Professional Documents
Culture Documents
Strategic Drivers
Competitive differentiation, growth and diversification REVENUE GROWTH AND DIVERSIFICATION OPERATING EXCELLENCE
Build on growth opportunities in the Brazilian capital market Foster greater sophistication among participants and investors Promote volume growth and revenue diversification Expand services quality and differentiation through the development of platforms that bring efficiency to BVMF and market participants Assure market integrity
SHAREHOLDER RETURN
Payment of at least 80% of GAAP earnings as dividends (100% in 2012) Share Buyback Program 3
End customer
Intermediaries
Issuers
Regulators
Shareholders / Bondholders
Relationship interfaces
Fixed Income
OTC Derivatives
Concluded
In testing
In development 4
GOALS AND REQUIREMENTS THAT HAVE DRIVEN BVMF IN REVISITING ITS FEE POLICY AND DEVELOPING INCENTIVE PROGRAMS Stimulate volume and revenue growth Strengthen the relationship with brokers and banks Deepen clients segmentation Eliminate cross subsidies among products and markets Benchmark international practices Create a differential for BVMF in the relationship with clients Incentivize product development and growth Ongoing and harmonized process
FIRST OUTCOME: CHANGES TO CASH EQUITIES FEE POLICY Reduction of the trading fee / rebalancing of trading and post-trade fees
Elimination of cross subsidies Sharing economies of scale
Progressive trading fee reduction for the cash equities market based on volume growth
Sharing future economies of scale Benchmark international practices
Competitive Differential
Investing to strengthen competitive differentiation BVMF differentiates by offering a fully integrated yet diversified platform
PUMA: state-of-the-art trading system for cash equities and derivatives (efficiency for participants) Pre-trade credit risk (market integrity) Competitive prices and growing fee structure sophistication Active role in market supervision and in the enforcement of price discovery rules
BVMF Revenues
(% of 2012 total revenues)
while possible market fragmentation raises questions and will increase costs for brokers
Additional costs for brokers (connectivity, trading screens and supervision tools) Fragmentation of liquidity and possible deterioration of the price discovery process How to deliver an efficient pre-trade credit risk process Discussions about regulation and market supervision and the related additional costs
8.7%
Cash equities trading
Development of a new integrated clearinghouse and a new risk architecture (CORE) that will deliver capital efficiency to market participants Fully integrated with market participants and regulators Back-office system (SINACOR) that is dominant among brokers Beneficiary owner level model has consolidated
Additional costs for brokers (connectivity, back-office and other systems) 28.9%
Cash equities posttrade
Capital allocation inefficiency for brokers and investors Discussions about regulation and market supervision and the related additional costs Race to the bottom risk from competition between clearinghouses
544
585
564
Capital return
(R$ millions)
2010
2011
2012
2013E
1,586 1,145
1,546 1,048
1,612 1,074
1,091 16 1.074
2012
260-290
170-200
2010
Buyback
Net income
268
204
258
2010
2011
2012
2013E
2014E
Expenses growth considering the mid-point budget for 2013 (BRL 570 million) and inflation CAGR (2010-2013) of the inflation is 5.8% p.a. Source: BCB Focus Bulletin (Nov. 30, 2012) estimated IPCA .
Financial Highlights
P/E analysis Since 2009, the goodwill tax benefit has been recognized as deferred liability (being cash neutral), reducing the GAAP earnings
Tax Book in 2012
R$ millions EBT (-) Goodwill amortization (-) Interest on capital (=) Taxable earnings Tax (34%) Current 1,511 1,586 90 (165) (56) Simulation without goodwill 1,511 680(2) 831 282 GAAP Book in 2012 R$ millions EBT Deferred Tax Other taxes /credits Total taxes GAAP Net income Current 1,511 539 (14) 525 1,074 Simulation without goodwill 1,511 282 1,228 : 14.2%
Stock price discounted by goodwill NPV (R$1.00 per share) / Earnings without goodwill
Adjusted Earnings
15-20% impact on P/E multiple Difference between GAAP EPS and the EPS adjusted to non existence of goodwill simulation
Different earnings impact the P/E calculation and distort comparisons and market consensus The reported adjusted net income reflects better the companys cash generation
1 Excludes
the investment in associate (CME Group) accounted under the equity-method. 2 Simulates the Interest on Capital amount that would be approved if there was no goodwill tax benefit; 3 Stock at R$13.79 (March 12th, 2013).
101.0
74.0 48.8
14.6
18.6 2009
3.7
2011 2012 2013*
2013*
2009
Tesouro Direto
(Custody in R$ billions)
Securities Lending
(Open position in R$ billions)
9.0
9.8
2.9
2009
3.9 2010
6.1
31.9
2011
2012
2013*
2009
2010
2011
2012
2013*
2011
2012
2013*
* Tesouro Direto and LCAs updated until Mar13; the others are updated until Apr13. ** On average , 12 months before and 12 months af ter the introduction of market makers (each market maker program was introduced on a specific date).
Small and medium entities (SMEs) Create conditions for SMEs to access market: ongoing discussions with government and regulator to revisit both tax and regulatory framework
Securities lending Improvements in the securities lending platform (BTC) model Attraction of more players (locals and foreigners) to this market Interest rate future contracts Build a culture of trading SELIC rates and then a culture of trading longer term rates in Brazil Offer the market more alternatives that follow Brazilian monetary policy closer ETFs Launching of fixed income and international indices ETFs OTC and fixed income
10
Derivatives NDFs Swaps Flexible options Exotic derivatives Continuous development of the Calypso platform and introduction of new features Registration
Fixed income
LCAs (improvements) LCIs and CDBs (adaptation of the platform pending regulatory approval)
Trading platform for government and corporate bonds Fixed income ETFs (pending regulatory approval) Changes in the fee policy Changes in the securities listing procedures and rules
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Trading
Post-trade Integration
BVMFs current post-trade environment BVMFs current post-trade infrastructure results from historical BOVESPA and BM&F developments and from the merger between the two exchanges
Clearing
CCP of the following markets: Cash equities, ETFs and BDRs Bonds Derivatives on stocks and indices Securities lending (BTC)
Derivatives
Future contracts and options on interest rate futures, FX, inflation indices, stock indices and agricultural, energy and metal commodities OTC Derivatives (swaps and options)
Spot foreign exchange Government bonds (spot and repos)
FX Securities
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Post-trade Integration
Project to integrate the clearinghouses Organization of the post-trade environment by types of assets/products
4 participant structures with distinct operating and capital requirements and eligibility criteria. 4 rulebooks and 4 manuals with distinct operational procedures. 4 distinct environments / IT architectures which generate higher operational risk, require constant maintenance efforts, and have an impact on product and feature launch deadlines, and on the deadlines for meeting regulatory demands.
4 systems / processes for transfers, for the allocation of trades and for the management of open positions.
4 settlement windows and 4 multilateral balances that are not netted, demanding higher intraday liquidity from participants and greater number of payment transactions.
4 systems / processes for risk management that do not consider all the effects of risk netting between the various products and assets, including those pledged as collateral.
4 pools of collateral that do not communicate, preventing the full use of pledged collateral.
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Post-trade Integration
Project to integrate the clearinghouses Integration of the clearinghouses
Organization of the post-trade environment by process instead of product type Rationalization and standardization of rules, procedures, requirements and documentation Establishment of a single settlement window for all markets Development of an integrated risk model and single pool of collateral
Equities, ETFs, BDRs Government bonds Rules and Manuals Structure of market participants Participants and customer registration
OTC derivatives
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Post-trade Integration
Key benefits Key Benefits for the Market
More efficiency in capital allocation Integrated Risk Calculation System - CORE (CloseOut Risk Evaluation); Integrated portfolio risk calculation, encompassing traded assets and derivatives, including OTC contracts, as well as pledged collateral; Integrated and robust modeling of market, liquidity and cash flow risks for the different assets/derivatives/collateral in the portfolio;
Risk netting between the various assets and contracts that has similar risk factors:
Examples: Futures versus options; Futures versus swaps; Options with different maturity dates; Short position in BTC versus equities deposited as collateral; Short position in equity options versus equities deposited as collateral; CORE has the potential to become the new international benchmark in terms of risk management in CCPs
15
Post-trade Integration
New system infrastructure New processes and systems architecture
CORE
Risk Management
Pricing
Positioning
Mark-to-market
Collateral Management
Fees
Taxation
Information Services
16
Post-trade Integration
BVMF proposal for IPN certification Certification phases iCADX Official Certification
Phase 1: Connectivity with the iCADX certification environment
Post-trade Integration
BVMF proposal for IPN certification
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BM&FBOVESPA IT Developments
Building a world-class IT platform PUMA Trading System is a state-of-the-art system deployed in the derivatives market in 2H11 and in the equities market in April 2013
Joint Development
Seamless Transition
Knowledge Transfer
Extensive Testing
19
BM&FBOVESPA IT Developments
Building a world-class IT platform
New Control Center room: redesigned processes, time-to-market solving problems (market surveillance and trading support together) and quality services for clients
20
BM&FBOVESPA IT Developments
Building a world-class IT platform
Performance and Capacity Supporting the growth of the Brazilian market Attraction of new global players (HFTs) Allows the expansion of market-maker programs
Multi-asset / market Delivering synergies for market participants and investors Leverage BVMFs capacity to offer new and complementary products / markets
Features Fully adapted to the characteristics of the Brazilian market Automation of process and controls Meets the needs of different market participants /clients
Availability and Controls More stability and availability to the market Price discovering rules (auctions) Price variation limits (dynamic / static)
21
BM&FBOVESPA IT Developments
Building a world-class IT platform
25
20
300
20 2008 2009
10-15 2010
10-15 2011
10-15 2012
<1 2013
2007
2008
2009
2010
2011
Processing capacity Ready to handle 200 million msgs/day Throttle being gradually expanded Derivatives: almost sevenfold between Aug11 and Apr13 Equities: orders bandwidth planned to be discontinued by 1H13; cancelation fees to be optimized in 2H13 Further efficiencies to be gradually implemented, through continuous improvements Partnership with CME continues
385.374 427.479
PUMAs msgs/min peaks (equity) The average msgs/min before and after PUMA grew more than 25%
263.547
284.348
15:15 01/08/2012
10:35 14/09/2012
16:17 12/04/2013
14:08 23/04/2013
Mega Bolsa
Mega Bolsa
PUMA
PUMA
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BM&FBOVESPA IT Developments
Building a world-class IT platform
PUMA Trading System number of trades in BM&F Segment (derivatives)
200.000
150.000
100.000
50.000
jan-10
abr-10
jul-10
out-10
jan-11
abr-11
jul-11
out-11
jan-12
abr-12
jul-12
out-12
jan-13
abr-13
1.000.000
800.000 600.000 400.000 Jan-12
Mar-12
# of trds - MegaBolsa
May-12
Jul-12
Sep-12
# of trds - tranch II
Nov-12
Jan-13
Mar-13
Last 22 days average
May-13
# of trds - tranch I
# of trds - PUMA
23
BM&FBOVESPA IT Developments
Data Center
Clients
BM&FBOVESPA
24
APPENDIX
25
Valor Econmico Magazine, The Thousand Largest Companies 701 companies not listed, with net revenue of R $553 bn
Segment to be developed with a strong presence and focus on EDUCATIONAL MEDIUM and LONG TERM.
Source: Ministry of Labor and Employment, IBGE , Valor 1000 and STRATUS research.
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OPERATIONAL HIGHLIGHTS
Bovespa segment: ADTV: +5.0% Margin: -3.4%
BM&F segment:
ADV: +11.5% RPC: +3.4% High growth products
Securities Lending: record of average open interest positions (R$44.7 billion); +31.5% Tesouro Direto: +24.5% of assets under custody FIIs (real estate funds): strong growth of volumes (R$38.8 million in 1Q13) and number of investors (102.7 thousand) LCA (agribusiness credit bills): consistent increase of average assets under custody (R$40.0 billion)
Excludes stock options plan, depreciation, provisions and tax on dividends from CME Group. Excludes deferred liability recognized in correlation with temporary differences from amortization of goodwill for tax purposes, the impact of the stock options plan, the investment in associate (CME Group) accounted under the equity method of accounting, net of taxes related to dividends and taxes paid overseas to be compensated. 3IPN/CORE implementation requires the authorization of the regulators.
1Q13 vs. 1Q12: -3.4% Decrease in the options margin (market maker) and derivatives participation in the total volume
28 28
1.8
1.9
2.1
1.3
(78%)
1.4
(86%)
1.8
(84%)
1.6
( 90%)
(71%)
0.4 1Q12
0.3 2Q12
0.2 3Q12
0.6 4Q12
4th-5th Maturity
0.3
1Q13
1st-3rd Maturity
29 29
17.7%
30.1%
4.9%
4.7%: Depository, Custody and Back-Office 4.2%: Securities Lending 2.9%: Vendors 2.3%: Trading Access (Brokers) 2.0%: Listing 1.6%: Others
Revenue breakdown for cash equities (trade + post-trade) do not reflect the pricing policy changes announced in Mar-13, into effect only In Apr-13: i) Reduction of trading fees to 0.5 bps from 0.7 bps for all investors ii) Post-trade fees increase to 2.0 bps from 1.8 bps for institutional investors and day traders
30 30
1Q13 Expenses
Focus on cost control and operational efficiency
TOTAL EXPENSES BREAKDOWN ADJUSTED EXPENSES
(in R$ millions)
4,0
1.0
(1.8)
(0.6)
(2.2)
(1.8)
125.4
124.0
1Q12 Adj. Personnel Data proc. Third Party Commun. Marketing Others* Exp.
*Include expenses with maintenance in general, taxes adjusted by the dividends from CME Group, board and committee members compensation and others (excluding provisions).
31 31
(in R$ millions) Net Income Expenses Operating Income Operating margin Financial Income EBT Net Income* Adjusted Net Income Adjusted EPS (in R$)
1Q13 521.0 (172.8) 348.2 66.8% 37.1 422.5 267.0 394.6 0.204
1Q12 502.8 (166.2) 336.7 67.0% 65.5 439.7 280.4 409.2 0.212
4Q12 499.2 (256.0) 243.1 48.7% 43.1 318.4 217.3 379.4 0.196
Adjusted Expenses
(124.0)
(125.4)
-1.1%
(174.2)
-28.8%
32 32
Financial Highlights
Strong cash position and high payout
CASH AND FINANCIAL INVESTMENTS
(In R$ millions)
FINANCIAL RESULTS
Net financial income was R$37.1 million, 43.4% drop from 1Q13
1Q13
1,041
1,191 1,166 1,443 1,207
348 440
346 350 343 390 340 363 383 354
2,341
1,964 2,100 1,979 1,714 3,658
4,169
3,851 3,999 4,125
4Q12
3Q12 2Q12 1Q12
CAPEX
In 1Q13, investments amounted R$41.8 million Capex budget ranges: 2013: between R$260 290 million
Market participants cash collateral and others* Restricted funds Subsidiaries** Available funds
PAYOUT
Cash position in 1Q13 hit R$2.3 billion, considering:
In May 09, the Board of Directors approved R$213.6 million, comprising R$163.6 million in dividends and R$50.0 million in interest on capital R$0.111 per share (80% of GAAP net income) Payment on June 7, 2013 based on shareholders position on May 21, 2013.
*Includes collaterals pledged by participants in the form of cash, receivables and rights in securities under custody, as well as payouts still undisbursed. **Includes third party collaterals and restricted funds at BM&FBOVESPA Settlement Bank (Banco BM&FBOVESPA).
33 33
Growth History
DERIVATIVES
Growth trend of Brazilian Real-denominated interest rate contracts Institutional and foreign investors were the groups with higher growth in trading these contracts, indicating greater sophistication and increasing risk exposure Trading in longer maturities contracts are growing faster
28 63 34 19 43 46
110 87 81 56
52
116 85 82 80
Institutionals
EQUITIES
(ADTV in R$ bn, mkt. cap. in R$ tri, Ibovespa in points and turnover velocity in %)
Turnover Velocity Avg. Mkt. Cap.
63.8% 2.33
64.2% 2.37
70.0% 2.42
71.7% 2.48
Volume growth to a level higher than R$7 billion, despite adverse market conditions
Low growth of market capitalization Average Ibovespa 13% below the 2010 level
10 8 6
67,258
6 5 .0 0 0
61,207
59,601
58,813
6 0 .0 0 0
5 5 .0 0 0
5 0 .0 0 0
4 5 .0 0 0
4 0 .0 0 0
6.5
6.5
7.3
7.5 1T13
4 2
3 5 .0 0 0
3 0 .0 0 0
2010
2011
ADTV (R$ billion)
2012
Foreign and institutional investors, HFTs and products development (ETFs, option and securities lending) driving the turnover velocity increase
34 34
Ibovespa (Average)
Securities Lending
(Average open interest for the period - in R$ billions)
+50.6%
CAGR(09-13):
CAGR (09-13):
+154.1%
73.4
48.8
+37.0%
44.7
12.7 20.5
30.2
31.9
3.7
2011
14.6
2012 2013*
2009
2009
2010
2011
2012
2013*
ETFs
(ADTV in R$ millions)
CAGR (09-13):
CAGR (09-13):
+51.5%
115.9 28.5 2010 48.7 2011 2012 2013* 98.0
+35.5%
9.0 9.8
BM&FBOVESPA has a 65% market share of the amount registered in the market (Mar-13).
18.6 2009
2.9
2009
3.9 2010
6.1
2011
2012
2013*
35
Financial Statements
Balance sheet summary (consolidated)
ASSETS LIABILITIES AND SH. EQUITY
(in R$ millions)
Current assets Cash and cash equivalents Financial investments Others Non-current assets Long-term receivables Financial investments Others Investments Property and equipment Intangible assets Goodwill Total Assets
3/31/2013 12/31/2012
4,011.7 32.8 3,705.5 273.5 20,446.8 659.2 3,536.3 43.6 3,233.4 259.3 20,610.8 808.9
(in R$ millions)
Current liabilities Collateral for transactions Others Non-current liabilities Foreign debt issues Deferred Inc. Tax and Social Contrib. Others Net equity Capital stock Capital reserve Others Minority shareholdings Liabilities and Net Equity
3/31/2013 12/31/2012
1,566.0 981.8 584.3 3,203.1 1,224.3 1,878.6 1,660.6 1,134.2 526.4 3,072.6 1,242.2 1,739.6
430.8
228.4 2,900.8 355.0 16,531.9 16,064.3 24,458.5
573.6
235.2 2,928.8 361.0 16,512.2 16,064.3 24,147.1
100.2
19,689.4 2,540.2 16,042.7 1,090.8 15.7 24,458.5
90.7
19,413.9 2,540.2 16,037.4 820.3 16.0 24,147.1
36
Financial Statements
Adjusted net income and adjusted expenses reconciliation
ADJUSTED NET INCOME RECONCILIATION
Change 1Q13/1Q12 -4.8% -6.1% 3.1% 17.2% 0.0% -3.6% Change 1Q13/4Q12 217.3 22.9% 7.9 -0.6% 134.8 3.1% (14.0) 132.9% 15.2 -11.9% 18.2 379.4 4.0%
(in R$ millions) Net Income* Stock options plan Deferred Liabilities Equity method investment (net of taxes) Recoverable taxes paid overseas Provisions - Health Plan (net of taxes) Adjusted net income
* Attributable to BM&FBOVESPA shareholders.
4Q12
(in R$ millions) Total Expenses Depreciation Stock options plan Tax on dividends from the CME Group Provisions
4Q12
Adjusted Expenses
www.bmfBOVESPA.com.br
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