic trading and
trading via internet (WebTrading), (ii) recording, clearing and settlement systems, integrated
with a robust and sophisticated risk management system to ensure the proper settlement of
the transactions recorded, and (iii) custodian systems for agribusiness securities, gold and
other assets
In addition, this segment includes the trading of commodities, foreign exchange, and public
debt, and services provided by Banco BM&F and the Brazilian Commodities Exchange,
Corporate products
Refer basically to services provided as depository of securities, as well as loans and listing of
securities (registration of issuers of trading securities on our systems), data services and
classification of commodities,
Currently there is no segment allocation for operating expenses and other results, which are
therefore shown in the "Other" column, below,
Others
It refers, basically, the revenues generated by the businesses of its subsidiaries and
dividends from shares.
Institutional
Currently there is no allocation for operating expenses by segment, net interest
income and income tax and social contribution, and then presented in column
institutional.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
84
Information by segment
Consolidado
2010
Bovespa
BM&F
Enterprise
Segment
Segment
Products
Other
Institutional
Total
Gross operating revenue
1,049,300
722,065
300,314
30,875
2,102,554
Deductions from revenue
(101,895)
(76,348)
(29,341)
(5,213)
(212,797)
Net operating revenue
947,405
645,717
270,973
25,662
1,889,757
Operating expense
(633,504)
(633,504)
Depreciation and Amortization
(54,818)
(54,818)
Administrative expenses
(578,686)
(578,686)
Operatingin come
(633,504)
1,256,253
Equity
38,238
38,238
Financial income
298,024
298,024
Taxes
(448,029)
(448,029)
Net income
947,405
645,717
270,973
25,662
(745,271)
1,144,486
Information by segment
Consolidado
2009
Bovespa
BM&F
Enterprise
Segment
Segment
Products
Other
Institutional
Total
Gross operating revenue
837,326
534,189
259,710
41,669
1,672,894
Deductions from revenue
(84,086)
(56,078)
(23,900)
(6,286)
(170,350)
Net operating revenue
753,240
478,111
235,810
35,383
1,502,544
Operating expense
(569,832)
(569,832)
Depreciation and Amortization
(42,396)
(42,396)
Administrative expenses
(527,436)
(527,436)
Operating income
(569,832)
932,712
Financial income
253,862
253,862
Taxes
(304,505)
(304,505)
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
85
Netincome
753,240
478,111
235,810
35,383
(620,475)
882,069
25 Insurance
The Company searches in the market for insurance consultant support to establish coverage
compatible with its size and operations, The main coverage, at December 30, 2010, was contracted at
the amounts indicated below, according to the insurance policies:
Insurance lines
Amounts
insured
Amounts at risk, material damages, property and equipment
272,590
Civil liability
60,486
Works of art
16,133
26 First time adoption of IFRS and CPCs
i)
Application of CPCs 37 and 43 and IFRS 1
The consolidated financial statements for the year ended December 31, 2010 are the first
annual consolidated financial statements in accordance with IFRSs and CPCs, and
BM&FBOVESPA has applied CPCs 37 and 43 and IFRS 1 in preparing these consolidated
financial statements.
The financial statements of the Company for the year ended December 31, 2010 are the first
annual individual financial statements in accordance with the CPCs. BM&FBOVESPA has
applied CPCs 37 and 43 in the preparation of these financial statements.
The transition date is January 1, 2009. Management has prepared the opening balance sheets
under the CPCs and the IFRS at that date.
In preparing those financial statements, BM&FBOVESPA has applied the relevant mandatory
exceptions and certain optional exemptions in relation to the full retrospective application.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
86
ii)
Reconciliation of shareholders' equity and net income between the accounting
practices adopted in Brazil prior to IFRS:
BM&FBOVESPA and Consolidated
Equity reconciliation
12/31/2009
01/01/2009
Equity disclosed in accordance with previous accounting practices
adopted in Brazil
19,709,749
19,291,724
Loss in recoverable value of investment in CME Group (a)
(460,610)
(460,610)
Mark to market adjustment of shares of CME Group classified as available
for sale (b)
77,396
-
Dividend above the minimum required at the balance sheet date
20,000
200,001
Contribution to establishment of the BSM previously treated as investment
(20,000)
(20,000)
19,326,535
19.011.115
Non-controlling shareholders participation (d)
16,358
15,339
Equity disclosed in accordance with IFRS
19,342,893
19.026.454
Consolidated
Net Income reconciliation
12/31/2009
Net income disclosed in accordance with previous accounting
practices adopted in Brazil
881,050
Non-controlling shareholders participation (d)
1,019
Net income disclosed in accordance with IFRS
882,069
(a) Under the accounting standards previously adopted in Brazil until December 31, 2009, the investment
in CME was recorded at historical cost in non-current assets, in accordance with CPC 14, and the
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
87
value of the investment was subject to impairment analysis considering the criteria for evaluating the
discounted cash flow (Value in use) as determined by CPC 01/IAS 36 for investments valued at cost.
Upon the effectiveness of CPC 38/IAS 39 in 2010, the investment was reclassified to the group of
financial instruments in the category of Financial Assets Available for Sale and adjusted to fair value.
Thus, the price of the asset being used to determine the fair value has become the stock price in an
active market (Stock Exchange).
Upon the classification of the investment in the category of Financial Assets Available for Sale, the
impairment analysis shoud be made by the comparison of the market value of the shares on the data
base date of assessment with its acquisition cost (CPC 38/IAS 39), and the loss indicator is the
significant or prolonged decline in the price of the shares.
As a result, BM&FBOVESPA recognized an adjustment to the recoverable value of the investment in
shares of CME Group in the amount of R$697,893, with a deferred tax asset corresponding to
R$237,283, and an impact net of tax in the amount of R$460,610 in equity in 2008, given the
significant decline in the price of the shares of CME Group in the fourth quarter of 2008. This
procedure established a new cost basis, according to CPC 38/IAS 39, of R$578,306 at December 31,
2008
With the acquisition of an additional equity stake in the CME Group, in july 2010, the investment is
now valued by the equity method and the portion relating to the impairment, net of tax, amounting to
R$460,610 was reversed against equity, establishing a new cost basis for investments classified
according to CPC 18/IAS 28.
(b) During the year 2009, based on the new level of cost of the investment, CME Group shares, as a
result of the change in fair value, generated a positive effect of marking to market in the amount of
R$77,396, net of tax.
As from July 2010, concomitantly with the increase in participation in CME Group from 1.78% to
5%, the investment is valued on the equity method.
(c) According to the Technical Interpretation ICPC 08 - Accounting for Proposed Dividend, the portion
that exceeds the mandatory minimum dividend (including interest on capital) must be maintained in
equity, in a specific account, until final determination of the shareholders. According to CPC 25/IAS
37, a liability should be recognized only when there is a legal obligation.
(c) Presentation of Financial Statements (CPC 26/IAS 1)
The participation of minority shareholders was reclassified to equity.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
88
(d) CPCs / IFRS implemented that did not generate effects on the company:
i.
Segment Information (CPC 22/IFRS 8) - BM&F BOVESPA is publishing the consolidated
financial statements by operating segment (Note 24)
ii.
Earnings per share (CPC 41/IAS 33) - Earnings per share is now presented based on the net
income of the period and the weighted average shares outstanding during the year, excluding
treasury shares. The diluted earnings per share is also became presented, taking into account
the potential impact arising from stock options that may dilute the result by increasing the
number of shares.
(e) Exemptions from full retrospective application
In preparing those financial information in accordance with new accounting practices adopted in
Brazil, BM&FBOVESPA applied the mandatory exceptions and certain optional exemptions in
relation to the full retrospective application of the new accounting practices outlined below, following
the prerogatives of the CPC 37/IFRS 1.
The main exemptions listed in the CPC 37/IFRS 1 do not apply to the BM&FBOVESPA ibecause of
the reasons listed below:
(i) Business combinations - BM&FBOVESPA has applied the business combinations
exemption described in IFRS 1 and CPC 37 and therefore did not restate the business
combinations that occurred before January 1, 2009, the transition date;
(ii) Deemed cost of fixed assets - BM&FBOVESPA has opted to use the values recorded
under previous accounting practices and did not use the exemption of deemed cost on the
transition date;
(iii) Leases - BM&FBOVESPA chose to reassess the contracts within the scope of IFRIC 4,
considering the facts and circumstances of the transition date. No impacts were identified
as the previously adopted practices were already aligned;
(iv) Share-Based Payment - The Brazilian accounting practices are already aligned
(v) Assets and liabilities of subsidiaries - The initial adoption of new practices were
implemented concurrently and consistently in all subsidiaries.
(f) Exceptions to retrospective application
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
89
The estimates adopted in preparation of these financial statements as of January 1
st
, 2009 and
December 31, 2009 are consistent with estimates on the same dates in accordance with the accounting
practices previously adopted in Brazil.
The other mandatory exceptions did not apply because there were no significant differences with
regard to accounting practices previously adopted in Brazil.
27
Interpretations and amendments to existing standards that are not yet in force
Topic
Key-requirements
Effective date
Amendment to IAS 32,
Financial Instruments:
Presentation - Classification
of Rights Issues "
The IASB has amended IAS
32 to allow that
rights,
options
or
warrants
to
purchase a fixed number of
equity instruments of the
entity for a fixed amount in
any currency are classified as
equity instruments, provided
that the entity provide rights,
options
or
warrants
proportionally to all owners of
the same class of its own
equity
instruments,
not
derivatives.
Applicable to financial years
beginning from February 1,
2010.
IFRIC 19 - "Extinguishment
of Financial Liabilities with
Equity Instruments"
Clarifies the requirements of
IFRS
when
an
entity
renegotiates
terms
of
a
financial liability with its
lender, and it agrees to accept
the entity's shares or other
equity instruments to settle the
financial liability in whole or
in part.
Applicable to financial years
beginning from July 1, 2010.
Amendment to IFRS 1 -
"First-time Adoption of IFRS
- Limited Exemption From
Disclosure of Comparative
IFRS 7 for Entities That Make
the First Time Adoption"
Offers to those entities that
adopt IFRS for the first time
the same options that were
given to current users of IFRS
in
the
adoption
of
amendments to IFRS 7. It also
Applicable to financial years
beginning from July 1, 2010.
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
90
clarifies the rules for the
transition of the amendments
to IFRS 7.
IAS 24 - "Related Party
Disclosures" (revised 2009)
Changes the definition of a
related party and modifies
certain
disclosure
requirements for related party
entities
related
to
the
government.
January 1, 2011
Amendment to IFRIC 14,
IAS 19 - "Asset Limit for
Defined Benefit, Minimum
Funding Requirements and
their Interaction"
Removes
the
unintended
consequences that arise from
the treatment of prepayments,
in which there is a minimum
requirement
of
providing
resources. The results of
advance
payments
of
contributions
in
certain
circumstances are recognized
as assets rather than expense.
January 1, 2011
IFRS 9 "Financial Instruments
"
IFRS 9 is the first standard
issued as part of a larger
project to replace IAS 39.
IFRS 9 retains and simplifies
the measurement model and
establishes
two
main
categories of measurement for
financial assets, amortized
cost and fair value. The basis
of classification depends on
the business model and the
characteristics of the entity's
contractual cash flows of
financial assets. The guidance
included in
IAS
39
on
impairment of financial assets
and
hedge
accounting
continues
to
be
applied.
Prior periods need not be
January 1, 2013
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(A free translation of the original in Portuguese)
BM&FBOVESPA S.A. ­ Bolsa de Valores, Mercadorias e Futuros
Notes to the Financial Statements
at December 31, 2010
(All amounts in thousands of reais)
91
resubmitted if an entity to
adopts
the
standard
for
periods
beginning
on
or
before of January 1, 2012.
28 Subsequent events
On February 17, 2011, the Board of Directors proposed the distribution of R$ 406,086 as additional
dividends for the year ended December 31, 2010, which is subject to the approval by the shareholders
in the next General Ordinary Meeting..