Investor Relations Department - RI Mobileir.bmfbovespa.com.br/enu/2845/BVMF Presentation - November...

1PublicPublicNovember, 2016 X

Investor Relations Department

São Paulo, SP

2

ForwardLookingStatements

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 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&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-competitive industries 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 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 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 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&FBOVESPA 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.

3

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

3Q16 RESULTS

APPENDIX

MAIN GROWTH INITIATIVESInvestments, new products and focus on the customer

4

Exchange sectorSafety and market integrity as priorities

Capital and derivatives markets in Brazil

Stable and solid regulation

CVM – Trade and post-trade

BACEN – Post-trade , banks and intermediaries

Main participants

Intermediaries – local and international brokers (linked to bank and independent)

Listed companies

Investors – institutional, foreign and individual (retail)

Exchange market characteristics in Brazil

BVMF is the sole exchange, despite the market 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 chain

Derivatives are predominantly listed and OTC derivatives must be registered mandatorily

Securities lending mandatorily through a central counter-party (CCP)

The exchange is responsible for oversight and self-regulation of the markets in which it operates

5

“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 the

global 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$7.2 billion on distributed earnings since 2008

Revenue diversification: trading and post-

trading services for stocks, derivatives, fixed income and 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'spredecessor)

Aug 2007: Bovespa Hld

demutualization

Oct 2007: Bovespa HldIPO (BOVH3)

1967:Bovespa’s

Mutualization

1986:Start of BM&F

activities

Sep 2007: BM&F demutualization

Nov 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 Dec/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

6

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)

Trade Repository (TD)

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 modelValue gained across most of the chain

7

DTCC

BRAZIL(Internalization of orders is forbidden)

USA(Internalization of orders is allowed)

POST-TRADINGCCPSSSCSD

TRADING

Brokers A and B

Investors Investors

Brokers A and B

Investors Investors

BrokerA

BrokerB

Model 100% vertical: clearing, settlement and central depository at the FINAL BENEFICIAL OWNER LEVEL

Clearing, settlement and depository occur at the brokerage houses

Trading venues

Multi-asset and vertically integrated modelValue gained across most of the chain

8

10%7%

5% 2%

76%

Capital World Investors

Oppenheimer Funds

BlackRock Funds

Treasury stock

Others

(update in Oct. 2016)

Listed in Novo Mercado (voting shares only and other shareholders’ rights, transparency, etc.)

Majority of the Board composed of independent members (regulatory requirement)

Chairman is an independent member

Other Board members are linked to market participants or strategic partner (CME); although considered non-independent, are not connected to controlling group or management

All Board members are not Company’s executive

Well-defined and solid Board of Directors and Board’s Committees

Executive compensation system aligned with Company’s performance and strategic objectives, as well as with shareholders long-term interests

Solid Governance Practices Broadly Dispersed Shareholder Base



Note: percentage ownership are estimated but may not represent exact figures due to different information dates about largest shareholders’ positions

Corporate governanceReference in corporate governance practices


(update in Aug. 2015)

9

2015-17 Board of Directors Composition

Independentmembers

Linked tomarket participant or

strategic partner (CME)

Corporate Governance Profile - Board & Committee Summary

Board

Committees

AuditNomination

and CGComp. Risk

Brokerage Industry

# Members 11 6 3 3 4 9

Independent Board 7 2 3 2 3 -

Market participant + Board 4¹ - - 1 1 2

Independent Non-Board - 4 - - - -

Market participant Non-Board - - - - - 7

# of meetings (2015) 14 7 8 8 14 5

Average attendance (2015) 94% 82% 100% 92% 80% 93%

Board Member BirthYears in the Board

Pedro Pullen ParenteFormer Minister of State; Former CEO of Media and Commodity Conglomerates

2/21/53 5

Claudio Luiz da Silva HaddadFormer CEO of Investment Bank; Founder and CEO of Business School

8/23/46 7

Antônio QuintellaFormer CEO of CS Brasil and Americas; Portfolio Manager

2/16/66 1

Laércio José de Lucena CosentinoTOTVS Chairman of the Board and TOTVS CEO

8/11/60 -

Luiz Antônio de Sampaio CamposFormer Director of CVM; Lawyer

6/9/70 1

Luiz Fernando FigueiredoFormer Governor of the Central Bank; Portfolio Manager

1/15/64 3

Luiz Nelson Guedes De CarvalhoFormer Central Bank and Sec. Commission Officer; Member of IIRC and CPC/IASB; Professor of Accounting

11/18/45 3

Denise Pauli PavarinaBradesco executive;

4/14/63 1

Eduardo Mazzilli de VassimonDirector of Itaú e CRO of Itaú Holding

10/7/58 1

José Berenguer NetoCEO of JP Morgan Brazil

9/10/66 3

Charles P. CareyFormer Chairman of CBOT; CME Group Board Member

9/1/53 4

Highly qualified Board Members and well-functioning Board’s Committees

Commitment and independence of Board of Directors and Committees members

Note: in the case of the Advisory Committee for the Securities Intermediation Industry the statistics regarding number of meetings and attendance considered the previous composition with 6 members, including two Board members. This change was implemented in Feb 2015.

Corporate GovernanceMultidisciplinary knowledge in conducting business

10

Board of Directors

CEOEdemir Pinto

CFODaniel Sonder

COOCícero Vieira

CIORodrigo Nardoni

Luis Furtado²

CPOJosé Ribeiro de

Andrade

Management (5 Executives + 26MDs)Responsible for implementing the guidelines established by the Board or Directors, executing the strategic plan, monitoring and executing the Company’s operations

Internal Working Groups (budget, products and services, projects, others)This internal working groups are important components of the Company’s corporate governance, monitoring the budget process and establishing priorities for products, services and projects development, among other things

Advisory Committees (market and credit risks, corporate risk, sustainability, code of conduct, business continuity, others)Multidisciplinary internal groups that address and monitor important business and issues of the Company

Advisory Chambers (commodities, listing, equities, fixed income, FX, derivatives, others)Several open channels with investors, market participants and companies which collaborate to develop and improve products and services, as well as to suggest better practices

Human Resources

Corporate RiskSustainability, Press and Mkt.

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 Develop.,

Commercial Relations,

Internat. Offices, Commercial Planning and

Project Analysis

Internal Working Groups Advisory CommitteesMarket Advisory

Chambers

4 MD´s 6 MD´s 5 MD´s 6 MD´s

Corporate GovernanceMultidisciplinary 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. ² Co-Chief Information Officer. In May, Mr. Furtado resigned from the statutory position of Chief Technology and Information Security Officer with effect from the end of his current mandate on April 30, 2017.

11

BM&FBOVESPA’s Sustainability PolicySustainability as a long-term driver

12






3Q16 RESULTS

APPENDIX


13

Growth opportunities in the Brazilian equities and derivatives markets

Opportunities in the Brazilian marketBM&FBOVESPA is ready to capture future growth

EQUITIES MARKET

Portfolio diversification: diversification of institutional investors’ portfolios with a higher participation of equities

Retail investors: small number of retail investors and growth of the middle class

Listed companies: low number of listed companies, while important sectors are not adequately represented on the exchange

DERIVATIVES MARKET

Growth of credit and fixed-rate government debt: higher demand for hedging 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 OTC transactions through a CCP

14

Investors’ exposure to equities is lowInvestors’ 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 the population (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 and some asset managers

• Lack of knowledge about the equity market, combined with retail investors’ fixed-income mindset

Sources: BM&FBOVESPA, ANBIMA and ABRAPP. ¹ Sep/16 and ²Jun/16.

15






3Q16 RESULTS

APPENDIX


16

BM&FBOVESPA IT, Risk and Operating DevelopmentBuilding 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 and strengthen relationship with intermediaries

Development of markets and products

Operational leverage for BM&FBOVESPA

Innovate and enhance market robustness ahead of regulatory demands

High performance: high availability, sub-milliseconds latency, low standard deviation

Operational leverage: easily scalable capacity

OTC MARKET

Capital efficiency for clients: integrated risk calculation (OTC and Exchange Traded Derivatives)

Customer relationship: strengthening relationships and adding revenue with little marginal expenses

NEW DATA CENTER

Long-term IT sustainability: significant capacity to expand co-location and own systems

Customer relationship: able to host participants and clients’ infrastructure

Capital efficiency for clients: integrated risk calculation (equities and derivatives -OTC and listed); and unification of settlement windows

Rationalization and standardization of rules, procedures and requirements

The implementation of IPN/CORE depends the approval of the regulators.

17

PUMA Trading System - PerformanceEnabling the increase of trades

Successive records broken in recent years, without delays or availability failure

Development of the number of messages/days (in millions)

Source: BM&FBOVESPA.

18

Clearinghouses’ Integration and New Risk Model (CORE)Post-trade environment evolution

Organization of the post-trade environment by types of assets/products

4 rulebooks and 4 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

Corporate fixed 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-trade environment by process

Exchange and market participation cost

reduction

Liquidity management improvement

More efficient allocation of capital by

investors

Operational and technological risk

reduction

19

Clearinghouses’ Integration and New Risk Model (CORE)Post-trade environment evolution

What we didAug’14: derivatives phase of the new BM&FBOVESPA Clearinghouse and of the new risk model CORE

What were the challenges

400 employees involved

46 legacy systems were deprecated and 31 new other were installed

+65 market participants (the majority adopts SINACOR)

11 parallel production cycles

CORE - complexity and sophistication

Calculate and process +1.3bn instrument prices

We have built a dedicated simulation environment, meeting demands from market participants

What is next2016: conclusion of substantially all the IT development of the equities phase in 4Q15. Next steps are:

Certification and parallel production processes

Launching will depend on tests results and regulatory approval

What are the challenges

Integration with the CSD

Settlement of securities (restrictions, failures, integration with securities lending system)

Covered options and forward transactions

Corporate actions treatment

Settlement window unification

Risk – more risk factors, higher volume of calculations

The achievements

Roughly R$20 billon released in collateral

R$15 billion reduction in required collateral

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 with high quality services

Delivering efficiency

20

In one year... 10 trading records broken, +72MM risk calculations,

+1.8MM risk simulations and 99.9% availability

Integration of the Clearinghouses –Derivatives (Performance)Gains in efficiency, resilience and capacity expansion

Development of trade numbers and records (in thousands)

Source: BM&FBOVESPA.

21






3Q16 RESULTS

APPENDIX


22

Long-term development of products, markets and services

Products and Services DevelopmentFocus 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

23

Long-term development of products, markets and services

Products and Services DevelopmentFocus 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 new platform (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

24






3Q16 RESULTS

APPENDIX


25

AVERAGE DAILY TRADING VALUE – ADTV (BRL billion)

AVERAGE ANNUAL MARKET CAP (BRL trillion) TURNOVER VELOCITY² (12 months average)

VOLUMES – BOVESPA SEGMENT (EQUITIES)

¹ Updated to October 31, 2016 ² Ratio of cash equities trading volume to the overall market capitalization

11

30.8%

29.4%

37.6%38.7% 42.3%

56.4%63.2%

66.6%

64.3%64.2%

70.0%73.4%

74.8%

77.4%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

26

VOLUMES - BM&F SEGMENT (DERIVATIVES)

AVERAGE DAILY TRADED VOLUME – ADV² (thousands of contracts)

REVENUE PER CONTRACT – RPC² (BRL)

¹Updated to October 31, 2016. ² Starting from Jan/16 excludes OTC data.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016¹ N-15 D-15 J-16 F-16 M-16 A-16 M-16 J-16 J-16 A-16 S-16 O-16

Interest rates in BRL 0.950 1.141 0.979 0.889 0.918 1.004 1.046 1.120 1.150 1.180 1.341 1.471 1.065 1.159 1.193 1.251 1.208 1.213 1.201 1.394 1.222 0.993

FX rates 1.859 2.065 2.161 1.928 1.894 2.205 2.535 2.669 3.671 3.914 4.319 4.507 4.524 4.483 4.285 4.136 3.846 3.902 3.533 3.518 3.455 3.434

Stock Indices 1.501 2.145 1.620 1.564 1.614 1.524 1.761 1.774 2.128 1.842 1.761 2.265 1.667 2.212 1.561 2.143 1.545 2.017 1.454 1.906 1.505 1.975

Interest rates in USD 0.965 1.283 1.357 1.142 0.941 1.015 1.231 1.294 1.840 1.858 1.839 1.892 2.128 2.100 2.225 1.879 1.960 1.877 1.523 1.608 1.555 1.616

Commodities 3.195 3.587 2.307 2.168 2.029 2.239 2.534 2.390 2.530 2.254 3.069 2.734 2.451 2.591 2.247 1.890 2.298 2.024 1.981 2.255 2.728 2.293

Mini contracts 0.054 0.162 0.176 0.128 0.129 0.116 0.119 0.117 0.218 0.256 0.273 0.276 0.276 0.281 0.259 0.276 0.268 0.264 0.242 0.240 0.241 0.235

OTC 2.111 2.355 1.655 1.610 1.635 1.769 1.409 2.092 3.925 - 6.120 45.662 - - - - - - - - - -

Total RPC 1.224 1.527 1.365 1.134 1.106 1.191 1.282 1.350 1.516 1.353 1.660 1.940 1.484 1.526 1.480 1.517 1.363 1.380 1.229 1.285 1.229 1.100

27

Investor participation in volumesEquities and derivatives segments

BM&F SEGMENT (DERIVATIVES)²

BOVESPA SEGMENT (EQUITIES)

¹Updated to October 31, 2016. ² Starting from Jan/16 excludes OTC data.

28






3Q16 RESULTS

APPENDIX


29

Income StatementHistory of income statement results (consolidated)

(in BRL thousand) 2009 2010 2011 2012 2013 2014 2015²

Net revenue 1,510,569 1,898,742 1,904,684 2,064,750 2,126,638 2,030,433 2,216,634

Expenses (569,832) (633,504) (816,664) (763,080) (790,814) (804,070) (850,656)

Adjusted expenses (446,677) (543,881) (584,521) (563,487) (575,763) (592,349) (614,350)

Operating income 940,737 1,265,238 1,088,020 1,301,670 1,335,824 1,226,363 1,365,978

Operating margin 62.3% 66.6% 57.1% 63.0% 62.8% 60.4% 61.6%

Equity method result - 38,238 219,461 149,270 171,365 212,160 136,245

Financial result 245,837 289,039 280,729 208,851 180,695 208,157 508,796

Income before taxation of profit 1,186,574 1,592,515 1,588,210 1,659,791 1,687,884 1,646,680 2,807,222

Income tax and social contribution (304,505) (448,029) (539,681) (585,535) (606,588) (660,959) (603,764)

Net income¹ 881,050 1,144,561 1,047,999 1,074,290 1,080,947 977,053 2,202,238

Adjusted net income 1,223,761 1,586,374 1,545,627 1,612,136 1,609,769 1,478,653 1,819,187

Adjusted EPS (BRL) 0.6104 0.7929 0.7932 0.8351 0.8389 0.8048 1.0152

¹Attributable to shareholders of BM&FBOVESPA.² Impacts of non-recurring items: (i) partial divestment in CME Group; (ii) discontinuity of the equity method of accounting; and (iii) impairment of Bovespa Holding

30

Focus on expenses control offset most of the inflationary adjustments over the past years

(in BRL million)

ADJUSTED EXPENSES BUDGET

INVESTMENTS BUDGET:

Adjusted¹ expenses and investment budgetFocus on cost control and investments phase

The CAPEX program initiated in 2010 renewed the Company's IT, operations and service platform

2015 vs. 2014: 3.72%IPCA 2015: 10.67%2

2016e vs. 2015: 6.61%4

IPCA (average) 2016e: 7.20%³

CAGR 2011-16e: 2.30%4

CAGR IPCA (average) 2011-15e: 7.19%³

Review of 2016 budget: from R$165 – 195 million to R$200 –230 million

FX exposure: 40%

Update of the timeline and budget of the Company’s main projects

(in BRL million)

¹ Expenses adjusted to Company´s depreciation, stock granting plan – principal and social charges -, stock options plan, transaction cost and planning of the proposed business combination with Cetipthat is still pending regulatory approval, transfer of fines and provisions. ² IPCA for 2015 released by the Central Bank ³ IPCA for 2016 based on market expectations released by the Central Bank in Aug. 5, 2016; 4 Considers the mid point for 2016 budget

31

Expenses DisciplineDelivering efficiency through diligent expense management

1 IPCA last 12 months until Dec´15 (Source IBGE) 2 Includes personnel expenses and capitalization and excludes costs from stock grant plan – principal and payroll taxes – stock option and bonus expenses. 3 Calculated based on the annual wage increase for personnel expenditure and the accumulated IPCA for the other lines of expenses.

Adjusted expenses grew 3.7%, significantly below average inflation of 10.7%1, reflecting prioritization of activities, review of contracts and enhancement

of processesNominal Change

Real Change3

3.9% -3.8%

-1.8% -11.2%

3.2% -6.7%

-61.1%-57.0%

(in R$ millions)

-4.5%5.7%

Nominal Change

Real Change3

18.5% -11.5%

16.9% 1,8%

-20.8% -40.0%

-81.0%-75.0%

(in R$ millions)

-76.6%-69.1%

-11.5%

Tota

l P

ers

on

ne

l 2

Dat

a p

roce

ssin

gTh

ird

par

ty

serv

ices

Mar

keti

ng

Co

mm

un

icat

.

Tota

l P

ers

on

ne

l 2

Dat

a p

roce

ssin

gTh

ird

par

ty

serv

ices

Mar

keti

ng

Co

mm

un

icat

.

2015 vs. 2014 2015 vs. 2011

32

Distribution of most of the cash generation, reaffirming the commitment to return capital to shareholders

(Total for Jan/09 through Sep/16, in R$ millions)

Cash Generation after Investment and Interest Payments¹Payout(% of net income)

2009: 80%2010: 100%2011: 87%

2012: 100%2013: 80%2014: 80%2015: 73%

9M16²: 50%

Share BuybackAbout 15% of free floatrepurchased in 7-year period (2H08-9M16)

+

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 and the divestment from CME Group shares in Sep/15 and Apr/16. ² 50% of the net income excluding the impact from the sale of CME Group shares in Apr/16.

33






3Q16 RESULTS

APPENDIX


34

Total revenue: R$621.3 mn, -6.3%,

BM&F Seg.: R$240.6 mn, -21.6%

Bovespa Seg.: R$241.8 mn, +9.0%

Other revenues: R$138.9 mn, +3.5%

Adj. expenses1: R$155.5 mn, -5.0%

Operat. income: R$113.0mn, -70.3%

Excluding extraordinary items that impacted 3Q16, operating income would have reached R$351.5 mn

IFRS net income²: R$293.5 mn

Excluding extraordinary items that impacted 3Q16, net income would have reached R$453.2 mn

Payout: R$146.7 mn (R$0.082 per share); equivalent to 50% of the 3Q16 net income

Financial highlights3Q16 (vs. 3Q15)

BM&F Segment:

ADV: 2.9 mn contracts, -11.7%

RPC: R$1.247, -12.9%

Bovespa Segment:

ADTV: R$6.93 bn, +5.9%

Margin: 5.268 bps, 0.02 bps

Others growth products:

Tesouro Direto: 86.4% increase in average assets under custody

ETFs: 20.1% increase in ADTV

Operating highlights3Q16 (vs. 3Q15)

1 Adjusted to (i) depreciation and amortization; (ii) stock grant plan costs – principal and payroll taxes – and stock option plan; (iii) transaction cost and planning of the proposed business combination with Cetip that is still pending regulatory approval; and (iv) transfer of fines, provisions and incentive programs to market participants. ²Attributable to BM&FBOVESPA´s shareholders. 3 Depending on test results and regulatory approval.

Proposed business combination with CetipPending regulatory approval: CVM, Central Bank and CADE (filed with CADE on June 28, 2016)

Efforts on planning the integration

Equities phase of BM&FBOVESPA ClearinghouseIntegrated test and certification with market participants were concluded

Beginning of the parallel production phase in Jul’16

Deployment planned for 1Q173

Strategic updates

3Q16 vs. 3Q15 highlights Bottom line impacted by extraordinary and mainly non-cash items

35

Total revenue

R$621.3 mn

1 The revenue breakdown considers the revenue lines “others” of the Bovespa Segment and “foreign exchange” and “securities” of BM&F Segment, as reported in the financialstatements note 20, within the other revenues not tied to volumes. ² Trading and post-trading.

USD-linked revenue represented 22.3% of the total revenue

REVENUE (in R$ millions / % growth YoY)

3Q16 revenue breakdown¹Revenue hurt by BM&F segment weak performance

36

CONTRACTS 3Q15 3Q16 YoY

Interest rates in BRL 1,791 1,206 -32.7%

FX rates 473 386 -18.3%

Stock indices 101 79 -22.2%

Interest rates in USD 321 229 -28.7%

Commodities 9 9 -2.2%

Mini contracts 597 997 66.9%

TOTAL 3,293 2,906 -11.7%

Derivatives market¹Revenue impacted by lower ADV and RPC

REVENUE (in R$ millions) ADV (in thousands of contracts)

MINI CONTRACTS (in thousands of contracts)

REVENUE PER CONTRACT (RPC)

RPC: R$1.247 per contract, -12.9% YoY

Mix effect:

Lower participation of Interest rates in BRL contracts

Higher participation of Mini contracts (RPC is significantly lower than average)

Appreciation of the BRL against USD (in 3Q16: 51.9% of derivatives´ revenue were linked to USD)

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$4.6million in 3Q16. ² Most of the fees charged on FX rate, Interest rates in USD and Commodities contracts are referred in USD. The average BRL/USD exchange rate appreciated 4.7%from 3Q15 to 3Q16.

% tot.

BM&F

rev.

37

REVENUE² (in R$ millions)

Equities market¹Higher volumes contributed to the revenue increase

¹ Revenue does not consider the revenue line “others” of Bovespa Segment, as reported in the financial statements note 20, which totaled R$4.5 million in the 3Q16. ² Excludesfixed income line.

MARKET CAPITALIZATION (in R$ trillions) AND TURNOVER VELOCITY (%)

ADTV growth was driven by the increase in the market capitalization, mostly concentrated in the end of the quarter

Trading and post-trading margins: 5.268bps, stable

ADTV (in R$ millions) AND MARGIN (in bps)

3Q16 HIGHLIGHTS

3Q15 3Q16 YoY

ADTV 6.545,1 6.930,9 5,9%

Margin 5,246 5,268 0.02 bps

38

Business lines not tied to volumesGrowth in revenue not tied to volumes

3Q16 REVENUE BREAKDOWN¹ (in R$ millions / %)

¹ Revenue as reported in the financial statements note 20.

22.4%

Other lines of business 3Q16 YoY

Depository 47.4 31.1%

Securities lending 30.2 6.8%

Market data (vendors) 24.6 -19.2%

Listing 13.1 -0.7%

Bank - financial intermediation and bank fees 9.9 -1.3%

Market participant access 8.7 -12.6%

Other 5.1 -18.9%

Total 138.9 3.5%

39

3Q15 87.0 (53%) 30.4 (19%) 12.6 (8%) 4.7 (3%) 28.9 (18%)

3Q16 84.1 (54%) 36.9 (24%) 14.4 (9%) 1.7 (1%) 18.4 (12%)

3Q16 expensesContinued focus on expense management

¹ Adjusted to (i) depreciation and amortization; (ii) stock grant plan costs – principal and payroll taxes – and stock option plan; (iii) transaction costs and planning of the business combination with Cetip that is still pending regulatory approval; and (iv) transfer of fines, provisions and incentive programs to market participants. ² Excluding the impact of stock grant/option expenses. ³ Include expenses with communication, maintenance, taxes, board and committee members compensation and other.

Others³ (-21.0%): in 3Q15, non-recurring write-off of R$6.4 mn

(in R$ millions and % of total adjusted expenses)

Marketing (-64.1%): in 3Q15, expenses connected to the organization of the Financial Markets Conference

Adjusted personnel²(-3.3%): annual wage adjustment of~9% offset mainly by higher capitalization

Data processing (+21.3%): inflation/FX rate adjustments to IT maintenance contracts

ADJUSTED EXPENSES¹ (in R$ millions)

3Q16 adjusted expenses decreased 5.0% YoY

Third party (+14.2%):higher expenses with consultancy services

40

3Q16 extraordinary expensesExtraordinary items that impacted the IFRS expenses

(in R$ millions)Line impacted in the

income statementBefore tax After tax

Provision on judicial decision – Spread Corretora Expenses 183.9 121.4

Provisions on success fees to legal advisors Expenses 47.4 33.6

Transaction with Cetip expenses¹; ² Expenses 7.2 4.7

Total 238.5 159.7

¹ Pending regulatory approvals from CVM, Central Bank and Antitrust Authority – CADE. ² Includes expenses with legal reports, auditors, appraisers, and lawyers, among other professionals engaged as advisors for the transaction as well as the planning of the integration.

IFRS EXPENSES OF R$446.1 MILLION, +104.8% YoY, IMPACTED BY EXTRAORDINARY ITEMS

41

Financial highlightsIncrease in financial revenue reflecting higher cash balance

¹ Includes gains from changes in the exchange rate as well as other financial revenue. ² Includes maintenance of stand-by facilities, available but not drawn, in connection with the transaction with Cetip. ³Effective rate 6.47% per year, after withholding income tax.

Higher cash balance which includes R$5.5 bnin proceeds from CME Group shares sale

FINANCIAL RESULT (in R$ millions)

FINANCIAL RESULT OF R$221.5 MILLION, +157.5% YoY

Other financial revenue¹ Other financial expense²

2020 Notes payment of semiannual coupon of 5.5%³ per year

2020 Notes hedging cost:

Principal: R$62.0mn (79.1% of the CDI)

Coupon: R$0.8mn (hedge set up in Sep’16)

42

Financial highlights (cont.)Higher cash position to fund proposed combination with Cetip

4Q155,202

3Q158,164

CASH AND FINANCIAL INVESTMENTS (in R$ millions)

1Q165,661

3Q1610,718

2Q1610,463

Third-party Restricted and unrestrictedTotal

¹ Includes earnings and rights on securities in custody. ² Includes BM&FBOVESPA Bank clients’ deposits. ³ Does not include investments in Bolsa Mexicana de Valores, Bolsa de Comercio de Santiago and Bolsa de Valores de Colombia amounting R$203.1 million at 3Q16 and booked as financial investments. See note 4 to the financial statements. 4 Pending regulatory approvals from CVM, Central Bank and Antitrust Authority – CADE.

BM&FBOVESPA’s cash position totaled R$8.5 bn in 3Q16

R$2.0 - R$2.5 bn to run the business

R$1.0 bn in clearinghouses’ required safeguards

The remaining supports the activity of the central counter-party and general corporate needs

~R$6.0 bn to fund the proposed combination with Cetip4

Includes R$5.5 bn in gross proceeds from the total divestment from CME Group shares

Third-party cash

Not considered as BM&FBOVESPA’s cash

The Company earns interest on most of this cash balance

43

Financial highlights (cont.)Strong cash generation

CASH GENERATION¹ (in R$ millions)

¹ Cash generation before dividends/IoC payments and share buybacks. ² Considers the cash flow from operating activities, adjusted by the variation of financial investments and guarantees and cash deposits and REPO transactions of the BM&FBOVESPA bank, as described in the note 13 to the financial statements. ³ Considers the cash flow from financing activities before the payment of dividends/IoC and share buyback. 4 Pending regulatory approvals from CVM, Central Bank and Antitrust Authority – CADE.

3Q15 3Q16

Adjusted net cash from operating activities²

513.1 672.3

Net cash from investment activities -37.7 -40.6

Net cash from financing activities before distributions³

-61.8 -64.8

Cash generation (before distributions)¹

413.6 566.9

Net cash from operating activities was positively impacted by higher financial

revenue

CASH GENERATION REACHED R$566.9 MILLION IN 3Q16, +37.1% YOY

CASH DESTINATION (in R$ millions)

CASH RETENTION OF R$310.8 MILLION TO FUND THE PROPOSED COMBINATION WITH

CETIP4

44

We are here

Business combination with Cetip¹Timeline: where we are and next phases of the process

April, 8th May, 20th Jun, 28th Oct, 13th Feb, 23th May, 24th

The final deadline for

CADE approvals (if extended)

Review of the transaction by the regulators:

Central Bank of Brazil (BACEN)

Brazilian Securities Commission (CVM)

The Antitrust Authority (CADE)

BVMF and Cetip’sBoards

approved the financial

terms for the transaction

Nov, 14th

This measure allows CADE to

extend the deadline for more

90 days

CADE considered complex the

concentration act of the combination

Request to analyze the act of concentration

was filed in CADE

BVMF and Cetip’s shareholders’ approved the transaction in the

shareholders’ meetings

Efforts on planning the integration²

Counted from the day of the last regulatory approval:

Cetip shares will be converted in BM&FBOVESPA shares (BVMF3) in T+5

The cash portion will be settled in up to 40 days

CADE deadline (240-day)

2016 2017

¹ Pending regulatory approvals from CVM, Central Bank and Antitrust Authority – CADE. ² The Company has dedicated efforts to plan the business combination, respecting the ground rules set by the antitrust authorities.

45

Financial Statements Summary of balance sheet (consolidated)

09/30/2016 12/31/2015 09/30/2016 12/31/2015

Current assets 9,067.6 8,673.8 Current liabilities 3,497.5 2,096.8

Cash and cash equivalents 546.8 440.8 Collateral for transactions 1,605.6 1,338.0

Financial investments 8,210.9 7,798.5 Others 1,891.9 758.8

Others 310.0 434.4 Non-current liabilities 5,038.3 5,859.9

Non-current assets 18,085.0 17,635.1 Foreign debt issues 1,993.7 2,384.1

Long-term receivables 2,335.9 1,961.4Deferred Inc. Tax and Social

Contrib. 2,617.1 3,272.3

Financial investments 2,162.8 1,815.6 Others 427.5 203.5

Others 173.2 145.8 Shareholders´ equity 18,616.8 18,352.2

Investments 29.5 30.6 Capital stock 2,540.2 2,540.2

Property and equipment 455.2 453.1 Capital reserve 14,284.7 14,300.3

Intangible assets 15,264.3 15,190.0 Others 1,782.1 1,501.6

Goodwill 14,401.6 14,401.6 Minority shareholdings 9.7 10.1

Total Assets 27,152.6 26,308.9 Liabilities and Shareholders´ eq. 27,152.6 26,308.9

LIABILITIES AND SHAREHOLDERS´EQUITY (in R$ millions)ASSETS (in R$ millions)

46

3Q16 3Q15Change

3Q16/3Q152Q16

Change

3Q16/2Q169M16 9M15

Change

9M16/9M15

IRFS net income* 293.5 2,012.5 -85.4% (114.4) -356.5% 518.4 2,610.0 -80.1%

Stock grant/option (recurring net of tax) 13.9 12.8 8.6% 27.2 -48.8% 57.9 37.6 53.9%

Deferred tax liabilities 135.3 137.5 -1.6% 135.3 0.0% 405.9 412.6 -1.6%

Equity in Income of Investees (net of taxes) 0.0 (37.6) - 0.0 - (19.6) (106.8) -81.7%

Expenses related to Cetip´s transaction (net of tax) 4.7 0.0 - 31.5 -85.0% 36.9 0.0 -

Divestment in CME Group shares (net of tax) 0.0 0.0 - 557.3 - 557.3 0.0 -

IOF on proceeds from CME Group shares sale (net of tax) 0.0 0.0 - 10.8 - 10.8 0.0 -

IoC Adjustments 0.0 (49.0) - 0.0 - 0.0 (49.0) -

Discontinuity of the equity method (net of taxes) 0.0 (1,145.0) - 0.0 - 0.0 (1,145.0) -

Results from the selling of the CME Group (net of taxes) 0.0 (474.2) - 0.0 - 0.0 (474.2) -

Non-recurring expenses with provisions (net of tax) 155.0 0.0 - 0.0 - 155.0 0.0 -

Adjusted net income 602.4 457.0 31.8% 647.7 -7.0% 1,722.5 1,285.1 34.0%

*Attributable to BM&FBOVESPA shareholders.

Financial StatementsNet income and adjusted expenses reconciliations

¹ Includes expenses with legal reports. auditors. appraisers. and lawyers. among other professionals engaged as advisors for the transaction. ² Includes expenses with consulting services hired to help the integration planning of the proposed combination with Cetip which is subject to regulatory approvals

ADJUSTED NET INCOME RECONCILIATION (in R$ millions)

ADJUSTED EXPENSES RECONCILIATION (in R$ millions)

3Q16 3Q15Change

3Q16/3Q152Q16

Change

3Q16/2Q169M16 9M15

Change

9M16/9M15

Total expenses 446.1 217.8 104.8% 268.8 66.0% 917.0 637.3 43.9%

Depreciation (25.1) (26.1) -3.8% (23.8) 5.8% (72.7) (84.8) -14.3%

Stock grant/option (21.1) (19.4) 8.6% (41.2) -48.8% (87.7) (84.9) 3.3%

Proposed business combination with Cetip¹ (0.7) 0.0 - (46.3) -98.5% (48.0) 0.0 -

Planning of the business integration with Cetip² (6.5) 0.0 - (1.5) 324.4% (8.0) 0.0 -

Provisions and others (237.3) (8.7) 2634.8% (9.4) 2431.8% (254.1) (23.6) 975.6%

Adjusted expenses 155.5 163.6 -5.0% 146.7 6.0% 446.5 443.9 0.6%

47

Financial Statements Summary of the income statement (consolidated)

SUMMARY OF THE INCOME STATEMENT (in R$ millions)

3Q16 3Q15Change

3Q16/3Q152Q16

Change3Q16/2Q16

9M16 9M15Change

9M16/9M15

Net revenues 559.1 598.3 -6.5% 574.5 -2.7% 1,697.1 1,673.4 1.4%

Expenses (446.1) (217.8) 104.8% (268.8) 66.0% (917.0) (637.3) 43.9%

Operating income 113.0 380.5 -70.3% 305.7 -63.0% 780.2 1,036.1 -24.7%

Operating margin 20.2% 63.6% -4,338 bps 53.2% -3,300 bps 46.0% 61.9% -1,595 bps

Financial result 221.5 86.0 157.5% (418.3) -153.0% (36.2) 219.0 -116.5%

IFRS net income (loss)* 293.5 2,012.5 -85.4% (114.4) -356.5% 518.4 2,610.0 -80.1%

Adjusted expenses (155.5) (163.6) -5.0% (146.7) 6.0% (446.5) (443.9) 0.6%

*Attributable to BM&FBOVESPA shareholders.

48






3Q16 RESULTS

APPENDIX


49

High growth productsGrowing sophistication of market participants

Securities LendingReal Estate Funds (FIIs) Options with Market Maker

(Open Interest - average for the period - in BRL billion)

Initiatives to develop and prompt higher volume in certain products

Performance shows that the initiatives are being well received by the market

ETFs Brazilian Treasury Direct - Tesouro Direto Agribusiness Credit Bills

(ADTV in BRL million)(ADTV in BRL million)

(ADTV in BRL million) (Custody – in BRL billion) (AUM – in BRL billion)

¹Updated to October 31, 2016. ²Updated to September 30, 2016.

50

Bovespa SegmentRaising Capital

PUBLIC OFFERINGS (BRL billion)

¹Excludes the portion acquired by the Brazilian government in the Petrobras offering, via the transfer of rights in barrels (BRL 74.8 billion).

¹Updated to October 31, 2016

51

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016¹ Total

IPOs - 1 - 7 9 26 64 4 6 11 11 3 10 1 1 1 155

Follow ons 14 5 8 8 10 16 12 8 18 11 11 9 7 1 4 7 149

Total 14 6 8 15 19 42 76 12 24 22 22 12 17 2 5 8 304

Dual Listings - - - 2 1 1 - - 1 - - - - - - - 5

Sarbanes-Oxley Act(Jul. 2002)

Novo MercadoLaunch

(Dec. 2000)

End of IOF Tax (2%) for foreign investors

(Dec. 2011)

End of CPMF(Financial

Transaction Tax)

Trading in ADRs of Brazilian companiesLiquidity migration process interrupted

Oct’16

Source: Bloomberg (in USD traded value of 35 companies with ADRs programs )

PUBLIC OFFERINGS IN NUMBER OF COMPANIES

37.7%

31.0%

7.5%

23.8%

31.3%

68.7%


52

Bovespa SegmentForeign investment flow

MONTHLY NET FLOW OF FOREGIN INVESTMENTS (in BRL billions)

Includes public offering (primary market) and regular trades (secondary market).


53

Products and Markets DevelopmentCreation 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) onamount in depository

Enhancement of Price and Incentives Policies

54

Clearinghouses’ Integration and New Risk Model (CORE)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&LCALCULATION

T+0 T+1 T+2 T+3 T+4 T+N...

Calculates and aggregates intertemporally P&Lassociated with each scenario, considering the defined closeout strategy

CLOSEOUT RISKResult: Two risk measures—market and liquidity—that are estimated both jointly and consistently

PERMANENT LOSS TRANSIENT LOSS

OVERVIEW: CLOSEOUT RISK CALCULATION IN THREE STEPS

55

Contato

www.bmfbovespa.com.br

55 11 2565-4729 / 4418 / 4207/4834/[email protected]

Investor Relations Department - RI Mobileir.bmfbovespa.com.br/enu/2845/BVMF Presentation - November...

Documents

Transcript of Investor Relations Department - RI Mobileir.bmfbovespa.com.br/enu/2845/BVMF Presentation - November...