Download - BM&F BOVESPA PRESENTATION Oct 2008
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BM&F BOVESPA PRESENTATIONOct 2008
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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&FBovespa S.A. 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 of BM&FBovespa S.A. performance.The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&F Bovespa SA services; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitive industries that BM&FBovespa S.A. 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&FBovespa SA 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&FBovespa S.A. 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 SA 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.
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THE NEW COMPANY
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Timeline
2007 – Demutualizations and IPOs
Feb May
Oct Nov
Integration
Initiation
Talks
Bovespa Demutualization
Aug Sep
2008 - Integration
Jun Aug
28th 20th
BM&F Demutualization
Bovespa´s IPO BM&F´s IPO
19th 8th
General
Meeting
20th
Chairman and CEO
Nomination
Top Mgmt Nomination First Trading
day of the new ticker: BVMF3
20th 29th
Final Staff and
Layoffs
26th 30th
Nov 28th
General Meeting to incorporate BVSP and CBLC
18th
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Market Data
Indices Licensing
Depository
Securities Lending
Clearing and Settlement
Software Licensing
Complete Array of ServicesComplete Array of Services
High Competitive EdgeHigh Competitive Edge
Business Model
Cash Market Trading
Listing
Derivatives
Custody
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Gross Operating Revenues Breakdown
1Q082Q08
OthersBovespa
9.2%
Trading andClearingBovespa52.6%
OthersBM&F1.4%
Vendors andOthers2.8%
Trading andClearing Fees
34.0%
Trading andClearingBovespa55.7%
Trading andClearing Fees
BM&F31.5%
OthersBovespa
8.3% OthersBM&F1.8%
Vendors andOthers2.7%
R$ 437.6 MillionR$ 483.6 Million
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Regulation in Brazil demands that all trades carried in exchanges must be matched at the beneficial owner level
Internalization of orders is not allowed
Our clearing houses act as central counterparty agents and we have the risk management at the investor level with mark to market (margin variation calls) done on daily basis
All trades must be carried through a brokerage house (clearing agent), which is responsible for their clients risk and know your client policies
Current regulation requires settlement, clearing and depository services to be provided to third parties on a commercial basis
Regulatory Environment
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Trading, Registration & Clearing Model
FX Cash MarketOpen outcry
Electronic trading
OTC registration
FX Clearinghouse
DerivativesOpen outcry
Electronic trading
OTC registration
DerivativesClearinghouse
Stocks andCorporate Bonds
Electronic Trading
OTC Registration
CBLC
GovernmentBonds
Electronic trading
OTC registration
SecuritiesClearinghouse
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Risk Calculation and Collateral Pledged
Risk calculation in almost real time (calculated every 15 minutes), updating the registered transactions and the requirement of additional collateral whenever necessary. Risk calculation based on stress testing.
When it comes to the Equities Clearinghouse (CBLC) and Derivatives Clearinghouses, risk calculation and collateral requirement are performed individually, according to each client or final beneficial owner.
Collateral pledged in the Clearinghouse’s custody account, with segregation between the different clients.
Legal Protection of Pledged Collateral
Legal protection of the collateral held by clearinghouses against bankruptcy procedures and judicial blocking attempts by creditors
Risk calculation and Pledge of Collateral
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Risk Management - Collaterals
R$ billions
Clearings Deposited RequiredDerivatives 89.8 74.0
Cash Equities 24.1 13.0FX 3.9 1.2Fixed Income 1.4 0.3Total in BRL
Date: Oct 24th, 2008
Public BondsLetters of CreditOthers*
79.95.04.9
67.43.63.0
Total in USD119.2
51.681.935.4
* Collateral deposited in shares of stocks, bank CDs, gold, cash and quotes of funds
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Settlement directly with Central Bank of Brazil
Even though the Clearinghouses are not banks, they have an exclusive settlement account in the Central Bank of Brazil to settle their transactions
The direct settlement with the Central Bank of Brazil avoids the Clearinghouse’s exposure of credit risk offered by financial institutions.
Short Selling
When it comes to Equities Clearinghouse (CBLC), short selling occurs when an investor sells a security lent by another investor. The decision of lending shares is taken at the beneficiary owner level, who is entitled to the returns generated by the transaction.
The borrowing of securities is centralized in the Clearinghouse, with collateral requirement higher than the security value (100%, plus amount equivalent to the security price variation risk) and daily mark to market.
The Clearinghouse plays the role of the central counterparty, guaranteeing the return of borrowed securities.
Settlement and Short Selling
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Launched in December 2000
Special listing segment of companies committed to better corporate governance standards, beyond those already established at current Brazilian regulation
Instituted with the goal to increase the market credibility and investors’ confidence
Becoming shareholders in these companies
Providing better valuation
Decision of joining NM is voluntary and market driven
Listing - Novo Mercado
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Dispersion
Shareholders rights
• maintain at least a 25% free float;
• adoption of special procedures in public offerings to enhance the dispersion of
the company shares.
Transparency
• only common shares;
• tag-along rights extend to all shareholders in the event of disposal of control;
• board of director with at least five members and a minimum of 20%
independent board member;
• public tender offering in case of delisting or cancellation of the NM’s contract
• a statement of cash flows (company’s and consolidated) included in the
quarterly financial reports and annual financial statements;
• annual financial statements in an international standard – IFRS or US GAAP;
• disclose information about the company’s securities traded by the controlling
shareholders and the senior managers.
Novo Mercado Rules
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Special Listing Segments Evolution
36.6% of total listed companies 57.8% of total market capitalization 66.4% of total traded value
164
19 24 31 33 37 36 44 447 10 14
20
92
18
33
7
22
18
44
102
2001 2002 2003 2004 2005 2006 2007 Sep 2008
Level 1 Level 2 Novo Mercado
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Market Opportunities
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Number of investors – potential increase in the country and abroad (550 thousand active investors)
Number of companies – potential increase of the Brazilian and Latin America listed companies (Around 450 Brazilian companies are listed and 9 foreign through BDRs)
Turnover ratio – low ratio compared with the other exchanges
Derivatives – new accessing gates will broad the investor basis
Revisiting the pricing policy
Opportunities
17Source: World Federation of Exchange (WFE)
Exchanges Ranking in total Market CapCash Markets
*From Jan to Sep, 2008
1 NYSE Group 13.045.903 NYSE Group 140.724
2 Tokyo SE 3.334.406 Nasdaq 59.811
3 Nasdaq 3.110.698 London SE 29.040
4 Euronext 2.691.846 Tokyo SE Group 23.770
5 London SE 2.565.051 Euronext 18.820
6 Shanghai SE 1.775.791 Shanghai SE 11.462
7 Hong Kong Exchanges 1.614.590 BME Spanish Exchanges 10.469
8 TSX Group 1.520.520 Deutsche Börse 9.993
9 Deutsche Börse 1.351.774 TSX Group 7.443
10 BME Spanish Exchanges 1.222.069 Hong Kong Exchanges 7.263
11 Swiss Exchange 999.073 Borsa Italiana 6.974
12 Australian SE 925.947 Cyprus SE 6.750
13 Sao Paulo SE 888.163 Swiss Exchange 6.587
14 Bombay SE 884.747 Korea Exchange 6.124
15 National Stock Exchange India 828.416 OMX Nordic Exchange 5.796
16 OMX Nordic Exchange 757.065 Australian SE 5.662
17 Borsa Italiana 663.260 Shenzhen SE 5.507
18 Korea Exchange 656.116 Taiwan SE Corp. 3.934
19 JSE 535.184 Sao Paulo SE 3.382
20 Taiwan SE Corp. 453.065 National Stock Exchange India 3.310
Market Cap - US$ millions Daily Traded Value - US$ millions
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Millions of contracts – from Jan to Jun 2008
1 CME Group 1.5512 Eurex 1.1723 Korea Exchange 1.1464 Liffe 565
5 CBOE 557
6 ISE 5067 BM&FBovespa 3678 Philadelphia SE 2619 National Stock Exchange India 234
10 NYMEX 217
Derivates - Traded Volume
Exchanges Ranking in total VolumeDerivatives
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Turnover Velocity
%1) NASDAQ 3312) AMERICAN SE 2853) SHENZEN 2584) NYSE GROUP 2085) CYPRUS 2086) B. ITALIANA 1957 )KOREA SE 1808) BME (ESPANHA) 1689) TAIWAN 15410) LONDON 15311) OSLO 15012) TOKYO 14313) OSAKA 14214) EURONEXT 13515) OMX 132
BM&FBovespa´s turnover is 60%
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New Listings Turnover
2005
2006
Total
2004
2007
ADTV of JULY 08
R$ millions
Annualized Turnover (Avg.
Market Cap)
62.6%
98.0%
104.5%
67.9%
121.7
115.0
162.7
387.2
IPOs
2008 129.4%137.9
2004-2008 924.5 80.8%
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64
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97 411112
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Novo Mercado
Período de 2004 a 2007Fonte: BM&FBOVESPA.
IPO evolution
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2002 2003 2004 2005 2006 2007
4.9
2.4
1.2
0.80.6
1.6
2008Jan-Sep
5.9R$ Billions
Bovespa´s trading evolution
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Bovespa´s Market Share
32.7%
46.5%
51.9%55.1%
50,3%
44,8%
41.7%
51.6%
55.5%
55.3%
55.5% 56.4%
61.5%
82.5%
72.3%
68.8%
59.3%
57,8%
67.5%
65,8%
70.0%
68,7%
70.4%
69.7%
75.6%
1999 2000 2001 2002 2003 2004 2005 2006 2007 jan-08 feb-08 mar-08 apr-08 may-08 jun-08 jul-08 aug-08
(BVSP vs NYSE) Only Companies with ADRs listed on NYSE (BVSP vs NYSE) All BVSP listed Companies
57.2%
58.0%
72.4%70.7%
65.6%63.6%
55.4%
50.8%
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Discounts of Trading Fees for BM&F segment's Products
40% through Brokerage Houses;
50% through DMA; and
70% for clients registered as Algorithm Traders.
The Company will have a Base Table where the discount percentages will fall upon, temporarily, according to its characteristics and access to the Trading System, as indicated below, starting Nov 3rd:
This discount policy will result in neutral impact over the annualized income of the company.
Starting on Feb. 2nd, 2009, the fixed discount policy will be replaced by a volume incentive methodology, considering ranges of traded contracts and/or utilization of services, willing to provide greater benefits to the biggest customers.
BM&F segment's former Pricing Policy terminated on Aug 25th25% discount for trading and clearing fees applied to investors that held at least 10,000 BMEF3 stocks.
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Central Depository – New Pricing Structure
The Central Depository will charge the following fees, on a monthly basis
Custody account maintenance
BRL 3.00 per inactive account BRL 6.50 per active account
Per asset and value of the stocks
BRL 1.00 per asset (ISIN code) Percentage of the average value registered at the account Average values below BRL 100,000 during the month will be exempted from this fee
Custody transfer
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CME Order Routing Agreement andDMA Timeline
Aug
3Q08
Sep
traditional DMA
IMPLEMENTED
29th
CME Order Routingagreement implementation
(Order flow)
Globex GTS Globex GTS
4Q08
Oct Nov Dec
DMA via direct connection
Q109
2009
DMA viaa provider
FIRST PHASE
SECOND PHASETHIRD PHASE
FOURTH PHASE
(For cash markets until the end of 09)
1ST HALF 09
Co-location
20th
Mock test of CME
order routing
30th
Traditional DMA figures until Sep 30th/08:
(i) 3,000 to 4,000 trades per day (10-15% from total)(ii) 100,000 contracts per day (6% from total)(iii) Around 30 brokers certified
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Buyback Program – Main Features
Approved by the Board on 09/24/2008 with shares acquired to be cancelled;
Free float – 2,036,179,471 shares
Buy back comprising 3.5% of the free float – 71.3 million shares
One year program, starting on Sep 28th, 2008
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Reconciliation of 1H08 Adjusted Results
Minority Interest (607)(607)
Reported
Income Before Taxes
Operating Result
Adjusted Net Margin by Goodwill
Adjusted Net Income by Goodwill
Income Tax and Social Contribution
Non-Operating Income
Financial Income, net
Goodwill Amortization
EBITDA Margin
EBITDA
Operating Margin
Operating Expenses
Net Revenues
57.6%39.8%
547,649457,244
563,349472,944
68.1%57.2%
476.584-
(236,336)(212,174)
10,84210,842
155,036155,036
(81,105)
(279,250)(369,655)
826,899826,899
R$ Thousands
55.3% 66.2%
(81,105)
542,017 632,422
NonRecurring Adjusted
Net Margin
Net Income
47.8%39.8%
395,479329,236 66,243
90,405
66,243
(24,162)
90,405
90,405
90,405
90,405
90,405
90,405
(24,162)
66,243
147,348
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BM&F Bovespa Investor Relations
Site: www.bmfbovespa.com.br
Phone numbers: 55 11 3233 2490/ 2847
E-mail: [email protected]