background image
July 2010
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Forward Looking Statements
This presentation may contain certain statements that express the management's expectations, beliefs and assumptions
about future events or results. Such statements are not historical fact, being based on currently available competitive,
financial and economic data, and on current projections about the industries BM&F Bovespa works in.
The verbs "anticipate," "believe," "estimate," "expect," "forecast," "plan," "predict," "project," "target" and other similar
verbs are intended to identify these forward-looking statements, which involve risks and uncertainties that could cause
actual results to differ materially from those projected in this presentation and do not guarantee any future BM&F Bovespa
performance.
The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&F services; (ii)
volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitive industries BM&F
Bovespa operates in; (iii) changes in (a) domestic and foreign legislation and taxation and (b) government policies related to
the financial and securities markets; (iv) increasing competition from new entrants to the Brazilian markets; (v) ability to
keep up with rapid changes in technological environment, including the implementation of enhanced functionality
demanded by BM&F customers; (vi) ability to maintain an ongoing process for introducing competitive new products and
services, while maintaining the competitiveness of existing ones; (vii) ability to attract new customers in domestic and
foreign jurisdictions; (viii) ability to expand the offer of BM&F Bovespa products in foreign jurisdictions.
All forward-looking statements in this presentation are based on information and data available as of the date they were
made, and BM&F Bovespa undertakes no obligation to update them in light of new information or future development.
This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be
any sale of securities where such offer or sale would be unlawful prior to registration or qualification under the securities
law. No offering shall be made except by means of a prospectus meeting the requirements of the Brazilian Securities
Commission CVM Instruction 400 of 2003, as amended.
2
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Business Model:
A Source of Competitive Strength
3
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Fully Integrated Business Model
Listing
(stocks, bonds, funds,
asset-backed securities,
among others)
Commodities
Certification
Trading
(stocks, derivatives, corporate and government
bonds, funds, spot US Dollar, among others)
Central Counterparty (CCP)
Clearing and Settlement
(for all the products)
Services for Issuers and
Commodities trading
Trading, Clearing and Depository Activities
Central Depository
(stocks and corporate bonds)
Securities Lending
(stocks and corporate bonds)
Custody
(services provided for
funds, and other market
participants)
Market Data
Indices Licensing
Software Licensing
(used by brokerage
houses and other
market participants)
Other Services
OTC Derivatives
Registration and
Collateral Management
4
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Diversified and Integrated
Exchanges
Integrated Derivatives
Exchanges
*
Do not provide post-trading services for the equity market
Diversified but Not
Integrated Exchanges*
Listed Exchanges Business Model
5
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18.3
17.7
15.1
13.7
7.8
7.6
6.0
4.5
4.1
2.8
2.2
2.1
71.3%
80.2%
64.9%
51.9%
62.7%
43.1%
60.8%
74.3%
48.7%
44.5%
66.5%
56.7%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
-
5
10
15
20
25
30
35
CME
HKEx
BVMF
Deutsche
Boerse
ICE
Nyse
Euronext
SGX
ASX
Nasdaq
LSE
BME
TMX
EBITDA Margin 2009
Date: 07/30/2010
Diversified and integrated
Derivatives
Diversified but not integrated
Market Capitalization (US$ billions) and 2009 EBITDA Margin (%)
Business Model enhances Margins and Market Cap
Majority of Integrated Exchanges above 60% EBITDA Margin
6
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Excellence in IT Solutions and Post-Trading Services
Business Model, regulation and competition
7
Brokers &
Investors
Trading
Post-Trading
Regulation prohibits internalization of orders, dark pools
and ATS/MTFs, stocks trading in both exchange and OTC
simultaneously
Settlement and clearing of stocks trading must be done
through a CCP
Settlement and clearing at the beneficial owner level
make the Brazilian market safer and more resilient
Under the regulation in place, potential competitors
would be obliged to provide the same integrated
solution, with the same rules and transparency
The final investor pays the exchange fee
Other exchanges have been seeking integrated models
(self clearing models)
Naked access is not allowed
Naked short selling is not possible
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Excellence in IT Solutions and Post-Trading Services
Business Model, regulation and competition
8
CHANGE IN REGULATION: POTENTIAL IMPACTS
Internalization of orders
Brokers and other market participants should adapt
their structure (the US prime brokers model does not
exist in Brazil)
Investors will face the broker risk
Regulators: potential increase in systemic risk
Adoption of the best execution practice in various
venues
Adoption would be difficult due to the size and
liquidity concentration (potential inefficiency in the
price discovery)
Brazilian equity market size is ~1% of the US market
Regulatory debate favors OTC transactions being
centrally cleared
Brokers &
Investors
Trading
Post-Trading
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Excellence in IT Solutions and Post-Trading Services
Business Model, regulation and competition
9
CHANGE IN TRADING REGULATION: POTENTIAL IMPACTS
Allowing simultaneous Exchange and OTC trading
Potential inefficiency in the price discovery, risk of price
manipulation and split of liquidity
Are there incentives for this change?
No cost reduction in the Sell side: investors pay the exchange
fee (no incentive for MTF venues)
Regulator: potential increase in market risk (inefficiency in price
discovering and potential market manipulation)
Global competitors: the Brazilian market structure would be a
limitation and, besides, they would need to develop or hire post-
trading services
A NEW CLEARING?
Buy side: higher costs (no cross margining or collaterals)
Sell side: increase in OPEX and CAPEX due to new back-office IT
solutions necessities
Regulator: the BACEN considers the four clearinghouses operated
by BM&FBOVESPA as systemically important (BM&FBOVESPA plays
a key role in the Brazilian payment system)
Brokers &
Investors
Trading
Post-Trading
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Stock Market Trading Rules: efficient price discovery
General characteristics
The trading rules are applied to all exchange listed stocks (a stock cannot be traded
simultaneously in both Exchange and OTC markets)
Main trading rules (auctions) established by CVM Instruction 168
There are maximum fluctuation limits for stock prices (automatically frozen by the
trading system):
For the most liquid stocks 3% oscillation is enough to trigger an auction procedure
For the less liquid stocks the limit for oscillation is 10%
An auction can take from 5 minutes to 1 hour
Also, there are limits regarding the size of the trade (automatically frozen by the
trading system):
The auction can take from 5 minutes (quantity above 5 times the average of the last
30 trading sections) to 48 hours advanced announcement (quantity higher than 6%
of common shares or 20% of preferred shares)
Also, there are other intermediary auction rules
Pre-trade limit analysis
For DMA access, before the order get in the matching engine, there is a tool (MegaLine
/ GTSLine) that analyze if the order is under the limits established by the broker
10
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Brazilian's Stock Trading Breakdown
28.4%
25.1%
14.6%
31.9%
Jul'10
Source: Bloomberg (in USD traded value of 35 companies with ADRs programs )
End of CPMF
(Financial
Transaction Tax)
Sarbanes-Oxley Act
(SOX)
*Updated until 08/12/2010
46.5%
53.5%
Novo Mercado
Launching
11
2001
2002
2003
2004
2005
2006
2007
2008
2009 2010* Total
IPOs
-
1
-
7
9
26
64
4
6
8
125
Follow ons
14
5
8
8
10
16
12
8
18
7
106
Total
14
6
8
15
19
42
76
12
24
15
231
Dual Listings
-
-
-
2
1
1
-
-
1
-
5
Public Offerings in Number of Companies
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
J
a
n
-
10
F
e
b
-
10
M
a
r
-
10
A
p
r
-
10
M
a
y
-
10
J
u
n
-
10
J
u
l
-
10
Other USA Venues - Brazilian ADRs
NYSE - Brazilian ADRs
BM&FBOVESPA - companies with ADRs
BM&FBOVESPA (except companies with ADRs)
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- 3 months holding period
- Brazilian Investment fund trade
- 1.5 Bp Broker Fee
- Securities lending not considered
All in trading cost in Bovespa Segment
12
28.6%
27.2%
28.3%
36.3%
34.4%
35.9%
11.5%
10.9%
11.3%
23.7%
27.6%
24.4%
(Avg. ADR price)
(Most expensive share price in Brazil)
(Avg. share price in Brazil)
US$ 28 - Stock Price
US$ 94 - Stock Price
US$ 14 - Stock Price
USD 0.015
USD 0.050
USD 0.008
Broker trading Fee
Exchange Trading fee
Exchange Clearing fee
Exchange Depository fee
1.5 Bp
1.9 Bp
0.6 Bp
1.3 Bp
Exchange Cost
3.8 Bps
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13
New Pricing Policy
Released in June/10
Bovespa Segment
Discounts from 10% to 50% only for trading fee (cash and options), according to the
volume
Only for day traders / HFTs
BM&F Segment
Discounts up to 75%, according to the volume
Termination of the 70% flat discount for HFTs
New policy for day traders / HFTs
Both Segments discounts will need to be prior approved by a committee
Implementation:
November, 2010
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Regulation and Taxation: IOF
IOF
October 20
th
: 2% charge on foreign capital inflow
November 19
th
: 1.5% charge on issuance of new DRs
Consequences
Equity trading declined by 5 to 7%, mainly due to the ADRs arbitrage
Reduction in non resident participation in Cash Market from 33-37% to 27-30% with
increased use of TRS (Swaps)
Increase in IOF unlikely
Brazilian capital market has become a very important source of funding to companies
like Petrobras, Banco do Brasil, Eletrobrás, government owned.
Massive investments will be needed in coming years to support growth
World Cup / Olympics / Pre Salt / Infrastructure
Government is not hostile to foreigners
14
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NEW DEVELOPMENTS
15
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Globally preferred strategic partners
Development of new multi-class trading platform
Reciprocal participation in CME and BVMF Board of Directors
Increase of BVMF stake in CME from 1.8% to 5% (equity accounting will be
adopted)
Strategic Committee
International Partnerships Leverage Connectivity and State of
the Art Technology
16
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Excellence in IT Solutions and Post-Trading Services
IT Developments
Post
Trading
Market
Access
Co-location Capacity: phase II implemented in Jul'10
Co-location in Bovespa Segment: to be implemented in Sep´10
ISVs: Trading Technology (TT) will provide screens for BM&F segment in
1Q11
Globex Technology: derivatives trading system: 1Q11
Capacity: phased in until Oct/10
BOVESPA Seg.: from 1.5 million to 3 million trades/day (Oct/10)
BM&F Seg.: from 200K to 300K trades / day (Aug 10)
from 300K to 400K trades / day (Oct/10)
Performance: improving performance in both systems (one digit latency)
Sungard/GMI Project (back office for FCMs): to be implemented in 3Q10
New Sinacor+ (back office for brokers): new version will be fully
implemented by the end of 2010
Clearing Integration: to be implemented in the end of 2011
17
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Business and Service Center (Single Gateway)
Central
Counterparty
Clearing
Facility
Central
Depository
Cross margining for Equities, Derivatives, Spot FX and Fixed Income
Single Settlement window
Greater capital efficiency
18
Post-Trading Services - Integration and Opportunities
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Market Makers (MMs) for Options:
Players: locals (only FI) and non-residents(all) - Implementation: Option on IBOVESPA and other securities - by the end
of 2010.
Non-Sponsored BDR ­ Level 1
Product: issued by a Brazilian depository institution
Authorized investors: Financial institutions, mutual funds, Portfolio managers and Consultants for securities authorized
by the CVM, in relation to their own funds
Implementation: 3Q - 10 big stocks listed in the US (DB)
+ 10 granted to Citibank
ETFs and Indexes
New ETFs to be launched - New Indexes: Financial Index
7 ETFs trading around BRL30 million per day
Launched of a Competitive Model to select new ETFs issuers
New Products Pipeline
19
Products
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Order Book in Foreign Currencies
(Brazil Easy Investing)
20
BM&FBOVESPA and Chi-X Global Term Sheet for joint development of
software
Trading system of stocks listed in Brazil with simultaneous FX execution -
allows non residents to match stocks in US$ and other currencies
Legal requirements to invest in Brazil keep unchanged (2689 Account)
Facilitates the foreign investor access to Brazilian market, especially retail
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BVMF
BROKERAGE
HOUSE
BROKER
BVMF
Other Countries
Brazil
Chi-FX
Brazil
BROKER
BVMF
BROKER
BVMF
BROKER
BVMF
INVESTOR
2689
INVESTOR
2689
INVESTOR
2689
NET
,
NET
Trading
System
INVESTOR
2689
Financial
Institution
that
provides FX
transaction
2
Buy BVMF3
at US$ 8.00
C
om
pra
de
B
V
M
F3

U
S
$
8.
00
3
US$ FX Sell at R$
1.80
3
Sell BVMF3
at R$ 14.4
3
Buy BVMF3
at R$ 14.4
1
BVMF3 Price at US$8.00
Order Book in Foreign Currencies
(Brazil Easy Investing)
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447
520
30
2009
2010e
REVIEWED OPEX AND CAPEX BUDGETS
22
Actual
Reviewed Budget
Budget Reduction
Opex (5.4% reduction)
Capex (10% reduction)
In R$ millions
96
272
30
2009
2010e
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Round Trip Time, in milliseconds
2007
2008
2009
2010e
Equity Market
450
300
10
One digit
Derivatives Market
70
25
10
One digit
*Includes outsourced services
** Related to May/2008
*** Updated until 07/30/2010
Throughput in thousands of trades
Equity Market
­
Average Capacity
390
770
1,500
3,000e
Daily Average
153
245
332
416***
Market peaks
343
414
591
634
Derivatives Market
­
Average Capacity
55
200
200
400e
Daily Average
23
29
39
68***
Market peaks
42
49
76
152
Number of employees*
1,828**
1,487
1,306
1,471
Network Carrier
RCCF`s Sole Provider
8 Networks (RCB)
Improving the IT capacity and performance
23
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OPERATIONAL PERFORMANCE
24
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Daily Average Number of Trades (Thousands)
Average Daily Traded Value - ADTV (BRL Billions)
Number of Custody Accounts (Thousands)
Turnover Velocity** (12 months average)
**Relation of the trading value in the cash market and the market cap of the exchange
*Updated until: July 30th, 2010
Bovespa Segment: Operational Highlights
25
30.8%
29.4%
36.8%
37.6%
38.7%
42.3%
56.4%
63.2%
66.6%
66.6%
2001
2002
2003
2004
2005
2006
2007
2008
2009
508
540
551
559
548
543
538
576
581
580
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
1.2
1.6
2.4
4.9
5.5
5.3
6.5
6.8
6.6
6.5
6.9
7.3
5.8
5.4
2004
2005
2006
2007
2008
2009
YTD*
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
54
62
87
153
245
332
416
424
409
393
405
489
399
395
2004
2005
2006
2007
2008
2009
YTD*
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
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·
Preliminary Data
·
Updated until August 2nd
Public Offerings (BRL billions)
Public Offerings in 2009/2010
24 public offerings in 2009 (6 IPOs and 18 Follow-Ons), raised more than BRL 46.0 bi
15 public offerings in 2010 (8 IPOs and 7 Follow-Ons), raised BRL 23.5 bi*
Pipeline
Also, there are 7 additional offerings in the pipeline
IPOs (6): WTORRE Empreendimentos Imobiliários, Sonae Sierra Brasil S/A, Norskan Offshore
S.A, Multiner, Autometal and Brasil Insurance
Follow-Ons (1): Petrobras
BOVESPA Segment: Capital Raised Activity
26
BOVESPA Segment: Capital Raised Activity
2004
2005
2006
2007
2008
2009
2010*
4.5
5.4
15.4
55.6
7.5
23.8
7.4
4.3
8.5
15.1
14.5
26.8
22.2
16.1
IPO
Follow-On
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422
501
711
988
789
843
1.694
1,135
1,255
2,270
2,171
1,483
1,278
2,121
110
168
266
473
535
447
579
525
642
603
611
670
530
477
86
74
68
112
88
80
90
78
106
75
96
106
96
75
187
109
124
167
162
150
180
168
181
170
176
220
159
189
2004
2005
2006
2007
2008
2009
YTD*
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
BRL Int. Rate (Thousands)
FX (Thousands)
Index (Thousands)
Others (Thousands)
BM&F Segment: Operational Highlights
Average Daily Traded Volume - ADTV (thousands of contracts)
Rate per Contract - RPC (BRL)
*Updated until: July 30th, 2010
27
2,063
805
852
1,167
1,740
1,573
2,544
1,906
2,184
3,117
3,054
2,479
1,521
2,863
2004
2005
2006
2007
2008
2009
YTD*
J-10
F-10
M-10
A-10
M-10
J-10
J-10
Interest rates in BRL
0,887
0,962
0,906
0,950
1,141
0,979
0,876
0,971
0,977
0,722
0,780
0,961
1,044
0,893
FX rates
4,002
2,858
2,244
1,859
2,065
2,161
1,894
1,968
2,005
1,837
1,872
1,752
1,908
1,983
Stock Indices
1,561
1,688
1,419
1,501
2,145
1,620
1,503
1,466
1,716
1,372
1,616
1,313
1,643
1,372
Interest rates in USD
1,999
1,385
1,094
0,965
1,283
1,357
1,173
1,104
1,319
1,239
1,203
1,145
1,137
1,086
Commodities
7,159
5,693
4,749
3,195
3,587
2,307
1,992
1,711
2,029
1,934
2,281
1,890
2,216
2,021
Mini contracts
-
0,038
0,034
0,054
0,162
0,176
0,130
0,133
0,139
0,129
0,136
0,122
0,133
0,124
OTC
1,199
1,703
1,571
2,111
2,355
1,655
1,639
1,588
1,408
1,626
1,790
1,646
1,895
1,684
Total RPC
1,620
1,467
1,247
1,224
1,527
1,365
1,127
1,254
1,308
0,961
1,031
1,171
1,274
1,084
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BM&F Segment ­ Open Interest
28
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Interest Rates in BRL
Total Open Interest
Derivatives Open Interest (in millions of contracts)
background image
10.5%
26.6%
59.4%
0%
10%
20%
30%
40%
50%
60%
70%
FX contracts
Index-based contracts
Mini contracts
4
20
41
50
69
155
118
226
118
92
0
5
18
44
41
50
47
62
42
40
4
7
22
53
77
93
72
120
84
85
0.3%
1.0%
2.8%
4.8%
3.8%
6.0%
4.2%
8.9%
6.3%
4.0%
-0,5%
0,5%
1,5%
2,5%
3,5%
4,5%
5,5%
6,5%
7,5%
8,5%
9,5%
-
50
100
150
200
250
300
350
400
450
500
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
Apr-10 May-10 Jun-10 Jul-10
FX
Equities
Mini contracts
% in Overall Volume
157 195 197 216
327 380
451 416
276 367
4
30
71
129
156
148
161
214
70
48
51
92
176
223
279 204
189
254
20
3
13
21
138
84 164
162
151
5.5%
7.5%
11.3%
14.4%
13.9%
17.6%
16.0% 20.1%
16.9%13.5%
0%
4%
8%
12%
16%
20%
-100
100
300
500
700
900
1100
Traditional DMA
CME Globex
DMA Provider
CoLocation
% of DMA in overall ADTV
CME-Globex ADTV ­ in thousands of contracts
DMA ADTV ­ in thousands of contracts
High Frequency Traders
ADTV ­ in thousand of contracts
Participation per type of contract
22 active participants in Jul'10
BM&F Segment: DMA and CME Order Routing Evolution
29
* Updated until July 30, 2010
4
20
33
42
58
83
81
126
43
27
5
16
39
39
29
37
39
12
9
6
2
45
59
35
43
49
15
11
0.1%
0.9%
2.5%
4.1%
3.2% 2.9%
2.6%
4.3%
1.7%
0.8%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
5,0%
5,5%
(20)
10
40
70
100
130
160
190
220
250
280
FX
Equities
Mini contracts
% in Overall Volume
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30
Drivers for BM&F and BOVESPA Segments: HFT
Colocation (Jul'10)
33 half racks hired
45 units in the pipeline:
13 units for the Bovespa
Segment,
32 units for both Segments.
Average Daily Traded Volume via Co-location
(thousands of contracts)
Seven active investors
* Updated until July 30, 2010
0
1
3
7
12
15
13
17
20
25
84
164 162
151
1.4%
3.3%
-0,5%
0,5%
1,5%
2,5%
3,5%
4,5%
5,5%
6,5%
-
20
40
60
80
100
120
140
160
180
2.6%
3.2
%
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APPENDIX
31
background image
BRAZIL
USA
BVMF
BVMF
BVMF
DTCC
DTCC
NYSE
Nasdaq
BATS
Direct Edge
TRF
Dark Pools
Beneficial Owner Level
Broker Level
All the trades
must be
matched on an
exchange
environment
Brokers can internalize
orders
Central Depository
Clearing (CCP)
Trading on the Exchange
Broker
Equity Market Settlement Structure: Brazil compared with USA
32
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Managed growth to support retail and high frequency trading
·
DMA Implementation (Direct Market Access)
·
Trading Systems: reduce latency and increase capacity
·
RCB Development (new BM&FBOVESPA Communication Network)
Via DMA
Co-location
Traditional
DMA
Via DMA
Provider
Direct
Connection
NET
NET
NET
NET
Remote access
tracking and maintenance
Application of
Co-location
NET
Provider
of DMA
Excellence in IT Solutions and Post-Trading Services
33
background image
US Exchanges and Trading Venues: Market share
US CONSOLIDATED EQUITIES VOLUME BREAKDOWN (JUN'10)
Source: Rosenblatt Securities Inc.
­
Trading Talk
34
22.8%
28.8%
15.3%
11.1%
11.0%
9.8%
1.4%
Nasdaq + BX
NYSE + Arca
TRF (Adjusted)
Dark Pools
BATS
EDGX + EDGA
Other
background image
Foundation Members
·
BRAiN seeks to articulate, with the public
and private sectors, projects in various areas:
Brazil's image abroad
Business infrastructure
Institutional connections
International trade
Education and talents
Financial products, services and channels
Regulation, taxation, and bureaucracy
BRAIN ­ Brazil Investments & Business
Mission
Reinforcing Brazil's position as an international investment and business hub
with regional focus and global connections, contributing to the sustainable
economic and social development of Brazil and Latin America.
35
Turn Brazil into the business hub for Latin America
Develop global projection and links
Develop local market strengthening
Brazilian ecosystem competitiveness
Strategic Objectives
background image
1Q10 EARNINGS
36
background image
227.0
282.6
245.7
403.2
1Q09
1Q10
1Q09
1Q10
176.7
334.6
1Q09
1Q10
55.8%
72.9%
BM&F segment all time high Trading Volume: 2.4 million contracts per day in
1Q10 and 3.1 million in Mar´10
Colocation and High Frequency Traders (HFT): Colocation and HFT from BM&F
Segment in Apr´10 hit new record highs, ADTV of 84K and 244K (buy + sell),
respectively
New Pricing Policy for HFT: market hearing launched in Apr´10
Products: Market Maker on Options, Non Sponsored BDR ­ Level 1, Hydrous
Ethanol Futures and Options and Foreign ­ NDFs / Futures
HIGHLIGHTS
Net Income (BRL Millions)
EPS (GAAP): BRL 0.14 in 1Q10 and Adjusted EPS: BRL 0.20 compared with BRL
0.12 in 1Q09
Adjusted Net Income (adjusted by non-cash items)*: 64.1% higher than 1Q09
EBITDA Margin: 72.9% in 1Q10 versus 55.8% in 1Q09 and 65.1% in 4Q09
Adjusted Operating Expenses*: increase by 12.1% vs 1Q09 and 13.1% lower
than 4Q09
Guidance: both BRL550 million OPEX (adjusted) and BRL302 million CAPEX
budgets will be revised downwards
Interest on Capital: BRL227 MM (BRL90 MM previously paid and BRL137 MM,
BRL 0.068 per share, to be paid), equivalent to 80% payout on GAAP net
income
* Adjusted net income in 1Q10 excludes stock options plan and impacts from deferred liabilities tax and in
1Q09, excludes stock options plan. Adjusted expenses in 1Q10 excludes depreciation and stock options plan
costs and in 1Q09 excludes depreciation, stock options plan and severance costs
GAAP
Adjusted
1Q10 EARNINGS
EBITDA (BRL Millions) / EBITDA Margin (%)
Operating Expenses (BRL Millions)
37
Highlights of 1Q10 x 1Q09
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Summary of Financial Statements
In BRL (thousands)
1Q10
1Q09
% Change
1Q10/ 1Q09
4Q09
% Change
1Q10 / 4Q09
Gross Operating Revenues
510,660
351,918
45.1%
473,890
7.8%
Net operating revenues
459,128
316,548
45.0%
424,759
8.1%
Operating expenses
(136,632)
(148,760)
-8.2%
(160,372)
-14.8%
Operating income
322,496
167,788
92.2%
264,387
22.0%
Income before Taxes
390,192
235,647
65.6%
338,491
15.3%
Income Tax and Social Contribution
(107,843)
(8,372)
1,188.1%
(118,371)
-8.9%
Net Income
282,601
226,980
24.5%
220,174
28.4%
Net margin
61.6%
71.7%
-10.2 pp
51.8%
9.7 pp
EBITDA
334,626
176,739
89.3%
276,399
21.1%
EBITDA margin
72.9%
55.8%
17.0 pp
65.1%
7.8 pp
Adjusted net income
403,248
245,739
64.1%
315,313
27.9%
Adjusted Operating Expenses
(115,502)
(103,050)
12.1%
(132,866)
-13.1%
Adjusted EBITDA
343,626
195,498
75.8%
291,893
17.7%
Adjusted EBITDA margin
74.8%
61.8%
13.1 pp
68.7%
6.1 pp
Adjusted earnings per share
0.200885
0.122869
63.5%
0.157282
27.7%
In 1Q10, the net impact from the adjustments on the bottom line
amounted to BRL 120.6 million, composed by 2 non-cash items:
BRL 111.6 million added ­ Recognition of deferred liabilities
related to the goodwill amortization in 1Q10;
BRL 9.0 million - Stock Options Plan;
In 1Q09, the net income was adjusted by the Stock Option Plan in
BRL 18.8 million
38
NET INCOME RECONCILIATION
BRL Millions
1Q10
1Q09
Var.
1Q10/1Q09
Adjusted Net Income
403.2
245.7
64.1%
Adjustments
Deferred Tax Liabilities
111.6
Stock Options Plan
9.0
18.8
Corporate Net Income
282.6
227.0
24.5%
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33%
51%
16%
Trading / Clearing Systems - BM&F
Trading / Clearing Systems-Bovespa
Other Operational Revenues
In BRL (thousands)
1Q10
1Q09
% Change
1Q10/ 1Q09
Operating Revenues
510,660
351,918
45.1%
Trading / Clearing Systems - BM&F
170,935
127,170
34.4%
Trading / Clearing Systems-Bovespa
259,835
158,196
64.2%
Other Operating Revenues
79,890
66,552
20.0%
Depository and custody
20,436
16,084
27.1%
Vendors
15,941
11,521
38.4%
Trading access (Brokers)
12,521
9,475
32.1%
Listing
11,511
10,621
8.4%
Securities Lending
10,520
6,127
71.7%
Bolsa Brasileira de Mercadorias
1,114
1,406
-20.8%
Bank
1,899
1,971
-3.7%
Others
3,513
3,976
-11.6%
Dividends (CME)
2,435
5,371
-54.7%
Revenues Breakdown
1Q09
1Q10
39
Revenues Breakdown
36%
45%
19%
Revenues Breakdown
Operational performance by Segment
1Q10
1Q09
Change
1Q10/1Q09
BM&F ADTV - in millions of contracts
2,453.6
1,471.7
66.7%
BM&F RPC - in BRL
1.126
1.345
-16.3%
BOVESPA ADTV - in BRL millions
6,599.6
3,908.1
68.9%
BOVESPA Margin - in bps
6.56
6.64
-1.1%
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555
581
1Q09
1Q10
Others Revenues
Vendors:
+38.4%
Due to the new pricing policy (Apr´09) and the
growth of the average number of users (+16.6%)
Securities Lending:
+71.7%
Depository and Custody:
+27.1%
Extra fee after April 2009
Trading Access (Brokers):
+32.1%
The market recovery lead brokers to migrate to
more expensive bandwidth
40
Other Revenues: 1Q10x1Q09
9.8
12.9
16.5
15.8
19.4
53.9
58.6
63.8
61.1
69.6
-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
-
5,0
10,0
15,0
20,0
25,0
1Q09
2Q09
3Q09
4Q09
1Q10
N
u
m
b
er

o
f
T
r
a
d
es
O
p
en

I
n
t
er
es
t
Open Interest (BRL billions)
Monthly Average Number of Trades (thousands)
Securities Lending - BTC
Number of Accounts (Average) ­ in thousands
background image
46.6%
15.6%
7.1%
3.9%
28.5%
Expenses
1Q10
In BRL (millions)
1Q10
1Q09
Var.
1Q10 / 1Q09
Operating Expenses
136,632
148,760
-8.2%
Personnel
63,718
85,462
-25.4%
Data processing
21,266
26,683
-20.3%
Deprec. and Amortization
12,130
8,951
35.5%
Third Party Services
9,637
9,119
5.7%
Maintenance
2,682
2,826
-5.1%
Communications
5,971
4,991
19.6%
Marketing
5,328
2,292
132.5%
Board Compensation
1,048
1,129
-7.2%
Other
14,852
14,367
3.4%
Adjusted Operating Expensesą
115,502
103,050
12.1%
Adjusted Personnel Expenses˛
54,718
48,703
12.4%
1Q09
1
Exclusions: In 1Q10: SOP (BRL 9.0 million and depreciation; In 1009: SOP (BRL 18.8 million), depreciation and severance expenses (BRL 18 million)
2
Exclusions: In 1Q10: SOP (BRL 9.0 million; In 1Q09: SOP (BRL 18.8 million) and severance expenses (BRL 18 million)
41
Expenses Breakdown
Expenses´s Breakdown
57.4%
17.9%
6.1%
1.5%
22.9%
Personnel
Data processing
Third Party Services
Marketing
Others
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130
120
103
105
109
133
115
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
Adjusted Operational Expenses* (BRL millions)
Synergies associated with 2007 expenses** (BRL millions)
* In 1Q10 excludes depreciation and stock options expenses and in 1Q09 excludes depreciation, stock options and severance expenses
** 2007 Operational expenses as adjusted for inflation and OPEX budget excludes depreciation and stock options
42
Expenses Breakdown
Adjusted Operational Expenses: 12.1% higher than 1Q09
Adjusted Personnel Expenses: 12.4% higher than 1Q09
IT: 20.3% reduction vs. 1Q09 due to projects that are being revised and costs reduction related to equipments
maintenance
Marketing: 132.5% growth in comparison with 1Q09 (low base) showing the efforts in the financial education
campaign
Others: CAPEX write off (BRL 3.7 million) and provisions of litigation (BRL 1.9 million)
Adjusted Operational Expenses*: BRL 115 million in 1Q10
Guidance: Both BRL550 million OPEX (adjusted) and BRL302 million in CAPEX budgets will be revised downwards
Expenses Breakdown
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Cash and Cash Equivalents
43
Financial Highlights
CAPEX
BRL26.4 million, (BRL23.6 million in IT and BRL2.8
million in other projects)
4Q09 - BRL 31.5 million
2009 ­ BRL 95.6 million
Financial Income
BRL 67 million in 1Q10 and in 1Q09
Cash distributions
BRL227 million Interest on Capital in 1Q10,
representing 80% of GAAP net income, as follow:
BRL90 million already paid during the 1Q10; and
BRL137 million, equivalent to BRL 0.068 per share,
to be paid on May 27
th
, based on the ownership
structure prevailing as of May 12
th,
2010
In BRL billions
1.2
0.5
2.2
Mar´10: BRL 4 billion
Collateral
Clearings safeguard structure
Own Cash
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In BRL thousands
ASSETS
Mar'10
Dec'09
LIABILITIES AND SHAREHOLDERS'
EQUITY
Mar'10
Dec'09
Current Assets
3,532,520
2,778,968 Current Liabilities
1,645,579
1,162,075
Cash and cash equivalents
48,238
50,779 Collateral for transactions
1,171,426
810,317
Financial investments
3,320,428
2,599,784 Others
474,153
351,758
Others
163,854
128,405 Non-current Liabilities
424,727
313,002
Non-current Assets
18,469,670
18,422,215 Financing
163
2,495
Long-term receivables
749,176
715,951 Deferred Inc. Tax and Social Contrib.
372,784
261,060
Financial investments
616,412
585,648 Others
51,780
49,447
Others
132,764
130,303 Minority interest in subsidiaries
16,378
16,357
Investments
1,319,386
1,319,439
Shareholders' Equity
19,915,506 19,709,749
Property and equipment
278,277
268,895 Capital
2,540,239
2,540,239
Capital reserve
16,675,489 16,666,489
Intangible assets
16,122,831
16,117,930 Others
699,778
503,021
TOTAL ASSETS
22,002,190
21,201,183 TOTAL LIAB. AND SHAREHOLDERS' EQUITY 22,002,190 21,201,183
44
Balance Sheet
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APPENDIX
Operational data
45
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Performance of BOVESPA Segment: Individuals Investors
46
On Line Trading´s in Overall ADTV (%)
ETFs - Average Daily Volume (BRL Millions)
Treasury Direct
8.8
5.3
11.4
20.3
22.0 23.5 21.7 21.5
26.6 25.6
18.3
16.9
22.2
27.1
25.3
33.1
29.1
24.5
26.7
J
a
n
-
09
F
e
b
-
09
M
a
r
-
09
A
p
r
-
09
M
a
y
-
09
J
u
n
-
09
J
u
l
-
09
A
u
g
-
09
S
e
p
-
09
O
c
t
-
09
N
o
v
-
09
De
c
-
09
J
a
n
-
10
F
e
b
-
10
M
a
r
-
10
A
p
r
-
10
M
a
y
-
10
J
u
n
-
10
J
u
l
-
10
0
50
100
150
200
250
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
Assets Value (BRL millions)
Investors (thousands)
17.5%
16.5%
18.3%
19.3%
21.2%
16.9%
17.9%
17.6%
18.7%
0,0%
4,0%
8,0%
12,0%
16,0%
20,0%
24,0%
1Q09
2Q09
3Q09
4Q09
1Q10
Apr´10
May´10
Jun´10
Jul´10
background image
0
100
200
300
400
500
600
700
J
a
n
-
05
A
p
r
-
05
J
u
l
-
05
O
c
t
-
05
J
a
n
-
06
A
p
r
-
06
J
u
l
-
06
O
c
t
-
06
J
a
n
-
07
A
p
r
-
07
J
u
l
-
07
O
c
t
-
07
J
a
n
-
08
A
p
r
-
08
J
u
l
-
08
O
c
t
-
08
J
a
n
-
09
A
p
r
-
09
J
u
l
-
09
O
c
t
-
09
J
a
n
-
10
A
p
r
-
10
J
u
l
-
10
Performance of BOVESPA Segment: Individuals Investors
47
Jul´10
628 k
Investors' Account
1.5
1.8
2.1
2.3
2.4
2.3
2.1
2.1
2.3
1Q09
2Q09
3Q09
4Q09
1Q10
Apr´10 May´10 Jun´10
Jul´10
Market Capitalization (BRL trillions)
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Bovespa Segment: Foreign investment flow
*Includes regular trades and public offering; updated until July 30th, 2010.
48
Monthly Net Flow of Foreign Investments* (in BRL billions)
-1.0
0.9
-0.6
6.0
2.9
-2.8
-7.3
5.3
-1.8
-4.7
-1.2
-0.4-0.6
0.5
1.4
5.7 6.1
4.2
5.5
2.5
5.2
9.1
2.1
1.4
-2.1
0.7
5.8
1.5
-1.5
-0.1
7.3
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Operational Highlights:
Investor
´
s Participation in Total Volume
BM&F Segment (Investor's Participation in Total Volume)
Bovespa Segment (Investor's Participation in Total Value)
49
56%
51%
49%
48%
45%
43%
43%
42%
44%
43%
40%
41%
24%
25%
23%
23%
24%
27%
26%
30%
26%
25%
29%
32%
12%
15%
17%
19%
20%
22%
23%
22%
24%
26%
25%
22%
7%
7%
9%
8%
8%
5%
5%
3%
4%
4%
4%
3%
2%
2%
2%
3%
3%
2%
3%
2%
2%
2%
1%
1%
2005
2006
2007
2008
2009
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Central Bank
Companies
Individuals
Foreign Investors
Institutional Investors
Financial Institutions
25%
25%
23%
27%
31%
31%
32%
31%
25%
27%
26%
28%
27%
27%
30%
27%
26%
29%
29%
30%
35%
34%
35%
36%
33%
36%
35%
35%
34%
28%
28%
27%
28%
30%
28%
28%
12%
10%
10%
8%
7%
9%
9%
9%
9%
7%
8%
7%
2%
2%
2%
3%
2%
2%
2%
2%
2%
2% 2%
2%
2005
2006
2007
2008
2009
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Individuals
Institutional Investors
Foreign Investors
Financial Insitutions
Companies
Others
background image
444.8
450 451.1
458.2
469.4
479.6 479.4
484.9
490.6
498.8 497.6
506.4
515.4
2002
2009
Institutional investors will broaden their participation in
capital markets: Pension Funds
13%
14%
14% 15%
16% 17%
15%
17%
18%
40%
Brazilian Pension Funds: projected asset growth
(% GDP)
Brazilian Pension Funds: asset evolution
(BRL billions)
Brazilian Pension Funds: equity
investments portfolio*
27.7%
33.3%
BRL 46.7
billion
BRL 163.8
billion
Source: ABRAPP
59.3%
70.8%
33.3%
21.1%
7.5%
8.1%
Total
Total without Previ
Fixed Income
Equity
Others
Brazilian Pension Funds Investments
Breakdown
­
Dec 2009
In September, 2009, the limit the pension funds are allowed to invest in stocks increased from 50% to 70% of their total portfolio
50
background image
55%
52%
63%
54%
47%
48%
44%
44%
28%
29%
17%
23%
24%
23%
24%
23%
10%
11%
12%
13%
14%
16%
18%
18%
8%
8%
8%
10%
15%
12%
15%
15%
2003
2004
2005
2006
2007
2008
2009
May/10
Fixed Income
Multimarkets
Others*
Equities
768.8
724.8
914.8
1,119.9
1,279.5
1,150.0
1,458.5
1,497,0
51
Institutional investors will broaden their participation in
capital markets : Investments Funds
Investments Funds: Portfolio Breakdown (in BRL billions )
Investments Funds: Multimarket and Equities Funds Evolution (in BRL billions)
* Brazilian Hedge Funds
* Others include: Asset backed securities, real estate, FX, off-shore and retirement funds
Source: Anbima
281
286
285
308
320
332
338
338
346
339
340
340
345
351
165
174
171
178
180
190
195
205
214
213
211
215
210
204
Apr-09 May-09 Jun-09
Jul-09
Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10
Feb-10 Mar-10 Apr-10 May-10
Multimarkets Funds*
Equities Funds
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Capital Markets in Brazil:
A Story of Growth
52
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Number of investor
accounts in
investment funds
270 million
(~60% of population)
USA
BRAZIL
10.2 million
(5% of population)
USA (Apr/10)
World(Dec/09)
Brazil (May/10)
% in Equities
53%
39%
14%
Source: ICI- Investment Companies Institute and Anbima
Modest exposure of Investment Funds
53
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Nasdaq
KEx
Shanghai
DB
Borsa
Italiana
NYSE
BME
Tokyo
LSE
AUX
TSX
NSEI
HKEx
SGX
BVMF
1,027%
243% 229%
171% 162% 161% 146%
129% 107% 98% 96% 88% 84%
67%
67%
Brazil places 28th in the WFE ranking, with 386 listed companies in Dec/09
High potential
for growth
Source: WFE
446%
Shenzhen
Brazilian Capital Market Indicators are still Incipient when
Compared to World Benchmarks
Turnover Velocity (2009)
54
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Real Estate Credit to GDP Ratio
Agricultural commodity
derivatives to total
exchange industry*:
World
­
5.3%
Brazil
­
0.7%
* Jan-Sept/2009
44%
15%
11%
3%
62%
USA
Spain
Chile
Mexico
Brazil
Source: FIA
Source: CDES Social and Economic Development Board and World Bank
Modest Development in Fixed-Income and Agricultural
Commodity Derivatives
55
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