BVMF Presentation - October 2015
Transcript of BVMF Presentation - October 2015
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Public
PublicNovember/2015 X
Investor Relations DepartmentSão Paulo, SP
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Forward Looking Statements
This presentation may contain certain statements that express the management’s expectations, beliefs andassumptions about future events or results. Such statements are not historical fact, being based on currentlyavailable competitive, financial and economic data, and on current projections about the industries BM&FBOVESPA
works in.
The verbs “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “plan,” “predict,” “project,” “target” and othersimilar verbs are intended to identify these forward-looking statements, which involve risks and uncertainties thatcould cause actual results to differ materially from those projected in this presentation and do not guarantee anyfuture BM&FBOVESPA performance.
The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&FBOVESPA
services; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitiveindustries BM&FBOVESPA operates in; (iii) changes in (a) domestic and foreign legislation and taxation and (b)government policies related to the financial and securities markets; (iv) increasing competition from new entrantsto the Brazilian markets; (v) ability to keep up with rapid changes in technological environment, including theimplementation of enhanced functionality demanded by BM&FBOVESPA customers; (vi) ability to maintain anongoing process for introducing competitive new products and services, while maintaining the competitiveness ofexisting ones; (vii) ability to attract new customers in domestic and foreign jurisdictions; (viii) ability to expand theoffer of BM&FBOVESPA products in foreign jurisdictions.
All forward-looking statements in this presentation are based on information and data available as of the date theywere made, and BM&FBOVESPA undertakes no obligation to update them in light of new information or futuredevelopment.
This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shallthere be any sale of securities where such offer or sale would be unlawful prior to registration or qualificationunder the securities law. No offering shall be made except by means of a prospectus meeting the requirements ofthe Brazilian Securities Commission CVM Instruction 400 of 2003, as amended.
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIESMain growth drivers
MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform
OPERATIONAL PERFORMANCENotable global exchange
FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer
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Exchange sector Safety and market integrity as priorities
Capital and derivatives markets in Brazil
Stable and solid regulation CVM – Trade and post-trade
BACEN – Post-trade , banks andintermediaries
Main participants
Intermediaries – local and internationalbrokers (linked to bank and independent)
Listed companies
Investors – institutional, foreign andindividual (retail)
Exchange market characteristics in Brazil
BVMF is the sole exchange, despite themarket being open for competitor since 2007
Stocks exclusively traded through an exchange(Dark pools, MTFs and internalization prohibit)
Identification of the final beneficial owner in
the entire trading and post-trading chainDerivatives are predominantly listed and OTCderivatives must be registered mandatorily
Securities lending mandatorily through acentral counter-party (CCP)
The exchange is responsible for oversight andself-regulation of the markets in which itoperates
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“State-of-the-art” trading and post-trading
systems: ~R$1.6 billion invested in resilience,
strength and safety
Solid market position: dominant position in the
domestic market and significant presence in theglobal exchanges industry
Reference in corporate governance
standards: cutting edge in adopting best practices
to the market
High dividend payer¹: +80% of the net income
and R$5,9 billion on distributed earnings since 2008
Revenue diversification: trading and post-
trading services for stocks, derivatives, fixed incomeand OTC
Constantly seeking operational efficiency:investments in technology and cost growth below
inflation²
Why invest in BM&FBOVESPA? A global exchange
1890:
Foundation of Bolsa
Livre (Bovespa's
predecessor)
Aug 2007:
Bovespa Hld
demutualization
Oct 2007:
Bovespa Hld
IPO (BOVH3)
1967:
Bovespa’s
Mutualization
1986:
Start of
BM&F
activities
Sep 2007: BM&F
demutualizationNov 2007:
BM&F IPO
(BMEF3)
May 2008:
Merger between BM&F and Bovespa
Hld and creation of BM&FBOVESPA
(BVMF3)
¹ Practice of the period and amount distributed from Jan/2008 to Jun/2015;
² Expenses adjusted to Company´s depreciation, stock granting plan – principal and social charges -, stock options plan, tax on dividends from the CME Group, transfer of fines and provisions
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Services for the whole chain
Trading Platform: equities, derivatives, government and
corporate bonds, funds, spot FX, among others
Post-trading Platform:
Central counterparty (CCP)
Settlement System (SSS)
Central Depository (CSD)
Services for Issuers and Participants:
Listing
Trading access (brokers)
Securities lending
Custody for clubs and foreign investors (2689)
Market Data (vendors)
Indices Licensing
Software Licensing
OTC (derivatives and fixed income)
COMMODITIES
FXINTEREST
CREDIT
EQUITY
CCP, SSS and CSD
POST-TRADE
CASH
FUTUREOPTIONS
FORWARDSWAP
Multi-asset and vertically integrated model Value gained across most of the chain
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DTCC
BRAZIL(Internalization of orders is forbidden)
USA(Internalization of orders is allowed)
POST-TRADINGCCP
SSS
CSD
TRADING
Brokers A and B
Investors Investors
Brokers A and B
Investors Investors
Broker
ABroker
B
Model 100% vertical: clearing,settlement and central depository atthe FINAL BENEFICIAL OWNER LEVEL
Clearing, settlement and depositoryoccur at the brokerage houses
Trading venues
Multi-asset and vertically integrated model Value gained across most of the chain
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7% 7%6%
5%
5%
2%
67%
Oppenheimer Funds
Vontobel Asset Management
Capital World Investors
BlackRock Funds
Capital Group International, Inc
Treasury stock
Others
(update in Aug. 2015)
(update in Out. 2015)
Listed in Novo Mercado (voting shares only andother shareholders’ rights, transparency, etc.)
Majority of the Board composed of independentmembers (regulatory requirement)
Chairman is an independent member
Other Board members are linked to market
participants or strategic partner (CME);although considered non-independent, are notconnected to controlling group or management
All Board members are not Company’s executive
Well-defined and solid Board of Directors andBoard’s Committees
Executive compensation system aligned withCompany’s performance and strategicobjectives, as well as with shareholders long-term interests
Solid Governance Practices Broadly Dispersed Shareholder Base
(update in Feb. 2013)
(update in Oct. 2015)
(update in Oct. 2015)
Note: percentage ownership are estimated but may not represent exact figuresdue to different information dates about largest shareholders’ positions
Corporate governance Reference in corporate governance practices
(update in Oct. 2015)
(update in Oct. 2015)
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2013-15 Board of Directors Composition
Independent
members
Linked tomarket participant or
strategic partner (CME)
Corporate Governance Profile - Board & Committee Summary
Board
Committees
AuditNomination
and CGComp. Risk
Brokerage
Industry
# Members 11¹ 6 3 3 4 9
Independent Board 6 2 2 2 2 1
Market participant + Board 5¹ - 1 1 2 1
Independent Non-Board - 4 - - - -
Market participant Non-Board - - - - - 7
# of meetings (2014) 13 13 3 8 10 7
Average attendance (2014) 90% 85% 100% 100% 83% 93%
Board Member Age
Years
in the
BoardPedro Pullen Parente
Former Minister of State; Former CEO of Media and
Commodity Conglomerates
62 4
Claudio Luiz da Silva Haddad
Former CEO of Investment Bank; Founder and CEO of
Business School
67 6
Antônio Quintela
Former CEO of CS Brasil and Americas; Portfolio Manager49 -
Luiz Antônio de Sampaio Campos
Former Director of CVM; Lawyer44 -
Luiz Fernando Figueiredo
Former Governor of the Central Bank; Portfolio Manager51 2
Luiz Nelson Guedes De Carvalho
Former Central Bank and Sec. Commission Officer; Member
of IIRC and CPC/IASB; Professor of Accounting
69 2
André Esteves
CEO of BTG Pactual47 2
Denise Pauli Pavarina
Bradesco executive; Chairwoman of Anbima51 -
Eduardo Mazzilli de Vassimon Director of Itaú e CRO of Itaú Holding
57 -
José Berenguer Neto
CEO of JP Morgan Brazil48 2
Charles P. Carey
Former Chairman of CBOT; CME Group Board Member59 3
Highly qualified Board Members and well-functioningBoard’s Committees
Commitment and independence of Board of Directorsand Committees members
Note: in the case of the Advisory Committee for the Securities Intermediation Industry the statisticsregarding number of meetings and attendance considered the previous composition with 6 members,including two Board members. This change was implemented in Feb 2015.
Corporate Governance Multidisciplinary knowledge in conducting business
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Board of
Directors
CEO
Edemir Pinto
CFODaniel Sonder COOCícero Vieira CIOLuis Furtado CPOEduardo Guardia
Management (5 Executives + 25MDs)Responsible for implementing the guidelinesestablished by the Board or Directors, executing the
strategic plan, monitoring and executing the Company’soperations
Internal Working Groups (budget, products andservices, projects, others)This internal working groups are important componentsof the Company’s corporate governance, monitoringthe budget process and establishing priorities forproducts, services and projects development, amongother things
Advisory Committees (market and credit risks,corporate risk, sustainability, code of conduct, businesscontinuity, others)Multidisciplinary internal groups that address andmonitor important business and issues of the Company
Advisory Chambers (commodities, listing, equities,fixed income, FX, derivatives, others)Several open channels with investors, marketparticipants and companies which collaborate todevelop and improve products and services, as well asto suggest better practices
HR, Marketing
and EducationCorporate
RiskSustainability
and Press
Internal Audit¹
Management and Internal Governance
Financial, Legal,
IR and Issuer
Regulation
Trading, Risk
Management,
Clearing,
Settlement,
Depository,
BVMF Bank and
Market
Participants
Relationship
Trading, Post-
trading, PMO,
New Products,
Infrastructure,
Mid- Back-Office
Systems
Products and
Business
Development,
Comercial
Relations (issuers
and investors)
and International
Offices
Internal Working Groups Advisory CommitteesMarket Advisory
Chambers
4 MD´s 6 MD´s 6 MD´s 5 MD´s
Corporate Governance Multidisciplinary knowledge in conducting business
¹ The Head of the Audit Department reports functionally to the Board of Directors and the Audit Committee. The Audit Committee may periodically assess the performance of the Head of Audit
Department, after consulting the Executive Board.
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BM&FBOVESPA’s Sustainability Policy Sustainability as a long-term driver
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIES
Main growth drivers
MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform
OPERATIONAL PERFORMANCENotable global exchange
FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer
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Growth opportunities in the Brazilian
equities and derivatives markets
Opportunities in the Brazilian market BM&FBOVESPA is ready to capture future growth
EQUITIES MARKET
Portfolio diversification: diversification of institutional investors’ portfolioswith a higher participation of equities
Retail investors: small number of retail investors and growth of the middleclass
Listed companies: low number of listed companies, while important sectorsare not adequately represented on the exchange
DERIVATIVES MARKET
Growth of credit and fixed-rate government debt: higher demand forhedging from financial institutions and institutional investors
Growth of foreign trade: higher demand for hedging through FX contracts
Equities market development: growth in demand for index-based contracts
OTC derivatives: capital requirements (Basel) should benefit OTCtransactions through a CCP
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Investors’ exposure to equities is low Investors’ portfolio opportunities shifting to equities
Funds’ AUM evolution. Global average of 40% for equities
Investment Funds’ AUM (in BRL billions)
Number of Custody Accounts (in thousands) Pension Funds’ AUM (in BRL billions)
Number of retail investors represents only 0.3% of thepopulation (lower than global average)
Participation of equities in the portfolio of pension funds
Investors’ portfolios are highly
concentrated in fixed income
• Historically high interest rates
• Low level of sophistication of pension funds andsome asset managers
• Lack of knowledge about the equity market,combined with retail investors’ fixed-incomemindset
Sources: BM&FBOVESPA, ANBIMA and ABRAPP. ¹ Aug/15 and ²May/15.
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIESMain growth drivers
MAIN GROWTH INITIATIVES
Building an State-of-the-art platform
OPERATIONAL PERFORMANCENotable global exchange
FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer
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BM&FBOVESPA IT, Risk and Operating Development Building a state-of-the-art platform to boost market growth
BM&FBOVESPA is investing
more than R$ 1.6 billion (2010 -2016) to build state-of-the-art
IT, Risk and Operating
infrastructure
Capital efficiency for clients
Attract and retain clients andstrengthen relationship withintermediaries
Development of markets andproducts
Operational leverage forBM&FBOVESPA
Innovate and enhance marketrobustness ahead of regulatorydemands
High performance: high availability, sub-milliseconds latency, low standard deviation
Operational leverage: easily scalable capacity
OTC MARKET
Capital efficiency for clients: integratedrisk calculation (OTC and Exchange TradedDerivatives)
Customer relationship: strengthening
relationships and adding revenue withlittle marginal expenses
NEWDATA CENTER
Long-term IT sustainability: significantcapacity to expand co-location and ownsystems
Customer relationship: able to hostparticipants and clients’ infrastructure
Capital efficiency for clients: integratedrisk calculation (equities and derivatives -OTC and listed); and unification ofsettlement windows
Rationalization and standardization ofrules, procedures and requirements
The implementation of IPN/CORE depends the approval of the regulators.
di f
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PUMA Trading System - PerformanceEnabling the increase of trades
Successive records broken in recent years, without delays oravailability failure
Development of the number of messages/days (in millions)
Source: BM&FBOVESPA.
l i h ’ i d i k d l( )
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Clearinghouses’ Integration and New Risk Model (CORE) Post-trade environment evolution
Organization of the post-tradeenvironment by types of assets/products
4 rulebooks and4 manuals.
4 participant
structures
4 systems /back-office
processes
4 systems /
processes for risk
management
4 pools of
collateral
4 settlement
windows and 4
multilateral
balances
4 distinct
environments /
IT architectures
4 registration
systems for
participants and
clients.
OTC
derivatives
Corporatefixed income
Interbank spot
foreign
exchangeFutures, options,
forwards
Securities
lending
Other products
and assets
Equities, ETFs,BDRs
Rules and Manuals
Structure of market participants
Participants and customer registration
Allocation and transfer
Position control
Clearing and settlement
Risk management
Pool of collateral
Government
Bonds
Organization of the post-tradeenvironment by process
Exchange and marketparticipation cost
reduction
Liquidity managementimprovement
More efficientallocation of capital by
investors
Operational andtechnological risk
reduction
Cl i h ’ I i dN Ri kM d l(CORE)
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Clearinghouses’ Integration and New Risk Model (CORE) Post-trade environment evolution
What we did
Aug’14: derivatives phase of the new
BM&FBOVESPA Clearinghouse and ofthe new risk model CORE
What were the challenges
400 employees involved
46 legacy systems were deprecatedand 31 new other were installed
+65 market participants (themajority adopts SINACOR)
11 parallel production cycles
CORE - complexity and sophistication Calculate and process +1.3bn
instrument prices
We have built a dedicatedsimulation environment, meetingdemands from market participants
What is next
4Q15: conclusion of substantially all
the IT development of the equitiesphase
The development will be followedby the certification and parallelproduction processes
Launching will depend on testsresults and regulatory approval
What are the challenges
Integration with the CSD
Settlement of securities(restrictions, failures, integrationwith securities lending system)
Covered options and forwardtransactions
Corporate actions treatment
Settlement window unification
Risk – more risk factors, highervolume of calculations
The achievements
Roughly R$20 billon released incollateral
R$15 billion reduction in requiredcollateral
R$5 billion increase to the value of
deposited collateral R$12 billion withdrawn in the early
days of activity
Almost 6 months since the launching
Very high availability
Serving participants and clients withhigh quality services
Delivering efficiency
I t ti f th Cl i h D i ti (P f )
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Integration of the Clearinghouses – Derivatives (Performance)Gains in efficiency, resilience and capacity expansion
In one year...
10 trading records broken
+72MM risk calculations
+1.8MM risk simulations
+61MM trades captured
+126MM allocations
99.9% availability
Development of trade numbers and records (in thousands)
Development of risk simulator use (in thousands)
Source: BM&FBOVESPA.
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIESMain growth drivers
MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform
OPERATIONAL PERFORMANCENotable global exchange
FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
Investments, new products and focus on the customer
P d t d S i D l t
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Long-term development of products, markets and services
Products and Services Development Focus on the customers’ demands and needs
Greater liquidity for listed products
Development of infrastructure for expansion of MM and HFT activity
Capital efficiency generated by CORE enables/encourages the realization of new strategies
Development of the securities lending platform
Marketing listed products and attracting new customers
Expanding the retail investor base
Incentive program with market participants
Expanding the portfolio to attend to the investment profile of individuals (Tesouro Direto, ETFs,FIIs ...)
Discussion about tax treatment simplification in the equities market
Capture of institutional investors’ diversification into foreign securities Listing of foreign securities (non-sponsored BDRs and Foreign Index ETF)
Cross-listing of futures contracts
P d t d S i D l t
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Long-term development of products, markets and services
Products and Services Development Focus on the customers’ demands and needs
Greater number of listed companies
Discussions with the Government to encourage and facilitate IPOs by SMEs
Law 13.043 grants exemption on capital gains for eligible SME’s investors until 2023
Creation of investment fund with proper structure to invest in SMEs
Reduction of maintenance and public offer cost for listed companies
Include stocks in the roll of restricted public distribution efforts
BNDES support to foster IPOs on BOVESPA MAIS
Fixed Income and OTC markets (product, market and revenue diversification)
Securities registration: (i) marketing of already-available products (CDB, LCA, LCI and COE); ii)new products (CDB - new types, Financial Bills, COE - physical delivery and repos)
OTC Derivatives: (i) benefits of CORE; (ii) SWAPs and Flexible Options migration to the newplatform (flexibility and operational efficiency); and (iii) development of SWAPs with cash flow
Corporate bonds: (i) acceptance of securities with restricted distribution efforts (ICVM 476);and (ii) migration of trading to PUMA
Constant fee structure and incentive improvements
Use of pricing policies and incentives as important tools for the development of products,markets and services, as well as alignment with market participants
Review and monitoring of existing pricing and incentives policies
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIESMain growth drivers
MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform
OPERATIONAL PERFORMANCE
Notable global exchange
FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer
BovespaSegment
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AVERAGE DAILY TRADING VALUE – ADTV (BRL billion)
AVERAGE ANNUAL MARKET CAP (BRL trillion) TURNOVER VELOCITY ² (12 months average)
1
Bovespa Segment Operational highlights
¹Updated to Oct 31, 2015. ²Ratio of cash market trading volume to the market cap of the exchange.
0.720.94
1.31
1.98 2.031.83
2.33 2.37 2.41 2.41 2.392.25
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015¹
30.8%
29.4%
37.6%38.7% 42.3%
56.4%
63.2%
66.6%
63.8%
64.2%70.0% 73.4% 72.8%
20012002200320042005 20062007200820092010 20112012201320142015
BM&FSegment
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BM&F SegmentOperational highlights
AVERAGE DAILY TRADED VOLUME – ADV (thousands of contracts)
REVENUE PER CONTRACT - RPC (BRL)
¹Updated to Oct 31, 2015.
2007 2008 2009 2010 2011 2012 2013 2014 2015¹ N-14 D-14 J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15
Inte rest rate s i n BRL 0.950 1.141 0.979 0.889 0.918 1.004 1.046 1.120 1.112 1.226 1.192 1.165 1.222 1.172 1.018 1.132 1.032 1.010 1.207 1.136 1.212
FX rates 1.859 2.065 2.161 1.928 1.894 2.205 2.535 2.669 3.467 2.980 3.173 3.007 3.048 3.158 3.569 3.442 3.705 3.554 3.686 3.932 4.436
Stock Indices 1.501 2.145 1.620 1.564 1.614 1.524 1.761 1.774 2.125 1.628 2.119 1.842 2.422 1.994 2.302 1.920 2.420 1.823 2.209 1.833 2.213
Inte rest rate s i n USD 0.965 1.283 1.357 1.142 0.941 1.015 1.231 1.294 1.790 1.078 1.461 1.557 1.645 1.797 1.911 1.747 1.770 1.633 1.768 2.154 2.268
Commodities 3.195 3.587 2.307 2.168 2.029 2.239 2.534 2.390 2.433 2.510 2.631 2.342 2.260 3.020 2.356 2.370 2.300 2.245 2.321 2.811 3.162
Mini contracts 0.054 0.162 0.176 0.128 0.129 0.116 0.119 0.117 0.196 0.120 0.118 0.128 0.150 0.164 0.177 0.173 0.229 0.226 0.235 0.233 0.274
OTC 2.111 2.355 1.655 1.610 1.635 1.769 1.409 2.092 2.396 1.517 2.689 2.286 1.967 3.077 3.928 4.545 1.768 2.465 0.817 1.169 14.879
Total RPC 1.224 1.527 1.365 1.134 1.106 1.191 1.282 1.350 1.454 1.405 1.481 1.417 1.524 1.493 1.436 1.474 1.436 1.341 1.482 1.476 1.671
Investorparticipationinvolumes
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Investor participation in volumes Equities and derivatives segments
BM&F SEGMENT (DERIVATIVES)
BOVESPA SEGMENT (EQUITIES)
¹Updated to Oct 31, 2015.
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIESMain growth drivers
MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform
OPERATIONAL PERFORMANCENotable global exchange
FINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer
IncomeStatement
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Income Statement History of income statement results (consolidated)
(in BRL thousand) 2009 2010 2011 2012 2013 2014
Net revenue 1,510,569 1,898,742 1,904,684 2,064,750 2,126,638 2,030,433
Expenses (569,832) (633,504) (816,664) (763,080) (790,814) (804,070)
Adjusted expenses (446,677) (543,881) (584,521) (563,487) (575,763) (592,349)
Operating income 940,737 1,265,238 1,088,020 1,301,670 1,335,824 1,226,363
Operating margin 62.3% 66.6% 57.1% 63.0% 62.8% 60.4%
Equity method result - 38,238 219,461 149,270 171,365 212,160
Financial result 245,837 289,039 280,729 208,851 180,695 208,157
Income before taxation of profit 1,186,574 1,592,515 1,588,210 1,659,791 1,687,884 1,646,680
Income tax and social contribution (304,505) (448,029) (539,681) (585,535) (606,588) (660,959)
Net income¹ 881,050 1,144,561 1,047,999 1,074,290 1,080,947 977,053
Adjusted net income 1,223,761 1,586,374 1,545,627 1,612,136 1,609,769 1,478,653
Adjusted EPS (BRL) 0.6104 0.7929 0.7932 0.8351 0.8389 0.8048
¹Attributable to shareholders of BM&FBOVESPA.
Adjusted¹expensesandinvestmentbudget
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Focus on expenses control offset most of the inflationary adjustments
over the past years(in BRL million)
ADJUSTED EXPENSES BUDGET
INVESTMENTS BUDGET:
Adjusted expenses and investment budget Focus on cost control and investments phase
The CAPEX program initiated in 2010 renewed the Company's IT,
operations and service platform
2014 vs. 2013: 2.88%IPCA 2014: 6.41%²
2015e vs. 2014: 1.71%4
IPCA (average) 2015e: 9.28%³
CAGR 2010-15e: 2.07%4
IPCA (average) 2010-15e: 6.78%³
Review of 2015 budget: fromR$190 – 220 million to R$200 – 230 million
Update of the timeline and budget
of the Company’s main projects
Capex is expected to decline in2016
2016e: R$165 – 195 million
(in BRL million)
¹ Expenses adjusted to Company´s depreciation, stock granting plan – principal and social charges -, stock options plan, tax on dividends from the CME Group, transfer of fines and provisions. ² IPCA for
2014 released by IBGE ³ IPCA for 2015 based on market expectations released by the Central Bank in Sep. 11, 2015; 4 Considers the mid-point of 2015 budget and high point 2014 budget
Expenses Breakdown
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Expenses BreakdownPursuit of greater efficiency and controlling expenses
Prioritization of activities, review of contracts and enhancement ofprocesses has resulted in greater efficiency
¹ Includes personnel expenses and capitalization and excludes stock option and bonus expenses, ² Calculated based on the annual wage increase between 2010 and2014 for personnel expenditure and the IPCA of services accumulated from Jan 2011 to Dec 2014 for the other l ines of expenses
Nominal
ChangeReal Change²
2.8% -4.3%
10.2% 1.8%
-12.8% -19.5%
-26.7%-20.6%
(in R$ millions)
-29.6%-23.8%
Nominal
ChangeReal Change²
48.5% 12.5%
19.7% 1,8%
-17.3% -40.8%
-62.9%-48.2%
(in R$ millions)
-80.9%-73.3%
-14.3%
T o t a l
P e r s o n n e l ¹
D a t a
p r o c e s s i n
g
T h i r d p a r t y
s e r v i c e s
M a r k e t i n
g
C o m m u n i c a t .
T o t a l
P e r s o n n e l ¹
D a t a
p r o c e s s i n
g
T h i r d p a r t y
s e r v i c e s
M a r k e t i n
g
C o m m u n i c a t .
2014 vs. 2013 2014 vs. 2010
AllocationofResults
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Distribution of most of the cash generation, reaffirming thecommitment to return capital to shareholders
(Total for Jan/09 through Jun/15, in R$ millions)
Cash Generation after Investment and Interest PaymentsPayout(% of net income)
2009: 80%2010: 100%2011: 87%
2012: 100%2013: 80%2014: 80%1H15: 80%
Share BuybackAbout 15% of free float
repurchased in 7-yearperiod (2H08-1H15)
+
Allocation of ResultsReturn of surplus capital to shareholders
¹Data of BM&FBOVESPA (not consolidated): excludes variation in financial transactions and collateral pledged by participants, proceeds raised in connection with the acquisition of CME Group shares in 2010.²Data from Dec 2014 and excludes third party resources (investors‘ collateral, resources deposited in the BM&FBOVESPA Bank and others).
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIESMain growth drivers
MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform
OPERATIONAL PERFORMANCENotable global exchange
FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer
3Q15Highlights (vs 3Q14)
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BM&F segment
ADV: 3.3 MM contracts, +24.3%
RPC: R$1.432, +8.9%
Bovespa segment
ADTV: R$6.5 billion, -10.2%
Margin: 5.246 bps, -0.26 bps
Other business lines (not tied tovolumes)
Sec. lending: average open interestgrew 31.1%
Tesouro Direto: assets under custodywere 45.2% higher
1
Adjusted to (i) depreciation and amortization; (ii) stock grant plan costs – principal and payroll taxes – and stock option plan; (iii) tax on dividends from CME Group; and (iv) transfer of fines and provisions.² Adjusted to (i) deferred taxes related to the goodwill; (ii) stock grant plan costs – principal and payroll taxes –, net of tax deductibility, and stock option plan; (iii) investment in CME Group under the equity
method of accounting, net of taxes related to dividends; (iv) taxes paid overseas to be compensated; (v) tax credits from IoC; (vi) non-recurring impact from the partial divestment in CME Group; and (vii) non-
recurring impact from the discontinuity of the equity method of accounting. ³ Excludes the net impacts of the partial divestment in CME Group and of the discontinuity of the equity method of accounting.
Total revenues: R$662.9 MM, +11.8%
BM&F seg.: R$306.8 MM, +34.2%
Bovespa seg.: R$221.9 MM, -15.8%
Other: R$134.3 MM, +33.1%
Adj. expenses¹: R$163.6 MM, +11,4%
Oper. income: R$380.5 MM, +7.9%
Adj. net income²: R$457.0 MM,
+27.9%
IFRS net income (ex-CME)³: R$393.3MM, +65.0%
Operating highlights
Gain on CME Group partialdivestment (sale of 1% of the totalCME Group shares)
Proceeds: R$1,201.3 million
Gross profit: R$724.0 million
Net profit: R$474.2 million
Discontinuity of the equity method(remaining 4% of the total CMEGroup Shares)
Balance sheet: from Investment in
associate to available for sale(marked-to-market)
Income statement: non-recurring /non-cash pre-tax income ofR$1,734.9 MM (net R$1,145.0 MM)
Non-recurring impacts
related to CME GroupOperating income andnet income growth
3Q15 Highlights (vs. 3Q14)Solid operating performance; non-recurring impacts related to CME Group investments
StrategicDevelopments –RecentUpdates
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Strategic Developments Recent UpdatesDelivering on the strategic plan
Building a world-class IT andoperations infrastructure
Clearing BM&FBOVESPA
Equities phase: conclusion of substantially all ITdevelopment in Oct’15. Start integrated test phaseand certification with market participants(launching date will depend on tests results andregulatory approval)
Derivatives phase (implemented in Aug’14): averagenumber of trades per day grew 61.8% from 2014 to2015¹
PUMA Trading System
Resilience: 851 days² without any interruption
Performance: 2015¹ average number of messages
per day grew 325.6% compared to 2010
iBalcão
Following the migration of NDF and Swaps in 1H15,Flex Options, with and without CCP, migrated to thenew OTC derivatives platform in 3Q15
Greater liquidity for listed products
Continuous efforts to expand the number of marketmakers for the equities and derivatives, 22 active programs
Efforts to attract more lenders to the securities lendingplatform (local pension funds and foreign investors)
Development of Inflation futures contracts (4 contracts re-
launched in Jun’15)
Enhancements to pricing and incentives
Implemented in 1Q15: DMA; securities lending; issuers;and options on equity-based indices futures
Implemented in 2Q15: mini contracts; Int. Rate in BRL feerebalancing; and depositary
Implementation in 3Q15: market data; and OTC derivatives
Corporate Governance for State-Owned Companies
Provides framework for listed companies to improvedisclosure, board and management selection, internalcontrols and compliance
Products/markets developmentand revenue diversification
¹ Updated until October, 2015. ² Until November 12, 2015
3Q15RevenueBreakdown¹
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3Q15 Revenue BreakdownBusiness model resilience and revenues growth
TOP LINE GROWTH DRIVEN BY REVENUES FROM FINANCIAL AND COMMODITIES DERIVATIVES ANDINCREASED NON-VOLUME RELATED REVENUES
Total
Revenues
R$662.9 MM
1
The revenue breakdown considers the revenue lines “others” of the Bovespa segment and “foreign exchange” and “securities” of the BM&F segment, as reported in the financialstatements note 20 within the other revenues not tied to volumes. ²Trading and post-trading.
(in R$ millions)
USD-linked revenuesrepresented 26% of the total
DerivativesMarket¹
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Contracts 3Q14 3Q15 YoY
Interest rates in BRL 1.51 1.79 19.0%
FX rates 0.48 0.47 -2.1%
Interest rates in USD 0.22 0.32 46.0%
Commodities 0.01 0.01 -13.6%
Mini contracts 0.32 0.60 88.5%
Stock indices 0.12 0.10 -15.8%
OTC 0.02 0.03 77.5%
TOTAL 2.67 3.32 24.3%
Derivatives MarketHigher volumes and FX depreciation pushed revenues up
REVENUE (in R$ millions)
Contracts priced in USD² represented ~24% of derivativesADV and ~52% of derivatives revenues in 3Q15
¹ Revenue does not consider the revenue lines “foreign exchange” and “securities” of the BM&F segment, as reported in the financial statements note 20, which totaled R$5.8million in the 3Q15. ² Most of the fees charged on FX, Interest rates in USD and Commodities are referred in USD. The average BRL/USD rate decreased 33.9% from 3Q14 to 3Q15.
ADV (in millions)
RPC: R$1.432 per contract, +8.9% year-over-year
Depreciation of BRL versus USD
Mix effect (higher participation of Interest rates in BRL and Mini contracts)
RATE PER CONTRACT (RPC)
EquitiesMarket¹
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REVENUE² (in R$ millions)
TRADING AND POST-TRADING MARGINS (in basis point)
ADTV² (in R$ millions)
Average market capitalization fell 14.5% to R$2.2
trillion in the 3Q15, which was partially offset by ahigher turnover velocity of 70.8%
Market 3Q14 3Q15 3Q15/3Q14
Stocks and Equity Derivatives 5.501 5.247 -0.25 bps
Cash Market 5.061 4.939 -0.12 bps
Derivatives 13.115 13.110 -0.01 bps
Options Market 13.145 13.157 0.01 bps
Forward Market 12.999 12.999 0.00 bps
TOTAL 5.502 5.246 -0.26 bps
Trading and post-trading margins drop 4.7%year-over-year
Equities MarketRevenues impacted by lower market capitalization of listed companies
¹ Revenue does not considers the revenue line “others” of the Bovespa segment, as reported in the financial statements note 20, which totaled R$2.1 million in the 3Q15. ²Excludesfixed income line.
Markets 3Q14 3Q15 YoY
Cash Equities 6,890.0 6,293.4 -8.7%
Equities Derivatives 398.3 246.2 -38.2%
TOTAL 7,288.3 6,539.6 -10.3%
BusinessLinesnotRelatedtoVolumes
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Business Lines not Related to VolumesSolid growth in revenues not tied to volumes
3Q15 REVENUE BREAKDOWN¹ (in R$ millions)
¹ Revenue as reported in the financial statements note 20.
+33.1%
Y-o-Y
3Q15AdjustedExpenses¹
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3Q15 Adjusted ExpensesContinued focus through diligent expense management
¹ Expenses adjusted to Company’s (i) depreciation and amortization; (ii) costs from stock grant plan – principal and payroll taxes – and stock option plan; (iii) tax on dividends from the CMEGroup; and (iv) transfer of fines and provisions.² IPCA last 12 months until Sep’15 (Source IBGE). ³ Excluding the impact of stock grant/option expenses. 4Include expenses with
maintenance, board and committee members compensation and others.
Adjusted
personnel³ (+4.2%): grew
less than
annual wage
adjustment
Dataprocessing (+7.5%): higher
maintenanceexpensesconnected tothe derivativesphase of thenew integratedBM&FBOVESPAClearinghouse
Third partyservices(+47.3%):professional
servicesrelated toprojects
Others4 (+36.1%):write-off ofR$6.4 MM,provisions andenergy costs
3Q15 ADJUSTED EXPENSES GREW 11.4% Y-O-Y
IN THE NINE MONTHS PERIOD THE GROWTH WAS SIGNIFICANTLY BELOW INFLATION (6.3% VERSUS AVERAGE
INFLATION OF 9.5%²)
3Q15 87.0 (53%) 30.4 (19%) 12.6 (8%) 1.0 (1%) 4.7 (3%) 27.9 (17%)
3Q14 83.5 (57%) 28.3 (19%) 8.6 (6%) 3.1 (2%) 2.9 (2%) 20.5 (14%)
Marketing(+61.4%):expensesconnected toFinancial
MarketsConference
Commun.(-66.4%):reduction ofmailing
expenses ofcustodystatements
(in R$ millions)
(in R$ millions and % of total adjusted expenses)
CMEGroupPartialDivestmentImpacts
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CME Group Partial Divestment ImpactsReducing Company’s exposure to FX rates and CME Group share price
Impacts from sale of 1%
Transaction: divestment of 20% of the stake in CMEGroup (equivalent of 1% of the total shares)
Reason: reduce risks exposure to FX and CME Groupshare price
Divestment of CME Group shares
Investment in CME Group over time
Source: Bloomberg e BM&FBOVESPA. ¹09/08/15 (before sale), ²09/09/15 (after sale), ³End of eachyear and Jun/15.
Tax due to be compensated against tax lossesgenerated by Interest on Capital distribution (nocash impact)
Balance sheet
Income statement EBT: R$724.0 MM
Income tax and social contribution: R$249.8 MM
Net income: R$474.2 MM
Assets
Financial investment:
R$1,201.3 MM
Liabilities
Tax provision:
R$249.8 MM
CME Group Accounting Changes
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p g gDiscontinuity of the equity method¹
Assets Liabilities & Equity
Current assets Current liabilities
Financial investments Income tax and social cont.
Non-current assets Shareholders´ equity
Investments Revenue reserves
Interest in associate Retained earnings
1. The CME Group shares cease to be treated as an
investment under non-current asset
2. The investment is now treated as available for sale
and will be measured at fair value (marked to
market)
3. Investment mark to market will impact the
shareholders’ equity only (no impact on income
statement in a quarterly basis after 3Q15)
4. The deferred income tax and social contribution line
now includes a tax provision on the potential gain to
be generated by this investment1
2
3
4
1. The equity in income of investee line will no longercontemplate the investment in CME Group
2. Extraordinary impact of the discontinuity of equitymethod of accounting
3. Dividends received from the CME Group will berecognized as financial income and will be included inthe Company’s tax base
Income Statement
Equity in income of investees
Discontinuity of the Equity method
Financial Income
2
3
1
Income statement
Balance sheet
¹ Discontinuity of the equity method of accounting starting from September 14, 2015.
Adjusted Net Income
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jReconciliation of net income – ex-CME and adj. net income
3Q15 – NET INCOME
IFRS ( in R$ millions ) 3Q15 3Q14 Var.
IFRS net income 2,012.5 238.4 744.2%
(-) Discontinuity of the equity method (1,145.0) - -
(-) Gain on disposal of investment in affiliate (474.2) - -IFRS net income ex-CME impact 393.3 238.4 65.0%
(+) Stock Grant/Option 12.8 7.3 74.5%
(+) Deferred Liability (goodwill) 137.5 138.6 -0.8%
(-) Equity in results of investee (37.6) (43.7) -13.9%
(+) Recoverable taxes paid overseas - 16.7 -
(-) IOC adjustment (49.0) - -
Adjusted net income 457.0 357.4 27.9%
Financial Highlights
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g gSolid and liquid financial profile
Third party cash and financial investments
Market participants cash collateral and others
include R$2,749.2 million related to a
transaction settled on Oct 1, 2015
Company’s cash and financial investments
Unrestricted cash (available funds) includes
R$1,201.3 million from the partial divestment
in the CME Group
CASH AND FINANCIAL INVESTMENTS (in R$ millions)
¹ Includes earnings and rights on securities in custody. ² Includes BM&FBOVESPA Bank clients’ deposits. ³ For 3Q15, does not include investment in CME Group(R$5,004.3 million) and in Bolsa de Comercio de Santiago (R$50.4 million), booked as a financial investment.
Ratings above the sovereign
S&P: BBB- (counterparty credit rating) / A-3 (issuer)
Moody’s: Baa2 (global scale issuer / global notes)
3Q158,165
2Q15
4,033
1Q154,355
4Q14
3,856
3Q14
3,841
Third party Available Total³ Restricted
Financial Highlights
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g gInvestments and returning cash to shareholders
PAYOUT
R$314.6 MM in Interest on Capital (80% of the IFRS netincome ex-CME in 3Q15)
Payment on Dec 04, 2015
CAPEX
R$47.5 MM in 3Q15 and R$166.5 MM in 9M15
Capex budget ranges reaffirmed:
2015: R$200 – R$230 MM
2016: R$165 – R$195 MM
Financial Statements
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Summary of balance sheet (consolidated)
(in R$ millions) 09/30/2015 12/31/2014 (in R$ millions) 09/30/2015 12/31/2014
Current assets 11,720.9 2,785.2 Current liabilities 4,949.1 1,891.8
Cash and cash equivalents 3,022.6 500.5 Collateral for transactions 4,063.7 1,321.9
Financial investments 8,360.7 1,962.2 Others 885.4 569.9
Others 337.6 322.5 Non-current liabilities 6,428.1 4,383.2
Non-current assets 19,278.6 22,478.2 Foreign debt issues 2,425.5 1,619.1
Long-term receivables 1,977.0 1,522.5Deferred Inc. Tax and Social
Contrib.3,793.5 2,584.5
Financial investments 1,836.3 1,392.8 Others 209.2 179.6
Others 140.7 129.8 Shareholders´ equity 19,622.3 18,988.4
Investments 31.0 3,761.3 Capital stock 2,540.2 2,540.2
Property and equipment 454.9 421.2 Capital reserve 14,289.8 15,220.4
Intangible assets 16,815.7 16,773.2 Others 2,782.4 1,218.9
Goodwill 16,064,3 16,064.3 Minority shareholdings 9.9 8.9
Total Assets 30,999.5 25,263.5 Liabilities and Shareholders´ eq. 30,999.5 25,263.5
LIABILITIES AND SHAREHOLDERS´ EQUITY ASSETS
Financial Statements
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3Q15 3Q14Change
3Q15/3Q142Q15
Change
3Q15/2Q159M15 9M14
Change
9M15/9M14
Total Expenses 217.8 192.0 13.4% 198.0 10.0% 637.3 553.7 15.1%
Depreciation (26.1) (29.5) -11.3% (28.1) -7.0% (84.8) (87.0) -2.5%
Stock Grant/Option (19.4) (7.3) 164.4% (22.1) -12.2% (84.9) (21.8) 289.5%
Tax on dividends from the CME Group - (5.8) - - - - (16.6) -
Provisions (8.7) (4.3) 103.4% (6.1) 42.2% (23.6) (15.1) 56.0%
BBM impact - 1.7 - - - - 4.3 -
Adjusted Expenses 163.6 146.8 11.4% 141.7 15.5% 443.9 417.4 6.3%
Net income and adjusted expenses reconciliations
ADJUSTED NET INCOME RECONCILIATION (in R$ millions)
ADJUSTED EXPENSES RECONCILIATION (in R$ millions)
* Attributable to BM&FBOVESPA’s shareholders.
3Q15 3Q14Change
3Q15/3Q14
2Q15Change
3Q15/2Q15
9M15 9M14Change
9M15/9M14IRFS net income* 2,012.5 238.4 744.2% 318.0 532.9% 2,610.0 744.6 250.5%
Stock Grant/Option (recurring net of tax) 12.8 7.3 74.5% 12.7 1.1% 37.6 21.8 72.6%
Deferred tax liabilities 137.5 138.6 -0.8% 137.5 0.0% 412.6 415.9 -0.8%
Equity in income of investee s (net of taxes ) (37.6) (43.7) -13.9% (31.4) 19.8% (106.8) (128.1) -16.6%
Recoverable taxes paid overseas - 16.7 - - - - 51.2 -
IoC Adjustments (49.0) - - - - (49.0) - -
Discontinuity of the equity method (net of taxes) (1,14 5.0 ) - - - - (1 ,1 45 .0) - -
Results from the selling of the CME Group (net of taxes ) (474.2) - - - - (474.2) - -
Adjusted net income 457.0 357.4 27.9% 436.8 4.6% 1,285.1 1,105.4 16.3%
Financial Statements
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SUMMARY OF INCOME STATEMENT (in R$ millions)
*Excludes the net gain from the partial divestment in CME Group and the net impact from the discontinuity of the equity method of accounting
for the remaining investment in CME Group.
Summary of income statement (consolidated)
3Q15 3Q14Change
3Q15/3Q14 2Q15Change
3Q15/2Q15 9M15 9M14Change
9M15/9M14
Net revenues 598.3 544.5 9.9% 554.6 7.9% 1,673.4 1,497.0 11.8%
Expenses (217.8) (192.0) 13.4% (198.0) 10.0% (637.3) (553.7) 15.1%
Operating income 380.5 352.5 7.9% 356.6 6.7% 1,036.1 943.3 9.8%
Operating margin 63.6% 64.7% -114 bps 64.3% -70 bps 61.9% 63.0% -109 bps
Equity in income of investees 49.0 49.5 -0.9% 40.3 21.5% 136.2 144.7 -5.8%
Financial result 86.0 47.0 82.9% 71.4 20.6% 219.0 154.1 42.1%
Net income ex-CME* 393.3 238.4 65.0% 318.0 23.7% 990.8 744.6 33.1%
Adjusted net income 457.0 357.4 27.9% 436.8 4.6% 1,285.1 1,105.4 16.3%
Adjusted EPS (in R$) 0.256 0.195 30.9% 0.243 5.1% 0.717 0.601 19.4%
Adjusted expenses (163.6) (146.8) 11.4% (141.7) 15.5% (443.9) (417.4) 6.3%
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REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCESafety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIESMain growth drivers
MAIN GROWTH INITIATIVESBuilding an State-of-the-art platform
OPERATIONAL PERFORMANCENotable global exchange
FINANCIAL HIGHLIGHTSCost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer
Bovespa Segment
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Raising Capital
PUBLIC OFFERINGS (BRL billion)
PIPELINE: OFFERINGS ANNOUNCED SO FAR TO THE MARKET
IRB Brasil Resseguros
Caixa Seguridade Participações
¹Excludes the portion acquired by the Brazilian government in the Petrobras offering, via the transfer of rights in barrels (BRL 74.8 billion).
Trading in ADRs of Brazilian companies
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total
IPOs - 1 - 7 9 26 64 4 6 11 11 3 10 1 1 154
Follow ons 14 5 8 8 10 16 12 8 18 11 11 9 7 1 1 139
Total 14 6 8 15 19 42 76 12 24 22 22 12 17 2 2 293
Dual Listings - - - 2 1 1 - - 1 - - - - - - 5
Sarbanes-Oxley Act
(Jul. 2002)
Novo Mercado
Launch
(Dec. 2000)
End of IOF Tax (2%) for
foreign investors
(Dec. 2011)
End of CPMF
(Financial
Transaction Tax)
Liquidity migration process interrupted
Sep’15
Source: Bloomberg (in USD
traded value of 35 companies
with ADRs programs )
PUBLIC OFFERINGS IN NUMBER OF COMPANIES
38.4%
29.1%
9.1%
23.4%
32.5%
67.5%
Bovespa Segment
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Foreign investment flow
MONTHLY NET FLOW OF FOREGIN INVESTMENTS (in BRL billons)
Includes public offering (primary market) and regular trades (secondary market).
¹Updated to October 31, 2015
Products and Markets Development
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Creation of value and stimulus for the development of products and markets
Organizational
Structure for Fee
Structure
Equities Market
Fee Structure
Rebalancing
Trading/post-trade
Fee Structure of
OTC Products
Prices p/ volume
Tiers in Derivatives
Price policy for
Mkt Data
Readjustment of
Issuers’ annual fee
Review of prices and
incentives: BTC, DMA,
Market Data, Issuers and
Depository
Fee structure of
interest rate
derivatives
OTC derivatives
fee structure
Transfers fee
structure at CSD
2008 2009 2010 2011 2012 2013 2014 2015
Charge (BPs) on
amount in
depository
Enhancement of Price and Incentives Policies
Clearinghouses’ Integration and New Risk Model (CORE)
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Benefits from Clearinghouse integration
1. DETERMINING
THE CLOSEOUT
STRATEGY
T+0 T+1 T+2 T+3 T+4 T+N ...
Defines the portfolio closeout strategy which,respecting the settlement restrictions of the
portfolio of assets/markets, should minimize
the risk of a loss associated with the closeout
process, preserving existing hedge strategies
2. RISK EVALUATION
T+0 T+1 T+2 T+3 T+4 T+N ...
Defines the (stress) scenarios associated with
the dynamics of each risk factor relevant to
the portfolio. All assets and contracts are
reevaluated considering the scenarios defined
in this step ( full valuation).
3. POTENTIAL P&L
CALCULATION
T+0 T+1 T+2 T+3 T+4 T+N
...
Calculates and aggregates intertemporally P&L
associated with each scenario, considering the
defined closeout strategy
CLOSEOUT RISKResult: Two risk measures—market and
liquidity—that are estimated both jointly and
consistentlyPERMANENT LOSS TRANSIENT LOSS
OVERVIEW: CLOSEOUT RISK CALCULATION IN THREE STEPS
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