1 Public Public
January/2016 X
Investor Relations Department
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
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparency
BRAZILIAN MARKET OPPORTUNITIES
Main growth driversMAIN GROWTH INITIATIVES
Building an State-of-the-art platformOPERATIONAL PERFORMANCE
Notable global exchangeFINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
4
Exchange sector
Safety and market integrity as priorities
Capital and derivatives markets in Brazil
Stable and solid regulation
CVM – Trade and post-trade
BACEN – Post-trade , banks 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
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$5,9 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's predecessor) Aug 2007: Bovespa Hld demutualization Oct 2007: Bovespa Hld IPO (BOVH3) 1967: Bovespa’s Mutualization 1986: Start of BM&F activities Sep 2007: BM&Fdemutualization 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 Jun/2015;
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)
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
FX
INTEREST
CREDIT
EQUITY
CCP, SSS and CSD POST-TRADE CASH FUTURE OPTIONS FORWARD SWAPMulti-asset and vertically integrated model
7
DTCC
BRAZIL
(Internalization of orders is forbidden)
USA
(Internalization of orders is allowed)
POST-TRADING
CCP
SSS
CSD
TRADING
Brokers A and B Investors Investors Brokers A and B Investors Investors Broker A Broker BModel 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 model
8 7% 7% 6% 5% 5% 2% 67% Oppenheimer Funds
Vontobel Asset Management Capital World Investors BlackRock Funds
Capital Group International, Inc Treasury stock
Others
(update in Aug. 2015) (update in Out. 2015)
Listed in Novo Mercado (voting shares only 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
(update in Feb. 2013)
(update in Oct. 2015)
(update in Oct. 2015)
Note: percentage ownership are estimated but may not represent exact figures due to different information dates about largest shareholders’ positions
Corporate governance
Reference in corporate governance practices
(update in Oct. 2015)
9
2015-17 Board of Directors Composition
Independent members
Linked to market participant or strategic partner (CME)
Corporate Governance Profile - Board & Committee Summary
Board
Committees
Audit Nomination
and CG Comp. Risk
Brokerage Industry
# Members 10¹ 6 2 3 4 9
Independent Board 6 2 2 2 2 1
Market participant + Board 4¹ - - 1 2 1
Independent Non-Board - 4 - - - -
Market participant Non-Board - - - - - 7
# of meetings (2014) 13 13 3 8 10 7
Average attendance (2014) 90% 85% 100% 100% 83% 93%
Board Member Age
Years in the Board
Pedro Pullen Parente
Former Minister of State; Former CEO of Media and Commodity Conglomerates
62 4
Claudio Luiz da Silva Haddad
Former CEO of Investment Bank; Founder and CEO of Business School
67 6
Antônio Quintella
Former CEO of CS Brasil and Americas; Portfolio Manager 49 - Luiz Antônio de Sampaio Campos
Former Director of CVM; Lawyer 44 -
Luiz Fernando Figueiredo
Former Governor of the Central Bank; Portfolio Manager 51 2 Luiz Nelson Guedes De Carvalho
Former Central Bank and Sec. Commission Officer; Member of IIRC and CPC/IASB; Professor of Accounting
69 2
Denise Pauli Pavarina
Bradesco executive; Chairwoman of Anbima 51 - Eduardo Mazzilli de Vassimon
Director of Itaú e CRO of Itaú Holding 57 - José Berenguer Neto
CEO of JP Morgan Brazil 48 2
Charles P. Carey
Former Chairman of CBOT; CME Group Board Member 59 3
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 Governance
10 Board of Directors CEO Edemir Pinto CFO Daniel Sonder COO Cícero Vieira CIO Luis Furtado CPO Eduardo Guardia Management (5 Executives + 25MDs)
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
HR, Marketing and Education Corporate Risk Sustainability and Press Internal Audit¹
Management and Internal Governance
Financial, Legal, IR and Issuer Regulation Trading, Risk Management, Clearing, Settlement, Depository, BVMF Bank and Market Participants Relationship Trading, Post-trading, PMO, New Products, Infrastructure, Mid- Back-Office Systems Products and Business Develop., Commercial Relations, Internat. Offices, Commercial Planning and Project Analysis
Internal Working Groups Advisory Committees Market Advisory Chambers 4 MD´s 6 MD´s 6 MD´s 5 MD´s
Corporate Governance
Multidisciplinary knowledge in conducting business
¹ The Head of the Audit Department reports functionally to the Board of Directors and the Audit Committee. The Audit Committee may periodically assess the performance of the Head of Audit Department, after consulting the Executive Board.
11
BM&FBOVESPA’s Sustainability Policy
12
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparencyBRAZILIAN MARKET OPPORTUNITIES
Main growth drivers
MAIN GROWTH INITIATIVES
Building an State-of-the-art platformOPERATIONAL PERFORMANCE
Notable global exchangeFINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
13
Growth opportunities in the Brazilian
equities and derivatives markets
Opportunities in the Brazilian market
BM&FBOVESPA is ready to capture future growth
EQUITIES MARKET
Portfolio diversification: diversification of institutional investors’ 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
14
Investors’ exposure to equities is low
Investors’ portfolio opportunities shifting to equities
Funds’ AUM evolution. Global average of 40% for equities
Investment Funds’ AUM (in BRL billions)
Number of Custody Accounts (in thousands) Pension Funds’ AUM (in BRL billions)
Number of retail investors represents only 0.3% of 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
15
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparencyBRAZILIAN MARKET OPPORTUNITIES
Main growth driversMAIN GROWTH INITIATIVES
Building an State-of-the-art platform
OPERATIONAL PERFORMANCE
Notable global exchangeFINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
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 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
17
PUMA Trading System - Performance
Enabling the increase of trades
Successive records broken in recent years, without delays or
availability failure
Development of the number of messages/days (in millions)
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 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
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Clearinghouses’ Integration and New Risk Model (CORE)
Post-trade environment evolution
What we did
Aug’14: derivatives phase of the new BM&FBOVESPA Clearinghouse and 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 next
4Q15: conclusion of substantially all
the IT development of the equities phase
The development will be followed by the 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
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Integration of the Clearinghouses – Derivatives (Performance)
Gains in efficiency, resilience and capacity expansion
In one year...
10 trading records broken +72MM risk calculations +1.8MM risk simulations
+61MM trades captured
+126MM allocations
99.9% availability
Development of trade numbers and records (in thousands)
Development of risk simulator use (in thousands)
21
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparencyBRAZILIAN MARKET OPPORTUNITIES
Main growth driversMAIN GROWTH INITIATIVES
Building an State-of-the-art platformOPERATIONAL PERFORMANCE
Notable global exchangeFINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
22
Long-term development of products, markets and services
Products and Services Development
Focus on the customers’ demands and needs
Greater liquidity for listed products
Development of infrastructure for expansion of MM and HFT activity
Capital efficiency generated by CORE enables/encourages the realization of new strategies
Development of the securities lending platform
Marketing listed products and attracting new customers
Expanding the retail investor base
Incentive program with market participants
Expanding the portfolio to attend to the investment profile of individuals (Tesouro Direto, ETFs, FIIs ...)
Discussion about tax treatment simplification in the equities market
Capture of institutional investors’ diversification into foreign securities
Listing of foreign securities (non-sponsored BDRs and Foreign Index ETF)
23
Long-term development of products, markets and services
Products and Services Development
Focus on the customers’ demands and needs
Greater number of listed companies
Discussions with the Government to encourage and facilitate IPOs by SMEs
Law 13.043 grants exemption on capital gains for eligible SME’s investors until 2023
Creation of investment fund with proper structure to invest in SMEs
Reduction of maintenance and public offer cost for listed companies
Include stocks in the roll of restricted public distribution efforts
BNDES support to foster IPOs on BOVESPA MAIS
Fixed Income and OTC markets (product, market and revenue diversification)
Securities registration: (i) marketing of already-available products (CDB, LCA, LCI and COE); ii) new products (CDB - new types, Financial Bills, COE - physical delivery and repos)
OTC Derivatives: (i) benefits of CORE; (ii) SWAPs and Flexible Options migration to the 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
24
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparencyBRAZILIAN MARKET OPPORTUNITIES
Main growth driversMAIN GROWTH INITIATIVES
Building an State-of-the-art platformOPERATIONAL PERFORMANCE
Notable global exchange
FINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
25
AVERAGE DAILY TRADING VALUE – ADTV (BRL billion)
AVERAGE ANNUAL MARKET CAP (BRL trillion)
TURNOVER VELOCITY² (12 months average)
1
Bovespa Segment
Operational highlights
26
BM&F Segment
Operational highlights
AVERAGE DAILY TRADED VOLUME – ADV (thousands of contracts)
REVENUE PER CONTRACT - RPC (BRL)
¹Updated to Dec 31, 2015.
2007 2008 2009 2010 2011 2012 2013 2014 2015 J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15 N-15 D-15
Interest rates in BRL 0.950 1.141 0.979 0.889 0.918 1.004 1.046 1.120 1.150 1.165 1.222 1.172 1.018 1.132 1.032 1.010 1.207 1.136 1.212 1.341 1.471 FX rates 1.859 2.065 2.161 1.928 1.894 2.205 2.535 2.669 3.671 3.007 3.048 3.158 3.569 3.442 3.705 3.554 3.686 3.932 4.436 4.319 4.507 Stock Indices 1.501 2.145 1.620 1.564 1.614 1.524 1.761 1.774 2.128 1.842 2.422 1.994 2.302 1.920 2.420 1.823 2.209 1.833 2.213 1.761 2.265 Interest rates in USD 0.965 1.283 1.357 1.142 0.941 1.015 1.231 1.294 1.840 1.557 1.645 1.797 1.911 1.747 1.770 1.633 1.768 2.154 2.268 1.839 1.892 Commodities 3.195 3.587 2.307 2.168 2.029 2.239 2.534 2.390 2.530 2.342 2.260 3.020 2.356 2.370 2.300 2.245 2.321 2.811 3.162 3.069 2.734 Mini contracts 0.054 0.162 0.176 0.128 0.129 0.116 0.119 0.117 0.218 0.128 0.150 0.164 0.177 0.173 0.229 0.226 0.235 0.233 0.274 0.273 0.276 OTC 2.111 2.355 1.655 1.610 1.635 1.769 1.409 2.092 3.925 2.286 1.967 3.077 3.928 4.545 1.768 2.465 0.817 1.169 14.879 6.120 45.662
27
Investor participation in volumes
Equities and derivatives segments
BM&F SEGMENT (DERIVATIVES)
BOVESPA SEGMENT (EQUITIES)
28
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparencyBRAZILIAN MARKET OPPORTUNITIES
Main growth driversMAIN GROWTH INITIATIVES
Building an State-of-the-art platformOPERATIONAL PERFORMANCE
Notable global exchangeFINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
29
Income Statement
History of income statement results (consolidated)
(in BRL thousand) 2009 2010 2011 2012 2013 2014 Net revenue 1,510,569 1,898,742 1,904,684 2,064,750 2,126,638 2,030,433 Expenses (569,832) (633,504) (816,664) (763,080) (790,814) (804,070) Adjusted expenses (446,677) (543,881) (584,521) (563,487) (575,763) (592,349) Operating income 940,737 1,265,238 1,088,020 1,301,670 1,335,824 1,226,363 Operating margin 62.3% 66.6% 57.1% 63.0% 62.8% 60.4%
Equity method result - 38,238 219,461 149,270 171,365 212,160
Financial result 245,837 289,039 280,729 208,851 180,695 208,157
Income before taxation of profit 1,186,574 1,592,515 1,588,210 1,659,791 1,687,884 1,646,680
Income tax and social contribution (304,505) (448,029) (539,681) (585,535) (606,588) (660,959)
Net income¹ 881,050 1,144,561 1,047,999 1,074,290 1,080,947 977,053
Adjusted net income 1,223,761 1,586,374 1,545,627 1,612,136 1,609,769 1,478,653
Adjusted EPS (BRL) 0.6104 0.7929 0.7932 0.8351 0.8389 0.8048
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 budget
Focus on cost control and investments phase
The CAPEX program initiated in 2010 renewed the Company's IT,
operations and service platform
2015e vs. 2014: 3.82%² IPCA (average) 2015: 10.44%³
2016e vs. 2015: 6.50%4
IPCA (average) 2016e: 6.70%³
CAGR 2011-16e: 2.30%4
CAGR IPCA (average) 2011-15e:
7.05%³
Review of 2016 budget: from R$165 – 195 million to R$200 – 230 million
FX exposure: 40%
Update of the timeline and budget of the Company’s main projects
(in BRL million)
¹ Expenses adjusted to Company´s depreciation, stock granting plan – principal and social charges -, stock options plan, tax on dividends from the CME Group, transfer of fines and provisions. ² Considers the upper-end of the budget for 2015 ³ IPCA for 2015 and 2016 based on market expectations released by the Central Bank in Dec. 04, 2015; 4 Considers the upper-end of 2015 budget and the mid point
31
Expenses Breakdown
Pursuit of greater efficiency and controlling expenses
Prioritization of activities, review of contracts and enhancement of
processes has resulted in greater efficiency
¹ Includes personnel expenses and capitalization and excludes stock option and bonus expenses, ² Calculated based on the annual wage increase between 2010 and 2014 for personnel expenditure and the IPCA of services accumulated from Jan 2011 to Dec 2014 for the other lines of expenses
Nominal
Change Real Change²
2.8% -4.3% 10.2% 1.8% -12.8% -19.5% -26.7% -20.6% (in R$ millions) -29.6% -23.8% Nominal
Change Real Change²
48.5% 12.5% 19.7% 1,8% -17.3% -40.8% -62.9% -48.2% (in R$ millions) -80.9% -73.3% -14.3% To ta l Pers o n n el ¹ Da ta p ro ce ss in g Th ir d p ar ty se rv ic e s M ar ke ti n g C o mm u n ic at . To ta l Pers o n n el ¹ Da ta p ro ce ss in g Th ir d p ar ty se rv ic es M ar ke ti n g C o mm u n ic at . 2014 vs. 2013 2014 vs. 2010
32
Distribution of most of the cash generation, reaffirming the
commitment to return capital to shareholders
(Total for Jan/09 through Sep/15, in R$ millions)
Cash Generation after Investment and Interest Payments¹
Payout
(% of net income) 2009: 80% 2010: 100% 2011: 87% 2012: 100% 2013: 80% 2014: 80% 9M15: 80%Share Buyback
About 15% of free floatrepurchased in 7-year period (2H08-9M15)
+
Allocation of Results
Return 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 1% sale of the CME total shares in Sep/15.
33
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparencyBRAZILIAN MARKET OPPORTUNITIES
Main growth driversMAIN GROWTH INITIATIVES
Building an State-of-the-art platformOPERATIONAL PERFORMANCE
Notable global exchangeFINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
34 BM&F segment ADV: 3.3 MM contracts, +24.3% RPC: R$1.432, +8.9% Bovespa segment ADTV: R$6.5 billion, -10.2% Margin: 5.246 bps, -0.26 bps Other business lines (not tied to volumes)
Sec. lending: average open interest grew 31.1%
Tesouro Direto: assets under custody were 45.2% higher
1 Adjusted to (i) depreciation and amortization; (ii) stock grant plan costs – principal and payroll taxes – and stock option plan; (iii) tax on dividends from CME Group; and (iv) transfer of fines and provisions. ² Adjusted to (i) deferred taxes related to the goodwill; (ii) stock grant plan costs – principal and payroll taxes –, net of tax deductibility, and stock option plan; (iii) investment in CME Group under the equity method of accounting, net of taxes related to dividends; (iv) taxes paid overseas to be compensated; (v) tax credits from IoC; (vi) recurring impact from the partial divestment in CME Group; and (vii) non-recurring impact from the discontinuity of the equity method of accounting. ³ Excludes the net impacts of the partial divestment in CME Group and of the discontinuity of the equity method of accounting.
Total revenues: R$662.9 MM, +11.8% BM&F seg.: R$306.8 MM, +34.2% Bovespa seg.: R$221.9 MM, -15.8% Other: R$134.3 MM, +33.1% Adj. expenses¹: R$163.6 MM, +11,4% Oper. income: R$380.5 MM, +7.9% Adj. net income²: R$457.0 MM,
+27.9%
IFRS net income (ex-CME)³: R$393.3
MM, +65.0%
Operating highlights
Gain on CME Group partial
divestment (sale of 1% of the total
CME Group shares)
Proceeds: R$1,201.3 million Gross profit: R$724.0 million Net profit: R$474.2 million
Discontinuity of the equity method
(remaining 4% of the total CME Group Shares)
Balance sheet: from Investment in associate to available for sale (marked-to-market)
Income statement: non-recurring / non-cash pre-tax income of
R$1,734.9 MM (net R$1,145.0 MM)
Non-recurring impacts
related to CME Group
Operating income and
net income growth
3Q15 Highlights (vs. 3Q14)
35
Strategic Developments – Recent Updates
Delivering on the strategic plan
Building a world-class IT and
operations infrastructure
Clearing BM&FBOVESPA
Equities phase: conclusion of substantially all IT development in Oct’15. Start integrated test phase and certification with market participants
(launching date will depend on tests results and regulatory approval)
Derivatives phase (implemented in Aug’14): average number of trades per day grew 61.8% from 2014 to 2015¹
PUMA Trading System
Resilience: 851 days² without any interruption
Performance: 2015¹ average number of messages per day grew 325.6% compared to 2010
iBalcão
Following the migration of NDF and Swaps in 1H15, Flex Options, with and without CCP, migrated to the new OTC derivatives platform in 3Q15
Greater liquidity for listed products
Continuous efforts to expand the number of market
makers for the equities and derivatives, 22 active programs Efforts to attract more lenders to the securities lending platform (local pension funds and foreign investors)
Development of Inflation futures contracts (4 contracts re-launched in Jun’15)
Enhancements to pricing and incentives
Implemented in 1Q15: DMA; securities lending; issuers; and options on equity-based indices futures
Implemented in 2Q15: mini contracts; Int. Rate in BRL fee rebalancing; and depositary
Implementation in 3Q15: market data; and OTC derivatives Corporate Governance for State-Owned Companies
Provides framework for listed companies to improve disclosure, board and management selection, internal controls and compliance
Products/markets development
and revenue diversification
36
3Q15 Revenue Breakdown¹
Business model resilience and revenues growth
TOP LINE GROWTH DRIVEN BY REVENUES FROM FINANCIAL AND COMMODITIES DERIVATIVES AND
INCREASED NON-VOLUME RELATED REVENUES
Total
Revenues
R$662.9 MM
1 The revenue breakdown considers the revenue lines “others” of the Bovespa segment and “foreign exchange” and “securities” of the BM&F segment, as reported in the financial
statements note 20 within the other revenues not tied to volumes. ²Trading and post-trading.
(in R$ millions)
USD-linked revenues represented 26% of the total
37
Contracts 3Q14 3Q15 YoY
Interest rates in BRL 1.51 1.79 19.0%
FX rates 0.48 0.47 -2.1%
Interest rates in USD 0.22 0.32 46.0%
Commodities 0.01 0.01 -13.6% Mini contracts 0.32 0.60 88.5% Stock indices 0.12 0.10 -15.8% OTC 0.02 0.03 77.5% TOTAL 2.67 3.32 24.3%
Derivatives Market¹
Higher volumes and FX depreciation pushed revenues up
REVENUE
(in R$ millions)Contracts priced in USD² represented ~24% of derivatives ADV and ~52% of derivatives revenues in 3Q15
¹ Revenue does not consider the revenue lines “foreign exchange” and “securities” of the BM&F segment, as reported in the financial statements note 20, which totaled R$5.8 million in the 3Q15. ² Most of the fees charged on FX, Interest rates in USD and Commodities are referred in USD. The average BRL/USD rate decreased 33.9% from 3Q14 to 3Q15.
ADV
(in millions)RPC: R$1.432 per contract, +8.9% year-over-year
Depreciation of BRL versus USD
Mix effect (higher participation of Interest rates in BRL and Mini contracts)
38
REVENUE²
(in R$ millions)TRADING AND POST-TRADING MARGINS (in basis point)
ADTV²
(in R$ millions)Average market capitalization fell 14.5% to R$2.2 trillion in the 3Q15, which was partially offset by a
higher turnover velocity of 70.8%
Market 3Q14 3Q15 3Q15/3Q14
Stocks and Equity Derivatives 5.501 5.247 -0.25 bps
Cash Market 5.061 4.939 -0.12 bps
Derivatives 13.115 13.110 -0.01 bps
Options Market 13.145 13.157 0.01 bps
Forward Market 12.999 12.999 0.00 bps
TOTAL 5.502 5.246 -0.26 bps
Trading and post-trading margins drop 4.7% year-over-year
Equities Market¹
Revenues impacted by lower market capitalization of listed companies
¹ Revenue does not considers the revenue line “others” of the Bovespa segment, as reported in the financial statements note 20, which totaled R$2.1 million in the 3Q15. ²Excludes fixed income line.
Markets 3Q14 3Q15 YoY
Cash Equities 6,890.0 6,293.4 -8.7% Equities Derivatives 398.3 246.2 -38.2% TOTAL 7,288.3 6,539.6 -10.3%
39
Business Lines not Related to Volumes
Solid growth in revenues not tied to volumes
3Q15 REVENUE BREAKDOWN¹
(in R$ millions)¹ Revenue as reported in the financial statements note 20.
+33.1%
Y-o-Y
40
3Q15 Adjusted Expenses¹
Continued focus through diligent expense management
¹ Expenses adjusted to Company’s (i) depreciation and amortization; (ii) costs from stock grant plan – principal and payroll taxes – and stock option plan; (iii) tax on dividends from the CME Group; and (iv) transfer of fines and provisions.² IPCA last 12 months until Sep’15 (Source IBGE). ³ Excluding the impact of stock grant/option expenses. 4Include expenses with
maintenance, board and committee members compensation and others.
Adjusted personnel³ (+4.2%): grew less than annual wage adjustment Data processing (+7.5%): higher maintenance expenses connected to the derivatives phase of the new integrated BM&FBOVESPA Clearinghouse Third party services (+47.3%): professional services related to projects Others4 (+36.1%): write-off of R$6.4 MM, provisions and energy costs 3Q15 ADJUSTED EXPENSES GREW 11.4% Y-O-Y
IN THE NINE MONTHS PERIOD THE GROWTH WAS SIGNIFICANTLY BELOW INFLATION (6.3% VERSUS AVERAGE INFLATION OF 9.5%²) 3Q15 87.0 (53%) 30.4 (19%) 12.6 (8%) 1.0 (1%) 4.7 (3%) 27.9 (17%) 3Q14 83.5 (57%) 28.3 (19%) 8.6 (6%) 3.1 (2%) 2.9 (2%) 20.5 (14%) Marketing (+61.4%): expenses connected to Financial Markets Conference Commun. (-66.4%): reduction of mailing expenses of custody statements (in R$ millions)
41
CME Group Partial Divestment Impacts
Reducing Company’s exposure to FX rates and CME Group share price
Impacts from sale of 1%
Transaction: divestment of 20% of the stake in CME Group (equivalent of 1% of the total shares)
Reason: reduce risks exposure to FX and CME Group share price
Divestment of CME Group shares
Investment in CME Group over time
Source: Bloomberg e BM&FBOVESPA. ¹09/08/15 (before sale), ²09/09/15 (after sale), ³End of each year and Jun/15.
Tax due to be compensated against tax losses generated by Interest on Capital distribution (no cash impact)
Balance sheet
Income statement
EBT: R$724.0 MM
Income tax and social contribution: R$249.8 MM Net income: R$474.2 MM
Assets
Financial investment: R$1,201.3 MMLiabilities
Tax provision: R$249.8 MM42
CME Group Accounting Changes
Discontinuity of the equity method¹
Assets
Liabilities & Equity
Current assets Current liabilitiesFinancial investments Income tax and social cont.
Non-current assets Shareholders´ equity
Investments Revenue reserves Interest in associate Retained earnings
1. The CME Group shares cease to be treated as an investment under non-current asset
2. The investment is now treated as available for sale and will be measured at fair value (marked to market)
3. Investment mark to market will impact the shareholders’ equity only (no impact on income statement in a quarterly basis after 3Q15)
4. The deferred income tax and social contribution line now includes a tax provision on the potential gain to be generated by this investment
1 2
3 4
1. The equity in income of investee line will no longer contemplate the investment in CME Group
2. Extraordinary impact of the discontinuity of equity method of accounting
3. Dividends received from the CME Group will be
recognized as financial income and will be included in the Company’s tax base
Income Statement
Equity in income of investeesDiscontinuity of the Equity method Financial Income 2 3 1
Income statement
Balance sheet
43
Adjusted Net Income
Reconciliation of net income – ex-CME and adj. net income
3Q15 – NET INCOME
IFRS (in R$ millions)
3Q15
3Q14
Var.
IFRS net income
2,012.5
238.4
744.2%
(-) Discontinuity of the equity method
(1,145.0)
-
-
(-) Gain on disposal of investment in affiliate
(474.2)
-
-
IFRS net income ex-CME impact
393.3
238.4
65.0%
(+) Stock Grant/Option
12.8
7.3
74.5%
(+) Deferred Liability (goodwill)
137.5
138.6
-0.8%
(-) Equity in results of investee
(37.6)
(43.7)
-13.9%
(+) Recoverable taxes paid overseas
-
16.7
-
(-) IOC adjustment
(49.0)
-
-
44
Financial Highlights
Solid and liquid financial profile
Third party cash and financial investments
Market participants cash collateral and others
include R$2,749.2 million related to a
transaction settled on Oct 1, 2015
Company’s cash and financial investments
Unrestricted cash (available funds) includes
R$1,201.3 million from the partial divestment
in the CME Group
CASH AND FINANCIAL INVESTMENTS (in R$ millions)
¹ Includes earnings and rights on securities in custody. ² Includes BM&FBOVESPA Bank clients’ deposits. ³ For 3Q15, does not include investment in CME Group (R$5,004.3 million) and in Bolsa de Comercio de Santiago (R$50.4 million), booked as a financial investment.
Ratings above the sovereign
S&P: BBB- (counterparty credit rating) / A-3 (issuer) Moody’s: Baa2 (global scale issuer / global notes)
3Q15 8,165 2Q15 4,033 1Q15 4,355 4Q14 3,856 3Q14 3,841
45
Financial Highlights
Investments and returning cash to shareholders
PAYOUT
R$314.6 MM in Interest on Capital (80% of the IFRS net
income ex-CME in 3Q15)
Payment on Dec 04, 2015
CAPEX
R$47.5 MM in 3Q15 and R$166.5 MM in 9M15
Capex budget ranges reaffirmed:
2015: R$200 – R$230 MM
2016: R$165 – R$195 MM
46
Financial Statements
Summary of balance sheet (consolidated)
(in R$ millions) 09/30/2015 12/31/2014 (in R$ millions) 09/30/2015 12/31/2014 Current assets 11,720.9 2,785.2 Current liabilities 4,949.1 1,891.8
Cash and cash equivalents 3,022.6 500.5 Collateral for transactions 4,063.7 1,321.9
Financial investments 8,360.7 1,962.2 Others 885.4 569.9
Others 337.6 322.5 Non-current liabilities 6,428.1 4,383.2
Non-current assets 19,278.6 22,478.2 Foreign debt issues 2,425.5 1,619.1 Long-term receivables 1,977.0 1,522.5 Deferred Inc. Tax and Social
Contrib. 3,793.5 2,584.5
Financial investments 1,836.3 1,392.8 Others 209.2 179.6
Others 140.7 129.8 Shareholders´ equity 19,622.3 18,988.4
Investments 31.0 3,761.3 Capital stock 2,540.2 2,540.2
Property and equipment 454.9 421.2 Capital reserve 14,289.8 15,220.4
Intangible assets 16,815.7 16,773.2 Others 2,782.4 1,218.9
Goodwill 16,064,3 16,064.3 Minority shareholdings 9.9 8.9
Total Assets 30,999.5 25,263.5 Liabilities and Shareholders´ eq. 30,999.5 25,263.5 LIABILITIES AND SHAREHOLDERS´EQUITY
47 3Q15 3Q14 Change 3Q15/3Q14 2Q15 Change 3Q15/2Q15 9M15 9M14 Change 9M15/9M14 Total Expenses 217.8 192.0 13.4% 198.0 10.0% 637.3 553.7 15.1% Depreciation (26.1) (29.5) -11.3% (28.1) -7.0% (84.8) (87.0) -2.5% Stock Grant/Option (19.4) (7.3) 164.4% (22.1) -12.2% (84.9) (21.8) 289.5%
Tax on dividends from the CME Group - (5.8) - - - - (16.6)
Provisions (8.7) (4.3) 103.4% (6.1) 42.2% (23.6) (15.1) 56.0%
BBM impact - 1.7 - - - - 4.3
-Adjusted Expenses 163.6 146.8 11.4% 141.7 15.5% 443.9 417.4 6.3%
Fin
ancial
Statements
Net income and adjusted expenses reconciliations
ADJUSTED NET INCOME RECONCILIATION (in R$ millions)
ADJUSTED EXPENSES RECONCILIATION (in R$ millions) *Attributable to BM&FBOVESPA’s shareholders.
3Q15 3Q14 Change 3Q15/3Q14 2Q15 Change 3Q15/2Q15 9M15 9M14 Change 9M15/9M14
IRFS net income* 2,012.5 238.4 744.2% 318.0 532.9% 2,610.0 744.6 250.5%
Stock Grant/Option (recurring net of tax) 12.8 7.3 74.5% 12.7 1.1% 37.6 21.8 72.6%
Deferred tax liabilities 137.5 138.6 -0.8% 137.5 0.0% 412.6 415.9 -0.8%
Equity in income of investees (net of taxes) (37.6) (43.7) -13.9% (31.4) 19.8% (106.8) (128.1) -16.6%
Recoverable taxes paid overseas - 16.7 - - - - 51.2
IoC Adjustments (49.0) - - - - (49.0) -
Discontinuity of the equity method (net of taxes) (1,145.0) - - - - (1,145.0) -
Results from the selling of the CME Group (net of taxes) (474.2) - - - - (474.2) -
48 SUMMARY OF INCOME STATEMENT (in R$ millions)
*Excludes the net gain from the partial divestment in CME Group and the net impact from the discontinuity of the equity method of accounting for the remaining investment in CME Group.
Fin
ancial
Statements
Summary of income statement (consolidated)
3Q15 3Q14 Change 3Q15/3Q14 2Q15 Change 3Q15/2Q15 9M15 9M14 Change 9M15/9M14 Net revenues 598.3 544.5 9.9% 554.6 7.9% 1,673.4 1,497.0 11.8% Expenses (217.8) (192.0) 13.4% (198.0) 10.0% (637.3) (553.7) 15.1% Operating income 380.5 352.5 7.9% 356.6 6.7% 1,036.1 943.3 9.8% Operating margin 63.6% 64.7% -114 bps 64.3% -70 bps 61.9% 63.0% -109 bps
Equity in income of investees 49.0 49.5 -0.9% 40.3 21.5% 136.2 144.7 -5.8%
Financial result 86.0 47.0 82.9% 71.4 20.6% 219.0 154.1 42.1%
Net income ex-CME* 393.3 238.4 65.0% 318.0 23.7% 990.8 744.6 33.1%
Adjusted net income 457.0 357.4 27.9% 436.8 4.6% 1,285.1 1,105.4 16.3%
Adjusted EPS (in R$) 0.256 0.195 30.9% 0.243 5.1% 0.717 0.601 19.4%
49
REGULATION, HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
Safety, resilience and transparencyBRAZILIAN MARKET OPPORTUNITIES
Main growth driversMAIN GROWTH INITIATIVES
Building an State-of-the-art platformOPERATIONAL PERFORMANCE
Notable global exchangeFINANCIAL HIGHLIGHTS
Cost discipline and capital return to shareholders
3Q15 RESULTS
APPENDIX
MAIN GROWTH INITIATIVES
50
High growth products
Growing sophistication of market participants
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)
+99.9%
(ADTV in BRL million)
(ADTV in BRL million) (Custody – in BRL billion)
CAGR(09-15): + 69.9% CAGR (10-15): +13.6%
CAGR (10-15): +33.9% CAGR (10-15): +34.4%
(AUM – in BRL billion)
51
Bovespa Segment
Raising Capital
PUBLIC OFFERINGS (BRL billion)
PIPELINE: OFFERINGS ANNOUNCED SO FAR TO THE MARKET
IRB Brasil Resseguros
Caixa Seguridade Participações
52 Sarbanes-Oxley Act (Jul. 2002) Novo Mercado Launch (Dec. 2000)
End of IOF Tax (2%) for foreign investors
(Dec. 2011) End of CPMF
(Financial Transaction Tax)
Trading in ADRs of Brazilian companies
Liquidity migration process interrupted
Dec’15
Source: Bloomberg (in USD traded value of 35 companies with ADRs programs )
PUBLIC OFFERINGS IN NUMBER OF COMPANIES
41.6% 27.5% 9.3% 21.6% 30.9% 69.1% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total IPOs - 1 - 7 9 26 64 4 6 11 11 3 10 1 1 154 Follow ons 14 5 8 8 10 16 12 8 18 11 11 9 7 1 4 142 Total 14 6 8 15 19 42 76 12 24 22 22 12 17 2 5 296 Dual Listings - - - 2 1 1 - - 1 - - - - 5
53
Bovespa Segment
Foreign investment flow
MONTHLY NET FLOW OF FOREGIN INVESTMENTS (in BRL billons)
Includes public offering (primary market) and regular trades (secondary market).
54
Products and Markets Development
Creation of value and stimulus for the development of products and markets
Organizational Structure for Fee
Structure Equities Market Fee Structure Rebalancing Trading/post-trade Fee Structure of OTC Products Prices p/ volume Tiers in Derivatives
Price policy for Mkt Data
Readjustment of Issuers’ annual fee
Review of prices and incentives: BTC, DMA, Market Data, Issuers and
Depository Fee structure of interest rate derivatives OTC derivatives fee structure Transfers fee structure at CSD 2008 2009 2010 2011 2012 2013 2014 2015 Charge (BPs) on amount in depository
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+NDefines 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+NDefines 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+NCalculates 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
56
Contato
www.bmfbovespa.com.br
55 11 2565-4729 / 4418 / 4207/4834/7938