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1
BM&FBOVESPA Investor Relations Department
December 2014
2
Forward Looking Statements
This presentation may contain certain statements that express the management’s expectations, beliefs and assumptions about future events or results. Such statements are not historical fact, being based on currently available competitive, financial and economic data, and on current projections about the industries BM&FBOVESPA 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
HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
BRAZILIAN MARKET OPPORTUNITIES
MAIN GROWTH INITIATIVES
OPERATIONAL PERFORMANCE
FINANCIAL HIGHLIGHTS
APPENDIX (includes results for 3Q14)
4
HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparency
5
1890: Foundation of Bolsa
Livre (BOVESPA's predecessor)
1986: Start of BM&F
activities
Aug 2007: BOVESPA Hld
demutualization
Sep 2007: BM&F demutualization
Oct 2007: BOVESPA Hld IPO (BOVH3)
Nov 2007: BM&F IPO (BMEF3)
May 2008: integration between BM&F and
BOVESPA Hld and creation of BM&FBOVESPA (BVMF3)
1967: BOVESPA’s
Mutualization
MARKET CAPITALIZATION (US$ billion) AND OPERATING MARGIN (%)
•¹12M to Jun. 28, 2013; ²12M to Mar 31, 2013. Source: Bloomberg (November 28,2014).
History of BM&FBOVESPA Important global exchange
6
PRE-TRADING TRADING POST-TRADE
Access Trade Allocation Transfer
Clearing/risk analysis
Position/ Collateral
Depository Auxiliary Services
VALUE CHAIN
Vertically integrated
Trading Platform: equities, derivatives, government and
corporate bonds, funds, spot FX, among others
Post-Trade Platform:
Central Counterparty (CCP) : An entity that interposes itself
between operations or contracts, becoming the guarantor of all
business
Settlement System (SSS): system that allows the transfer of
securities or assets from investors, in which the transfer may be
free or against payment
Central Depository (CSD): performs centralized asset custody and
treatment of corporate actions (dividends, stock splits, etc.)
Services for issuers and brokers
Listing (stocks, funds, corporate bonds, securitization, among other)
Trading access (brokers)
Securities Lending
Custody for clubs and foreign investors (2.689 account)
Market Data (vendors)
Indices Licensing
Software Licensing
OTC (derivatives and fixed income)
Commodities certification
Vertical model as a differential Value gained across most of the chain
Settlement Risk Analysis
(DMA) Risk Analysis
7
DTCC
BRAZIL (Internalization of orders is forbidden)
US (Internalization of orders is allowed)
Post trade CCP SSS CSD
Trading
Brokers
A and B
Investors Investors
Brokers A and B
Investors Investors
Broker
A
Broker
B
Model 100% vertical: clearing, settlement and central depository at the final beneficial
owner level
Brokers settle positions and control their clients’ portfolios through BM&FBOVESPA’s
infrastructure (impact on post-trade fees)
Clearing, settlement and custody occur at the brokerage houses
Each prime broker has its own structure to control its customers’ portfolios and settle
positions (impact on the prime broker’s costs)
Trading Venues
Vertical model as a differential BM&FBOVESPA present at all post-trade stages
8
Brokerage houses & investors
Trading
Post-Trade
Regulations prohibit internalization of orders, dark pools and ATS/MTFs and simultaneous exchange/OTC equities trading
Settlement and clearing of equities trading must be done through a CCP
Settlement and clearing at the final beneficial owner level make the Brazilian market safer and more resilient
Under the prevailing regulations, potential competitors must provide an integrated solution with the same status regarding rules and transparency
In Brazil the final investor pays the exchange: compared to other markets we have a competitive all-in-cost, as BM&FBOVESPA provides more services than other exchanges
Naked access is not allowed
Naked short selling is not possible
Brazilian market regulatory framework Resilience and safety as priorities
9
EXECUTIVE OFFICERS BOARD OF DIRECTORS
COMMITTEES
Edemir Pinto CEO
Luis Furtado CIO
Cícero Vieira COO
Daniel Sonder CFO
Eduardo Guardia Chief Product / IRO
Audit Committee
Risk Committee
Nominations and Corporate Governance Committee
Compensation Committee
Corporate Governance Multidisciplinary knowledge in conducting business
Charles Carey Independent Director, Director of CME Group
José Roberto Mendonça de Barros Independent Director, economist and professor
Pedro Parente (Chairman) Independent Director, engineer
Marcelo Trindade (Vice Chairman) Independent Director, lawyer
Claudio Haddad Independent Director, engineer and professor
André Esteves Non Executive Director, CEO of BTG Pactual
Alfredo Antônio Lima de Menezes Non Executive Director, Executive Officer of Bradesco
Luiz Fernando Figueiredo Independent Director, Co-Founder of Mauá Investments
Luiz Nelson Guedes De Carvalho Independent Director, professor
Daniel Luiz Gleizer Non Executive Director, Director of Itaú Unibanco
José Berenguer Neto Non Executive Director, CEO of JP Morgan Brazil
Advisory Committee For The Securities Intermediation Industry
10
AGM - Mar. 24, 2014
Number of individual shareholders 51,924
Number of institutional shareholders 3,245
Total number of shareholders 55,169
Free float (ON)¹ 1,852,153,920 (97.5%)
Ownership structure Widely-held shareholder base
¹ Updated on March 11, 2014
10.44%
6.84%
5.32%
3.15%
5.02%
69.23%
Funds managed by OppenheimerFunds, Inc.
Funds managed by Vontobel Asset Management Inc.
CMEG Brasil I Participações Ltda.
Funds managed by BlackRock Inc.
Treasury stock
Other
11
BM&FBOVESPA’s Sustainability Policy Approved by the Board of Director
12
BRAZILIAN MARKET OPPORTUNITIES Main growth drivers
13
Opportunities in the Brazilian market BM&FBOVESPA is ready to capture future growth
Growth opportunities in the Brazilian equities and derivatives markets
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
Capital Market Great opportunities in the equities and derivatives segments
Funds’ AUM evolution (in BRL billion). Global average of 40% for equities
LISTED COMPANIES
Source : BM&FBOVESPA, ANBIMA , WFE (Dec-13) and ABRAPP. *Oct/14 ** Jun/14
INVESTMENT FUNDS¹ NUMBER OF CUSTODY ACCOUNTS (thousand)
PENSION FUNDS¹
Number of retail investors represents only 0.3% of the population (lower than global average)
Lower number of listed companies in comparison with other countries
Participation of equities in the portfolio of pension funds
¹ May have a partial overlap between investment funds and pension funds portfolios.
6,973
5,008 4,132 3,886
3,245
2,055 1,813
363
India USA China/HK Canada Spain Australia Korea Brazil
15
MAIN GROWTH INITIATIVES Investments, new products and focus on the
customer
16
BM&FBOVESPA IT, Risk and Operating Development Building a state-of-the-art platform to boost market growth
BM&FBOVESPA is investing more than USD650 million
(2010 - 2015) to build world-class and cutting-edge 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, standard deviation low
Operational leverage: easily scalable capacity
OTC MARKET
Capital efficiency for clients: integrated risk calculation (OTC and Exchange Traded Derivatives)
Customer relationship: strengthening relationships with customers
NEW DATA CENTER
Customer relationship: able to host participants and clients’ infrastructure
Significant capacity to expand co-location
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
17
PUMA Platform High availability and performance
BM&F segment
BOVESPA segment Capacity and resilience of the system tested in times of high volatility and message peaks
The entire trading infrastructure must be adequately sized for peak message traffic:
BOVESPA Segment– Apr. 29th
Peak of msgs/min: 619,063
Average msgs/min: 60,000 - 70,000
BM&F Segment – Aug. 13th
Peak of msgs/min: 85,388
Average msgs/min: 7,000 - 8,000
RESILIENCE AND AVAILABILITY 438 uninterrupted trading days*
* Until Sep. 26, 2014
18
Clearinghouses’ Integration Further differentiation in BM&FBOVESPA post-trade
Equities and corporate debt (BRL 74.4 bn*)
Equities, ETFs and corporate fixed income cash market
Equity and indices derivatives (options and forward)
Securities lending
Derivatives (BRL 132.6 bn*)
Financial and
commodities derivatives (futures, options and forwards)
OTC derivatives
FX (BRL 3.7 bn*)
FX spot market
(US$ vs. BRL )
Securities (BRL 0.7 bn*)
Cash market and
forward market for government bonds
INTEGRATED CLEARINGHOUSE** =
Capital efficiency
• Aggregate of pledged collateral at our clearinghouses totaled BRL 211.4 billion in Jun 30, 2014. ** Implementation of BM&FBOVESPA Clearinghouse subject to the results of the tests with the market and the authorization from regulators..
Implemented on Aug 18th, 2014
19
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
exchange Futures, 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
20
Clearinghouses’ Integration and New Risk Model (CORE) Derivatives clearinghouse migration results
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
More than 5,000 margin simulation exercises per day
21
Products and Services Development Focus on the customers’ demands and needs
Long-term development of products, markets and services
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, Fixed Income 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
22
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 elegible SME’s investors until 2023
Creation of investiment 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 suppor 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
Long-term development of products, markets and services
Products and Services Development Focus on the customers’ demands and needs
23
Tax treatment for Retail Investors
BM&FBOVESPA and the Brazilian IRS are developing a proposal to simplify tax treatment for individual investors in equities market
Fixed income ETFs
Tax treatment definition
Incentives for SMEs
Tax exemption on capital gains; reduction of maintenance costs of publicly-held companies; restricted distribution offering, and entrepreneurial and management qualification programs
Securities Lending
Tax treatment clarification on payouts(dividends and interest on capital)
Addressing important issues to foster the long-term development of the Brazilian capital market
Development Discussions with the Government Creating incentives and addressing important issues
24
OPERATIONAL PERFORMANCE
25
BOVESPA Segment Operational highlights
*Updated to November 28, 2014. **Ratio of cash market trading volume to the market cap of the exchange.
AVERAGE DAILY TRADING VALUE – ADTV (BRL billion)*
AVERAGE ANNUAL MARKET CAP (BRL trillion) TURNOVER VELOCITY** (12 months average*)
*
26
2006 2007 2008 2009 2010 2011 2012 2013 2014* N-13 D-13 J-14 F-14 M-14 A-14 M-14 J-14 J-14 A-14 S-14 O-14 N-14*
Interest rates in BRL 0.906 0.950 1.141 0.979 0.889 0.918 1.004 1.046 1.115 1.115 1.266 1.049 0.980 1.105 1.185 1.211 1.168 1.152 1.177 1.090 1.076 1.226
FX rates 2.244 1.859 2.065 2.161 1.928 1.894 2.205 2.535 2.628 2.611 2.832 2.629 2.633 2.616 2.555 2.594 2.659 2.619 2.578 2.464 2.654 2.980
Stock Indices 1.419 1.501 2.145 1.620 1.564 1.614 1.524 1.761 1.740 1.664 2.122 1.695 1.958 1.597 1.834 1.601 2.095 1.527 1.863 1.477 1.721 1.628
Interest rates in USD 1.094 0.965 1.283 1.357 1.142 0.941 1.015 1.231 1.278 1.359 1.340 1.325 1.414 1.553 1.275 1.300 1.332 1.156 1.250 1.240 1.264 1.078
Commodities 4.749 3.195 3.587 2.307 2.168 2.029 2.239 2.534 2.376 2.430 2.760 2.401 2.199 2.683 2.587 2.883 2.223 2.152 2.084 2.315 2.295 2.510
Mini contracts 0.034 0.054 0.162 0.176 0.128 0.129 0.116 0.119 0.117 0.120 0.128 0.122 0.123 0.119 0.118 0.120 0.123 0.120 0.115 0.107 0.113 0.120
OTC 1.571 2.111 2.355 1.655 1.610 1.635 1.769 1.409 2.062 1.266 0.978 1.077 1.069 1.155 1.501 2.679 3.027 3.862 3.236 2.069 1.911 1.517
Total RPC 1.247 1.224 1.527 1.365 1.134 1.106 1.191 1.282 1.339 1.367 1.575 1.294 1.261 1.393 1.411 1.406 1.431 1.335 1.373 1.249 1.284 1.405
BM&F Segment Operational highlights
AVERAGE DAILY TRADED VOLUME – ADV (thousands of contracts)
REVENUE PER CONTRACT - RPC (BRL)
*Updated to November 28, 2014.
27
Investor participation in volumes Equities and derivatives segments
BM&F SEGMENT (DERIVATIVES)
BOVESPA SEGMENT (EQUITIES)
28
FINANCIAL HIGHLIGHTS Cost discipline and capital return to shareholders
29
Income Statement History
SUMMARY OF INCOME STATEMENT (CONSOLIDATED)
(in BRL thousand) 2009 2010 2011 2012 2013 9M14
Net revenue 1,510,569 1,898,742 1,904,684 2,064,750 2,131,795 1,657,209
Expenses (569,832) (633,504) (816,664) (763,080) (797,160) (558,304)
Adjusted expenses (446,677) (543,881) (584,521) (563,487) (575,764) (417,449)
Operating income 940,737 1,265,238 1,088,020 1,301,670 1,334,635 942,147
Operating margin 62.3% 66.6% 57.1% 63.0% 62.6% 62.8%
Equity method result - 38,238 219,461 149,270 171,365 144,673
Financial result 245,837 289,039 280,729 208,851 181,535 154,881
Income before taxation of profit 1,186,574 1,592,515 1,588,210 1,659,791 1,687,535 1,241,701
Income tax and social contribution (304,505) (448,029) (539,681) (585,535) (606,588) (496,570)
Net income* 881,050 1,144,561 1,047,999 1,074,290 1,081,516 745,131
Adjusted net income 1,223,761 1,586,374 1,545,627 1,612,136 1,609,769 1,105,422
Adjusted EPS (BRL ) 0.6104 0.7929 0.7932 0.8351 0.8389 0.6007
*Attributable to shareholders of BM&FBOVESPA.
30
REVENUE BREAKDOWN (3Q14)
Revenue and Expense breakdowns Diversified revenue sources as a differential, costs under control
EXPENSE BREAKDOWN (3Q14)
Total revenue R$594.7 million
Expenses R$193.8 million
31
Adjusted expenses¹ estimates increase below inflation • Focus on expenses control offset most of the inflationary adjustments over the past years
Adjusted Opex¹ Budget Focus on cost control
Opex- millions R$ 2014 budget reaffirmed
2014e vs. 2013: 3.34%²
IPCA 2014e: 6.38%³
2015e vs. 2014e: 1.26%4
IPCA (average) 2015e: 6.50%³
CAGR 2010-15e: 2.07%4
IPCA (average) 2010-15e: 6.23%³
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 Considers the high point 2014 budget; ³ IPCA for 2014 and 2015 based on market expectations released by the Central Bank in Dec. 05, 2014; 4 Considers the mid-point of 2015 budget and high point 2014 budget
32
The CAPEX program initiated in 2010 renewed the Company's IT, operations and service platform
Capex Budget Investments phase
Capex- millions R$
NEW DATA CENTER
... Market Maker
BTC SINACOR
33
1H14 Expenses Breakdown Pursuit of greater efficiency and controlling expenses
Prioritization of activities, review of contracts and enhancement of processes has resulted in greater efficiency
129.8
154.4
1H11
1H14Per
son
nel
exp
end
itu
re¹
46.7
55.4
1H11
1H14
Dat
ap
roce
ssin
g
21.1
17.7
1H11
1H14
Thir
d p
arty
serv
ices
24.1
5.2
1H11
1H14Mar
keti
ng
Diligent process of managing resources and headcount sizing
Average annual wage increase of 7.2% and recognition of individual talents
Prioritization of activities and projects
Review of contracts
Strategic review of marketing activities
R$ MM
19.0%
-15.9%
-78.4%
¹ Includes personnel capitalization and excludes stock option and bonus expenses, ² Calculated based on the annual wage increase between 2011 and 2013 for personnel expenditure and the IPCA of services accumulated from July, 2011 to June, 2014 for the other lines of expenses
Nominal Var. Real Var. ²
-37.7%
-84.0%
-3.3%
12.3
7.1
1H11
1H14
Co
mm
un
icat
.
Reduced costs from the posting of trading and custody statements, as a result of changes to the submission process
Higher expenses with maintenance of new IT platforms
Expenses reduction with service providers and deprecation of legacy IT platforms
18.8% -12.0%
-41.9% -57.0%
34
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 September, 2014 and excludes third party resources (investors‘ collateral, resources deposited in the BM&FBOVESPA Bank and others).
Financial Highlights Financial solidity combined with return of excess capital to shareholders
Distribution of most of the cash generation, reaffirming the commitment to return capital to shareholders
Payout (% of GAAP earnings)
2009: 80% 2010: 100% 2011: 87%
2012: 100% 2013: 80% 9M14: 80%
Buyback Almost 13% of free
float repurchased in almost 6 years (2H08-
9M14)
+
(Accumulated ¹ between January, 2009 and September, 2014, in R$ million)
Cash Generation after Investments and Interest Payments Cash Position²
R$2,091 MM
Indebtedness
R$1,513 MM
Rating
Moody’s
Baa1 (issuer global scale)
Baa2 (issuer BR scale)
Baa1 (global notes)
S&P
BBB+ (counterparty cred.)
A-2 (issuer)
35
3Q14 RESULTS
36
Total revenue: R$594.7 MM, -0.4%
BM&F seg.: R$228.7 MM, flat
Bovespa seg.: R$263.6 MM, +2.5%
Other: R$102.4 MM, -7.8%
Net revenue: R$546.0 MM, +2.0%
Adjusted expenses¹: R$146.8 MM, -2.3%
Operating income: R$352.2 MM, +3.2%
EBITDA²: R$431.2 MM, +3.4% (EBITDA margin 79.0%)
Financial Results: R$47.3 MM, -4.6%
Adjusted net income³: R$357.4 MM, -11.5%
Adjusted EPS: R$0.195, -7.5%
Payout: R$190.7 MM in 3Q14, 80% of GAAP net income
Share buyback: Jul-Oct´14: 12.4 MM shares (0.7% of the free float) – 11.2 MM repurchased in October.
3Q14 Highlights Solid results in a challenging environment; one-off charge
FINANCIAL HIGHLIGHTS (3Q14 vs. 3Q13)
1 Excludes stock options plan cost, depreciation, tax on dividends from CME Group and provisions. 2 According to CVM Rule 527/12 that does not exclude equity method accounting. ³ Excludes deferred liability recognized in correlation with temporary differences from amortization of goodwill for tax purposes, stock options plan cost, investment in associate (CME Group) accounted under the equity method of accounting, net of taxes related to dividends and taxes paid overseas to be compensated.
RETURNING CAPITAL TO SHAREHOLDERS
Better volumes quarter-over-quarter for both segments
Oct’14 volumes: Bovespa seg. +64.0% yoy (all time high); and BM&F seg. +38.0% yoy
MAIN PROJECTS AND UPDATES
36
VOLUME HIGHLIGHTS
Clearinghouses Integration: derivatives module fully implemented on August 18, 2014
Indices development: partnership with S&P DJI
Dispute related to the deductibility of expenses from Bovespa Holding’s IPO
Amount under dispute reduced from R$123.0 MM to R$69.2 MM – one-off net impact of R$63.1 MM (R$18.1 MM as financial expense and R$45.0 MM as income tax)
TAX RELIEF PROGRAM (REFIS) – ONE-OFF CHARGE
37
3Q14 vs. 3Q13: +0.8%
Roughly flat at R$7.29 billion, mainly due to:
9.9% increase in average market capitalization
Lower turnover velocity yoy
Volatility related to elections in Brazil positively impacted volumes from mid-August
37
AVERAGE DAILY TRADING VALUE (ADTV)
Bovespa Segment Performance Margins positively impacted by the mix effect
MARKET CAPITALIZATION AND TURNOVER VELOCITY TRADING MARGINS (in basis point - bps)
Market 3Q14 3Q13
Cash market 5.061 4.991
Derivatives on single stocks 13.115 13.021
Options market (stocks / indices) 13.145 13.029
Forward market 12.999 12.999
Total Bovespa 5.502 5.363
3Q14 vs. 3Q13: +2.6%
Trading/post-trade margins impacted by the mix effect:
Lower participation of local institutional investors
Higher participation of equity derivatives
Lower participation of day traders
38
3Q14 vs. 3Q13:
ADV: 2.7 million contracts, +7.3%
+47.3% ADV of mini contracts
+38.9% ADV of Interest Rates in USD contracts
RPC: -6.4%
Mix effect: higher participation of lower priced contracts (mini contracts and options) coupled with higher participation of day traders
2.5% Real appreciation against USD in the period
38
AVERAGE DAILY VOLUME (ADV) AND AVERAGE REVENUE PER CONTRACT (RPC)
BM&F Segment Performance Mix effect and FX rate drove RPC down, offsetting ADV growth
MINI CONTRACTS
(in millions of contracts)
REVENUE PER CONTRACT AND FX RATE (in R$)
~44% of derivatives revenue was priced in USD in 3Q14
*Average FX rate (R$/US$) in the quarter, considering the closing price for previous month.
Contracts with RPC referenced in USD represented ~26% of derivatives ADV in 3Q14
215.1 202.8 249.4 255.1
316.8
8.6% 9.1% 8.8%
11.3% 11.9%
3Q13 4Q13 1Q14 2Q14 3Q14
ADV (millions of contracts) % Total
39
37.8%: Financial/Commodity Derivatives¹
38.1%: Cash Market
5.9%: Trading
32.2%: Post-Trade
5.7%: Stock and Indices Derivatives¹
Total Revenue R$594.7 million
3.2%: Securities Lending
3.1%: Depository, Custody and Back-Office
3.1%: Vendors
2.0%: Listing
1.6%: Trading Access
18.4%: Other Revenue
39
3Q14 Revenue Breakdown Diversified revenue base
REVENUE BREAKDOWN
CASH EQUITIES TRADING REVENUE ACCOUNTED FOR 5.9% OF TOTAL
DERIVATIVES REVENUE (BM&F + BOVESPA) ACCOUNTED FOR
43.5% OF THE TOTAL
18.1%: Brazilian Real interest rate contracts
13.5%: FX Contracts
2.9%: USD interest rate contracts
3.3%: Other Financial/Commodity Derivatives
1Trading and Post-trade
40
Adjusted Expenses (-2.3%)
Adjusted personnel (-2.2%): (i) headcount downsizing; (ii) reduction to profit-sharing accrual; and (iii) higher personnel expenses capitalized
Data processing (-11.5%): 3Q13 was impacted by the concentration of expenses for software service and maintenance of IT platforms
Communication (-30.3%): reduction in mail service expenses, reflecting improvements and electronification of the statements mailing process
Other (+120.0%): higher donations and contributions including, particularly:
Contribution to the Federal Government educational program called “Ciências sem Fronteiras”
Transfer of fines due to failures in the financial and physical settlement processes, which are now destined to BSM
40
3Q14 Expenses Breakdown Delivering efficiency on a diligent expense management
ADJUSTED EXPENSES (3Q14 vs. 3Q13) (in R$ millions)
*Include expenses with maintenance in general, taxes adjusted by the dividends from CME Group, board and committee members compensation and others.
41
9M14 Expenses Breakdown Pursuit of greater efficiency and controlling expenses
Pe
rso
nn
el
exp
en
dit
ure
¹ D
ata
p
roce
ssin
g Th
ird
par
ty
serv
ices
M
arke
tin
g
Nominal Var. Real Var. ²
¹ Includes personnel capitalization and excludes stock option and bonus expenses, ² Calculated based on the annual wage increase between 2013 and 2014 for personnel expenditure and the IPCA of services accumulated from September, 2013 to September, 2014 for the other expenses lines.
Average annual wage increase of 7.0%
Higher expenses from new IT platforms maintenance and inflationary contract
adjustments
Inflationary contract adjustments
Inflationary contract adjustments
4.9% -2.2%
3.5% -3.0%
2.9% -3.6%
-23.2% -18.0%
260.6
264.2
81.3
84.2
26.5
25.7
9.9
8.1
Prioritization of activities, review of contracts and enhancement of processes has resulted in greater efficiency 9M14 adjusted expenses grew 2.5% yoy, significantly bellow inflation
Main forces pressuring expenses
Main factors offsetting expenses growth
Diligent management of assets and headcount
dimensioning; lower profit sharing
Review of contracts, legacy system deprecated
Contracts review
Strategic review of marketing activities; ongoing process of
expenses review
(in R$ millions)
Co
mm
un
icat
.
Inflationary contract adjustments -27.6% -22.8%
10.2
13.2 Improvements and
eletctronification of the mailing process for
statements successfully implemented
42
3Q14: R$47.7 MM (R$153.7 MM in 9M14)
Capex budget ranges:
2014: between R$230 – 260 MM
2015: between R$190 – 220 MM
Payout
R$190.7 MM in dividends (80% of the 3Q14 GAAP net income): payment on November 28th (shareholders’ position of November 17th)
Share Buyback
Mar-Oct’14: 41.5 MM shares (R$456.9 MM) under the current program (up to 100 MM shares – until Dec’14)
YTD14: 78.4 MM shares (R$827.4 MM) reaching 4.1% of the free-float
Financial Highlights Consistently returning capital to shareholders
FINANCIAL RESULT
CAPEX
RETURNING CAPITAL TO SHAREHOLDERS
Financial result of R$47.3 MM, down 4.6% from 3Q13, explained mainly by R$18.1 MM interest payment in connection with the settlement of a tax dispute under the REFIS
(In R$ millions)
CASH AND FINANCIAL INVESTMENTS
¹ Includes earnings and rights on securities in custody. ² Includes third party collateral at BM&FBOVESPA Settlement Bank (Banco BM&FBOVESPA).
3,842
3,497
5,077
4,871
4,498 1,686
2,134
2,441
1,131
1,390
497
457
432
404
360
355
359
897
909
1,037
1,960
1,921
1,307
1,053
1,055
3Q13
4Q13
1Q14
2Q14
3Q14
Market participants cash collateral and others¹
Subsidiaries²
Clearinghouses' required safeguards
Available funds
Clearinghouses’ required safeguards: growth in line with additional collateral pledged by market participants
43
Msgs BM&F Seg. (08/13/14)
Resilient IT Infrastructure Capacity and resilience of the system tested in times of high volatility
Investments in trade and post-trade platforms ensured the resilience of our systems in a period of messages and trades peaks
486 uninterrupted trading days*
* Until Nov. 13th, 2014
Less than three months after its launch, the new
Clearinghouse has already handled record volumes in the
BM&F Segment
Msgs Bovespa Seg. (04/29/14)
# of Trades in the Bovespa Seg. (million)
0
1
2
3
Jan-14 Feb-14Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14
Oct-27-14 Record # of Trades
2,582,718
# of Trades in the BM&F Seg. (million)
Oct-16-14 Record # of Trades
376,741
0
100
200
300
400
Jan-14 Feb-14Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14
44 44
REVENUE GROWTH OF SELECTED PRODUCTS
Products well accepted by clients, with continuous developments to maintain growth trend
Securities Lending
Tesouro Direto
Market maker for options on single stocks
Exchange traded funds (ETF)
Agribusiness credit bills (LCA)
Real estate investment funds (FII)
Non sponsored Brazilian Depositary Receipts (BDRs N1 NP)
CAGR (2010-14):
+22.9%
(In R$ millions)
Growth Products Increasing revenue diversification
45
Financial Statements Summary of Balance Sheet (Consolidated)
(in R$ millions) 9/30/2014 12/31/2013 (in R$ millions) 9/30/2014 12/31/2013
Current assets 3,025.6 4,319.5 Current liabilities 1,888.7 2,710.8
Cash and cash equivalents 370.0 1,196.6 Collateral for transactions 1,333.4 2,073.0
Financial investments 2,337.0 2,853.4 Others 555.3 637.9
Others 318.5 269.5 Non-current liabilities 4,386.1 3,886.9
Non-current assets 22,214.7 21,577.2 Foreign debt issues 1,493.2 1,426.2
Long-term receivables 1,517.3 1,135.4 Deferred Inc. Tax and Social Contrib. 2,718.7 2,295.8
Financial investments 1,134.2 820.8 Others 174.2 165.0
Others 383.1 314.6 Shareholders´ equity 18,965.4 19,298.9
Investments 3,544.6 3,346.3 Capital stock 2,540.2 2,540.2
Property and equipment 421.0 423.2 Capital reserve 15,213.7 16,056.7
Intangible assets 16,731.7 16,672.3 Others 1,196.4 687.3
Goodwill 16,064.3 16,064.3 Minority shareholdings 15.1 14.7
Total Assets 25,240.3 25,896.7 Liabilities and Shareholders´ equity 25,240.3 25,896.7
LIABILITIES AND SHAREHOLDERS´EQUITY ASSETS
46
Financial Statements Net income and adjusted expenses reconciliations
ADJUSTED NET INCOME RECONCILIATION
ADJUSTED EXPENSES RECONCILIATION
* Attributable to BM&FBOVESPA shareholders.
3Q14 3Q13 Change
3Q14/3Q13 2Q14
Change 3Q14/2Q14
9M14 9M13 Change
9M14/9M13
Net Income* 238.4 281.6 -15.3% 250.1 -4.7% 744.6 899.4 -17.2%
Stock options plan 7.3 5.6 30.2% 7.6 -3.2% 21.8 21.4 2.0%
Deferred tax liabilities 138.6 138.9 -0.2% 138.6 0.0% 415.9 416.7 -0.2%
Equity in income of investees (net of taxes) (43.7) (38.2) 14.3% (39.8) 9.9% (128.1) (117.0) 9.4%
Recoverable taxes paid overseas 16.7 15.8 5.6% 16.3 2.5% 51.2 47.4 7.9%
Adjusted Net Income 357.4 403.7 -11.5% 372.8 -4.1% 1,105.4 1,267.9 -12.8%
3Q14 3Q13 Change
3Q14/3Q13 2Q14
Change 3Q14/2Q14
9M14 9M13 Change
9M14/9M13 Total Expenses 193.8 194.1 -0.2% 178.2 8.7% 558.3 543.7 2.7% Depreciation (29.5) (32.5) -9.2% (28.0) 5.2% (87.1) (88.4) -1.5% Stock options plan (7.3) (5.6) 30.2% (7.6) -3.2% (21.8) (21.4) 2.0% Tax on dividends from the CME Group (5.8) (5.1) 13.2% (5.3) 9.2% (16.6) (14.8) 12.1% Provisions (4.3) (0.6) - (3.2) 36.7% (15.4) (11.8) 30.4% Adjusted Expenses 146.8 150.2 -2.3% 134.1 9.5% 417.4 407.3 2.5%
47
(in R$ millions) 3Q14 3Q13 Change
3Q14/3Q13 2Q14
Change 3Q14/2Q14
9M14 9M13 Change
9M14/9M13
Net revenues 546.0 535.4 2.0% 464.8 17.5% 1,500.5 1,656.2 -9.4%
Expenses (193.8) (194.1) -0.2% (178.2) 8.7% (558.3) (543.7) 2.7%
Operating income 352.2 341.3 3.2% 286.6 22.9% 942.1 1,112.5 -15.3%
Operating margin 64.5% 63.7% 76 bps 61.7% 286 bps 62.8% 67.2% -438 bps
Equity in income of investees 47.3 49.6 -4.6% 59.5 -20.5% 154.9 129.8 19.3%
Financial result 449.0 434.2 3.4% 391.1 14.8% 1,241.7 1,374.2 -9.6%
Net income* 238.4 281.6 -15.3% 250.1 -4.7% 744.6 899.4 -17.2%
Adjusted net income 357.4 403.7 -11.5% 372.8 -4.1% 1,105.4 1,267.9 -12.8%
Adjusted EPS (in R$) 0.195 0.211 -7.5% 0.203 -3.8% 0.601 0.660 -9.0%
Adjusted expenses (146.8) (150.2) -2.3% (134.1) 9.5% (417.4) (407.3) 2.5%
Financial Statements Summary
SUMMARY OF INCOME STATEMENT (CONSOLIDATED)
* Attributable to BM&FBOVESPA shareholders.
48
APPENDIX
49
Securities Lending Real Estate Funds (FIIs) Options with Market Maker
(Open Interest - average for the period - in BRL billion)
Initiatives to develop and prompt higher volume in certain products
Performance shows that the initiatives are being well received by the market
ETFs Brazilian Treasury Direct - Tesouro Direto Agribusiness Credit Bills
(ADTV in BRL million)
+50.3%
(ADTV in BRL million)
(ADTV in BRL million) (Custody – in BRL billion)
High growth products Growing sophistication of market participants
CAGR(09-14): + 85.7% CAGR (10-14): +12.8%
CAGR (10-14): +36.7% CAGR (10-14): +33.5%
*Updated to October 31,2014. ** Update to September 30, 2014.
(AUM – in BRL billion)
50
PUBLIC OFFERINGS (BRL billion)
PIPELINE: OFFERINGS ANNOUNCED SO FAR TO THE MARKET
Updated to November 28, 2014
BOVESPA Segment Raising Capital
There are 4 offerings in the pipeline
IPO:T4U, Ouro Verde, JBS and AZUL
Additionally, there are 5 Real Estate Funds filed with CVM: estimated value of R$ 1.1 billion
* Excludes the portion acquired by the Brazilian government in the Petrobras offering, via the transfer of rights in barrels (BRL 74.8 billion).
51
BOVESPA Segment Foreign investment flow
MONTHLY NET FLOW OF FOREGIN INVESTMENTS (in BRL billons)
Includes public offering (primary market) and regular trades (secondary market).
*Updated to November 28, 2014.
52
Trading in ADRs of Brazilian companies Liquidity migration process interrupted
September´14
Source: Bloomberg (in USD traded value of 35 companies with ADRs programs )
Sarbanes-Oxley Act (Jul. 2002)
Novo Mercado Launch
(Dec. 2000)
PUBLIC OFFERINGS IN NUMBER OF COMPANIES
End of IOF Tax (2%) for foreign investors
(Dec. 2011)
End of CPMF (Financial
Transaction Tax)
31.5%
28.1%
10.3%
30.1%
40.5%
59.5%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total
IPOs - 1 - 7 9 26 64 4 6 11 11 3 10 1 153
Follow ons 14 5 8 8 10 16 12 8 18 11 11 9 7 1 138
Total 14 6 8 15 19 42 76 12 24 22 22 12 17 2 291
Dual Listings - - - 2 1 1 - - 1 - - - - - 5
53
Honing of BM&FBOVESPA’s pricing policy and incentives
Creation of an organizational
structure for fees
BOVESPA seg. (disc. per volume day-trade
and rebalancing) Rebalancing
trading/pos- trade
2009 2010 2011 2012 2013 2014
Incentive program for Tesouro Direto
Annual fee adjustment for issuers
2008
Market Data Pricing Policy
Charges on Depository amount in
balance
OTC Products
Products and Services Development Evolution and governance of pricing policy structure
Markets and products development
Models review
Discounts review
Price recomposition
Pricing new products
BM&F seg. (prices per volume tiers)
Main drivers
Incentive program for retail base
BOVESPA seg. (volume discount for HFTs)
BM&F seg. (disc. over exchange fees for
HFTs)
2015...
Announc. pricing revision for
Market Data, Issuers, DMA
(BM&F seg.) and Sec. Lending
54
Products and Services Development Recent changes in pricing policy and incentives
Products / Market Main changes
SECURITIES LENDING Elimination of 0.05% incentive for national lenders (settlement rate for voluntary loan maintained at 0.25% p.a.)
DMA Elimination of 10% discount for trades via DMA in Derivatives Market (BM&F Segment)
MARKET DATA Price recomposition and pricing of new products and services
ISSUERS
Elimination of analysis fee discount on the annual fee
Creation of analysis fee for Public Tender Offers, IPOs and Follow-ons
Depository Adjustment of maintenance fees of custody accounts for a certain group of investors; and creation of fees for ownership transferring within the depository
55
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&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 RISK Result: Two risk measures—market and liquidity—that are estimated both jointly and consistently
PERMANENT LOSS TRANSIENT LOSS
OVERVIEW: CLOSEOUT RISK CALCULATION IN THREE STEPS
56
BM&FBOVESPA – INVESTOR RELATIONS
+55 (11) 2565 4729 /4418 / 4207 / 4834 [email protected]
ir.bmfbovespa.com.br