2011 Reference Form

2011 Reference Form BM&FBOVESPA S.A.
- Bolsa de Valores, Mercadorias e Futuros (BVMF)
BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros
The Brazilian Securities, Commodities and Futures Exchange
Reference Form 2011

(Free Translation)
Version 16,0 Last updated May 21, 2012.
2011 Reference Form BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros (BVMF)
1. Identification of persons responsible for the information provided in this form I, Edemir Pinto, acting herein in the capacity of chief executive officer of BM&FBovespa S.A., hereby declare that (i) I have reviewed this filled out Reference Form; (ii) the information contained herein fulfills the requirements of CVM Instruction No. 480 dated 2009, in particular the requirements under articles 14 through 19 thereof; and (iii) the totality of the information provided herein truthfully, accurately and completely reflects the financial position and results of operations of our Company, the risks inherent in its activities and its issued and outstanding securities. I, Eduardo Refinetti Guardia, acting herein in the capacity of investor relations officer of BM&FBovespa S.A., hereby declare that (i) I have reviewed this filled out Reference Form; (ii) the information contained herein fulfills the requirements of CVM Instruction No. 480 dated 2009, in particular the requirements under articles 14 through 19 thereof; and (iii) the totality of the information provided herein truthfully, accurately and completely reflects the financial position and results of operations of our Company, the risks inherent in its activities and its issued and outstanding securities. 2. Independent Auditors 2.1. Information regarding the independent auditors
2010 Name of the auditing firm PricewaterhouseCoopers Auditores Independentes Name: Edison Arisa Pereira CPF: 006.990.038-81 Lead auditor, taxpayer ID (CPF), contact data Phone number (11) 3674-2000 Email: edison.arisa@br.pwc.com Retention date March 4, 2010 Auditing the full-year financial statements; reviewing the quarterly financial reports; other audit-related services. Not applicable Not applicable Not applicable 2009 PricewaterhouseCoopers Auditores Independentes Name: Edison Arisa Pereira CPF: 006.990.038-81 Phone number (11) 3674-2000 Email: edison.arisa@br.pwc.com April 24, 2009 Auditing the full-year financial statements; reviewing the quarterly financial reports; other audit-related services. Not applicable Not applicable Not applicable 2008 PricewaterhouseCoopers Auditores Independentes Name: Ricardo Baldin CPF: 163.678.040-72 Phone number (11) 3674-2000 Email: ricardo.baldin@br.pwc.com June 16, 2008 Auditing the full-year financial statements; reviewing the quarterly financial reports; other audit-related services. Not applicable Not applicable Not applicable
Agreed services
Auditors replacement Replacement justification Auditors reasons
2.2. Total compensation paid to the independent auditors in the most recent full year, segregating fees paid for auditing services and fees paid for any other services.
Fees paid to the independent auditors Auditing services Audit-related services Cross border bond offering (global notes) Total in 2010
(in R$ thousands)
1,261 258 360 1,909
2.3.
Other information the registrant may deem material to report.
Not applicable. 3. Selected Financial and Operating Information 3.1. Consolidated financial statements
2009 (in R$ thousands)
2009 (in R$ thousands)
Shareholders equity . Total assets .. Net revenues. Gross income. Net income. Number of shares issued and outstanding, not including treasury stock Shareholders equity per share .. Earnings per share . Basic earnings per share Diluted earnings per share
19,419,048 22,633,975 1,889,757 1,592,515 1,144,486

(in number of shares)
19,342,893 20,837,839 1,502,544 1,186,574 882,069

(in number of shares)
1,979,921,193
(in Brazilian reais)
2,004,766,312
9.807990 0.572058 0.568172
9.648453 0.439983 0.436195
Our annual financial statements as of and for the year ended December 31, 2010, were prepared and presented in accordance with Brazilian GAAP, which include first-time adoption of IFRS. As a result, for comparability purposes, we have adjusted our financial information for the prior year and presented retrospective financial statements as of and for the year ended December 31, 2009, revised for adoption of such accounting standards, guidance and interpretations. However, similar adjustments have not been made, and were not required to be made to our 2008 financial statements, for which reason they are not presented herein. For additional information on significant changes to our accounting practices, see subsection 10.4 of this form. 3.2. Non-GAAP financial measures
EBITDA for 2010 amounted to R$1,315,046 thousand, a 34.9% year-on-year rise from R$975,108 thousand in the prior year. Likewise, the EBITDA margin (EBITDA divided by net income) climbed to 69.6% from 64.9% one year ago.
Net income Minority interest in subsidiaries Income tax and social contribution Interest income, net Depreciation and amortization Share of net profit (loss) in associate (equity-method investment) Tax on equity-method investment EBITDA 2010 1,144,561 (75) 448,029 (298,024) 54,818 (38,238) 3,975 1,315,046 2009 881,050 1,019 304,505 (253,862) 42,396 975,108 % 29.9% -107.4% 47.1% 17.4% 29.3% 34.9%
EBITDA Margin
69.6%
64.9%
4.7 pp
EBITDA information is developed by us as a measure of our operating performance. As used by us, EBITDA consists of net income plus Minority interest in subsidiaries, income and social contribution taxes, interest income, depreciation and amortization expenses, our share of the net profit or loss in the associate (equity-method investment) and tax on equitymethod investment. EBITDA is not a measure of financial performance under Brazilian GAAP, is not representative of cash flow for the periods presented, and should not be considered in isolation, or as an alternative to net income as a measure of operating performance or an alternative to operating cash flow as an indicator of liquidity. EBITDA has no standardized meaning and our definition of EBITDA may not compare with EBITDA as used by other companies. Given that Management uses EBITDA as a measure of performance, we understand it is important to provide this information herein. Management believes EBITDA provides a deeper understanding of our operating performance and allows for better comparability with other companies in the same industry as ours even if they calculate EBITDA somewhat differently. 3.3. Subsequent events.
At a meeting held on February 17, 2011, our board of directors approved a supplementary dividend distribution out of net income determined for December 31, 2010, in the amount of R$406,086 thousand, approved at the annual meeting held on April 18, 2011 for payment as of May 16, 2011. 3.4. Dividend and cash distributions policy Topic Years ended December 31, 2010, 2009 and 2008
Topic
Rules on earnings retention
Years ended December 31, 2010, 2009 and 2008

From net income for the year, as determined after the deductions set forth in article 53 of our Bylaws, we make the following allocations, as applicable: (a) 5% allocation to the legal reserve, up to a legally prescribed limit; (b) The remainder, as adjusted by allocations to contingency reserve or reversal thereof, as the case may be, is allocated to the 25% mandatory annual dividend to shareholders, and any balance then outstanding is allocated to a bylaws reserve which we may use for investments and for allocations to safeguard mechanisms adopted to ensure transactions executed or registered in our trading, registration and securities lending systems are properly cleared and settled; (c) However, the amount allocated to our bylaws reserve pursuant to item (b) above must not exceed the amount of our capital stock; (d) If our board of directors deems the bylaws reserve (item (b) above) sufficient to meet our investment and safeguard requirements, it may propose (to the shareholders meeting) (i) that we allocate to the bylaws reserve less than the portion required under the bylaws (item (b) above); and/or (ii) a reversal of part of the bylaws reserve for distribution to shareholders in the form of dividends; and (e) After meeting the allocation requirements set forth in paragraph 1 of artic le 54 of the bylaws, the shareholders meeting may decide to retain that portion of net income for the year which has been forecast in the capital expenditure budget approved pursuant to Article 196 of Brazilian Corporate Law. In addition, while under Brazilian Corporate Law and our bylaws (article 55, paragraph 1) we are required distribute a mandatory dividend every year, we are also allowed to suspend this mandatory distribution if the board of directors reports to our annual shareholders meeting that the distribution would be inadvisable given our financial condition. We were not required to make any net income allocations to the legal reserve based on earnings ascertained for the years ended December 31, 2010, 2009 and 2008, because at each of these dates the amount of our legal reserve plus our capital reserves exceeded 30% of our capital stock, thereby dispensing with the otherwise required allocation. Earnings retained based on allocations to our bylaws reserve out of net income for the years ended December 31, 2008 and 2009, amounted to R$127,433 thousand and R$155,191 thousand, respectively. No earnings have been retained and no allocations to the bylaws reserve made with regard to net income for the year ended December 31, 2010.
Rules on dividend distributions
Under our Bylaws, shareholders are assured a mandatory distribution of dividends and interest on shareholders equity in the aggregate corresponding at least to 25% of the net income for the year, as adjusted pursuant to the corporate legislation. However, as noted in item (e) above, the mandatory distribution may be suspended if our board of directors advises the shareholders that this would inadvisable due to our financial condition. Dividends are distributed pursuant to a decision of the annual shareholders meeting, which typically takes place in April. However, our board of directors may decide (a) to declare dividends based on income determined in semi-annual financial statements; (b) to declare dividends based on income determined in interim financial statements drawn up for shorter periods, provided the total dividends paid in any given six-month period must not exceed the amounts accounted for as capital reserves (Brazilian Corporate Law, Article 182, paragraph 1); (c) to distribute interim dividends based on retained earnings determined in the most recent annual or semi-annual financial statements; and (d) to decide to pay interest on shareholders equity to shareholders, as often as it ma y deem fit, which in any event may be computed as part of the mandatory dividends we are required to distribute. Under Brazilian Corporate Law we are permitted to suspend the distribution of the mandatory dividend contemplated in item (ii) of paragraph 1 of article 54 of our Bylaws in any year in which our board of directors reports to the annual shareholders meeting that the distribution would be inadvisable given our financial condition. In this case, the fiscal council, if active, should review the matter and issue an opinion on the matter. Moreover, within five days after the date of the shareholders meeting, Management would be required to file justification with the CVM. Net income not distributed on acco unt of a suspension (paragraph 5 of article 56 of our Bylaws) must be allocated to a separate special reserve and, if not absorbed by subsequent losses, is required to be distributed as dividends as soon as our financial condition should permit it.
Dividend distribution frequency
Restrictions on dividend distributions
3.5.
Summary of distributions of net income and retained earnings.

2010
1,144,561 1,144,561 100.0%
See the table below See the table below
(in R$ thousands, unless otherwise indicated)
2009
881,050 705,000 80.0%
2008
645,596 512,762 79.4%
Adjusted net income (for distribution purposes) Dividend distributions Distributions, as a percentage of adjusted net income Distributions by kind and class of shares Distribution payment dates Rate of return on shareholders equity (ROE) Retained earnings (in R$ thousands) Date of retention approval
5.9% -
4.5% 155,191 ASM - April 20, 2010 Gross distribution per share
(in R$)
3.3% 127,433 ASM April 28, 2009 Total gross distribution
Cash Distributions Interest on shareholders equity Interest on shareholders equity Dividends Interest on shareholders equity Dividends Total for 2008 Interest on shareholders equity Interest on shareholders equity Dividends Dividends Interest on shareholders equity Dividends Total for 2009 Interest on shareholders equity Interest on shareholders equity Interest on shareholders equity Interest on shareholders equity Dividends Dividends Interest on shareholders equity Dividends Total for 2010
Type of shares common stock common stock common stock common stock common stock
Distribution payment dates April 15, 2008 September 2, 2008 September 2, 2008 April 15, 2009 May 12, 2009
(in R$ thousands)
0.020320 0.072995 0.069969 0.069307 0.030317
20,539 149,203 143,019 139,376 60,625 512,762
common stock common stock common stock common stock common stock common stock
May 29, 2009 August 26, 2009 August 26, 2009 November 24, 2009 January 8, 2010 May 14, 2010
0.055931 0.070653 0.016727 0.074888 0.009976 0.123602
112,000 141,500 33,500 150,000 20,000 248,000 705,000
common stock common stock common stock common stock common stock common stock common stock common stock
March 11, 2010 April 13, 2010 May 27, 2010 September 10, 2010 September 10, 2010 November 25, 2010 January 19, 2011 May 16, 2011
0.014951 0.025406 0.057996 0.022422 0.098957 0.119101 0.016156 0.206723
30,000 60,000 137,000 45,000 198,600 235,875 32,000 406,086 1,144,561
For additional information, see the discussion on dividend and other distributions policy in the above subsection 3.4. 3.6. Dividends declared in the last three financial years out of retained earnings or other profit reserves previously registered. In the three most recent years we have not declared dividends out of retained earnings or other profit reserves previously registered. 3.7. Indebtedness level.
The table below sets forth information on the evolution of liabilities, as comprising current and noncurrent liabilities at year-end of the last year.
Year ended December 31,
Amount (in R$ thousands)
Type of debt ratio
Ratio
Index description and reason for use
2010
3,214,927
Debt to Equity Ratio
16.5%
- Method: D/E = (total current + non-current liabilities) / shareholders equity.
2010
Debt ratio or Total Debt-to-Total Assets
5.1%
- Method: Total Debt to Total Assets = (short term debt + long term debt) / total assets - Reason: This is a metric used to measure a companys financial risk by determining how much of the companys assets have been financed through debt. It is calculated as the ratio of the sum of short term debt (interest payable on bonds issued abroad and loans) and long term debt (bond issuance abroad and loans) divided by total assets (the sum of current assets, fixed assets and other intangible assets such as goodwill). - Method: Debt/EBITDA = (short term debt + long term debt) / EBITDA - Reason: This is a measure of a companys ability to pay incurred debt. It is calculated as the ratio of the sum of short term debt (interest payable on bonds issued abroad and loans) and long term debt (bond issuance abroad and loans) divided by EBITDA (earnings before interest, taxes depreciation and amortization). This ratio gives the investor the approximate amount of time that would be needed to pay off all debt, ignoring the factors of interest, taxes, depreciation and amortization. Debt/EBITDA is a common metric used by credit rating agencies to assess the probability of defaulting on incurred debt. - Method: EBITDA-to-Interest Coverage = EBITDA / Interest payments - Reason: This is a metric used to assess a companys durability that by examining whether it is profitable enough to pay off its interest expenses. It is calculated by dividing a companys EBITDA (earnings before interest, taxes depreciation and amortization) of one period by the companys interest expenses (interest payable on bonds issued abroad and loans) in the same period.
2010
Debt-to-EBITDA Ratio
0.8
2010
EBITDA-to-Interest Coverage Ratio
40.0
The above debt ratios indicate our company enjoys fairly conservative financial leverage ratios. For information on the particular characteristics of our indebtedness, see subsection 10.1(f) below, in this form. 3.8. Debt obligations by type and time to maturity
Short-term Type of Debt (*) maturing within 1 year Long-term maturing maturing within within 1-3 years 3-5 years (in R$ thousands) Maturing after 5 years
Year ended December 31, 2010
(data from our consolidated financial statements) in R$ thousands
Current liabilities Collateral for transactions Earnings and rights on securities under custody Suppliers Salaries and social charges Provision for taxes and contributions payable Income tax and social contribution Interest payable on bonds issued abroad and loans Dividends and interest on shareholders equity payable Other liabilities Noncurrent liabilities Bond issuance abroad and loans Deferred income tax and social contribution Provision for contingencies and legal obligations Total Indebtedness (current + noncurrent liabilities)
__________________________________________________ ( )
Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured
1,416,204 954,605 34,791 80,828 64,351 23,981 5,576 33,154 2,773 216,145 0
1,798,723 1,010,059 732,074 56,590 1,798,723
1,416,204
* The type of debt classification (as defined by type of guarantee or absence thereof) is secured by collateral, by floating assets or unsecured.
We note that the line items collateral for transactions and earnings and rights on securities under custody recorded under current liabilities are intrinsic to our activities as an exchange and are not operated in any particular or actually defined term.
Likewise, movements in the line item deferred income tax and social contribution recorded under noncurrent liabilities have no defined period. While we understand our total debt classifies as unsecured debt, other items under liabilities are not categorized by type of guarantee or absence thereof (collateral, floating assets or unsecured) but, rather, as defined by law in terms of liquidity. 3.9. Other information deemed to be material.
Global Senior Unsecured Notes

On July 16, 2010 BM&FBOVESPA completed a cross-border offering of global senior unsecured notes priced at 99.635% of the aggregate principal nominal amount of US$612 million, which after deducting underwriting discounts netted proceeds of US$609 million (at the time equivalent to R$1,075,323 thousand). The notes mature on July 16, 2020, and pay interest of 5.50% per annum, with coupons payable every six months in January and July. However, as computed to include the transaction expenses, in particular underwriting discounts, commissions paid to arranging and structuring banks and other offering expenses, listing fees, legal fees, rating fees paid to Standard & Poors and Moodys, and ongoing administration and custody expenses, the actual cost correlates with a rate of 5.64% per annum. As translated into Brazilian reais and including accrued interest of R$30,179 thousand, the balance of our debt under the global notes as of December 31, 2010, was R$1,041,238 thousand. We used the offering proceeds to purchase additional interest in the shares of the CME Group effective July 16, 2010. We have issued the notes as callable bonds, thus allowing us the prerogative exercisable in our discretion at any time and from time to time of redeeming all or some of the notes prior to maturity. The redemption price was set at the greater of (i) 100% of the principal of the notes called for redemption plus accrued interest to the date, and (ii) interest accrued to the date plus the present value of the remaining scheduled payments on the notes, discounted to the redemption date, on a semiannual basis (30/360 daycount basis), at a rate equal to the sum of the applicable U.S. Treasury Rate for the remainder of the term plus 40 basis points (0.40%) per annum. Accrued and unpaid interest will be paid to, but excluding, the redemption date. Starting from the notes issue date, we have designated as hedging instrument that portion of the principal under the notes which correlates with changes in exchange rates in order to hedge the foreign currency risk affecting that portion of our investment in the CME Group Inc which attributable to the notional amount of US$612 million (a hedging instrument in a hedge of net investment in a foreign operation, per Note 7 to our financial statements as of and for December 31, 2010). Accordingly, we have adopted net investment hedge accounting pursuant to accounting standard CPC-38 (Financial Instruments: Recognition and Measurement), for which purpose the hedging relationship has been formally designated and documented, including as to (i) risk management objective and strategy for undertaking the hedge, (ii) category of hedge, (iii) nature of the risk being hedged, (iv) identification of the hedged item, (v) identification of the hedging instrument, (vi) evidence of the actual statistical relationship between hedging instrument and hedged item (retrospective effectiveness test) and (vii) a prospective effectiveness test. Under CPC 38 (IAS 39) we are required to assess the hedge effectiveness periodically by conducting retrospective and prospective tests. On testing backward-looking effectiveness, we adopt the ratio analysis method, also called dollar offset method, as applied on a cumulative and spot-rate basis. In other words, this method compares changes in fair values of the hedging instrument and hedged item attributable to the hedged risk, as measured on a cumulative basis over a given period (from the hedge inception to the reporting date) using the foreign currency spot exchange rate as of each relevant date in order to determine the ratio of cumulative gain or loss on the notes principal amount to cumulative gain or loss on the net investment in a foreign operation over the relevant period. And on testing forward-looking effectiveness, we adopt stress scenarios which we apply to the hedged variable in performing foreign currency sensitivity analysis to determine degree of sensitivity to changes in exchange rates. We have tested the hedge effectiveness retrospectively and prospectively, having determined that at December 31, 2010, there was no realizable ineffectiveness. Moreover, at that date, the fair value of our debt under the notes, as determined based on market data, was R$1,037,774 (Source: Bloomberg). Management information system implementation We have implemented in 2010 a management information system (MIS) whose primary purpose is to allow for results to be released by product, business area, market segment, customer segment and type of investor, in addition to meeting our analysis and reporting requirements, which will contribute to nimbler decision-making and assist us in strategic planning and costing and budgeting processes, as well as in projecting and maximizing resources. Early in 2011, we started to use our PROPHIX system more broadly, in a number of contexts, including those that are listed below, but continue to work on further enhancing the system and our ability to use it efficiently.
Objectives of our Management Information System

Prepare the revenue and expense budget;
Follow-up on actual vs. forecast revenues and expenses; Allocating expenses by cost center and revenues by product; Assisting in the pricing of products and services; Follow-up on efficiency indicators; Controlling expenses by area allocating indirect costs pursuant to the ABC method (activity based costing); Pricing the transfer of resources between areas, products and companies within the group. Greater agility and quality in determining and releasing management reports (revenues, expenses, cash flows, balance sheets) for nimbler decision-making; Detailed information for improved control, analyses and projections; TOTAL synergy with our accounting; Quantitative analysis of the variables particular to each business line; Segmentation of results; Flexibility for preparation of managerial reports at all company levels.
Benefits
4. Risk Factors 4.1. Discussion of risk factors that may influence investment decisions, in particular risk factors related to the following: a. Risks relating to the Company
In our role as central counterparty clearing house we are exposed to substantial credit risk from third parties, including customers, counterparties and clearing agents.
Our clearinghouses act as central counterparty to ensure multilateral clearing and settlement of exchange or OTC transactions carried out on, or registered in our trading systems, including securities lending transactions. In performing this role, we provide central counterparty clearing for transactions in equities and equity derivatives and corporate debt securities (covering the local cash, forwards, options and futures markets and the securities lending market), and for transactions in financial, credit and commodity derivatives, including swaps and foreign exchange derivatives (covering the local cash, forwards, options and futures markets), and for spot U.S. dollar transactions (dlar pronto) traded on the local interbank market, and for transactions in Brazilian government bonds and debt securities (covering the spot, forwards and repo markets). As a result, we are exposed to substantial credit risk from third parties, including clearing agents, the most frequent counterparties, financial institutions that are counterparties to transactions settled in our foreign exchange clearinghouse, and customer market participants as the brokerage firms and their customers. Default by any of these parties may expose us to significant market risk, as our clearinghouses must assure settlement of all transactions carried out on our trading system. The amount of such market exposure depends on open positions of market participants, as well as the type of guarantees deposited as part of risk management policies we adopt. The likelihood of any default event is directly related to (i) high volatility of prices and fees, in particular those that are used to define the value of our products and contracts settled in our trading systems, (ii) the level of leverage in the market, (iii) uncertainties related to local and global macro-economic environment, (iv) interruptions on liquidity flow of domestic and global markets, (v) systemic credit events on domestic and global markets, (vi) drastic political changes in Brazil and in the main economies worldwide and (vii) events of major social impacts in Brazil or abroad, such as wars or natural disasters. Defaults by market participants on their obligations with our clearinghouses could cause our clearinghouses to use margins and collateral deposited. We would suffer substantial losses in the event our policies and risk management mechanisms associated with central counterparty activities fail to work properly. For more information about the risks inherent in our role as central counterparty, see item 5 of this Reference Form.
We depend heavily on information technology for the operation of our business and any failure or malfunction of our systems may adversely affect the course of business in our markets and us.
Our business depends on the integration and performance of computer systems and supporting communication systems. Speed, scale and scalability, availability of hardware and software, reliability and ongoing updating of our technological platforms constitute important factors for the performance of our operations, so as to attract a larger number of participants. We operate in an industry that continues to undergo fast and significant technology changes. In recent years, securities and derivatives traded through electronic platforms have grown significantly and our clients demand for diversified methods of trade execution has increased. We are constantly required to make significant investments in our platforms to increase capacity to handle growing demand for our services. In order to remain competitive, we must continue to improve and enhance the functionalities, accessibility and response time of our systems, as well as the characteristics of our trading platforms, software and communications systems and technologies. If we are unable to continue to improve and enhance our technology
infrastructure and systems, the brokers, clearing agents and financial institutions and other market participants that use our platform could migrate to other preferable platforms, which would adversely affect our business. In addition, systems and communication networks can be vulnerable to unauthorized access, computer viruses, human error and other security problems, such as terrorist acts, natural disasters, sabotage, extended power shortages and other events beyond our control, including events of force majeure. If our information security and business continuity measures are partially or entirely compromised, or if there are interruptions or malfunctions in our systems or communications networks, there could be a corresponding material adverse effect on our business, financial condition and operating results. In these situations, we may need to incur significant expenses in order to remediate problems caused by security violations or system failures. We intend to continue implementing security measures following market standards and strengthen the integrity and reliability of our systems. However, if these measures do not prevent failures or delays in our computer systems or communications networks, there may be a significant reduction in the trading volume on our trading systems, resulting in a material adverse effect on our business, financial condition and operating results. The back-up systems and the preventive mechanisms that we adopt may not be sufficient to prevent such failures and/or problems. These failures or a degradation of systems could result in complaints from client and market participants to regulatory agencies, in lawsuits against us, or lead to regulatory investigations of compliance failures with applicable laws and regulations. The above risk factors apply to systems and networks acquired and operated directly by us or by third parties, including service providers. In the case of systems or networks that belong to, or are operated by third parties, their failure or unavailability could also adversely affect our operations.
We depend on the level of market activity, which is beyond our control.

The success of our business depends, in part, on our ability to sustain or increase the volume of transactions carried out and/or registered in our trading, clearing and settlement systems. We offer a variety of products and trading channels to brokers, clearing agents and financial institutions. If the level of activity on our markets were to decline or we were unable to retain customers as brokerage firms and other market participants that represent a significant portion of the volume of transactions from which we derive our revenues, this could materially and adversely affect our business, our revenues, results of operations and financial condition. We derive a significant portion of our overall revenues from fees we charge on transactions carried out on the equities markets and fixed income markets comprising our Bovespa segment, meaning exchange and OTC markets for the trading of stocks, other equity securities, equity derivatives and corporate debt securities. For this reason, we are highly dependent on the level of activity on these markets and, therefore, also on the volume and price of securities and derivatives traded and on turnover velocity, all of which significantly influence average daily value traded (ADVT) across these markets. Other factors influencing performance include the market capitalization of listed issuers and the number of brokerage firms and other financial institutions with access to our markets. Another significant portion of our revenues we derive from fees we charge on transactions carried out within our BM&F segment, which comprises derivatives markets for options, forwards and futures contracts based on financial and cash-settled commodities, metals, energies, stock indexes, exchange rates and so forth, such that this segment too is highly dependent on the level of market activity (as measured in terms of average daily trading volume, or ADTV). Decreases in the volume of trading in derivative contracts, particularly exchange and interest rate futures contracts, which account for a significant portion of our revenues for the segment, may adversely impact our revenues and profitability, thereby negatively affecting our business, results of operations and financial condition. We have no direct control over any of these variables, which depend, among other things, on the attractiveness of the securities and derivatives listed to trade on markets we operate vis--vis other investments, as well as on our ability to be perceived as an attractive venue for the trading of these securities and derivatives when compared with other exchanges and trading platforms. These variables, in turn, are influenced by the overall economic conditions in Brazil, in Latin America and worldwide, in terms of (i) growth levels, liquidity and political stability, (ii) the regulatory environment for securities and derivatives, and (iii) activity, volatility and performance of global markets. Additionally, we may be more significantly affected by global crises and capital market crises than financial and financial services institutions, given that these factors directly affect average daily value and volume traded on these markets, which in turn impact our revenues from trading and settlement fees. For example, in the period spanning the latter part of 2008 through to 2009, the global financial and financial services industries and the capital markets experienced materially adverse conditions, including substantially heightened volatility, outflows of customer funds and securities, losses resulting from declining asset values, defaults on securities, high deleveraging and thin liquidity. Economic downturns, global financial crises or sudden changes in economic or market conditions, credit crunches, market instability, volatility of market prices, reductions in spending, exchange rate instability, inflationary pressures and similar other factors beyond our control have had, and may continue to have materially adverse effects on both the Brazilian economy and the level of activity in capital markets, and, thus, significantly and negatively impact our revenues from trading and settlement fees. In addition, financial institutions may be unable to renew, extend, or grant new lines of credit under economically favorable conditions, or may even be unable or unwilling to honor existing obligations, all of which could materially and adversely affect our revenues, profitability, results of operations and financial condition.
Because our cost structure consists mostly of fixed costs, if our revenues decrease and we are unable to reduce costs our profitability could be materially adversely affected.
Our cost structure consists mostly of fixed costs and is based on historical and expected levels of demand for products and services offered to the participants in the markets in which we operate. If the demand for these products and services declines, resulting in a decrease in our revenues, we may not be able to immediately adjust our cost structure to compensate. We may also have to incur in substantial development costs and marketing and sales expenses to introduce new products or services in the market, which may not generate the expected results, reducing our working capital and operating profit and thereby adversely affecting our business.
Our businesses involve the use of technologies, products and services, and intellectual property rights may be violated by us or by third parties.
We may be unable to prevent third parties from utilizing our technologies, programs, services or products developed by us (such as indexes and negotiable instruments) without our authorization or from violating our intellectual property rights in any other way. On the other hand, our competitors, as well as other companies and individuals, may have secured, or may secure in the future, intellectual property rights relating to products or services similar to those we offer or plan to offer. We may be unaware of all existing secured intellectual property rights, which may create litigation risks concerning ownership rights of these products, services and technologies. We cannot assure you that we will be successful if we pursue these violations through legal proceedings in order to enforce our intellectual property rights or defend ourselves against allegations of violation. In addition, allegations of violations are a common and costly reality in our industry, and lawsuits and complaints concerning such allegations, whether they are successful or not, could give rise to substantial costs for us, thus adversely affecting our business.
We rely on members of our management team, who we may be unable to retain or replace with persons with similar experience and qualification.
A significant portion of our future success depends on the skills and efforts of our management team. We compensate certain members of our management team with fixed salaries, performance bonuses and a stock option plan in an effort to retain such executives. If any of the members of our management team decides to leave us, we may not be able to hire professionals with similar qualifications. For more information, see Management. The loss of any member of our management team and our inability to hire professionals with similar experience and qualification may have a material adverse effect on our business.
Any damage to our reputation may have an adverse effect on us.

Our reputation may be compromised in different ways, including as a result of failures in our self-regulatory functions, our technology or the settlement of transactions executed on our trading platforms. Our reputation may be further damaged by events beyond our control, such as scandals involving other exchanges, which may affect investors perception of the securities market as a whole. In addition, any inappropriate conduct by market participants, our employees, brokerage firms, may result in disciplinary sanctions and harm our reputation. Damage to our reputation may cause issuers to delist from our markets or to transfer their listings to other exchanges, as well as discourage other parties from transacting on our markets, which may, in turn, reduce the value traded on our exchange. Any of these events may have an adverse effect on us.
We intend to continue to explore acquisitions, investments and other strategic alliances. We may not be successful in identifying opportunities or in integrating the acquired businesses. Any such transaction may not produce the results we anticipate which could adversely affect our business and the market price of our shares.
We intend to continue to explore and pursue acquisitions and other strategic opportunities to strengthen our business and grow our company, including the increase of our ownership interest in CME to 5.0%, which could help us penetrate new markets, offer new products and services, and develop or enhance our trading systems and technologies. We may make acquisitions or investments or enter into strategic partnerships, joint ventures and other alliances. There is no guarantee that our efforts will be successful. We may not realize the anticipated growth and other benefits from strategic growth initiatives we have made or will make in the future and we may have to incur significant expenditures to address the additional operational and control requirements as a result of our growth, which may have an adverse impact on our financial condition and operating results. Furthermore, some of our partnership agreements might restrict our ability to seek strategic alliances with other relevant players in the market, preventing us from taking advantage of business opportunities presented by such players.
The interpretation of Brazilian tax authorities on the effects of the conversion of BM&F and Bovespa into forprofit companies in 2007 may differ from our interpretation, which could result in material tax contingencies.
In response to a formal consultation presented by the Brazilian Exchanges Commission (Comisso Nacional de Bolsas), or CNB, the Brazilian tax authorities have indicated that the demutualization of not-for-profit exchanges is not permitted pursuant to current regulation since: (1) the section of the Brazilian Civil Code dealing with dissolution of not-for-profit organizations would
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prevent the transfer of assets and liabilities to for-profit corporations; and (2) only a legal entity organized as a corporation would be able to approve its spinoff, since there would be no legal provision authorizing not-for-profit organizations to implement a spin-off. Based on the opinion of counsel, we believe that the interpretation of the Brazilian tax authorities is not in accordance with the applicable laws. Therefore, we presented a similar formal consultation to the Brazilian tax authorities specifically relating to our demutualization, but the Brazilian tax authorities responded in a manner consistent with their response to the CNB and provided no additional information. Current or future interpretations by the Brazilian tax authorities regarding our demutualization may result in material tax contingencies, which could cause a material adverse effect on our results of operations and financial condition. b. Risks relating to direct or indirect controlling shareholder or controlling group
We do not have a controlling shareholder or controlling group of shareholders, which may lead to shareholder coalitions, control contests, shareholder activism, or similar other events correlated with the lack of a controlling shareholder or controlling group of shareholders.
Ownership in our shares is fairly dispersed, and we currently do not have a controlling shareholder or controlling group of shareholders. As a result, we may be vulnerable to takeover bids, including a hostile takeover, and similar other disruptions correlated with lack of a controlling interest in our shares. If a successful bidder were to obtain control over a majority of our shares, there could be sudden and unexpected shifts in our policies and strategic plans, and our directors and officers could be replaced. In addition, the lack of a person or group holding a controlling interest in our shares could negatively affect o ur decisionmaking processes, as there may be instances where the shareholders are unable to gather sufficient affirmative or negative votes to meet the legally prescribed quorum to pass certain decisions at a shareholders meeting. Any sudden or unexpected change in management team or our policies and strategic plans, or any attempt at obtaining a controlling stake in our shares, and similar other disruptions could adversely affect our business and results of operations. c. Risks relating to our shareholders
Certain brokerage firms and other market participants, as well as financial institutions and other customers are also our shareholders, which may engender conflicts of interest with our other shareholders and us.
Some of our shareholders are financial institutions that operate on our markets, whose sources of revenues include brokerage activities, custody and settlement of securities, with respect to the Bovespa segment, and negotiation and clearing of derivatives, with respect to the BM&F segment. For this reason, there is a risk that certain shareholders may try to interfere with decisions for their own interests, through voting as a block in shareholders meetings or otherwise influencing our management to reduce the price of our services, which may adversely affect us.
The relative volatility and illiquidity of the Brazilian securities market may substantially limit our shareholders ability to sell their shares at the price and time at which they wish to sell them.
Investing in securities that trade on emerging markets, such as Brazil, often involves greater risk than investing in securities traded on more developed and mature international markets, and such investments are generally considered to be more speculative in nature. The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major international securities markets. Highly active and liquid markets comparatively experience less volatility and enhanced order execution efficiency. As a result, the local market characteristics could substantially limit our shareholders ability to sell their shares at the price and time at which they wish to sell them, which in turn could negativ ely affect the market price of our shares. In addition, volatility could lead to substantial sales of our shares or to market perception that such sales may occur, which could result in further declines in the market price of our shares.
Our bylaws include provisions aimed to protect share dispersion, which may hamper or delay transactions that may be of interest to our shareholders.
Our bylaws contain provisions designed to avoid the concentration of our shares in the hands of a single or small number of shareholders, in order to provide for a more dispersed shareholders base. One such provision requires a shareholder or group of shareholders sharing similar interests, which becomes a holder of shares representing 30% or more of our capital stock, to carry out or file a tender offer to purchase all our outstanding shares within 30 days of the date of the date of purchase or event resulting in ownership interest in excess of the 30% threshold. Any such provision may hamper or prevent takeover attempts, and may discourage, delay or hinder a merger or acquisition transaction, including a transaction in which investors could receive a premium on the market value of their shares. d. Risks relating to our subsidiaries and affiliates Risk factors related to our subsidiaries and affiliates are the same as related to us and are discussed herein above. e. Risks relating to our suppliers
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We depend on third party suppliers and service providers for several services that are important to our business. Interruptions of any of these material third-party services could materially and adversely affect on our business.
We depend on several suppliers, such as banking, clearing and settlement organizations, telephone operators, online service providers, data processors and software and hardware vendors in connection with our registration, trading, clearing and settlement systems, as well as other related support and maintenance systems. We cannot assure you that any of these service providers will continue to provide such services efficiently, or that they will be able to expand their services to meet our increasing needs. Interruption of material services provided by third parties and our inability to promptly make alternative arrangements or perform such services internally could have a material adverse effect on our business. f. Risks relating to our customers Our direct customers are the brokers, brokerage firms, and issuers listing securities to trade on our markets.
A significant portion of our revenues is highly dependent on the trading of securities of a limited number of issuers.
As of December 2010, the top ten stocks most actively traded on our stock exchange market (Bovespa segment) accounted for 43.42% of the overall value traded. Given the relative importance of the market activity of these securities on our combined revenues, if one or more of these issuers were to delist from our exchange or if the outstanding shares of one or more of these companies were to significantly decrease (including as a result of corporate restructuring, acquisition, merger or exchange for shares of an unlisted issuer), our combined revenues and results of operations could be adversely affected.
We are highly dependent on the level of trading by foreign investors.

We are highly dependent on the level of activity of foreign investors. In 2010, foreign investors accounted for 29.6% of the total value traded on markets comprising the Bovespa segment and 16.3% of the overall volume traded on derivatives markets comprising the BM&F segment. The Brazilian government may implement changes in taxation that affect the flow of foreign investments to Brazilian markets, including by investors that trade on our exchanges. For instance, in October 2009, in an effort to curb the appreciation of the real against the U.S. Dollar, the Brazilian government increased the IOF tax rate on inflows of foreign funds to invest in Brazilian securities from zero to 2.0%. Then, because the actual impact of the tax (IOF) would have been to divert trading away from local markets, draining precious onshore liquidity, in November 19 the Brazilian government announced a 1.5% IOF tax on issuances of American Depositary Receipts (ADRs). Subsequently, on October 5, 2010, again in an effort to arrest the Brazilian currency appreciation against the U.S. dollar, the Brazilian government increased to 4.0% (from 2.0% one year earlier, as indicated above) the IOF tax rate levied on inflows directed to transactions in fixed income securities. And the Central Bank, on October 7, adopted a requirement for simultaneous foreign exchange transactions to be closed at any time a foreign investor migrates to different types of portfolio investments as, for example, from equities to fixed income or vice versa, despite the absence of an actual inflow, which is merely assumed. However, as IOF tax is levied on these foreign exchange contracts, the new rule resulted also in a 2.0% levy on the cancellation of ADRs. Soon thereafter, on October 18, the Brazilian government again raised the IOF tax rate levied on inflows directed to transactions in fixed income securities, this time to 6.0% (from 4.0% a fortnight ago), while the IOF tax rate levied on collateral margin posted in connection with transactions on futures markets climbed to 6.0% from 0.38% previously. Such measures had a negative impact on our markets (mainly Bovespa segment markets), increasing the burden for foreign portfolio investments in Brazil. It also created a certain level of uncertainty and concerns about any additional measures the Brazilian government may implement. Moreover, given that the market prices of securities of Brazilian issuers are affected to varying degrees by the inflow of capital from foreign investors, a decrease in the inflow of capital from foreign investors to markets we operate may reduce average daily trading value (Bovespa segment) or volume (BM&F segment), which would adversely affect our revenues and results of operations. g. Risks relating to the exchange industry
We face significant competition in securities and derivatives trading, and we expect this competition to deepen in the future.
We face significant competition from foreign exchanges, particularly concerning trading with securities and derivatives, and we expect that this competition will intensify in the future. Our current and potential competitors are numerous and include stock markets, both organized and over the counter, in Brazil and abroad, and other commodities and futures exchanges. We compete with existing and new market participants in various aspects, including with respect to cost, quality and speed of trades, conduct of business, liquidity, functionality, ease of use and performance of trading systems, variety of products and services offered to the trading participants, and technological innovation. Entry of new competitors into our markets can also increase price competition and reduce margins in all of the existing securities and futures markets, including those in which we operate. In addition to traditional and new competitors, new technologies and the Internet may create environments that are favorable for replication of our business, redirecting market participants to these new environments. The current international stock market environment has encouraged the creation of new, alternative trading centers with different market structures and new business models that would be replicated in our market in the future.
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Well-capitalized competitors in other markets, such as the U.S. and Europe, could attempt to expand their operations into our markets of operation. If we are not successful in promptly adapting to the structural changes in our markets, to technological and financial innovation and to other competitive factors, we could be unable to maintain or increase the volume of transactions carried out and/or registered on our trading, clearing and settlement systems, and our revenues, business, financial condition and results of operations could be materially adversely affected.
In our BM&F and Bovespa segments, the average rate per contract, or RPC, and trading fees margin, respectively, are subject to significant fluctuations due to a number of factors, and as a result you will not be able to rely on our average RPC or trading fees margin in any particular period as an indication of our future average RPC and future trading fees margin.
The average RPC in our BM&F segment, which impacts our results of operations, is subject to fluctuation due to shifts in the mix of products traded, the trading venue and the mix of customers and the impact of our pricing structure. For example, we earn a lower RPC for trades in short-term Real-denominated interest rate futures contracts. Likewise, we earn a lower RPC on high frequency trades because under our policy we grant progressive discounts based on volume traded. And we also earn a lower RPC in reais for contracts where the fees are U.S. dollar denominated (such as FX futures) if the real appreciates against the U.S. dollar. Variations in each of these factors are difficult to predict but they do have an impact on our average RPC in the relevant period. As a result, you may not be able to rely on our historical average RPC as an indication of future average RPC. The margin in our Bovespa segment, which impacts our results of operations, is subject to fluctuation due to changes in the mix of customers and to the share of each market in the overall ADTV. For example, we earn a lower margin on day trades and on the trading from local institutional investors. Additionally, we charge higher fees on the forward and options market compared to cash market transactions. In addition, the revenues we earn from trading in our Bovespa segment is subject to fluctuation due to changes in the market prices for stocks, as we trading fees as a percentage on value traded, such that if market prices drop this will ultimately affect our revenues from trading fees. In addition, we grant progressive discounts based on high frequency value traded, which influences our trading fees margin. Variations in each of these factors are difficult to predict but do impact on our average margin on value traded in the relevant period. Because of this fluctuation, you may not be able to rely on our average transaction margin in any particular period as an indication of our future average trading fees margin. h. Risks relating to the industry regulation
We operate in a highly regulated industry and are subject to existing and future regulations and restrictions, and may be subject to penalty fines and other sanctions if we fail to comply with our legal and regulatory obligations.
We operate in a highly regulated industry and are subject to extensive regulation. Our industry is subject to broad governmental regulation and may be subject to increasing regulatory scrutiny. This regulation is designed to preserve the integrity of the securities market and of other financial markets and to protect the interests of investors. Our operations depend on the authorization of governmental agencies and on the continuity of this authorization. Our ability to comply with applicable laws and regulations is highly dependent on our ability to maintain adequate systems and procedures. The Brazilian Monetary Council (Conselho Monetrio Nacional), or CMN, and the CVM regulate Brazilian stock and futures exchanges and have broad powers to audit, investigate and enforce compliance with their rules and regulations, as well as to impose sanctions in the event of non-compliance. In recent years, a number of regulatory changes that have been introduced have impacted our operations, including CVM Rule 461 in 2007 governing the organization, operation and dissolution of stock, futures and commodity exchanges and OTC markets. Any regulatory changes may have an adverse effect on us and on the current and future users of our services. For instance, regulatory authorities may implement changes that reduce the attractiveness of listing on our markets or the use of our services, or cause companies listed on our trading platform to migrate to alternative markets that may have more flexible trading or corporate governance rules. The loss of a substantial number of users or a reduction in the level of the trading activities on our exchange and OTC markets may have an adverse effect on us. Additionally, the Central Bank may adopt rules or procedures regarding the clearing and settlement of securities, and also require additional collateral for transactions executed occurring on our markets, which may result in changes to our existing clearing, settlement and risk control procedures or in higher costs to comply with these requirements, all of which may have an adverse effect on us. As a consequence of the recent international financial crisis, stricter rules on financial institutions are being discussed worldwide. If such rules are implemented abroad, the Central Bank and the CMN may also implement part of these stricter rules in Brazil, which may impact our activities. The Central Bank and the CVM have broad administrative powers to fine, suspend or interrupt our activities. In the event of actual or alleged non-compliance with regulatory requirements, we may be subject to investigations, and administrative or legal proceedings, which may lead to substantial penalties and, in extreme cases, the cancellation of our authorization to act as a securities market operator. Any investigation or proceeding, regardless of the outcome, may result in substantial costs and may also adversely affect our reputation and, therefore, our results of operations.
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We have self-regulatory responsibilities as a securities market operator and also operate a for-profit business, which could create conflicts of interest.
The listing of our common shares on our Bovespa segment may generate conflicts of interest between our self-regulatory functions and our interests as a listed company. As a securities market operator, we are responsible for establishing listing and disclosure standards to be followed by issuers. Lowering these standards so as to benefit us as a listed company or encourage additional securities listings in our market may harm our image and reputation. i. 4.2. Risks relating to other countries in which the Company operates. We have no operations elsewhere other than Brazil. Expectations that exposure to these risks will reduce or increase over time. We continually assess and weigh the risk factors to which we and our business are exposed, in particular those with potential to materially and adversely affect our business, financial condition and results of operations. With the aim of managing, controlling and mitigating these and other risk factors, we adopt practices fo r continuing pursuit of improvements to our infrastructure and services, which include (i) providing efficient, reliable and cost effective trading, clearing, settlement and other systems to markets which we operate and manage; (ii) strengthening and expan ding our market data activities, for more nimble, accurate and cost effective retrieval and transmission of market data to vendors, market participants, investment research analysts, advisory services and, ultimately, the investment decisions of customer i nvestors; (iii) continuing monitoring of changes in the macroeconomic outlook and how they influence market trends and our business; (iv) strengthening and expanding the different ways to access our markets and trading systems; (v) implementing our investor education programs, which include retail investors, local and foreign institutional investors; and (vi) implementing and enhancing compliance and surveillance activities. In addition, given that we act as central counterparty to ensure clearing and settl ement of transactions carried out on equities markets, and provide clearing and settlement services to each of the markets we operate and manage, we adopt risk management and safeguard structures at each of our clearing facilities with the aim of controlli ng and mitigating the risks inherent in these activities. For further information on risk management and safeguard structures , see the information under section 5 of this form. 4.3 Arbitration court and administrative proceedings (classified by legal nature, i.e., labor, tax, civil law or other) having the Company or any subsidiary as a party, which (i) are not protected by absolute privilege; and (ii) whose outcome could materially affect business. The Company and its subsidiaries are parties to administrative and court cases relative to matters of tax, labor and civil law. Our provisions policy has been established consistently with the guidelines provided under CVM Resolution No. 594 dated September 15, 2009. Given that the information presented herein in connection with court and administrative and arbitration proceedings include outcome assessments based on criteria differing from those contemplated under CVM Resolution 594/09, the tables below include also information about cases whose prospects for a defeat have been assessed as remote such that we have not reserved their value at issue as contingent liabilities in our financial statements for periods preceding the date of this fo rm. (I) Labor claims As of December 31, 2011, the Company and subsidiaries were parties to 306 labor claims, which classify into two main groups: I Claims by former employees of the Company or subsidiaries. These refer to 109 labor cases (40.19% of the total) involving claims for salary differences (mostly related to overtime, salary equalization and health hazard allowance, among other things). In this group, 28 claims involving contingent liabilities of R$6,555,733.00 have been assessed as a probable defeat, whereas 81 claims, which involve contingent liabilities of R$39,914,260.83, have been assessed as a possible defeat. A total of 14 cases ended and the records are set for shelving.
Party Number of claims assessed as a probable defeat Contingent liabilities under claims assessed as a probable defeat Number of claims assessed as a possible defeat Contingent liabilities under claims assessed as a possible defeat
Company BVRJ BBM TOTAL
22 05 1 28
5,765,609.73 541,074.31 249,048.93 6,555,733.00
73 08 00 81
37,875,098.46 2,039,162.97 39,914,260.83
II Third-party claims (other than former employees of ours). These refer to 183 claims (59.81% of the total) filed by the former employees of outsourced providers and brokerage firms seeking to have the Company or a subsidiary held jointly or secondarily liable for severance and other payments on grounds that Precedent 331 of the Superior Labor Court
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(TST) is applicable. These claims substantially classify into three groups, as follows: a. This group comprises 63 claims, where 59 suits have been brought by former pit traders that used to work on the exchange floor against a number of brokerage firms and the Company. The decisions thus far issued by the courts in the records of some of these claims upheld our arguments to overrule the plaintiffs allegation tha t the Company holds secondary liability in the issue. In addition, there are four other claims the Capital Market Workers Union ( Sindicato dos Trabalhadores em Mercados de Capitais) brought against brokerage firms, banks, insurance companies and the Company on behalf of unionized workers. The Union argues our former trading floor posed an environmental health hazard for traders and other workers, which thus should have been compensated through payment of additional allowance for health hazards. A lower court decision issued in the larger of these claims ruled in favor of the Company, setting aside the notion that we hold secondary liability in the matter. However, these cases are still ongoing and appeals expected to be filed. Based on evaluations by counsel, Management classifies the prospects for a defeat in these cases as remote, given that the actual employers of these claimants and unionized workers were the brokerage firms and other co -defendants, the exchange floor being merely the place at which they performed functions assigned by their employers, such that there are no valid legal grounds to justify their claim of secondary liability for any severance or other payments to these workers, including health hazard allowances, due to indirect employment relationship with us.. b. 84 lawsuits have been brought by former employees of outsourced providers of cleaning and security services. These plaintiffs allege to be owed severance payments by their former employers.. As a result, we are susceptible of being found secondarily liable in 27 of these claims, which were assessed as a probable defeat and involve contingent liabilities of R$358,745.70. In another 57 claims, which involve contingent liabilities in the amount of R$4,592,131.51, the prospects for a defeat have been assessed as possible. The other 14 claims are due to be shelved.
Party Number of claims assessed as a probable defeat Contingent liabilities under claims assessed as a probable defeat Number of claims assessed as a possible defeat Contingent liabilities under claims assessed as a possible defeat
Company BVRJ TOTAL
26 01 27
1,355,127.12.., 3,618.58 1,358,745.70
55 02 57
4,423,610.45., 168,521.06 4,592,131.51
c. 22 claims have been brought by former employees of outsourced providers of IT services. The prospects for a defeat in these cases have been assessed as possible. The table below sets forth data regarding the contingent liabilities involved in these cases.
Party Number of claims assessed as a possible defeat Contingent liabilities under claims assessed as a possible defeat
Company TOTAL
22 23
16,342,812.00.., 16,356,418.53..,
The Company makes accounting provisions for the amounts involved in claims where the prospects for a defeat are classified as probable. For this reason, we understand that these labor claims do not represent a material risk to our business.
(II) Tax Cases

II.1 BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros (BM&FBOVESPA) II.1.1)
Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Case No. 2007.61.00.030994-8 4 th Lower federal court of the judiciary subsection of So Paulo (SP) Appellate degree November 12, 2007 Plaintiff: Bolsa de Mercadorias & Futuros S.A. BM&F S.A. (merged with BM&FBOVESPA on May 8, 2008) Defendant: Brazilian Government This is a declaratory action seeking a court decree recognizing the absence of taxation relationship permitting the government to charge the Additional Social Security Cont ribution levied at a 2.5% rate from financial institutions. The Company argues that while Decree No. 2173/97 (subsequently replaced with Decree No. 3048/99) included commodities and futures exchanges as contribution payers, this was an illegal move given that Supplementary Law No. 84/96, which established the levy did not include commodities and futures exchanges as a potential contribution payer, such that no charge of said contribution on the Company is admissible. In addition, the Company argues that Decree No. 2173/97 illegally expanded the contribution calculation basis to encompass also the payroll, whereas the law that established this contribution designated as calculation basis just the
Amounts, assets or rights at risk
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aggregate payments made to independent service providers. Purpose and principal related facts Prospects for a defeat Impact in case of a defeat Provisioned amount - In order to litigate the matter BM&FBOVESPA is required to make post collateral by making monthly deposits with the court of the amount corresponding to the charge of Additional Social Security Contribution. - The lower court decision acknowledged the absence of a taxation relationship. The appeal is pending judgment by the 3 rd Regional Federal Court. Legal obligation Because the amounts being litigated are deposited with the court, in the event of a defeat on final judgment, the Company could lose the amount deposited, with no further impact. R$15,121,757.40
II.1.2)
Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Administrative Case No. 16327.001536/2010-80 8 th Panel of the So Paulo Regional Tax Adjudication Division Brazilian Federal Revenue Service Lower administrative court November 26, 2010 Claimant: Brazilian Federal Revenue Service Respondent: BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros This case initiated with a Federal Revenue Tax Delinquency Notice whereby the tax authority seeks to collect corporate income tax (principal totaling R$301,686 plus defaul t interest and penalty fine) and social contribution on net income, or CSLL (principal totaling R$108,525 plus default interest and penalty fine), on alleged grounds that in 2008 and 2009 BM&FBOVESPA failed to pay income tax and social contribution on the amortization of goodwill related to the merger of the shares of Bovespa Holding S.A., approved at the shareholders meeting held on May 25, 2008. - BM&FBOVESPA received service of process on November 29, 2010, and on December 28, 2010, filed opposition challenging the tax assessment. - The lower court decision (Regional Tax Adjudication Division) was partially favorable to the Company in that it cutback the amount of the tax assessment arguing the tax authority calcul ated the tax basis relative to 2008 by erroneous criteria. - We appealed this decision to the Appellate Tax Adjudication Board on November 21, 2011. - A decision by the Appellate Tax Adjudication Board is now pending. Remote A final judgment of liability would entail obligation to pay the principal deemed delinquent, as accruing interest and the penalty fine. No amount has been provisioned.
Amounts, at risk
assets
or
rights
Purpose and principal related facts
Prospects for a defeat Impact in case of a defeat Provisioned amount
(III) Civil law cases

III.1 BM&FBOVESPA and BVRJ III.1.1)
Case No. 2007.001167284-8 Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets or rights at risk 2 nd lower business court of the judicial district of Rio de Janeiro (RJ) Appellate degree October 2, 2007 Plaintiffs: Naji Robert Nahas, Selecta Participaes e Servios S/C Ltda. and Cobrasol Companhia Brasileira de leos e Derivados Defendants: BVRJ and Bovespa Association R$10,000,000,000.00 (claim for moral and actual damages) This is an action for damages (ordinary proceedings) in which plaintiffs seek to have BVRJ and the Bovespa Association sentenced to pay indemnity for moral and actual damages allegedly incurred as a result of certain stock trades late in the 1980s. Following the answers, replies and rebuttals, the lower court decision found against the plaintiffs. Both plaintiffs and defendants filed motions to clarify, which were partially granted. The plaintiffs next appealed the decision, which the Court of Appeals of Rio de Janeiro rejected, so the plaintiffs filed special and extraordinary appeals, which the higher court refused to entertain on grounds of ineligibility. This caused the plaintiffs to file interlocutory appeal addressed to the Superior Court of Justice and the Supreme Federal Court. The Supreme Court recently issued a certiorari order, accepting the case for review. The case records are now set to be remitted to the Supreme Court. Remote
Purpose and principal related facts4
Prospects for a defeat
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Impact in case of a defeat Provisioned amount
In the unlikely event both the lower court and appellate court decisions were to be reversed by the higher court, still an award for damages would not reach the level of the indemnity claimed by plaintiffs. No amount has been provisioned.
III.1.2)
Case No. 96.0037050-8 Court of origin Stage (degree of jurisdiction) Filing date Litigating parties 22
nd
lower federal court of the judiciary subsection of So Paulo (SP)
Appellate degree November 19, 1996 Plaintiffs: Rubens Taufic Schahin et Al. Defendants: BM&FBOVESPA, BVRJ, CVM, Indstrias de Chocolate Lacta S.A., Kraft Suchard Brasil S.A., Kibon Indstrias Alimentcias Ltda. et Al. Indemnity for actual damages, if any, would be arbitrated in liquidation of award proceedings. The value originally attributed on the action was amended to R$109,518,846.03 (as of November 1996), which however is not reflective of the financial value intrinsic in the plaintiffs claim. This is an action for damages where the plaintiffs seek compensation based on the difference between the true value of the preferred shares of LACTA, of which plaintiffs allege to have been deprived, and the amount actually paid, in addition to loss of earnings (in the form of dividends not earned). The plaintiffs allege to have been compelled to sell their shares in an auction at the stock exchange, after the courts had annulled the decision of a shareholders meeting authorizing a share issuance in which plaintiffs purchased their equity interest in Lacta shares. Kraft filed counterclaim, seeking repayment of dividends previously paid. After the answers, replies and rebuttals, the lower court decision found the claim and counterclaim invalid, ordering the plaintiffs and Kraft to bear loss of suit expenses, including fees of counsel. As a result, the plaintiffs and defendants Kraft, Silb Participaes, CVM and Philip Morris appealed the decision. In addition, BM&FBOVESPA and BVRJ filed adhesive appeal seeking to increase the arbitrated fees of counsel. The Regional Federal Court rejected the plaintiffs appeals, whereas granting the co-defendants appeals in respect only of the increase in arbitrated fees of counsel. The plaintiffs filed motion to clarify, which were rejected. Plaintiffs and defendant Philip Morris then filed special appeals, counter-arguments of appeal were filed and a decision on whether the appeals are to be entertained is currently pending. Remote If the final decision were to award damages, the indemnity would be apportioned amongst the co defendants at an amount ultimately arbitrated in liquidation of award proceedings. No amount has been provisioned.
III.2 BM&FBOVESPA III.2.1)

Case No. 583.00.2010.172946-2 Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets or rights at risk 11 th lower civil court of the judicial district of So Paulo (SP) First degree of jurisdiction August 17, 2010 Plaintiff: Bankruptcy estate of Spread Commodities Mercantil e Corretora de Mercadorias Ltda. Defendant: BM&FBOVESPA (as successor of BM&F, following its demutualization, going -public and merger with Bovespa Holding). Membership certificates in BM&F (then a mutualized non-profit entity, which subsequently was demutualized, went public and merged with Bovespa Holding as BM&FBOVESPA). The estimated value of a membership certificate as of February 2012 has been estimated at R$ 65,245,687.08 The trustee of the bankrupt estate of this former commodity broker has filed declaratory action against BM&FBOVESPA seeking to annul the cancellation (due to defaulted of membership fees due and payable) of Spreads membership certificates previously held in BM&F, which otherwise, the trustee argues, would have represented 4,908,015 shares of BM&FBOVESPA. The trustees intent is to have the equivalent of 3,278,554 shares of BM&FBOVESPA integrate the estate for the proceeds from a sale of such shares to be paid to the creditors. Moreover, the trustee seeks compensation for losses allegedly incurred with the certificates cancellation (which he estimates in the equivalent of hypothetically selling 1,629,461 shares of BM&F S.A. in the companys 2007 IPO at the offering price per share of R$20.00), in addition to indemnity for dividends and interest on shareholders equity BM&FBOVESPA has since paid to shareholders, which he argues the certificates cancellation prevented the bankrupt estate from receiving. On January 18, 2011, BM&FBOVESPA received service
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of process and filed the answer shortly thereafter. On August 5, 2011, the lower court decision found for the plaintiff in that it recognized the bankrupt estates ownership rights in 3,278,554 shares of BM&FBOVESPA, ordering such number of shares seized to integrate the bankrupt estate for sale . Additionally, the court granted the plaintiffs claim for redress of losses from the membership certificates cancellation (arbitrated at R$32,589,220.00, i.e., the proceeds from a hypothetical sale of 1,629,461 shares in the 2007 IPO of BM&F S.A., plus 1% default interest accruing since the IPO plus adjustment for inflation), and the claim for indemnity for dividends and interest on shareholders equity BM&FBOVESPA (as successor) has paid to shareholders since the IPO of BM&F (arbitrated at R$2,311,592.14, plus 1% default interest since accruing the IPO plus adjustment for inflation), and any other payouts paid or payable to the aggregate number of shares thus attributed to Spreads bankrupt estate. In addition, the court ordered the defendant to pay fees of counsel on behalf of the bankrupt estate, arbitrated at 10% of the value at issue. We have since filed an appeal, on which a decision by the So Paulo Court of Appeals is now pending. Prospects for a defeat Possible In his asset-recovery efforts, the trustee of the bankrupt estate seeks payment of a sum equivalent to the market price of 3,278,554 shares of BM&FBOVESPA (in lieu of membership certificates), in addition to compensation for losses supposedly ensuing from the impossibility to sell membership certificates of the now extinct company (BM&F) estimated at R$32,589,220.00 (as of Nove mber 2007) supposedly derived from the cancellation of membership certificates, which allegedly prevented the brokerage firm from selling BM&F shares in the going -public process. Additionally, the bankrupt estate claims R$2,311,592.14 in unpaid dividends and interest on shareholders equity BM&FBOVESPA declared over time since absorbing BM&F. No amount has been provisioned.
Impact in case of a defeat
Provisioned amount
III.2.2)
Case No. 583.00.2005.204334-9 Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets or rights at risk 11 th lower civil court of the judicial district of So Paulo (SP) Appellate degree November 30, 2005 Plaintiff: Welinton Balderrama dos Reis Defendant: BM&FBOVESPA (as successor to BM&F, following its demutualization, going -public and merger with Bovespa Holding) and BM&F Association. Membership certificate in BM&F (then a mutualized non-profit entity, later demutualized and merged into BM&FBOVESPA). This is action seeks to annul a decision of the board of directors of BM&F (then a mutualized Exchange), which excluded the plaintiff from membership by cancelling membership certificates due to default of fees owed to the Exchange, in addition to seeking an appraisal to update the v alue of the equity membership of common members, pursuant to the bylaws of the then mutualized Exchange, as adjusted for inflation between 1990 and 1999. Following the answer, reply and rebuttal, the lower court decision held the action invalid. While the appellate court rejected the plaintiffs appeal, it also recognized the plaintiffs right to claim potential credits against BM&F. Both parties filed motions to clarify; our (BM&FBOVESPA and BM&F Association) motion was partially granted, whereas the plaintiffs was rejected. The plaintiff then filed both a special appeal and extraordinary appeal, whereas BM&FBOVESPA and BM&F Association in view of the appellate courts judgment on the motion, filed a second motion to clarify, which is now pending a decis ion. Possible Payment of plaintiff's credits resulting due to elimination from BM&F membership (BM&F was then a mutual entity), which we estimate to correspond to R$1,107,810.62 (as of December 2010). No amount has been provisioned.
III.2.3)
Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Case No. 583.00.2010.206075-4 14 th lower civil court of the judicial district of So Paulo (SP) First degree of jurisdiction October 23, 2010 Plaintiff: Esboriol Participaes e Empreendimentos Ltda. and Fernando Alexandre Esboriol Defendant: BM&FBOVESPA (as successor to BM&F)*, BM&F Association and BM&FBOVESPAs CEO, Mr. Edemir Pinto. ( ) * BM&F was originally a mutualized non-profit entity, which went public after a demutualization
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process, and later merged and combined with Bovespa Holding. The surviving entity is BM&FBOVESPA. Amounts, assets or rights at risk An adjusted amount equivalent to the proceeds of a hypothetical sale of shares in the 2007 IPO of BM&F (as a demutualized Exchange), assuming the courts recognize the plaintiffs hold ownership rights in such shares, as arising from a conversion of the membership certificate special trader category they once held in the predecessor mutualized entity. The plaintiffs in this action seeks to annul certain board decisions and transactions (including, in particular, a sale of membership certificates in a buyback program and a spin-off of BM&F and related plan of substitution of shares for certificates) implemented in the course of the demutualization process, on grounds of alleged defective consent. The plaintiffs intend to regain ownership rights in membership certificates in order to have them replaced with an equivalent number of shares of BM&FBOVESPA. Alternatively, the plaintiffs seek indemnity in the equivalent value of said number of BM&FBOVESPA shares, including shares they supposedly would have been allotted were it n ot for having given allegedly defective consent to certain demutualization transactions. The deadline for the answer will start only after the officer of the court gives notice of having served process on every defendant, which is now pending. Remote A defeat would establish a negative precedent, which would encourage other former members selling membership certificates in the buyback program implemented as part of the demutualization process to pursue similar annulments and indemnities. No amount has been provisioned.
III.2.4)
Case No. 583.00.2011.117867-5 Court of origin Stage (degree of jurisdiction) Filing date 8 th lower civil court of the judicial district of So Paulo (SP) First degree of jurisdiction February 25, 2011 Plaintiff: Solidez Corretora de Ttulos e Valores Mobilirios Ltda. Defendant: BM&FBOVESPA (as successor to BM&F)*, BM&F Association and BM&FBOVESPAs CEO, Mr. Edemir Pinto. ( ) * BM&F was originally a mutualized non-profit entity, which went public after a demutualization process, and later merged and combined with Bovespa Holding. The surviving entity is BM&FBOVESPA An adjusted amount equivalent to the proceeds of a hypothetical sale of shares in the 2007 IPO of BM&F (as a demutualized Exchange), assuming the courts recognize the plaintiffs hold ownership rights in such shares, as arising from a conversion of the membership certificate commodity broker category once held in the predecessor mutualized entity. The plaintiff in this action seeks to annul certain board decisions and transactions (including in particular, a sale of membership certificates in a buyback program adopted at the time) implemented in the course of the demutualization process, on grounds of alleged defective consent. The plaintiff intends to regain ownership rights in membership certificates, which it ultimately seeks to replace with an equivalent number of shares of BM&FBOVESPA. Alternatively, the plaintiff seeks indemnity in the equivalent value of said number of BM&FBOVESPA shares (35% of such hypothetical interest valued at the price per share offering in the 2007 IPO, whereas 65% would be val ue at the present stock market value, whereas allowing for certain adjustments). The answer and rebuttal have been filed. The parties are now set to be notified to specify the evidence they intend to produce during discovery. Remote A defeat would establish a negative precedent, which would encourage other former members selling membership certificates in the buyback program implemented as part of the demutualization process to pursue similar annulments and indemnities. No amount has been provisioned.
Litigating parties
III.2.5)
Administrative Misconduct Actions Nos. 1999.34.00020289-0 and 1999.34.00019665-0; Class Actions Nos. 1999.34.00.009903-7, 1999.34.00.010188-7, and 1999.34.00.012074-3 Court of origin Stage (degree of jurisdiction) 22 nd lower civil court of the Federal District judiciary section First degree of jurisdiction
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Filing date
Between April 20 and June 25, 1999 Plaintiffs: The Federal Public Prosecution Office, Plaintiff in the administrative misconduct actions; Luiz Carlos Tanaka et Al, Plaintiffs in the class actions; Defendants: Banco Marka S.A, Banco FonteCindam S.A, BM&F (Mercantile and Futures Exchange), Edemir Pinto (in the capacity of Managing Director of BM&F, currently Chief Executive Officer of BM&FBOVESPA), Antnio Carlos Mendes e Barbosa and Paulo Roberto Garbato (former officers of BM&F) et Al. Refunding the Brazilian Treasury for alleged losses from certain futur es market trades between the Central Bank and the two defendant banks (Marka and FonteCindam). The administrative misconduct actions include claims for imposition of penalty fine and a writ banning the defendants from transacting with the Government or being granted tax incentives. These are actions that seek to quash certain transactions in USD-denominated futures which were agreed between the Central Bank and the two banks (Marka and FonteCindam) in January 1999, and claim indemnification for losses and damages from the persons involved in the transactions and their beneficiaries. BM&F (then a mutualized non-profit Exchange, later demutualized, merged with Bovespa Holding, and was succeeded by BM&FBOVESPA) and its officers at the time appear as codefendants for allegedly having participated in structuring the transactions, which supposedly benefitted the Exchange, and for having elected to forgo with internal operations related to the clearing and settlement process. The answers, replies and rebuttals followed. In its defense, BM&F argued, among other things, that the Exchange was merely the futures market operator, and had had no role, or taken any action to justify being named as co-defendant; additionally the Exchange ascertained no benefit whatsoever from any of the Central Bank transactions that (January 1999) led to the currency devaluation. The court granted requests for expert examination to be carried out. In addition, given the identity of purposes found in these actions, the expert examination was accepted as valid for each of the cases. On March 15, 2012, the actions were adjudged, found valid and most defendants held jointly and secondarily liable for redressing the Brazilian Treasury, including BM&FBOVE SPA (as successor to BM&F). The value at issue may rise to R$7,005 million, which according to one of the decisions now issued may be offset (up to R$5,431 million) against gains the Central Bank made by avoiding to use its U.S. dollar reserves. These amounts have been stated as at January 1999 and, under the court order, should be restated to include adjustment for inflation, interest in arrears and loss of suit expenses. Furthermore, we note that some of the defendants were also charged with administrativ e misconduct. In the case of BM&F (our predecessor and the only futures market operator at the time the litigated events took place), the penalties for administrative misconduct would include a five -year ban on transactions with the Government, and on its ability to receive direct or indirect tax incentives and other benefits, and payment of a civil fine as of January 1999 amounting to R$1,418 million . Mr. Edemir Pinto, our Chief Executive Officer, was exonerated, as the claims against him have been found invalid. We are set to appeal these decisions as soon as they are formally publicized by the court. Remote A proportionate part of the award for refund, which pursuant to the lower court decisions woul d rise to R$7,005 million, which according to one of the decisions now issued may be offset against gains (up to R$5,431 million) the Central Bank made by avoiding to use its U.S. dollar reserves. These amounts have been stated as at January 1999 and, under the court order, should be restated to include adjustment for inflation, interest in arrears and loss of suit expenses. In addition, for administrative misconduct, a civil fine as of January 1999 amounting to R$1,418 million, subject also to monetary adjustment and interest in arrears, plus a five-year ban on transactions with the Government, and on its ability to receive direct or indirect tax incentives and other benefits . No amount has been provisioned.
Litigating parties
Prospects for a defeat
Provisioned amount
III.2.4) Case No. 000.00.612656-1

Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets or rights at risk 3 rd lower civil court of the judicial district of So Paulo (SP) Appellate degree September 18, 2000 Plaintiff: Capitnea Distribuidora de Ttulos e Valores Mobilirios Ltda. Defendant: BM&FBOVESPA This lawsuit seeks to annul the collection of fees charged (since established, on December 22, 1999) for holders of rights to operate as Commodity Broker and Clearing Participant Member, whi ch was the
20
case of the plaintiff. This is an annulment action filed against BM&F (then a mutualized entity, later demutualized, merged into, and succeeded by BM&FBOVESPA) that seeks to quash a board decision dated Dece mber 22, 1999, which approved the charge of trading fees (emolumentos de prego) from holders of rights to operate as Commodity Broker and Clearing Participant Member, including holders undergoing extrajudicial liquidation, court-administrated reorganization or bankruptcy proceedings, which are not permitted to operate. After the answer, reply and rebuttal, the lower court decision entered held the action invalid, recognizing the charge as lawful. The plaintiff appealed, we responded, and the Court of Appeals rejected the appeal. The plaintiff then filed motion to clarify, which was rejected . The plaintiff then filed special and extraordinary appeals, which were also rejected and followed by interlocutory appeal to reverse the rejection. The interlocutory appeal filed in the record of the special appeal is now pending a decision. Remote In the event of defeat, beyond the annulment of the access fees charged, the decision would establish a negative precedent adversely affecting the collection of fees from market participants undergoing extrajudicial liquidation, court-administrated reorganization or bankruptcy proceedings. No amount has been provisioned.
4.4 Arbitration, administrative and court proceedings (not protected by absolute privilege) in which the Company or a subsidiary participates as a party having as opposite party or parties any current or former directors or officers or controlling shareholders or investors in its own securities or those of a subsidiary. As of the date of this Reference Form there are no legal, administrative or arbitration proceedings (not protected by absolute privilege) in which the Company or a subsidiary participates as a party having as opposite party or parties current or former directors or officers or controlling shareholders or investors in our own securities or those of a subsidiary. 4.5 Impact and contingency in case of a defeat in disputes protected by absolute privilege whose outcome could materially affect the Company or a subsidiary. As of the date of this Reference Form there are no material confidential proceedings to which the Company or its controlled companies were party that were not disclosed in the above items. 4.6 Arbitration, administrative and court proceedings of a labor, tax, civil law or other nature , not protected by absolute privilege, and consisting of repetitive or connected cases as to the facts and rights on action, whose outcome (taken collectively) could materially affect the Company or a subsidiary.
(I) Labor Cases

There are no arbitration or administrative or court proceedings consisting of repeti8tive or connected cases of a labor law nature, whether or not protected by absolute privilege, whose outcome (taken collectively) could materially affect us or any of our subsidiaries.
(II) Tax Cases

There are no arbitration or administrative or court proceedings consisting of repeti8tive or connected cases of a tax nature, whether or not protected by absolute privilege, whose outcome (taken collectively) could materially affect us or any of our subsidiaries.
(III) Civil Law Cases

(III.1) Repetitive Cases I
Plaintiffs; original or appellate courts; case numbers 1) Ordinary Action Case Record No. 583.00.2008.125497-9 29 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 994.09.324431-6 in the Court of Appeals of So Paulo - Plaintiff: Carlos Rodrigues Jnior; 2) Ordinary Action Case Record No. 583.00.2008.125496-6 16 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Paulo Roberto Ferreira de Sena; 3) Ordinary Action Case Record No. 583.00.2008.125498-1 24 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal No. 9204350-79.2009.8.26.0000 (formerly case 994.09.032357-2) in the Court of Appeals of So Paulo Plaintiff: Jurandir Pinheiro de Castro; 4) Ordinary Action Case Record No. 583.00.2008.125499-4 12 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 9138494-71.2009.8.26.0000 (formerly case 994.09.032149-9) Court of Appeals of So Paulo - Plaintiff: Walter Silva Jnior; 5) Ordinary Action Case Record No. 583.00.2008.136416-9 2nd Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Egemp Gesto Patrimonial Ltda.;
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Plaintiffs; original or appellate courts; case numbers
6) Ordinary Action Case Record No. 583.00.2008.129504-4 12 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Esborial Participaes e Empreendimentos Ltda; 7) Ordinary Action Case Record No. 583.00.2008.129505-7 9th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0129505-60.2008.8.26.0100 (formerly case 990.10.027374-4) in the Court of Appeals of So Paulo - Plaintiff: Reginaldo Goncales da Silva; 8) Ordinary Action Case Record No. 583.00.2008.130365-7 8th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0130365-61.2008.8.26.0100 (formerly case 990.10.316027-4) in the Court of Appeals of So Paulo Plaintiff: Solidez Corretora de Cmbio, Ttulos e Valores Mobilirios Ltda; 9) Ordinary Action Case Record No. 583.00.2008.125495-3 9th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0125495-70.2008.8.26.0100 (formerly case 990.10.116624-0) in the Court of Appeals of So Paulo Plaintiff: Roberto Duprat; 10) Ordinary Action Case Record No. 583.00.2008.129506-0 40 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Jair do Nascimento; 11) Ordinary Action Case Record No. 583.00.2008.130363-1 10 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Mrio Srgio Nunes da Costa; 12) Ordinary Action Case Record No. 583.00.2008.130364-4 15 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: So Paulo Corretora; 13) Ordinary Action Case Record No. 583.00.2008.130362-9 9 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0130362-09.2008.8.26.0100 (formerly case 990.10.180329-1), in the Court of Appeals of So Paulo Plaintiff: Aureum Corretora.; 14) Ordinary Action Case Record No. 583.00.2009.1017857 39 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0101785-84.2009.8.26.0100 (formerly case 990.10.405020-0), in the Court of Appeals of So Paulo Plaintiff: Banex Distribuidora de Ttulos e Valores Mobilirios; 15) Ordinary Action Case Record No. 583.00.2008.243345-0 1st Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Carmine Enrique Filho; 16) Ordinary Action Case Record No. 583.00.2009.197829-0 12 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0197829-68.2009.8.26.0100 (formerly case 990.10.326960-8), in the Court of Appeals of So Paulo Plaintiff: Future Premium; 17) Ordinary Action Case Record No. 583.00.2008.212130-9 14 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Granleo Comrcio e Indstria de Sementes Oleagiosas e Derivados; 18) Ordinary Action Case Record No. 583.00.2009.197370-1 12 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0197370-66.2009.8.26.0100 (formerly case 990.10.493616-0), in the Court of Appeals of So Paulo Plaintiff: Marcelo Ferreira da Costa; 19) Ordinary Action Case Record No. 583.00.2009.197372-7 9 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0197372-36.2009.8.26.0100 (formerly case 990.10.483040-0), in the Court of Appeals of So Paulo Plaintiff: Mario Cesar Nassif da Fonseca; 20) Ordinary Action Case Record No. 583.00.2009.197375 20th Lower Civil Court of the Central Courthouse Plaintiff: Miguel Jurno Neto; 21) Ordinary Action Case Record No. 583.00.2009.106268-2 37 th Lower Civil Court of the Central Courthouse Plaintiff: Pedro Sylvio Weil; 22) Ordinary Action Case Record No. 583.00.2008.243341-9 37 th Lower Civil Court of the Central Courthouse Plaintiff: Renato Enrique; 23) Ordinary Action Case Record No. 583.00.2008.212131-1 10 th Lower Civil Court of the Central Courthouse Plaintiff: Shan Ban Chun; 24) Ordinary Action Case Record No. 583.00.2010. 184066-6 23 rd Lower Civil Court of the Central Courthouse Plaintiff: Ademir C. do Nascimento; 25) Ordinary Action Case Record No. 583.00.2010.184184-2 15 th Lower Civil Court of the Central Courthouse Plaintiff: Flavio Barreto Moreira; 26) Ordinary Action Case Record No. 583.00.2010.184065-3 39 th Lower Civil Court of the Central Courthouse Plaintiff: Jos Carlos Citti de Paula; 27) Ordinary Action Case Record No. 583.00.2010.142878-5 28 th Lower Civil Court of the Central Courthouse Plaintiff: Laeta S/A Participaes; 28) Ordinary Action Case Record No. 583.00.2010.184083-5 8 th Lower Civil Court of the Central Courthouse Plaintiff: Ricardo Lombardi de Barros; 29) Ordinary Action Case Record No. 583.00.2010.104331-4 1st Lower Civil Court of the Central Courthouse Plaintiff: Luiz Carlos Ferreira; 30) Ordinary Action Case Record No. 583.00.2010.184070-3 29 th Lower Civil Court of the Central Courthouse Plaintiff: Alexandre de Freitas Nuzzi; 31) Ordinary Action Case Record No. 583.00.2010.184078-5 6 th Lower Civil Court of the Central Courthouse Plaintiff: Rogrio Sandes Cardoso; 32) Ordinary Action Case Record No. 583.00.2010.183812-8 31st Lower Civil Court of the Central
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Plaintiffs; original and appellate courts; case numbers
Courthouse Plaintiff: Target Consultoria Financeira; 33) Ordinary Action Case Record No. 583.00.2010.184197-7 10 th Lower Civil Court of the Central Courthouse Plaintiff: Shan Ban Chun; 34) Ordinary Action Case Record No. 583.00.2009.115872-8 19 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0317709-63.2009.8.26.0000 (formerly case 994.09.317709-3), in the Court of Appeals of So Paulo Plaintiff: Carlos Eduardo Chamma Lutfalla et al.; 35) Ordinary Action Case Record No. 583.00.2009.115872-8 8 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0115872-45.2009.8.26.0100 (formerly case 990.10.058207-0), in the Court of Appeals of So Paulo Plaintiff: Cludio Coppola Di Todaro; 36) Ordinary Action Case Record No. 583.00. 2007.256585-8 16 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0300971-97.2009.8.26.0000 (formerly case 994.09.300971-3), in the Court of Appeals of So Paulo Plaintiffs: Rivale Representaes Ltda., Marisa Lojas, and Dcio Goldfarb; 37) Ordinary Action - Case Record No. 583.00.2007.264023-3 2nd Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Ernesto and Ike Rahmani; 38) Civil Appeal no. 994.07.018222-9 (originally lower court 527.322-4) Court of Appeals of So Paulo Plaintiff: Terramar Navegao Ltda.; 39) Ordinary Action Case Record No. 0019453-43.2010.4.03.6100 12 th Federal Lower Court, Federal Justice, So Paulo Judiciary Section Plaintiff: Carlos Eduardo Rodrigues; 40) Ordinary Action Case Record No. 0019455-13.2010.4.03.6100 7 th Federal Lower Court, Federal Justice, So Paulo Judiciary Section Plaintiff: Roberto Cordeiro Simes; 41) Ordinary Action Case Record No. 0019454-28.2010.4.03.6100 16 th Federal Lower Court, Federal Justice, So Paulo Judiciary Section Plaintiff: Robson Rodrigo de Souza. BM&FBOVESPA, as successor to BM&F Mercantile and Futures Exchange (a corporation, originally a mutual association) Membership certificates held in BM&F (then a mutual association) These are ordinary actions in which the Plaintiffs sustain irregularities have occurred relative to the 52 nd Extraordinary General Meeting of the members of the former independent exchange known as BM&F Mercantile and Futures Exchange, whose order of business was a decision concerning the proposed demutualization and subsequent spin-off of the BM&F, then a mutual association. The Plaintiffs also object to the valuation of their membership certificates and the plan of substitution for shares of the resulting demutualized corporation, which they claim did not take into account earning retained since 1994. The Plaintiffs applied for interim relief in the form of an injunction annulling the meeting or, in the alternative, as a secondary plea, annulling the members decision that approved the valuation of the membership certificates, and an order for the Defendants to refund losses allegedly incurred by the Plaintiffs on account of the value of membership certificates not having been adjusted on the basis of the last and special balance sheet, prepared in connection with the demutualization. The application for injunctions was rejected and the decision upheld by appellate and higher courts. These events did not prevent the regular holding of an extraordinary members meeting o n September 20, 2007. The actions listed under Nos. (39), (40 and (41), having as plaintiffs Messrs. Carlos Eduardo Rodrigues, Roberto Cordeiro Simes and Robson Rodrigo de Souza, respectively, were filed before a federal court because they include the Brazilian Securities Commission (CVM) as co-defendant. However, in each of these courts the lower court judge decided the market regulator has no standing to be sued, thereby referring the case to the competence of the State Judiciary. The plaintiffs filed interlocutory appeals which are pending decision by the 3 rd Regional Federal Court. As for the other cases, in their answers, the defendants sustained, as preliminary arguments, lack of interest in the action and legal impossibility of the claim, while on the merits claiming for the invalidity of the actions, adding appropriate arguments related to the peculiarities of each case. In the following particular cases, a decision on the merits has been entered by the lower court judge, which either found for the invalidity of the action or dismissed the action without prejudice: lawsuits filed by Plaintiffs Carlos Rodrigues Junior item (1); Jurandir Pinheiro de Castro item (3); Walter Silva Junior item (4); Esborial Participaes e Empreendimentos item (6); Reginaldo Goncales da Silva item (7); Roberto Duprat item (9); Aureum Corretora item (13); and Solidez Corretora item (8); Banex Distribuidora de Ttulos e Valores Mobilirios item (14); Egemp Gesto Patrimonial Ltda item (5), Future Premium item (16), Marcelo Ferreira da Costa item (18), Mario Cesar Nassif item (19), Mrio Srgio Nunes da Costa item (11), Miguel Jurno Neto item (20), Pedro Sylvio Weil item (21), So Paulo Corretora item (12), Shan Ban Chun item (23), Carlos Eduardo Chamma Lutfalla et al. item (34); Cludio Coppola Di Todaro item (35;) Rivale Representaes, Marisa Lojas and Dcio Goldfarb item (36). The decisions in the actions filed by Pedro Sylvio Weil (item 21) and Esborial Participaes (item 6) ha ve become final and unappealable and we are executing the plaintiffs for the loss of suit expenses they are required to pay. The decisions in the actions filed by Mrio Srgio Nunes da Costa (item 11), Miguel
Defendant Amounts, assets or rights at risk
23
Jurno (item 20), Shan Ban Chun (item 23) and Ernesto Rahmani e Ike Rahmani (item 36) may still be appealed for the deadline of the legal period for appeal has yet to come. In all other cases the decisions have been appealed, and four of the appeals have been decided as follows: (a) Civil Appeal No. filed by Aureum Corretora (item 13) upheld the lower court decision which found the action invalid; (b) Civil Appeal No. 0197370-66.2009.8.26.0100, filed by Marcelo Ferreira Martins Costa (item 18), also upheld the lower court decision which found for the invalidity of the action; (c) Civil Appeal No. 012950560.2008.8.26.0100, filed by Reginaldo Goncales da Silva (item 7) the appellate decision vacated the lower court decision solely on grounds that it violated the principle of non infra petita , meaning the decision contemplated less than all the matters of law and the claims of the plaintiff; c) Civil Appeal No. 994.07.018222-9, filed by Terramar Navegao Ltda (item 37), was decided against the appellant and upheld the lower court decision that defeated the action. Terramar filed special appeal with the Superior Court of Justice (STJ), which was followed by a court order that the condition precedent for entertaining the appeal had not been met. This latter order was in turn again appealed (interlocutory appeal) and a decision is currently pending. In addition, it should be noted that Aureum Corretora (item 13) and Reginaldo Goncales da Silva (item 7) filed motions to clarify the appellate decisions issued against them in each of their cases, which are currently pending a decision. And the legal period for Mr. Marcelo Ferreira M. Costa (item 18) to file special appeals is still ongoing. Practice originating the contingency Prospects for a defeat Supposed irregularities related to the 52 nd Extraordinary General Meeting of the members of the former independent exchange known as BM&F Mercantile and Futures Exchange, whose order of business was the decision concerning the proposed demutualization and subsequent spin-off of BM&F, then a mutual association. The Plaintiffs also objected to the valuation of their membership certificates and the plan of substitution for shares of the resulting demutualized corporation. Remote Given the time elapsed since these actions were filed, and the general context within which these cases have been evolving, we understand that the worst-case scenario would be one in which we would be sentenced to pay compensation for losses. A decision annulling the demutualization decision at this point would be highly unlikely for it would be almost impossible to revert to pre-demutualization state of affairs. However, it is very difficult to estimate any amount as reasonable indemnity due to the multiple factors that could be taken into account for this purpose. Thus, in the unlikely event we were to be defeated in any of these cases, the court decision would have to establish guidelines for calculation of the indemnity, as otherwise it seems impossible to assign value to the Plaintiffs supposed losses. No amount has been provisioned.
Provisioned amount
(III.2)
1) Ordinary Action Case Record No. 583.00.2008.155287-5 32 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 924647329.2008.8.26.0000 (formerly case 994.09.320191-2), in the Court of Appeals of So Paulo Plaintiff: Lawrence Pih; 2) Ordinary Action Case Record No.583.00.2008.155286-2 37 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0155286-84.2008.8.26.0100 (formerly case 990.10.141540-2), in the Court of Appeals of So Paulo Plaintiff: Andr Arantes; 3) Ordinary Action Case Record No. 583.00.2009.119296-0 21st Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0289521-60.2009.8.26.0000 (formerly 994.09.289521-0), in the Court of Appeals of So Paulo - Plaintiff: Chao em Ming.; 4) Ordinary Action Case Record No.583.00.2009.113283-6 13 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0113283-80.2009.8.26.0100 (formerly case 990.10.342920-6), in the Court of Appeals of So Paulo Plaintiff: Claudio Monteiro da Costa; 5) Ordinary Action Case Record No. 583.00.2009.113286 23 rd Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Fernando Alexandre Esborial; 6) Ordinary Action Case Record No. 583.00.2009.113284-9 2nd Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Henrique S. Filho; 7) Ordinary Action Case Record No. 583.00.2009.135484-1 17 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Jos Ginaldo de Souza; 8) Ordinary Action Case Record No. 583.00.2009.113285-1 42 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 9177337-08.2009.8.26.0000 (formerly 994.09.276741-8), in the Court of Appeals of So Paulo Plaintiff: Seeich Abe. 9) Ordinary Action Case Record No. 583.00.2010.184100-2 18 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Carlos Eduardo Miranda Teixeira; 10) Ordinary Action Case Record No. 583.00.2010.184181-4 25 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Celso Rodrigues; 11) Ordinary Action Case Record No. 583.00.2010.184093-9 12 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Correta Corretora; 12) Ordinary Action Case Record No. 583.00.2010.184183-0 38 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Edilson Morais Alencar;
Repetitive Cases II
24
13) Ordinary Action Case Record No. 583.00.2010.184182-7 10 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Fabio Causso Feola; 14) Ordinary Action Case Record No. 583.00.2010.184076-0 27 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Izael Camillo dos Anjos; 15) Ordinary Action Case Record No. 583.00.2010.184060-0 27 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Marcos Bianco Bastos; 16) Ordinary Action Case Record No. 583.00.2010.184085-0 36 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Roberto Allan de Moraes Barros; 17) Ordinary Action Case Record No. 583.00.2010.184092-6 42 nd Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Ronaldo Caire; 18) Ordinary Action Case Record No. 583.00.2010.132917-9 7 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Srgio Prado Frigo; 19) Ordinary Action Case Record No. 583.00.2010.184067-9 28 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Henrique Bispo Pimentel; 20) Ordinary Action Case Record No. 583.00.2010.184068-1 36 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Paulo Srgio Albanezi; 21) Ordinary Action Case Record No. 583.00.2010.184196-1 11 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Pedro Augusto Spnola; 22) Ordinary Action Case Record No. 583.00.2010.184196-1 4 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Ulisses Sandes Cardoso. Defendant Amounts, assets or rights at risk BM&FBOVESPA, as successor to BM&F Mercantile and Futures Exchange (a corporation, originally a mutual association) Membership certificates held in the old So Paulo Commodities Exchange ( Bolsa de Mercadorias de So Paulo), or BMSP These are actions against BM&FBOVESPA, as successor to former BM&F Mercantile and Futures Exchange, seeking recognition of the ineffectiveness of the provisions of a certain Partial Spin-Off Protocol and Justification entered into in September 2007 by and between the mutual association named BM&F and the corporation named BM&F S.A. The Plaintiffs sustain that because the document contemplated the termination of the membership certificates in the mutual association named BM&F before the merger through consolidation with BMSP had been completed, this was in conflict with the provisions of a 1991 Memorandum of Understanding between BMSP and the mutual association named BM&F. Every decision thus far rendered in these lawsuits (Lawrence Pih item 1; Andr Arantes item 2; Chao em Ming item 3; Cludio Monteiro da Costa item 4; and Seeich Abe item 8) held the actions invalid. However, the Plaintiffs appealed these decisions, which are now pending judgment by the Court of Appeals of So Paulo. Supposed ineffectiveness of the provisions of the Partial Spin-Off Protocol and Justification entered into in September 2007 by and between the mutual association named BM&F and the corporation named BM&F S.A. The Plaintiffs argue that the ineffectiveness stems from the fact that the document addressed the termination of the BM&F membership certificates before the consolidation of BM&F and BMSP had been completed, which they allege to be inconsistent with the terms of a 1991 Memorandum of Intent entered into by BM&F and BMSP. Remote Shares of BM&FBOVESPA (or the market value thereof) in the equivalent of the membership certificates of the mutual association named BM&F. No amount has been provisioned.
Practice originating the contingency
(III.3) Repetitive Cases III

1) Ordinary Courthouse 2) Ordinary Courthouse 3) Ordinary Courthouse 4) Ordinary Courthouse Action of So Action of So Action of So Action of So Case Record No. 583.00.2010.184098-2 Paulo Plaintiff: Henrique Bispo Pimentel; Case Record No. 583.00.2010.184069-4 Paulo Plaintiff: Marcos Bianco Bastos; Case Record No. 583.00.2010.184096-7 Paulo Plaintiff: Seeich Abe. Case Record No. 583.00.2010.184097-1 Paulo Plaintiff: Srgio Carnelosso. 7th Lower Civil Court of the Central 1st Lower Civil Court of the Central 2nd Lower Civil Court of the Central 3rd Lower Civil Court of the Central
Defendant Amounts, assets or rights at risk Purpose and principal
BM&FBOVESPA and Association BM&F (as successors to BM&F, originally a mutualized entity. The hypothetical present value of the purchase price attributable to certificates BM&F (then a mutualized entity) used to issue granting access rights for certain commodity traders to operate in the agricultural commodities market (called special agricultural commodities trader) or, in the alternative, 10% of the special trader membership certificate (which granted both equity and market access rights). These are actions against BM&FBOVESPA and Association BM&F which object to, and challenge, the
25
related facts
cancellation of BM&F membership certificates attributable to Special Commodities Trader at the time of the demutualization process, on the allegation that such cancellation hinged on the plaintiffs consent or indemnity in the equivalent value. They seek to annul the cancellation or, in the alternative, as a secondary plea, to have BM&FBOVESPA and Association BM&F held liable for paying indemnification. These actions were filed in September 2010 for attributed value on the action of R$50,000.00. Both BM&FBOVESPA and Association BM&F answered each of these lawsuits sustaining, as preliminary argument, insufficciency of action (lack of legal grounds to substantiate the claim) and, on the merits, the invalidity of the claims, as the certificates had no intrinsic economic value, merely granting market access rights, which were sustained after the demutualization, the going-public process and, later, sustained by BM&FBOVESPA, as successor and market operator, through market access permits whose issuance grants trading rights. No decision has yet been entered in any of these suits. Cancellation of BM&F certificates granting rights as special agricultural commodities trader in the course of the demutualization process carried out in preparation of the subsequent corporate restructuring and going-private processes. In any event, after the demutualization, it was no longer necessary to hold a certificate in order for any brokerage or trader to be grante d market access rights. Remote Award for damages requiring payment of indemnification at the hypothetical present value of the purchase price attributable to special agricultural commodities trader certificates or, in the alternative, 10% of the special trader membership certificate. No amount has been provisioned.
Practice originating the contingency Prospects for a defeat Impact in case of a defeat Provisioned amount
4.7
Other material contingent liabilities not previously discussed.
As of the date of this Reference Form neither we nor any of our subsidiaries has additional contingent liabilities other than the legal or administrative proceedings discussed under subsection 4.3 above. 4.8 Information on the rules applying in the jurisdiction of the issuers home country, if based abroad, and on the rules applying in the foreign jurisdiction in which securities are held under custody. BM&FBOVESPA has been duly organized and is regularly existing under the laws of Brazil. Our stocks have been listed to trade on a stock exchange in our home country, under the jurisdiction of Brazil. As we have not registered securities elsewhere, this subsection is not applicable to us. 5. Market risks 5.1. Quantitative and qualitative disclosure of exposure to market risks, including risks of changes in exchange rates and interest rates.
The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy, which could impact our business.
The Brazilian government frequently intervenes in the domestic economy and occasionally makes significant changes in its policies and regulations. The Brazilian governments actions to curb inflation and to implement other policies has in the past included increases in interest rates, changes in fiscal policy and tax regulations, price controls, currency devaluations, capital controls, and certain limits on imports of goods and services. Our business, financial condition, results of operations and cash flow, and the market price of our shares, could be adversely affected by changes in policies or regulations involving or affecting certain factors, including interest rates; foreign exchange controls and restrictions on capital flows; fluctuations in exchange rates; inflation rates; liquidity in the domestic financial and capital markets; fiscal policy and taxation system; and other policy, social and economic developments in Brazil or affecting domestic economic conditions. Uncertainty over whether the Brazilian government will implement changes in fiscal policy, in taxation or the labor laws, or whether it will adopt a more restrictive interpretation of existing rules that affect these or other factors in the future contributes to economic uncertainty and heightens market volatility, which could adversely affect the markets we operate, our business and the operations of other market participants. The Brazilian federal government has, from time to time, intervened in the domestic economy and the capital markets and financial services industry. Government intervention in the past has included changes in the taxation system, implementation of tax reforms, changes in tax rates and, occasionally, the creation of transitory taxes whose proceeds are allocated to funding certain government programs. The effects of any of these or other changes involving taxation are difficult to quantify or predict. In particular, changes in the charge of tax on financial transactions and transactions in securities and derivatives could deter trading and adversely affect our business. Additionally, the Brazilian courts or the federal revenue could adopt a more restrictive interpretation of existing tax rules in the future, which could change the taxation system as currently applying to us and the capital markets.
Inflation and government measures to curb inflation could significantly influence the domestic economic
26
landscape and adversely affect our results of operations.

Brazil has in the past experienced extremely high rates of inflation. Inflation, along with government measures to curb inflation and speculation about future government actions, have significantly and negatively affected the Brazilian economy in the past, contributing to economic uncertainty and heightened volatility in the Brazilian capital markets. Future government measures to contain inflationary pressures, including cuts in interest rates, intervention in the foreign exchange market and actions to adjust or stabilize the real, could negatively impact the domestic economy and our business. If Brazil again experiences high inflation, we may not be able to adjust the prices we charge our customers to offset the effects of inflation on our cost structure, which would cut down our net and operating margins.
Political and economic developments and the perception of risk in other countries, especially emerging market countries, could adversely affect the Brazilian economy, our business and the market price of our shares.
The market price of securities of Brazilian issuers is affected to varying degrees by the capital flows and the economic and market conditions in other countries, including other emerging market countries. Heightened risk aversion in our markets could have detrimental effects and push down the market prices of securities of Brazilian issuers.
Exchange rate fluctuations could adversely affect our company and the market price of our shares.
Over the past four decades the Brazilian government implemented a number of economic plans and different exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the timing of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating rate system. From time to time, there were significant fluctuations in Brazilian real exchange rate to U.S. dollar and other currencies. Depreciations of the Brazilian real relative to the U.S. dollar could create additional inflationary pressures in Brazil and lead to increases in interest rates, which would negatively affect the Brazilian economy as a whole, the trading activities on our stock and contract markets and the market price of our shares. Additionally, depreciations of the Brazilian real could significantly impact the cost of our debt denominated in U.S. dollars and negatively affect the market value of our securities portfolios. In contrast, the appreciation of the Brazilian real relative to the U.S. dollar and other foreign currencies could result in deterioration of the Brazilian current accounts denominated in foreign currency and a slowdown in exports growth. Depending on the circumstances, a steep depreciation or appreciation of the Brazilian currency could materially and adversely affect the conditions for growth of the Brazilian economy, thereby affecting our strategic growth plans, our business, financial condition and results of operations. There have been from time to time significant fluctuations in the Brazilian real exchange rate to the U.S. dollar and other currencies. In 2002 the Brazilian real depreciated 52.3% against the U.S. dollar, partially due to political uncertainties a bout the presidential election and the effects of a global economic slowdown. While the Brazilian real exchange rate appreciated against the U.S. dollar by 11.8%, 8.7%, 17.2%, 25.5% and 11.7% in 2005, 2006, 2007 and 2009 and 2010, respectively, in 2008 it depreciated by 31.9% primarily due to the global financial crisis. We can give no assurances that the Brazilian real will depreciate or appreciate against the U.S. dollar in the future. As of December 31, 20 10, the PTAX selling rate compiled and released by the Central Bank was R$1.67/US$1.00. Moreover, in 2010, approximately 32.0% of our revenues from derivatives and 14.0% of our overall revenues from trading fees were denominated in U.S. dollars, and correlated primarily with transactions in Fx futures and options, in particular where the underlying is the exchange rate for the Brazilian real against the U.S. dollar, and US dollar-denominated interest rate futures contracts. Given that we charge fees in U.S. dollars for these contracts and options, appreciation of the Brazilian real against the U.S. dollar could discourage trading in these contracts and options, which would adversely affect our revenues and results of operations.
Fluctuations in interest rates may negatively affect our business and results of operations.
Since 2001 there have been frequent adjustments of the basic interest rate. As a result, interest rates have fluctuated significantly. During the second half of 2003 and first half of 2004 the basic interest rate was gradually cut by the Centra l Bank. Then, in August 2004, as a measure to curb inflationary pressures, the Central Bank raised the basic interest to 16% and again in May 2005 to 19.75% by year. Over the next two years, the favorable macroeconomic landscape and low and stable inflation, controlled through inflation targeting, drove the Central Bank to resume the gradual cuts in interest rates, which in December 2005 and September 2007 had declined to 18% and 11.25%, respectively. However, between April and June 2008, inflationary pressures and market expectations of a spike in inflation ra tes spurred 0.5% monthly jumps in the basic interest rate, which by June 2008 had climbed to 12.25% by year. The 2008-2009 global financial crisis prompted measures to curb economic slowdown and expand credit availability, as well as another round of cuts in the benchmark reference rate, or Selic rate, which by July 2009 had dropped to 8.75% per annum. This rate was sustained through April 2010, when the Central Bank reversed this declining trend to increase the basic rate to 9.5% , then to 10.25% in June 2010 and 10.75% p.a. in July 2010, in an effort to curb the inflationary trend. High inflation and interest rates, as well as sudden shifts in monetary and other Brazilian government policies could materially and adversely affect economic growth and macroeconomic conditions in Brazil, which could lead to significant declines in the market prices of securities traded on Brazilian capital markets, in particular our equities and derivatives markets, thereby
27
materially and adversely affecting our revenues, financial condition and results of operations.
Risks relating to our role as Central Counterparty Clearing House (CCP)

Through our clearing facilities (derivatives, FX, debt securities and equities clearinghouses) we act as central counterparty (CCP) to ensure multilateral clearing and settlement for the derivatives market (including futures, forward, options and swap markets), and the spot FX market, the government debt securities markets (cash, forward, and repo and securities lending markets) and, in addition, for the equities markets (including cash, forward, options, futures and securities lending markets) and the private debt securities markets (cash and securities lending markets). We are directly or indirectly exposed to important credit risks, which are intrinsic to our role as central counterparty to clearing and settlement transactions and correlate with the roles of the following participants: Clearing participants, clearing agents and participant brokerage firms that operate at our clearinghouses; Customers of participant brokerage firms that operate at our clearinghouses; and Financial institutions that are participants in our FX clearinghouse. A default by a clearing participant, clearing agent, brokerage firm or participant in our FX clearinghouse could correlated with factors as a bankruptcy, intervention, extrajudicial liquidation, lack of liquidity or operating failure, among other factors beyond our control. While our clearing facilities are not directly exposed to market risks because they do not carry net long or short positions in any contract or financial asset traded on our markets, default by a market participant would entail our exposure to market risks associated with a third-party position which our clearinghouse would be required to clear and settle, as it is pledges to do in any transaction where a participant acts as intermediation agent. Market risks that correlate with exposure to thirdparty positions include: The market price of stocks and stock indices traded on our equities markets; Liquidity and the value of collateral posted as margin and positions intermediated by market participants; The Brazilian real to U.S. dollar exchange rate; The interbank rate denominated in Brazilian reais; U.S. dollar-denominated Brazilian yield curve (cupom cambial) e The market prices of agricultural commodities. The potential value at risk associated with these and other market risk factors essentially correlate with the value of open positions in default, and on the nature of collateral posted as part of the risk management mechanisms adopted by our clearinghouses. Typically, the prospects for materialization of risk associated with events of default are positively correlated with the following factors: Heightened volatility in market prices and rates, in particular those that define the value of securities and contracts cleared and settled in our systems; Heightened degree of financial leveraging; Uncertainties about macroeconomic conditions in Brazil and across the world; Disruption of the liquidity flows in local and international markets; Developments in the local or international credit markets, which affect institutions the Central Bank considers to be systemically important; Sudden political changes in Brazil or in advanced market economies; Catastrophic events, such as natural disasters or war. Acting in the capacity of central counterparty, we absorb the risks of the counterparties in -between a trade transaction and its clearing and settlement, carrying out multilateral activities for financial settlement and clearing of securities and other financial assets, such that in the event of default we may have to resort to certain established safeguard mechanisms, or in extreme situations we may have to resort to our own net assets.
Risks relating to our financial investments

In addition to the risks factors previously discussed, we are exposed to market risks that correlate with the normal course of our business. These risks may affect us in different ways that essentially correlate with changes in rates and market prices, and our role as central counterparty to clearing and settlement transactions. The discussion below provides further information on these market risks.
Interest rate risk

Interest rate risk correlates with fluctuations in interest rates in the future (at expiration) affecting the spread between interestearning assets and interest-bearing liabilities, with impact on the fair value of our transactions.
Floating rate positions. Given the advisability of, and need for securing immediate liquidity with as little as possible mismatch
resulting from fluctuations in interest rates, our policy on financial investments calls for financial assets and liabilities to track either floating or pegged rates. The chart in subsection 5.2(d) of this Form, under the heading Risk Factors (consolidated data), sets forth consolidated data on investments in bank deposit certificates (CDBs, which track the interbank deposit rate),
28
and in government bonds, repo transactions, and units of open-ended funds benchmarked to the interbank deposit rate (DI) or the base interest rate (Selic rate). This strategy mitigates the impact eventual fluctuations in interest rate may have on the fair or present value of our financial assets and liabilities. We consider exposure to interest rate volatility an important risk factor. Accordingly, consistent with the CVM requirement, we present the table below, which sets forth data concerning the impact on year-end interest income of 25% and 50% fluctuations in the Selic rate over a 3-month probable scenario.
At December 31, 2010 Risk factor Impact on interest income (3 month probable scenario) -50%
( )
-25%
Probable scenario
25%
50%
Financial investments (in R$ thousands) Assumed annualized rate (%)

( )
Selic rate * CDI rate **
( )
44,497 5.51%
66,094 8.27%
87,282 11.03%
108,079 13.79%
128,502 16.54%
Selic rate (*) CDI rate (**)
* Selic rate is the benchmark reference rate compiled and released by the Central Bank; ( **) CDI rate refers to Brazils overnight interbank deposit rate (known DI-Over) compiled by CETIP as the daily average annualized rate
calculated by the number of business days in the month, of the one-day interbank deposit rates. CDIs are one-day interbank deposit certificates.
Fixed rate positions: As part of our financial investments is pegged to fixed rates, so is our net exposure to interest rate risk
inherent in these investments. However, such as shown in the chart in subsection 5.2(d) of this Form, under the heading Risk Factors (consolidated data), we consider the impact of possible materialization of risk in these cases would not be material.
Exchange rate risk

Exchange rate risk correlates with exchange rate fluctuations affecting the purchase price of equipment and materials, the selling price of products and the price of transactions in financial instruments, where any of these prices is denominated in foreign currency. Fluctuations in foreign exchange rates may have a negatively impact on the equivalent value in Brazilian reais. In addition to receivables and payables denominated in foreign currency, which include interest payable under our global senior notes, we also record foreign currency liabilities consisting of third-party collateral pledged by foreign investors to secure the settlement of transactions carried out on our markers, as well as our own financial resources located abroad. As of December 31, 2010, our net exposure to exchange rate risk amounted to negative R$1,820 thousand (versus positive R$16,930 thousand as of December 31, 2009 and positive R$30,165 thousand as of January 31, 2009. However, per percentage data shown in the chart in subsection 5.2(d) of this Form, under the heading Risk Factors (consolidated data), we consider the impact of possible materialization of risk in these cases would not be material.
Positions in inflation indexes and gold derivatives

As a percentage of the total, pursuant to data set forth in the chart in subsection 5.2(d) of this Form, under the heading Risk Factors (consolidated data), we consider the impact of possible materialization of risk in these cases would not be material. 5.2. a. Market risk management policy risks against which protection through hedging is sought
1)
Our role as Central Counterparty Clearing House (CCP)
Given that our clearing facilities are potentially subject to market risks associated default under third-party trade positions, our risk management systems take into account an extensive number of risk factors, whether or not associated with the type of assets and contracts cleared and settled though our clearinghouses. Risk factors we take into account when assessing market and other risks have been discussed in item 5.1 above.
2)
Risks related to our equity investment in the CME Group
Starting from the issue date of our global notes, we have designated as hedging instrument that portion of the principal under the notes which correlates with changes in exchange rates in order to hedge the foreign currency risk affecting that portion of our investment in the CME Group Inc which attributable to the notional amount of US$612 million (a hedging instrument in a hedge of net investment in a foreign operation, per Note 7 to our financial statements as of and for December 31, 2010). Accordingly, we have adopted net investment hedge accounting pursuant to accounting standard CPC-38 (Financial Instruments: Recognition and Measurement), for which purpose the hedging relationship has been formally designated and documented, including as to (i) risk management objective and strategy for undertaking the hedge, (ii) category of hedge, (iii) nature of the risk being hedged, (iv) identification of the hedged item, (v) identification of the hedging instrument, (vi) evidence of the actual statistical relationship between hedging instrument and hedged item (retrospective effectiveness test) and (vii) a prospective effectiveness test. Under CPC 38 (IAS 39) we are required to assess the hedge effectiveness periodically by conducting retrospective and prospective tests. On testing backward-looking effectiveness, we adopt the ratio analysis method, also called dollar offset method, as applied on a cumulative and spot-rate basis. We have tested the hedge effectiveness retrospectively and prospectively, having determined that at December 31, 2010, there was no realizable ineffectiveness.
3)
Risks related to our financial investments
29
Our policy for investment of cash balances recommends that we focus on lower -risk investment alternatives, which translates into substantial portions invested in Brazil government bonds or repurchase agreements whose underlying are government bonds from our portfolio, which we originally acquire through investment funds or directly in the market. In any event, our policy on investment of cash balances calls for preservation of capital and allocation of cash balances to conservative, highly-liquid, lower risk financial investments readily convertible into cash. As a result, we customarily hold positions substantially consisting of Brazil government bonds which for the most part pay floating rates that track either the Selic rate or the CDI rate. b. hedging strategies
1)
Hedging strategies we use are designed to cover potential losses related to our role as central counterparty (CCP) to clearing and settlement transactions. These strategies correlate primarily with potential market risks intrinsic in our central counterparty activities and aimed to protect us against these risks. The safeguard structure of a clearing facility represents a set of resources and mechanisms we may use to hedge potential loss arising from failed delivery or settlement by one or more market participants. The formation of these safeguard structures is contemplated under article 4 of Law No. 10,214 dated March 27, 2001, which governs activities performed by clearing and settlement facilities within the realm of the Brazilian payment system and the capital markets. At BM&FBOVESPA a risk management safeguard structure includes these safeguard mechanisms, a set of policies, standards, procedures and systems and practices.
2)
As previously discussed, in July 2010 we issued global notes for a nominal amount of US$612 million, which mature in July 2010. The purpose of this bond issuance was to finance our purchase of additional shares in the CME Group , thereby increasing our aggregate holdings to 5% of the outstanding shares. Starting from the notes issue date, we have designated as hedging instrument that portion of the principal under the notes which correlates with changes in exchange rates in order to hedge the foreign currency risk affecting that portion of our investment in the CME Group Inc which attributable to the notional amount of US$612 million (a hedging instrument in a hedge of net investment in a foreign operation, per Note 7 to our financial statements as of and for December 31, 2010). For additional information, see subsection 5.2(a) above.
3)
While for a relatively moderate portion of our financial investments (as set forth in subsection 5.2(c) below) we do seek hedge protection through investing in exclusive investment funds, which is explained by the very low risk profile associated the large portion which we do not hedge, we have nonetheless decided not to adopt hedge accounting. c. hedging tools used for protection
1)
Pursuant to our strategy which prefers solid mechanisms to mitigate exposure to potential materialization of risk intrinsic in our role as central counterparty to ensure multilateral clearing and settlement transactions, we have developed specific risk management systems and safeguard mechanisms for each of the clearing facilities we operate. These systems and safeguard structures are described in detail in the operating regulations and procedure manuals adopted by each of these facilities. In addition, these systems and structures have been tested and approved by t he Brazilian National Monetary Council (CMN) and the Central Bank pursuant to CMN Resolution No. 2,882/01 and Central Bank Circular Directive No. 3,057/01. Data on key components of these safeguard structures are set forth below.
Derivatives Clearinghouse
Collaterals pledged by participants of the derivatives clearinghouse (futures contracts and other derivatives). The table below sets forth data on the positions in different types of collaterals pledged to our derivatives clearinghouse.
Pledged collaterals At December 31,2010
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds Bank letters of guarantee Stocks Bank Deposit Certificates (CDBs) Gold Cash collateral BM&F FoF (FIC Banco BM&F) BB-BM&F Financial Investment Fund
76,979,261 3,538,492 4,934,328 1,150,998 105,958 652,290 173,340 -
53,754,858 1,479,341 3,351,593 1,307,762 60,865 555,106 95,595 -
89,760,722 3,690,835 2,678,991 2,161,736 319,831 327,644 78,130 29,049
30
(FIF BB-BM&F)
Rural Commodity Notes (CPRs) Total 87,534,667 343 60,605,463 829 99,047,767
At the derivatives clearinghouse, the intermediation agents to a transaction (brokerage firm and clearing participant) are co-liable for these transactions and for meeting margin calls.
Special Clearing Participant Fund (Fundo de desempenho operacional) Derivatives Clearinghouse. This special
clearing participant fund (year-end positions amounting to R$1,162,122 thousand (versus R$1,126,126 thousand in 2009, R$1,145,908 thousand in 2008) was set up as a mutual fund to ensure the settlement of collateralized transactions in the event of default by one or more clearing participants and holders of access permits granting settlement and trading rights. The minimum contribution clearing participants are required to make to the fund vary in correlation to the type of settlement rights ( direitos de liquidao , or DL) granted under the access permit issued to any particular clearing participant (R$5,500 thousand, R$6,500 thousand and R$7,500 thousand for Type 1,Type 2 or Type 3 settlement rights, respectively. The minimum contribution commodity brokerages are required to make to the fund amounts to R$6,000 for holders of permits granting full trading rights, and R$4,000 for holders of permits granting restricted trading rights (for trading in interest rate contracts, exchange rate contracts, equity index contracts). Participants holding rights to trade in derivatives cleared and settled at our derivatives clearing facility contribute minimum R$3,000 thousand. The minimum contribution for certain traders we define as Locals amoun ts to R$1,600 thousand both in the case of locals holding full trading rights and holders of permits granting restricted rights to traded in interest rate contracts, exchange rate contracts and equity index contracts. Finally, permit holders with rights to trade in other futures contracts cleared and settled at our derivatives clearing facility contribute minimum R$1,000 thousand;
Contributed assets At December 31,2010
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds Bank letters of guarantee Bank Deposit Certificates (CDBs) Stocks BM&F FoF (FIC Banco BM&F) Gold Cash collateral Total contributions Minimum membership contribution of clearing agents and trading participants Surplus contributions
921,678 172,210 52,801 15,358 75 1,162,122 (989,200) 172,922
859,804 156,200 81,310 20,098 1,781 582 6,351 1,126,126 (1,009,500) 116,626
863,451 160,730 98,683 17,647 4,177 1,220 1,145,908 (1,026,700) 119,208
Agribusiness Operating Fund (Fundo de operaes do mercado agropecurio ) Derivatives Clearinghouse . This fund
(R$50,000 thousand as of December 31, 2010, 2009 and 2008) was set up as a safeguard mechanism for the settlement of transactions in agricultural commodities;
Clearing Participant special fund (Fundo especial dos membros de compensao) Derivatives Clearinghouse. This
special clearing fund (R$40,000 thousand as of December 31, 2010, 2009 and 2008) was set up to ensure settlement of transactions, regardless of the type of contract being settled;
Clearing Fund (Fundo de liquidao de operaes) Derivatives Clearinghouse.
This clearing fund (R$408,509 thousand as of December 31, 2010 versus R$378,113 thousand and R$387,236 thousand as of December 31, 2009 and 2008, respectively) was set up to ensure settlement of transactions registered and accepted at the derivatives clearinghouse in the event of default by one or more clearing agents, if other safeguard mechanisms run out of assets with which to ensure clearing and settlement and completed. The minimum individual contributions amount to R$2.000 thousand, R$3.000 thousand and R$4.000 thousand, for holders of access permits granting Type 1, Type 2 and Type 3 settlement rights. Moreover, each clearing participant is required to pay R$500 thousand by designated holders of trading rights for whose activities the clearing participant undertakes certain responsibilities.
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds Bank letters of guarantee Bank Deposit Certificates (CDBs) Stocks
354,256 35,012 14,700 4,541
314,304 33,000 20,200 6,634
324,979 30,000 18,560 7,763
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Gold Cash collateral BB-BM&F Financial Investment Fund (FIF BB-BM&F) Total contributions Minimum membership contributions from clearing agents and trading participants Surplus contributions
408,509 (313,000) 95,509
2,925 1,050 378,113 (319,500) 58,613
1,928 4,005 1 387,236 (333,500) 53,736
Pursuant to article 5 of Law No. 10,214 dated March 27, 2001, and article 19 of Central Banks Circular Directive No. 3,057 dated August 31, 2001, which govern and regulate activities by clearing and settlement facilities within the realm of the Brazilian payment system and the capital markets, as of December 31, 2010 our derivatives clearinghouse operated with especially allocated net assets worth R$34,807 thousand (versus R$31,678 thousand and R$28,808 thousand in 2009 and 2008, respectively).
Equities Clearinghouse
Collaterals pledged by participants of the equities clearinghouse (stocks, equity securities and private debt securities);
Collaterals At December 31,2010
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds Stocks Foreign government bonds Bank Deposit Certificates (CDBs) Bank letters of guarantee Cash collateral Gold BB-CBLC Financial Investment Fund
22,749,941 25,809,847 736,905 580,066 448,054 235,806 4,955 6,092 130,873 50,702,537
15,665,732 17,208,344 1,944,896 997,944 296,442 247,477 2,476 8,179 65,884 36,437,374
10,185,946 9,101,835 1,219,499 467,649 239,625 101,927 25,958 6,140 132,692 21,481,271
(FIF BB-CBLC)
Other Total
At the equities clearinghouse, the intermediation agents to a transaction (brokerage firm and clearing participant) are coliable for these transactions and for meeting margin calls.
Settlement Fund (Fundo de liquidao) - Equities Clearinghouse. As of December 31, 2010, the settlement fund had
contributed assets worth R$485,409 thousand (versus R$322,268 thousand and R$350,209 thousand in 2009 and 2008, respectively) as a result of contributions from clearing and settlement agents for assurance of completion of clearing and settlement transactions;
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds BM&FBOVESPA investments in exclusive funds, Brazils bonds and repo transactions Cash collateral Total contributions
485,409 485,409
322,261 7 322,268
190,629 159,580 350,209
Pursuant to article 5 of Law No. 10,214 dated March 27, 2001, and article 19 of Central Banks Circular Directive No. 3,057 dated August 31, 2001, which govern and regulate activities by clearing and settlement facilities within the realm of the Brazilian payment system and the capital markets, as of December 31, 2010 our equities clearinghouse operated with especially allocated net assets worth R$37,210 thousand (versus R$33,877 thousand and R$30,374 thousand in 2009 and 2008, respectively.
FX Clearinghouse
Collaterals pledged by FX market participants;
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds Cash collateral
3,855,147 66,520
3,766,090 -
3,550,223 174,060
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Total contributions
3,921,667
3,766,090
3,724,283
Participation fund (Fundo de participao) FX Clearinghouse. The participation fund (year-end positions amounting to
R$162,235 thousand versus R$154,056 thousand and R$140,584 thousand in 2009 and 2008, respectively) was set up to cover financial losses resulting from risks related to the banking operations in our FX clearinghouse. Bank contributions may be in the form of currencies or financial instruments;
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds
162,235
154,056
140,584
Operating Fund FX Clearinghouse. The operating fund was set up to cover losses from failed executions and participant
clerical errors during the trading cycle. As of December 31, 2010, 2009 and 2008 the fund held contributed assets worth R$50,000 thousand;
Guarantor fund for the spot U.S. dollar pit (Fundo garantidor da roda de dlar pronto) FX Clearinghouse. Starting
from mid-2009, this fund was discontinued. Contributions to the guarantor fund formerly included deposits in cash and assets made by us and participants to cover financial losses resulting from mistakes or clerical errors during the trading cycle, as from exchange rate fluctuations between a trade on the spot U.S. dollar pit and the final acceptance by the bank for which the trade was intended. As of June 30, 2009, when we shut down the trading floor and the spot pit, this fund was discontinued. Total contributed assets then amounted to R$27,759 (as of that date our contributions totaled R$15,000);
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds Bank letters of guarantee Cash collateral BM&FBOVESPA contribution Total contributions
13,812 240 480 15,000 29,532
Pursuant to article 5 of Law No. 10,214 dated March 27, 2001, and article 19 of Central Banks Circular Directive No. 3,057 dated August 31, 2001, which govern and regulate activities by clearing and settlement facilities within the realm of the Brazilian payment system and the capital markets, as of December 31, 2010 our FX clearinghouse operated with especially allocated net assets worth R$34,848 thousand (versus R$31,714 thousand and R$28,808 thousand in 2009and 2008, respectively).
Debt Securities Clearinghouse

Collaterals pledged by participants in the bonds market;
(in R$ thousands)
At December 31,2009
(in R$ thousands)
At December 31,2008
(in R$ thousands)
Brazil government bonds
928,786
832,125
1,423,484
Operating Fund Debt Securities Clearinghouse. The operating fund was set up to cover losses from failed executions and
participant clerical errors during the trading cycle. As of December 31, 2010, 2009 and 2008 the fund held contributed assets worth R$40,000 thousand; Pursuant to article 5 of Law No. 10,214 dated March 27, 2001, and article 19 of Central Banks Circular Directive No. 3,057 dated August 31, 2001, which govern and regulate activities by clearing and settlement facilities within the realm of the Brazilian payment system and the capital markets, as of December 31, 2010 our Debt Securities clearinghouse operated with especially allocated net assets worth R$24,536 thousand (versus R$22,373 thousand and R$20,277 thousand in 2009 and 2008, respectively).
2)
In order to hedge the foreign currency risk affecting that portion of our investment in the CME Group Inc which is attributable to the notional amount of US$612 million, and correlates with the nominal amount of our July 2010 bond issuance whose proceeds funded said portion of our investment in CME shares, we have designated the latter a hedging instrument in a hedge of net investment in a foreign operation (per Note 7 to our financial statements as of and for December 31, 2010) that portion of the principal under the global notes which correlates with changes in exchange rates. Accordingly, we have adopted net investment hedge accounting pursuant to accounting standard CPC-38 (Financial Instruments: Recognition and Measurement). For additional information on the hedge accounting, see subsection 5.2(a) above.
3)
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Derivative financial instruments in which we transact include futures contracts and options based on the local inter est rate, which are recognized at their market value. These financial instruments make part of the portfolios of exclusive funds, which were consolidated and are user with the aim of covering exposure to fixed rate risks by acquiring a similar position in floating rate (CDIs) contracts. The table below sets forth our hedged position as of December 31, 2010.
Year ended December 31,2010 Benchmark (in R$ thousands) Market price (in R$ thousands) Accumulated result ((in R$ thousands)
Interest rate
Futures contract short position

LTN (National Treasury Bills) Net position
(10,094) 11,038 944
(10,768) 11,454 686
(186) 214 28
d.
guidelines adopted in managing these risks

1)
The safeguard structures we adopt at our clearing facilities are based to a large extent on a loss sharing model known as Defaulter Pays, pursuant to which any shortfall in settlement obligations is apportioned either on the basis that this is covered by the defaulting party (defaulter pays model) or absorbed by the participants in the clearing arrangement, which for this purpose will have put up collateral, on which we and they rely to absorb possible losses from default. As a result, our margin requirements and margin calls constitute key components of the risk management structure we adopt to tackle risk exposure inherent in our role as central counterparty to multilateral clearing and settlement transactions. For most contracts and transactions in financial assets we calculate and size margin so as to cover the market risks inherent in the relevant transaction, i.e., price volatility over an expected time horizon, which is the expected timeline to settlement of positions by a potentially defaulting participant. This time horizon varies in correlation to the nature of a contract or the financial asset for which margin requirements are calculated. Typically, the models we use in margin requirement calculation are based on stress testing. Stress testing uses a particular methodology to gauge market risk considering not only recent historical price volatility, but also the possibility that unexpected events could modify historical price and market patterns. The main parameters we use in margin calculation models are stress scenarios defined by our market risk committee for those market risk factors that affect the prices of contracts and assets traded on our markets. In defining stress scenarios, the market risk committee adopts a combination of quantitative and qualitative analysis. Quantitative analysis is conducted with the support of statistical models of risk estimation, such as the Extreme Value Theory (EVT), estimation of implied volatilities, and GARCH family models, besides historical simulations. Qualitative analysis in turn considers aspects related to the domestic and international economic outlook and political landscape, as well as possible impacts on the markets we operate.
2)
For net investment hedge accounting, we adopt the guidelines and parameters provided by accounting standard CPC-38 (IAS 39) (Financial Instruments: Recognition and Measurement). Accordingly, we have formally designated and documented the hedging relationship as a hedging instrument in a hedge of net investment in a foreign operation, and assess the hedge effectiveness periodically by conducting retrospective and prospective tests. For more information, see subsection 5.2(a) above.
3)
Our risk management policy calls for cash balances to be invested in low-risk investment alternatives, earning floating or fixed interest rates. This strategy mitigates the impact eventual fluctuations in interest rate may have on the fair or present value of our financial investments. The table below sets forth data on exposure to market risk factors related to financial instruments, which we use to structure financial investment strategies:
Risk Factors (consolidated data) Risk factor base: December 2010 2010
Financial element
Percentages at December 31 2009
2008
CDIs Fixed interest rate Gold Exchange rate (USD) Inflation rate
A fall in CDI rates A rise in fixed rate A fall in market price Appreciation of BRL to USD rate A fall in inflation rate
99.35% 0.35% 0.25% 0.05% 0.00% 100.00%
98.03% 1.27% 0.20% 0.50% 0.00% 100.00%
96.68% 1.78% 0.17% 1.37% 0.00% 100,00%
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e. in case the issuer transacts in financial instruments other than to hedge risks, identify the purposes of said transactions;
1)
Such as previously discussed, our clearing facilities do not carry net long or short positions in any contract or financial asset traded on our markets. In addition, these clearing facilities do not trade in other markets seeking to hedge positions.
2) 3)

Not applicable. While we do not seek hedge protection for a significant portion of our financial investments, because of the very low risk profile associated with them, we do hedge certain positions representing a relatively moderate portion of our financial investments, such as set forth in subsection 5.2(c) above, and in these cases we consistently transact in financial instruments that provide hedging protection. f. organizational risk management and control structure
1)
Risk management policies adopted at our clearing facilities are established by our market risk committee use in line with the guidelines and framework set by our board and executive officers. In May 2009 we established the Risk Committee as a board advisory body whose primary responsibilities include mo nitoring economic and market developments, and evaluating and accessing market, liquidity, credit and systemic risks related to markets we operate and manage, substantially through a strategic and structural approach. The risk committee is composes of four members, including the chairman and independent directors. Currently appointed members of our risk committee include Arminio Fraga Neto (independent director and chairman of our board), Jos Roberto Mendona de Barros (independent director), Julio de Siqueira Carvalho de Arajo (director) and Luis Stuhlberger (director). Under our bylaws, the market risk committee is a body whose members include the chief executive for risk management and the clearing and depository facilities, the chief operations officer, the chief product development officer, the risk management officer, settlements officer, operating officer, strategy and planning officer, products of derivatives officer, corporate risk and fixed income and FX officer. The responsibilities of the market risk committee include (i) assessing the domestic policy and macroeconomic conditions and their impact on the markets we operate; (ii) determining the models we use for margin requirement calculation and for control of the intraday risk underlying transactions carried out in our markets; (iii) setting parameters for these models, in particular stress scenario parameters for each type of risk factor; (iv) establishing the list of acceptable collaterals, and the collateral valuation methods, usage limitations and risk-based haircuts; and (v) other research and analyses. Our risk management officer is responsible for executing the risk management policies set by the market risk committee in connection with our activities as central counterparty to multilateral clearing and settlement transactions, and responsible also for continually monitoring policy suitability vis--vis current market conditions. As of December 31, 2010, our risk management department included 38 active employees.
2)
We systematically monitor the hedge effectiveness retrospectively and prospectively relative to the hedging instrument in a hedge of net investment in a foreign operation, according to accounting standard CPC-38 (IAS 39). This is done because we have adopted net investment hedge accounting, the objective being to hedge the foreign currency risk affecting that portion of our investment in the CME Group Inc which is attributable to the notional amount of US$612 million, which correlates with the nominal amount of our July 2010 bond issuance whose proceeds funded said portion of our investment in CME shares, and also, more specifically, with that portion of the principal under the global notes which correlates with changes in exchange rates. This we have formally designated a hedging instrument in a hedge of net investment in a foreign operation, and are required to test for effectiveness. For more information, see subsection 5.2(a) above.
3)
Our policy on financial investments was established by our board of directors. Management routinely monitors our financial investments and compliance with the policy. g. suitability of the operating structure and internal controls for assessment of the effectiveness of the risk management policy
1)
Such as discussed in the preceding item, the decision-making structure related to risk management processes associated with our role as central counterparty to multilateral clearing and settlement transactions involves a number of professionals at different levels (strategic, management, operational), from different departments and practice areas, and is instrumental in
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prompting awareness and adherence to the policies guidelines and standards, in addition to spurring objective and sharp evaluations of effectiveness.
2)
We systematically monitor the hedge effectiveness retrospectively and prospectively relative to the hedging instrument in a hedge of net investment in a foreign operation, according to accounting standard CPC-38 (IAS 39). This is done because we have adopted net investment hedge accounting, the objective being to hedge the foreign currency risk. For more information, see subsection 5.2(a) and (f) above.
3)
We routinely and systematically monitor, and periodically evaluate our financial investments, review and consistently seek to improve our internal controls operating structure to ensure our policies are adequately and effectively implemented. 5.3. Significant changes in exposure to primary market risks or the risk management policy in the last year
1)
There have been no significant changes to the key risk factors related to our activities as central counterparty (CCP) to multilateral clearing and settlement transactions.
2)
There have been no changes related to the principal market risk factors related to the net investment in a foreign operation which we hedge as previously discussed (see subsection 5.2(a) above). We have tested the hedge effectiveness retrospectively and prospectively, having determined that at December 31, 2010, there was no realizable ineffectiveness.
3)
There have been no changes in our exposure to market risks associated with our financial investments. 5.4. Additional information deemed to be material.
Other than as discussed above, there is no additional information on market risks which has not been discussed in this Section 5. 6. Corporate history 6.1. Incorporation Date: December 14, 2007, is the date of incorporation of T.U.T.S.P.E. Empreendimentos e Participaes SA , the company which originated BM&FBOVESPA. In its current configuration, BM&FBOVESPA SA Securities, Commodities and Futures Exchange is the result of the integration of the Brazilian Mercantile & Futures ExchangeBM&F SA and BOVESPA Holding SA, as approved by their respective Extraordinary General Meetings of Shareholders held on May 8, 2008. Corporate type: Corporation (under Brazilian law, a companhia) Country of incorporation: Brazil 6.2. 6.3. Term of duration History The Company has been established for an indefinite period of time. BM&FBOVESPA is the company that emerged from the integration process that through certain merger transactions combined two formerly independent exchanges, i.e., the futures and commodities exchanged known as BM&F and the So Paulo stock exchange operated by BOVESPA Holding. The corporate restructuring process that implemented the integration process was approved at extraordinary shareholders meetings held on May 8, 2008. Set forth below is a brief history of each of these two formerly independent exchanges and ours, as BM&FBOVESPA. Since this integration process we have, for convenience, grown used to referring to markets previously operated by Bovespa as our Bovespa Segment, meaning exchange and OTC markets for the trading of stocks, other equity securities and equity derivatives, in addition to corporate debt securities traded on the fixed income market. Likewise, we now use BM&F Segment when referring to markets previously operated by BM&F as an independent exchange, i.e., derivatives markets for options, forwards and futures contracts based on financial and cash-settled commodities, metals, energies, stock indexes, exchange rates and so forth.
BM&F Segment history

BM&Fs trajectory of success and unprecedented accomplishments started in January 1986 out of its founding members realization that it was high time for the local markets embrace some of the risk-transfer instruments and derivatives dealing practices of major international markets, such as the U.S. and the U.K. markets. In the early 1990s, BM&F and the So Paulo commodities exchange, or BMSP, agreed a merger which strengthened its position in the domestic market and ultimately consolidated BM&F as a major Latin American venue for the trading of derivatives and commodities.
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Then, in 1993, in a move to narrow its relationship with foreign exchanges and regulatory agencies, it created BM&F USA Inc., based in New York City, to act as representative office and, among other things, identifying opportunities for strategic alliances. In 2002, aiming to structure integrated multi-asset market solutions, BM&F acquired a controlling interest in the Rio de Janeiro Stock Exchange (BVRJ) and coordinated the creation of the Brazilian Commodities Exchange, or BBM, based in Rio de Janeiro. In addition, it introduced the foreign exchange clearing house, made possible in the aftermath of the Brazilian governments initiative to remodel the Brazilian Payment System. The FX clearing house was followed in 2004 by a clearing house for debt securities, including government bonds, and the organization of the BM&F Settlement Bank, both of which widened the scope of the strategic position BM&F now occupied in the Brazilian capital markets. Until 2007 BM&F had been operating as a not-for-profit mutual association whose membership was composed of brokers and broker-dealers holding market access rights. A demutualization process began in 2007 in preparation of a going public process. At the time, the members equity rights were detached from the market access rights and ultimately converted into equity interest in the shares of the for profit corporation (BM&F) that emerged from the corporate restructuring process that followed the demutualization. BM&F was now oriented towards strengthening the business and building long-term shareholder value. As part of these objectives, on September 20, the shareholders of BM&F authorized the management to pursue an initial public offering. In addition, also in September 2007, General Atlantic LLC and BM&F agreed an acquisition agreement whereby General Atlantic purchased a 10% interest in BM&F shares worth R$1.0 billion. . One month later, in October, BM&F and the CME Group agreed a partnership involving a cross-investment arrangement and the interconnection of their communications networks for adoption of two-way order routing systems so investors in both countries could trade in each others products. The order routing system now includes Bovespa segment listings and, in addition, in February 2010 the scope of the partnership with CME has been widened, as set forth below under BM&FBOVESPA History. Finally, in November 30, 2007, BM&F shares started trading under ticker symbol BMEF3 on the Novo Mercado listing segment of the Sao Paulo Stock Exchange (BOVESPA). Since August 20, 2008, after the integration with BOVESPA completed, and the shares had been converted at a 1:1 ratio, BM&FBOVESPA shares trade under ticker symbol BVMF3.
BOVESPA Segment history

BOVESPAs origin dates back to 1890 when Bolsa Livre was created. Beginning in the 1960s, BOVESPA became a mutualized not-for-profit stock exchange, whose membership comprised securities brokers and broker-dealers holding both equity and market access rights. Also in the 1960s, when new legislation was enacted to regulate the Brazilian capital markets, the name Sao Paulo Stock Exchange was adopted. The Bovespa Index (Ibovespa) was launched in 1968 as an indicator of average market behavior. The integrity of its historical series has been maintained since its inception, with no any methodology modifications. In the 1970s the stock exchange implemented an automated system for the registration of trades. In addition, price quotes and other market data regarding listed securities began to be promptly disseminated in electronic form. By the late 1970s BOVESPA pioneered the trading of stock options. Early in the 1980s two key factors were decisive in further driving development within the realm of the stock market: one was introduction of mutual funds, including equity-oriented funds and pension funds, and two, the transition to an electronic booking system for the securities custody services, which contributed to more efficient clearing and settlement processes ultimately boosting liquidity. In the early 1990s BOVESPA introduced a computer-assisted trading system, or CATS, developed by the Toronto Stock Exchange, which operated in conjunction with the open outcry trading sessions, using remote terminals installed in the facilities of its broker members. By the mid-1990s the electronic trading system was replaced by an advanced system developed by the then Paris Bourse (currently NYSE Euronext). In addition, the Brazilian Clearing and Depository Corporation (CBLC) was organized to operate as central securities depository and tackle the clearing process, for which banking institutions were authorized to operate as clearing agents. Later, in 2000, in an effort to drive growth in the domestic stock market and consolidate all Brazilian equity trading in a single exchange, BOVESPA led an integration program with the other eight stock exchanges then active in Brazil to become the only local exchange operator for equities, accessed by brokers all over the country. During the integration process, BOVESPA acquired the Settlement and Custody Company (CBLC), which was then in charge of settlement and custody services for securities traded on the Rio de Janeiro Stock Exchange (BVRJ). Moreover, in the same year BOVESPA launched three special listing segments that adopted additional and more stringent corporate governance requirements, i.e., the Novo Mercado and Corporate Governance Levels 1 and 2. In 2001 it launched BOVESPA FIX, an electronic platform for the trading of fixed-income securities, and in 2002, with the takeover of SOMA, an OTC market, BOVESPA expanded operations, organized the market, which grew to concentrate all local trading in OTC equities and equity-based securities. Then, in September 2005 BOVESPA closed its trading floor and became a fully-integrated electronic market.
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On August 28, 2007, the demutualization of BOVESPA was approved, equity and market access rights were detached in preparation of the ensuing corporate restructuring process, upon whose implementation all of the former members and shareholders of BOVESPA and CBLC became shareholders of BOVESPA Holding. In October 2007 the initial public offering of BOVESPA Holding launched and the shares first traded on the Novo Mercado segment under ticker symbol BOVH3. Later, in May 2008, the integration with BM&F (futures and commodities exchange) was approved, a merger and corporate restructuring process ensued, and on August 20, 2008, the shares of Bovespa Holding were converted into shares of BM&FBOVESPA, the combined company that emerged from the process, at a ratio of 1:1.42485643 common shares (ticker symbol BVMF3) plus 0.1 preferred share. These preferred shares were subsequently redeemed at a price of R$17.15340847 per preferred share.
BM&FBOVESPA history
BM&FBOVESPA was incorporated on December 14, 2007, as a holding company existing under the name T.U.T.S.P.E. Empreendimentos e Participaes SA. Shareholder action decided on April 8, 2008, changed the corporate name to Nova Bolsa SA., meaning the New Exchange. On May 8, 2008, the integration process that combined the activities of BM&F and BOVESPA Holding was approved. The ensuing corporate restructuring process included a merger of BM&F assets and liabilities into Nova Bolsa SA; a merger of the shares of BOVESPA Holding into Nova Bolsa SA, and adoption of the corporate name BM&FBOVESPA SA Bolsa de Valores, Mercadorias e Futuros (Securities, Commodities and Futures Exchange). This combined company gave rise to one of the largest exchanges across the world by market capitalization, the second exchange in the Americas and leading exchange in Latin America. BM&FBOVESPA adopts a fully integrated business model, which comprises the entire chain of trading, clearing and settlement, risk management, CCP and CSD, through integrated, fullyelectronic systems, based straight-through processing. As a result, beyond offering a fully-integrated and automated venue for the trading of stocks and other equity and debt securities, including government bonds, ETFs, equity, financial and commodity derivatives and other financial instruments, on cash, futures, options and forward markets, BM&FBOVESPA also offers listing services for issuers and ETFs, operates market data sales and distribution services, index production, system and software development, and technology enhancements, in addition to operating a central securities depository (CSD) and complete custody system. Furthermore, BM&FBOVESPA operates four clearing houses (equities, derivatives, debt securities and forex) for the clearing and settlement of transactions carried out on markets it operates, and in doing so it acts as central counterparty clearing house, provides risk management and securities lending services and operates safeguard mechanisms to ensure customer market participants and investors are provided with a modern and efficient structure for their dealings. In its present configuration, BM&FBOVESPA provides customer market participants and investors with a wide array of transaction possibilities ranging from buy and sell trades, execution of hedging strategies, arbitrage between markets or financial assets, leverage techniques, portfolio diversification and so forth. In February 2010 we agreed the Term Sheet of a 15-year global preferred strategic partnership with the CME Group (1) for the two exchanges to cooperate in identifying and pursuing opportunities for co-investment in, and joint commercial partnerships with, third-party international exchanges on a shared and equal basis; (2) for the two exchanges to combine efforts for joint development of a multi-asset class electronic trading platform; and (3) for us to acquire additional shares in CME and increase to 5% our total ownership interest in CME shares, an aggregate investment of approximately US$1 billion, and (4) for us to designate a representative to be elected to the CME Board. The transaction was approved in an extraordinary general meeting held in April 20, 2010. On June 22, 2010, we executed the definitive agreements with the CME Group, and in July, following completion of a US$612 million bond offering, the proceeds thereof were use in the purchase of an additional 3.2% interest in CME shares, thus totaling a 5% aggregate ownership interest and reportedly becoming the largest CME shareholder. As result, beginning from July 2010, we now account for this investment under the equity method of accounting (a 5% interest in CMEs shareholders equity), and recognize gains and losses from investment in associate through profit or loss (in the statement of income). Furthermore, the joint development and implementation of a multi-asset class electronic trading platform, which will include acquiring the technology and related intellectual property licensing, are set to take place on a phased basis. For completion, we estimate investments on the order of US$175.0 million over the coming 10 years (meaning present value of US$100.0 million). For information on our product offerings, see section 7 of this Form. 6.4. Registration as a public company Dated August 12, 2008, the Brazilian Securities Commission (CVM) registered BM&FBOVESPA as a public company. Additionally, we are also subject to the regulatory authority of the CVM in our capacity as operator of securities and derivatives markets. For this reason, following the integration process previously discussed and our going public process, the CVM issued SMI Circular Letter No. 018/09 dated June 18, 2009, confirming our registration as market operator. 6.5. Principal corporate transactions involving the Company, subsidiaries and affiliates (including merger & acquisition transactions, transfer of control, purchase or sale of material assets)
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As reported in items 6.1 and 6.3 above, in its current configuration BM&FBOVESPA is the result of an integration and corporate restructuring process that combined BM&F and BOVESPA Holding. The principal related corporate transactions were approved at the following shareholders meetings: The BM&F Extraordinary Shareholders Meeting held on May 8, 2008, approved the merger of BM&F assets and liabilities into Nova Bolsa SA; The Nova Bolsa SA Extraordinary Shareholders Meeting held on May 8, 2008, approved the merger of BM&F assets and liabilities into Nova Bolsa SA; The Nova Bolsa SA Extraordinary Shareholders Meeting held on May 8, 2008, approved the merger into Nova Bolsa SA of all shares issued and outstanding of BOVESPA Holding. Action was taken also to change the companys name to BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros.
It should be noted that the share merger did not imply termination of Bovespa Holding, which was still an ongoing concern and now a wholly-owned subsidiary of the mergor, i.e., BM&FBOVESPA. Bovespa Holding in turn owned and controlled Bolsa de Valores de So Paulo S.A . (or Sao Paulo Stock Exchange) and Companhia Brasileira de Liquidao e Custdia (or CBLC, the Brazilian Clearing and Depository Corporation). The principal corporate transactions related to the corporate restructuring process that ultimately combined these companies into BM&FBOVESPA were approved at the following shareholders meetings: The So Paulo Stock Exchange Extraordinary Shareholders Meeting held on August 29, 2008, approved the merger of the Sao Paulo Stock Exchange into BOVESPA Holding; The BOVESPA Holding Extraordinary Shareholders Meeting held on August 29, 2008, approved the merger of the Sao Paulo Stock Exchange into BOVESPA Holding and changed the name of the mergor to Nova BVSP as a result of the merger the company named Bolsa de Valores de So Paulo S.A (So Paulo Stock Exchange) terminated, and BOVESPA Holding was now named Nova BVSP (BVSP being an acronym for Sao Paulo Stock Exchange); The Nova BVSP Extraordinary Shareholders Meeting held on November 28, 2008, approved the merger of company into BM&FBOVESPA; The CBLC Extraordinary Shareholders Meeting held on November 28, 2008, approved the merger of CBLC into BM&FBOVESPA; The BM&FBOVESPA Extraordinary Shareholders Meeting held on November 28, 2008, approved the merger of each of Nova BVSP and CBLC into BM&FBOVESPA. Upon implementation of the mergers, these two companies were terminated.
As a result of these corporate restructurings, the companies Brazilian Mercantile & Futures ExchangeBM&F SA, Bovespa Holding SA, Sao Paulo Stock Exchange SA and Brazilian Clearing and Depository Corporation (CBLC) ceased to exist and were all merged into BM&FBOVESPA SA Securities, Commodities and Futures Exchange. Moreover, at the combined annual and extraordinary shareholders meeting of BM&FBOVESPA held on April 20, 2010, the shareholders approved our acquisition of additional shares of the CME Group, agreed in connection with our global preferred strategic partnership, by virtue of which we increased to 5% our aggregate ownership interest in CME shares. The crossholdings structure discussed above in subsection 6.3, under BM&F Segment history has been maintained. 6.6. 6.7. Bankruptcy or recovery proceedings Other information deemed to be material No application has been filed by us or any other party seeking a bankruptcy order or judicial or extrajudicial recovery. There is no additional information deemed to be material in connection with matters discussed under this section. 7. Business 7.1. Overview of the business of the Company and its subsidiaries
BM&FBOVESPA S.A., the Securities, Commodities and Futures Exchange

BM&FBOVESPA is the Brazilian exchange operator and manager of organized securities and derivatives markets, provider of registration, clearing and settlement services for transactions carried out on its trading platforms, acting as central counterparty, or CCP, to ensure multilateral clearings and settlements. We at BM&FBOVESPA adopt a vertically integrated business model, pursuant to which we offer a wide range of products and services for the trading of stocks and other securities and contracts, including fixed-income securities, exchange-traded derivatives based on equities, stock indices, exchange or interest rates, commodities, foreign currencies, and other financial assets, in addition to currency trading on the spot market. We also provide listing services for the registration of securities, depositary receipts and debt securities, and operate a central securities depository and a securities lending facility. Moreover, we developed, update and license the software named Sinacor, a brokers management integrated system with capacity to process several middle and back-office activities for brokerage firms
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and other financial institutions. Additionally, acting through Bovespa Superviso de Mercados, or BSM, a market surveillance mutual entity in which we hold material membership interest, we perform activities as a self-regulatory entity in charge of overseeing activities by market participants and all trading, clearing and settlement transactions performed within the realm of the markets we manage.
BM&F Settlement Bank (Banco BM&F de Servios de Liquidao e Custdia S.A.)

With the purpose of providing services that meet the specificities and peculiarities of the markets in which it operates, BM&FBOVESPA established the BM&F Settlement Bank, a wholly-owned subsidiary which offers our clearing houses and participants with access to our clearing houses facilities that simplify the clearing, settlement and custody of securities and other financial assets. Conceived as an operating support vehicle, the BM&F Settlement Bank operates pursuant to the same high standards of efficiency and security adopted by the clearing houses that integrate the BM&FBOVESPA system, offering custody and settlement-related services in an exclusive, transparent, technical and skilled environment. Service offerings include settlement of transactions registered and accepted at our clearing houses, the operation of a depositary facility and the central registration facility; clearing and settlement of bonds, securities, derivatives and foreign exchange transactions; local representation and custody services for non-resident investors; and support to investment clubs. The BM&F Settlement Bank provides important risk mitigation and operational support for our clearing houses and for market participants. It performs activities in line with the strategies and guidelines of the parent and in accordance with its corporate purposes.
BM&F (USA) Inc.

BM&F (USA) Inc. is a wholly-owned subsidiary based in New York, which also operates a representative office in Shanghai, China, which opened in November 2009. Its operations in these bases consist of acting as cross-border representative office of BM&FBOVESPA, establishing professional relationships with other exchanges and market regulators, and prospecting customers for BM&FBOVESPA markets, in particular investors and intermediaries.
BM&FBOVESPA (UK) Ltd.

In the second half of 2010, we started a restructuring process involving our subsidiaries abroad. According to corporate documents and agreements dated February 1, 2011, BM&FBOVESPA (UK) Ltd., based in London, which previously was a whollyowned subsidiary of BM&F (USA) Inc is now directly controlled by BM&FBOVESPA. It has similar objectives as BM&F (USA) Inc.
Brazilian Commodities Exchange (Bolsa Brasileira de Mercadorias)

The Brazilian Commodities Exchange is a mutualized entity in which BM&FBOVESPA holds a majority membership interest. It operates under contract with Companhia Nacional de Abastecimento (CONAB), the Brazilian Food Supplies Corporation, in implementing the Policy on Assured Minimum Prices (Poltica de Garantia de Preos Mnimos), and in providing public and private electronic auction services for the trading of commodities and agribusiness services, centralizes the trading of agricultural commodities and OTC agribusiness securities, such as rural product notes, or CPRs, of farming certificates of deposit and related farming warrants, or CDAs and WAs, agribusiness credit bills, or LCAs, agribusiness credit certificates, or CDCAs, and agribusiness receivables certificates, or CRAs.
Rio de Janeiro stock exchange, or BVRJ (Bolsa de Valores do Rio de Janeiro)

BVRJ is an inactive stock exchange. Beginning from 2004 it rents out space in its main office building (the former exchange premises, now converted into a convention center. The Rio Exchange Convention Center leases space for seminars, congresses, conferences, professional training sessions, private meetings, and similar other events. The space allows for different set-up configurations and types of social or institutional events. 7.2. Operating segments included in the most recent full year financial statements
a.
Products and services offerings
BM&F Segment
The BM&F segment comprises operations, products and services to support and manage the principal stages of the trading and settlement cycles of debt securities and derivatives contracts. These services include: (i) electronic trading systems for electronic and web-based trading; (ii) registration system, clearing and settlement systems integrated into a robust financial safeguard structure and a sophisticated risk management system; and (iii) custody systems for agribusiness securities, gold certificates and other financial assets and securities. Moreover, the BM&F segment comprises the trading of agricultural and other commodities, currency trading on the spot market and trading of government bonds and securities, in addition to the services offered by the BM&F Settlement Bank and the Brazilian Commodities Exchange.
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Clearing houses for the BM&F segment

Along with the BM&F Settlement Bank, our three clearing houses, which we call Derivatives Clearinghouse, Foreign Exchange or FX Clearinghouse, and Securities Clearinghouse, provide integrated risk management, clearing and settlement services, in addition to registration, clearing and settlement of transactions taking place on the organized OTC market. Our clearing houses and the BM&F Settlement Bank are fully integrated to ensure the integrity and efficient operation of our markets. Our clearing houses act as central counterparties for trades executed on our systems and in collateralized OTC transactions. This allows for the efficient netting of collateral obligations, thereby reducing the number of payment orders participants are required to make in executing and settling trading orders, which also serves to reduce transaction costs and operational risks for market participants. Additionally, given that our clearing houses act as central counterparties for multilateral netting of obligations, this mitigates exposure to credit risks incurred by market participants that operate in our markets. To help mitigate and manage credit risk, we have implemented risk assessment and management systems, procedures and methodologies, based on which we operate to calculate risk intrinsic to each transaction for some contracts almost in real time, but often in real time, immediately before bids and asks are matched and to determine the margin our clearing houses will be required to call to effectively cover these risks. Our Derivatives Clearinghouse manages risks and settles exchange-traded futures and options contracts, as well as OTC-traded swap contracts upon the parties request. Our FX Clearinghouse is responsible for the registration, clearing, settlement and risk management of spot U.S. dollar transactions (dlar pronto) traded on the Brazilian interbank market. Trades registered and accepted in our FX Clearinghouse may be executed pursuant to private deals, and are cleared and settled by means of physical delivery of local currency (deposited into an account the FX Clearinghouse holds at the Central Bank) against delivery of U.S. dollars (deposited into accounts the FX Clearinghouse holds at correspondent banks in New York City). By adopting payment versus payment settlement, or PVP, our clearing house has eliminated the risk of default on principal, using collateral pledged to mitigate volatility risk. Our Securities Clearinghouse is responsible for the registration, clearing, settlement and risk management of transactions involving Brazilian government-issued securities, which includes buy and sell transactions for prompt or forward settlement, and repurchase (repo) and lending transactions. Trades registered and accepted by our Securities Clearinghouse can originate from private trading on the OTC market or from online trading through our Sisbex electronic system. The BM&F Settlement Bank performs an important supplementary role for the operation of our three clearinghouses and risk management systems. Through the BM&F Settlement Bank, these clearinghouses can promptly access the intraday Central Bank credit facility, which mitigates possible liquidity risks, particularly when it is necessary to access customer collateral and/or liquidate government securities pledged as collateral. In addition, the BM&F Settlement Bank provides market participants, in particular commodity brokers and clearing agents, with services and solutions designed to facilitate efficient and cost-effective settlement processes and management of collaterals, assets and securities under custody.
Custody systems for agribusiness securities, gold certificates and other securities and financial assets
In addition to our trading, settlement and risk management systems, our clearinghouses and the BM&F Settlement Bank also offer custodial services for agribusiness securities, gold certificates and other financial assets and securities, which are provided in a supplementary and integrated manner through our vertical business model.
Custody system for agribusiness securities. Through our Agribusiness Securities Custody Registration System (Sistema de Registro de Custdia de Ttulos do Agronegcio), or SRCA, we provide custody of rural product notes, or CPRs, of
farming certificates of deposit and related farming warrants, or CDAs and WAs, agribusiness credit bills, or LCAs, agribusiness credit certificates, or CDCAs, agribusiness receivables certificates, or CRAs, and other agribusiness securities. These securities are registered in our SRCA system to trade on the Brazilian Commodities Exchange. Certain of these securities may also be pledged as collateral for transactions registered in the Derivatives Clearinghouse systems. In the future, we may also accommodate physical delivery of certain agribusiness futures through agribusiness securities registered in our SRCA system. This added capability is expected to improve trading in agricultural commodity derivatives.
Fungible custody for gold. Fungible custody of gold consists of book-entry registration of gold bars, which permits
trading in our systems and use of these assets for settlement of futures and options contracts based on gold. Gold can also be pledged as collateral in our Derivatives Clearinghouse.
Custody of other financial assets and securities. The BM&F Settlement Bank operates its own structure to provide
custodial services for financial assets in general. Its growth plan includes expanding the provision of custodial services to a wider universe of non-resident investors seeking portfolio investments in the local capital markets (pursuant to mechanisms regulated under Brazilian National Monetary Council Resolution No. 2.689).
Registration services for OTC transactions
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In addition to other offerings related to clearing and settlement of trades carried out on our exchange markets, our Derivatives Clearinghouse provides registration services for dealings on the OTC market, including swaps and exotic options based on exchange rates, interest rates, inflation indexes and stock indexes. We believe our OTC products provide customers with tailormade hedging alternatives that address the specific requirements of their businesses and investment portfolios.
Primary sources of revenues

We derived revenues primarily from fees we charge for the use of our trading, registration, clearing, settlement and risk management systems. These fees represent the operating costs customers incur to transact in our systems and are expressed in Brazilian currency for payment through the settlement processes implemented at our clearing houses. The exceptions are agricultural commodity derivatives contracts, which are settled in U.S. dollars in New York City, United States (under the rules of Brazilian National Monetary Council Resolution No. 2.687). According to their nature, these fees can be classified as follows:
Exchange or trading fees. We charge fees for the execution of any transaction on our trading platforms, including
position closeouts or transfers. Exchange fees are calculated for groups of products with similar characteristics and purposes or for products based on the same underlying asset.
Registration fees.
Clearinghouses.
These are charged for the registration of transactions at the Derivatives, FX or Securities
Permanence fees. These are fees we charge to manage open positions at the Derivatives Clearinghouse. We calculate
permanence fee based on a customers number of contracts outstanding at the end of business on a daily basis.
Physical delivery fees.
These are charged in connection with clearing futures contracts based on agricultural commodities through physical delivery.
Financial and commodity derivatives

Trading activities in our derivatives markets include transactions in derivatives contracts based on the local interest rate (or Real-denominated interest rate contracts), the local interest rate denominated in U.S. dollars, and derivatives based on exchange rates, stock indices and commodities, in addition to mini-sized derivative contracts and OTC derivatives traded on the organized OTC market. Fees we charge at the Derivatives Clearinghouse differ based on the type of contract and time to expiration or maturity. In addition, on setting fee rates for the different contracts and contract periods we also take into account the contracts implied volatility, the existing market conditions and the fees charged in competing markets, among other things. Typically, contracts implying greater volatility, i.e., riskier contracts are charged at higher fees than less risky contracts. The most actively traded contracts on the derivatives markets are Real-denominated interest rate contracts, charged at fees that vary in correlation with the contract period; exchange rate contracts, where the fees primary variable is the actual Brazilian real exchange rate against the U.S. dollar; and derivatives based on stock indices, the average fees for which, while set at fixed rates, vary based on type of transaction and investor category. Certain factors influenced our average rate per contract in different periods, which correlate with the review of our pricing policy in the second half of 2008 and the impact of the fluctuation of the Brazilian real to U.S. dollar exchange rate (the fees we charge on FX derivatives, on contracts based on the spread between interest rate and exchange rate fluctuation, and on commodity derivatives vary based on the exchange rate). The relevant data on average rate per contract are included in the comparison of 2009 to 2008 and 2008 to 2007. The amendments to the pricing policy observed the following stages: On August 25, 2008, we discontinued a policy whereby we used to grant a universal 5% discount to member brokers, and a 25% discount to former holders of minimum 10 thousand BM&F shares (traded under ticker symbol BMEF3, i.e., BM&F prior being absorbed into BM&FBOVESPA); On November 17, 2008, we implemented a transitory policy of granting a universal 40% discount to all market participants, and a 50% discount to trades executed via Direct Market Access, or DMA, which gives investors the ability to rout orders without need to contacting a broker by phone), and a 70% discount to high frequency traders, which was meant to offset the impact of the increase in fees, and as a result in rate per contract, expected to take place after the end of this transitory discount policy in August. Additionally, at the same time we adopted certain changes in the manner we charge fees, according to which, for example, we adopted fixed fee rates for futures on stock indices; Subsequently, on February 16, 2009, a new pricing policy took effect whereby we grant discounts based on progressive volume bands. According to this new policy, trading via DMA were granted 10% discounts, whereas high frequency trading continued to enjoy 70% discounts. A revised pricing policy for high frequency trading for both segments (Bovespa and BM&F) took effect on November 1, 2010, which grants holders of HFT registration accounts progressive discounts based on intraday trading volume bands.
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In addition to making for more competitive products and fees, this new pricing policy is more cost effective for market participants and more adequate for the new market reality, in addition to spurring liquidity by encouraging trading by liquidity providers and high frequency traders.
Trading volumes and rate per contract

Years ended December 31, 2010 and 2009
The volumes traded in the BM&F segment in 2010 reached daily average of 2.50 million, a 64.7% year-on-year rise. The heightened volume of trading in Brazilian-interest rate contracts is due not only to structural growth of the domestic market, but also to deepening volatility and uncertainty about a possible uptrend in the Selic rate (benchmark reference rate), and expectations about the Central Banks decision on the matter. Market structural growth is evidenced by widespread increase in exposure to fixed rates, whether under private loans and financing arrangements or the Brazilian governments public debt, which requires lenders and market participants holding debt securities to hedge exposure to fluctuations in interest rates in an attempt at mitigating risk that interest rates or the fixed rates implied volatility will change. According to data compiled by the Central Bank, at December 31, 2010, the overall volume of fixed-rate loans had climbed 26.7% year-over-year, to R$623.6 billion from R$492.2 billion one year ago, whereas in the same period the portion of national debt paying fixed interest rate had grown 29.0%, to R$608.4 billion from R$471.5 billion previously. The other component that explains the heightened volume of trading in Brazilian-interest rate contracts correlates with volatility triggered by the diversity of opinions and expectations of market participants about the direction of the base rate and, as a result, of other interest rates. Over the course of the year the Central Bank has changed the base rate three times, in April, June and July. A monthly analysis of average daily traded volumes shows these volumes peaked in the months in which the Selic rate changed, preceded by a build-up process in the months leading up to these rate moves. The analysis also indicates a substantial build-up in the months of November and December, which we believe is substantially attributable to expectations about additional rate moves, which materialized in January 2011. In addition, in peak months the volumes traded in Brazilian-interest rate contracts largely concentrate in short-term contracts (first and second maturity dates), as speculative moves and bets on the Central Banks decisions tend to focus on these maturity dates. A natural effect of this, given that our pricing policy does take maturity date into account, is the negative impact of volume concentration on our yearly average rate per contract for Brazilian-interest rate contracts, which in 2010 fell 9.1% year-over-year. The average RPC has dropped across derivatives markets influenced also by the heightened volume concentration on Brazilianinterest rate contracts, which accounted for 67.2% of the overall volume for 2010 (versus 55.5% in the prior year). Forex contracts were the second group more actively traded over the year. The average daily traded volume rose by 20.9% year-over-year, again the highest on record. This performance was particularly positive in the first half of the year, a period of heightened volatility in the foreign exchange market.
Years ended December 31, 2009 and 2008
The volumes traded in the BM&F segment in 2010 reached daily average of 1.52 million, a 3.3% drop year-on-year from 2008, primarily due to 16.4% and 8.7% falls in volumes traded in FX and stock-index contracts, respectively. These declines in turn were counterbalanced by a 7.0% rise in average daily volume traded in Real-denominated interest rate contracts, to 843.5 thousand from 788.7 thousand previously. The average daily volume traded in 2008 was 1.57 million, down 9.6% from the prior year. Average rate per contract (RPC) in the BM&F segment amounted R$1.365 in 2009, down 10.3% year-on-year. The fall in RPC for 2008 and, to a lesser extent, for 2009 were due in part to the transition to the new pricing policy implemented in February 2009, and for a while increased the RPC for 2008 thus affecting comparability. On a year-on-year comparison of 2009 versus 2008, these revenues declined due to the slump in volumes traded in derivatives (except for Real-denominated interest rate contracts) and the drop in rate per contract (except for USD interest rate and exchange rate contracts). The tables below set forth data on evolution of average daily trading volumes and average rate per contract for the periods indicated, by group of derivatives contracts.
BM&F segment Average Daily Trading Volume ADTV
Year Realdenominated interest rate USDdenominated interest rate Exchange rate Equities Commodities
(In number of contracts)

OTC market Mini contracts ADTV
)
2008 2009 2010
788,665 843,480 1,683,623
94,281 78,298 89,714
534,922 447,093 540,623
87,632 80,015 89,406
14,916 10,236 12,898
12,447 9,273 12,866
40,478 52,637 75,605
1,573,342 1,521,032 2,504,736
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2009/2008 2010/2009
7.0% 99.6%
-17.0% 14.6%
-16.4% 20.9%
-8.7% 11.7%
-31.4% 26.0%
(In Brazilian reais)
Commodities
-25.5% 38.7%
30.0% 43.6%
-3.3% 64.7%
Average rate per contract RPC

Year Realdenominated interest rate USDdenominated interest rate Exchange rate Equities
OTC market
Mini contracts
ADTV
2008 2009 2010 2009/2008 2010/2009
1.141 0.979 0.889 -14.2% -9.1%
1.283 1.357 1.142 5.8% -15.8%
2.065 2.161 1.928 4.6% -10.8%
2.145 1.620 1.564 -24.5% -3.4%
3.587 2.307 2.168 -35.7% -6.1%
2.355 1.655 1.610 -29.7% -2.7%
0.162 0.176 0.128 8.5% -27.0%
1.527 1.365 1.134 -10.6% -16.9%
As a percentage of 2010 overall volume for the segment, the share contributed by institutional investors increased to 29.6% from 24.3% one year ago, while the share foreign investors contributed to the overall yearly volume for the segment rose to 22.4% from 20.0% in the earlier year. In the period between 2008 and 2009, the share contributed to volumes traded in derivatives by type of investor changed primarily as follows: volumes traded by financial institutions fell to 45% from 48% previously; the order flow from foreign investors increased to 20% from 19% of the consolidated volume one year earlier; volumes from institutional buyers rose to 24% from 23% in the prior year. For comparison, in the period between 2007 and 2008 the shares of overall volumes traded in derivatives attributable to financial institutions fell to 48% from 49% previously, whereas the order flow from foreign investors increased to 19% from 17% of the consolidated volume for the prior year. In the three-year period between 2008 and 2010, the shares of overall volume traded in derivatives by foreign investors and institutional buyers increased considerably, whereas volumes traded by financial institutions fell. Growth in volumes, particularly in volumes traded by foreign investors, speaks of the significant development and stature achieved by the domestic derivatives markets, mainly on account of repeated surges in high frequency trading volumes (see further data below). The table below sets forth additional data on participation in volumes traded by type of investor.
BM&F segment Shares of overall volume by investor category
Year 2008 2009 2010 2009/2008 2010/2009 Institutional buyers Foreign investors Retail investors Financial institutions Corporate investors Central Bank
22.60% 24.26% 29.61% 1.65 p.p. 5.36 p.p.
18.79% 20.02% 22.40% 1.23 p.p. 2.38 p.p.
7.97% 7.63% 3.88% -0.34 p.p. -3.75 p.p.
47.60% 45.46% 42.40% -2.14 p.p. -3.06 p.p.
2.90% 2.53% 1.71% -0.37 p.p. -0.82 p.p.
0.15% 0.11% 0.00% -0.04 p.p. -0.11 p.p.
Evolution of trading volume by group of derivative contracts

Real-denominated interest rate contracts. These comprise futures contracts and options based on local interest rates, in addition to inflation-indexed derivatives, meaning contracts based on local inflation indexes. The average rate per contract (RPC) in these cases varies based on expiration date. The underlying in the most actively traded contract in this group is the interbank deposit rate (depsito interfinanceiro), or DI. As a result, DI futures are also the most liquid derivative contract in the segment. DI futures basically allows for trading in the fixed interest rate most commonly used in the financial market for different periods of time. DI futures are very important for the Brazilian financial system and are often traded as a hedging mechanism for debt obligations under loans and financing arrangements, or to hedge obligations referenced to Brazilian government bonds, or to leverage positions or in arbitrage strategies. Options on DI futures and options on DI index (or IDI) are also very popular amongst our customers for it allows for more sophisticated hedging strategies. The table below sets forth data on average daily trading volumes (ADTV) by group of futures contracts, also showing the fee rate by maturity, as applicable.
Real-denominated interest rate futures contracts (by expiration) 2008
Realdenominated interest rate ADTV(*) RPC(**) Realdenominated interest rate
2009
ADTV(*) RPC(**) Realdenominated interest rate
2010
ADTV(*) RPC(**)
1st maturity 2 maturity 3rd maturity 4th maturity 5th maturity

nd
80,073 80,611 80,459 34,597 513,748
0.293 0.555 0.802 1.038 1.121
1st maturity 2 maturity 3rd maturity 4th maturity 5th maturity

nd
113,905 123,265 88,302 51,905 466,104
0.233 0.432 0.529 0.814 1.063
1st maturity 2nd maturity 3rd maturity 4th maturity 5th maturity
270,598 360,283 175,592 104,194 772,955
0.224 0.412 0.515 0.804 1.066
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_____________________________________________
Total
789,488
1.140
Total
843,480
0.979
Total
1,683,623
0.889
( ) (
* ADTV - Average daily trading volume is expressed in number of contracts **) RPC Average rate per contract is expressed in Brazilian real
The average daily trading volume for 2010 soared 99.6% year-on-year, whereas average RPC dropped 9.1% to R$0.889 from R$0.979 one year ago, due primarily to greater concentration of trades in short-term contracts, for which we charge lower fee rates (see the above table). In turn, ADTV for 2009 went up 7.0% year-on-year, whereas average rate per contract fell 14.2%, to R$0.979 from R$1.141 in 2008. As of December 2010, the most active investors in this type of contracts included financial institutions, institutional buyers and foreign investors, with shares of 47.3%, 36.7% and 13.4% of the volume, respectively. FX derivative contracts. These encompass futures contracts based on the Brazilian real to U.S. dollar exchange rate (the most actively traded) and the Brazilian real exchange rates to Euro, to Australian dollar, to Canadian dollar, to Pound Sterling, to Mexican Peso, in addition to options based on the Brazilian real to U.S. dollar exchange rate. The average rate per contract in these cases is denominated in U.S. dollars, such that fluctuations in the currency rate affect our average rate per contract. The most actively traded contracts in this group are US dollar futures, which may not be settled by physical delivery, rather requiring the loss/gain (as determined on the basis of the Brazilian real to U.S. dollar exchange rate (PTAX) compiled and disclosed daily by the Central Bank) to be cash-settled upon expiration. Investors typically trading in these contracts include bank treasurers, fund managers and non-resident investors, in addition to trading and other companies engaging in import and export activities. For the most part these trades are sought to hedge receivables and debt obligations denominated in U.S. dollars, or in arbitrage opportunities that may appear in other currency markets or to leverage positions. Options on U.S. dollar futures and options on spot U.S. dollar are very liquid contracts as well and are frequently used as part of the currency hedging strategies designed by our customers. Average daily volume traded in FX contracts in 2010 went up 20.9% year-on-year, whereas the related average RPC dropped 10.8% year on year to R$1.928 from R$2.161 in 2009. This drop in RPC is due mainly by two factors, one being the 11.7% year over year appreciation of the Brazilian real against the U.S. dollar, since we charge U.S. dollar-denominated fee rates on these transactions; two, being the greater share of the volume (8.1% in 2010) attributable to high frequency trading, regarding which we charge fee rates that enjoy progressive discounts determined by intraday trading volume band. Average daily trading volume for 2009 went down 16.4% year-on-year, whereas average RPC climbed 4.6% to R$2.161 from R$2.065 in 2008. This high in RPC correlates mainly with the depreciation of the average exchange rate between the two periods, which nonetheless was partially counterbalanced by increase in high frequency trading, which in December 2009 accounted for 4.4% of the yearly average volume traded in exchange rate contracts. As of December 2010 the most active investors in these types of contracts were financial institutions, foreign investors and institutional buyers, with shares of 45.3%, 26.4% and 22.5% of the overall average volume, respectively. US dollar-denominated interest rate contracts. These encompass futures based on the local interest rate denominated in U.S. dollars, or on Brazils Global Bonds or on U.S. Treasury Notes. Futures based on the U.S. dollar-denominated local interest rate consist of futures on the spread between the local interbank deposit rate and the exchange rate fluctuation, i.e., a U.S. dollar-denominated local yield curve futures (locally also called ID versus USD spread futures contract, or futuro de cupom cambial), which may be traded either as a standardized futures contract or pursuant to a structured transaction under a forward rate agreement. A FRA strategy permits the customer to meet its own operating requirements by combining in a single transaction the buying and selling of a short position in the underlying yield curve with the buying and selling of a long position in the same underlying. The average RPC for these futures contracts varies based expiration date and the actual Brazilian real to U.S. dollar exchange rate. Average daily trading volume for 2010 climbed 14.6% and the average RPC declined 15.8%, to R$1.142 from R$1.357 one year ago, whereas the average daily trading volume for 2009 had fallen 17.0% from the prior year and the average RPC had climbed 5.8% to R$1.357 from R$1.283 one year earlier. As of December 2010 the most active investors in these contracts were financial institutions, institutional buyers and foreign investors, with shares of 62.9%, 24.4% and 12.0% of the overall volume, respectively. Index-based derivatives contracts. These encompass futures contracts based on the Bovespa Index, or Ibovespa, and the IBrX-50, or Brazil 50 Index, in addition to options on Bovespa index futures. Bovespa index futures is the third most liquid derivative contract traded within BM&F segment and an efficient, cheap and highly liquid alternative for investors seeking to hedge long positions in listed stocks, in particular in bear market periods. It is also an attractive investment alternative for investors seeking to bet on a stock market bullish trend.
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In the case of index-based derivatives we charge trading fees at a fixed rate, instead of a rate based on the index points. The average rate per contract will vary in correlation to day trading volumes and the order flow from high frequency traders, as these enjoy progressive discounts based on intraday volume traded. Average daily volume traded in index-based derivatives in 2010 climbed 11.7% year on year, whereas average RPC gave back 3.4%, down to R$1.564 from R$1.620 in 2009, primarily due to a rise in high frequency trading volume, which in December 2010 accounted for 20.7% of the overall volume trade in index-based futures contracts. High frequency traders make use of statistics and mathematical models to enter large orders designed to capitalize on minute-by-minute changes in the market. Under our pricing policy, high frequency traders holding HFT registration accounts with us enjoy progressive discounts granted per intraday traded volume bands. In the year to December 2009, trading in index-based derivatives accounted for 23.9% of the overall volume traded for the segment. As of December 2010 the most active investors in these derivatives were foreign investors, institutional buyers and financial institutions, with shares of 35.4%, 29.4% and 17.3% of the overall volume, respectively. In August 2009, the Commodity Futures Trading Commission, or CFTC, granted approval for us to offer and sell in the United States full-sized and mini-sized futures contracts and options based on the Bovespa Index (or Ibovespa). Commodity derivatives. Our offerings of commodity derivatives include futures contracts based on Arabica coffee, Conillon coffee, livestock, feeder cattle, soybean, denatured fuel ethanol, corn, crystal sugar, cotton and gold, in addition to options on these futures. The average rate per commodity derivative contract (RPC) varies in correlation to the contract combination making up the volume traded in any particular period, given that for some of them we charge fees at a rate set in Brazilian reais while in other cases the fee rates are denominated in U.S. dollars. Average daily volume traded in commodity derivatives in 2010 went up 26.0% year over year, while average RPC dropped 6.1% to R$2.168 from R$2.307 in 2009, due primarily to appreciation of the Brazilian real against the U.S. dollar, as the fee rates we charge for a number of these derivatives are denominated in that currency. For comparison, the ADTV for 2009 fell 31.4% from the earlier year and average RPC dropped to R$2.307 from R$3.587 in 2008, mainly on account of changes in our pricing policy. As of December 2010 the most active investors in these derivatives were retail investors, corporate investors and financial institutions, with shares of 50.9%, 27.9% and 12.8% of the volume, respectively. Highlights in terms of volumes traded in commodity derivatives in 2010 are livestock futures and options on futures with average 5.5 thousand daily contracts, as compared to 3.6 thousand one year ago, a 50.3% year on year climb, and cash-settled corn futures and options on futures, with record high daily average of 2.0 thousand contracts, a 72.8% rise year over year. In addition, cash-settled denatured fuel ethanol futures and options on futures s were authorized for trading in May 2010, and cash-settled soybean futures and options on futures started trading in January 2011. Mini-sized contracts. Mini-sized contracts are smaller-sized versions of the equivalent full-sized derivative contracts. Most our mini-sized contract offerings consist of derivatives based on stock indices (20% of the full-sized contract) and forex futures (10% of the full-sized contract). Changes in average RPC per type of mini-sized contract correlate with the changes in RPC for the equivalent full-sized derivative contract. Average daily volume traded in mini-sized contracts in 2010 went up 43.6% year-on-year, while the average RPC fell 27.0% to R$0.128 from R$0.176 one year ago, in line with the drop in average RPC for the equivalent full-sized contracts, most consisting of stock index and exchange rate based derivative contracts. This fall in average RPC was further influenced by the larger year-on share of high frequency volumes traded in mini-sized contracts (54.7% for 2010), as high frequency traders enjoy progressive fee discounts by band of intraday volume traded. For comparison, average daily trading volume in 2009 went up 30.0% year-on-year, while the average RPC climbed to R$0.176 from R$0.162 in the earlier year. As of December 2010 the most active investors in these derivatives were foreign investors, retail investors and institutional buyers, with shares of 38.8%, 32.9% and 20.7% of the overall volume, respectively. OTC derivatives. OTC derivatives include interest rate swaps (for both fixed and floating interest rates), inflation index swaps, forex and currency swaps (for U.S. dollar, Euro and Yen), equity swaps (the equity leg may include stock indexes, such as Ibovespa or IBrX-50 or a basket of selected stocks), and gold, in addition to flexible barrier options on the U.S. dollar rate, or the Bovespa index, or the local interest rate, with the customer setting expiration date, size, strike price, exercise style, in addition to trigger and knock-in or knock-out barrier). Average daily volume traded in these OTC derivatives in 2010 climbed 38.7% year-on-year and the average RPC dropped slight 2.7% to R$1.610 from R$1.655 one year ago. For comparison, the 2009 average daily trading volume had fallen 25.5% yearon-year, while average RPC had dropped 29.7% from the earlier year, to R$1.655 from R$2.355. As of December 2010 the most active investors in these derivatives were financial institutions, institutional buyers and corporate investors, with shares of 75.1%, 20.7% and 3.0% of the overall volume, respectively.
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DMA (Direct Market Access)

We continue to implement our plans towards enhancing the electronification of trading processes, in particular by broadening direct market access (DMA) alternatives. The volume of trades executed via DMA has been increasing consistently as new access models are launched. In 2010, trading via any of our DMA models has increased to 16.2% of the overall volume, as compared to 9.7% in 2009. While implemented relatively recently, DMA provided pursuant to co-location arrangements is regarded as highly efficient, a window into the evolution and technology changes which can be expected for the derivatives markets, and was the best performing model in terms of volume growth, having accounted for 3.1% of the overall volume for the fourth quarter of 4Q10, as compared to 0.4% for the same quarter one year ago. The better example of this transformation is high frequency trading. High frequency dealings on our markets began in 2009, a year in which the HFT order flow accounted for 2.2% of the overall trading volume, while in 2010 it accounted for 4.8% of the total. The peak HFT volume occurred in the second quarter of 2010, particularly in May 2010, when volatility in forex contracts surged, an environment in which HFT strategies typically thrive. The HFT volume in May 2010 accounted for 18.3% of the volume traded in forex contracts and 8.9% of the overall volume traded on derivatives markets. BM&F segment HFT average daily volumes (buy + sell)
(in thousands of contracts)
6.0% 4.8%
13 88
93
4.8% 4.4%
90 42 93
3.8%
4.8%
50
77
2.2%
21 17 29
43 94
53
44
41
69
155
43 74
38
77
50
2009
2010
4Q09
1Q10
2Q10
3Q10
4Q10
FX
Equities
Mini contracts
Interest Rates
% in Overall Volume
While forex contracts, stock index futures and mini-sized forex and stock index futures contracts remain the most actively traded derivatives, there are signs high frequency traders may have been looking for opportunities provided by other contracts, in particular Brazilian-interest rate contracts and commodities derivatives. While high frequency traders still account for a relatively small share of total volume traded in contracts within this contract group, the fourth quarter trading volume implies positive suggestion that the HFT flows could be further drawn to these contracts. BM&F segment share of the HFT volume by contract group
70,0%
60,0%
50,0%
54.7%
40,0% 30,0%
20,0% 20.7% 8.1% 1.5% 1.3%
10,0%
0,0%
Mini contracts
Equities
FX
Interest Rates
Commodities
Forex market
At our FX Clearinghouse we transact with customers and settle exchange rate transactions carried out on the spot interbank market. These contracts, which we call spot U.S. dollar contracts ( dlar pronto), are traded for physical delivery on T+0, T+1 or T+2. Our trading fees for spot U.S. dollar contracts are calculated daily and allocated on a daily basis by applying different fee rates to value-traded bands based on the gross amount of transactions registered and settled in our systems. We currently adopt five different value-traded bands to determine our fees. For any given customer, the higher the amounts traded, the lower the fees we charge. Our fees are payable to us in Brazilian currency. In addition, our FX Clearinghouse provides transaction registration, clearing and settlement services, as well as risk management services for trades carried out in the interbank spot U.S. dollar market. In providing these services, we act as
47
central counterparty to ensure clearing and settlement on a payment-versus-payment basis, or PVP, which eliminates the risk of default. The financial value traded and settled in this market in 2010 hit R$1,313 billion, a 4.1% year over year increase from R$1,262 billion in 2009, as compared with 1.8% year-on decline from 2008, when trading value reached R$1,268 billion. These movements are largely explained by appreciation of the Brazilian real exchange rate against other currencies, mainly U.S. dollars, over 2010 and, conversely, depreciation of the Brazilian currency over 2009.
Bonds and Debt Securities

Our Clearinghouse for Bonds and Debt Securities is responsible for the registration, clearing, settlement and risk management of transactions involving Brazilian government bonds and debt securities, including buy and sell transactions for prompt or forward settlement, repo and lending transactions, which we clear and settle on a delivery-versus-payment basis, or DVP, thereby averting the risk of default. We charge registration fees to register trades and transaction fees for the clearing and settlement of transactions in debt securities. In addition, given that transactions registered in our clearinghouse have a relatively short settlement cycle, we do not charge permanence fee. Transactions in government bonds and other debt securities are eligible for registration, clearing and settlement at our Debt Securities Clearinghouse include the following: Cash or forward buy and sell transactions in Brazilian government bonds and debt securities (which may earn fixed or floating interest rates, or track an inflation index or the Brazilian real to U.S. dollar exchange rate); and Repurchase (repo) or securities lending transactions in Brazilian government bonds and debt securities. The average volume traded in government bonds and debt securities in 2010 dropped 1.6% year over year, whereas in 2009 trading volume had declined 76.9% from 2008 due to sustained downward trends in the market for government bonds and other debt securities in the relevant periods.

The Brazilian Commodities Exchange operates under contract with the National Supplies Corporation ( Companhia Nacional de Abastecimento ), or CONAB, in implementing the Brazilian governments Policy on Assured Minimum Prices ( Poltica de Garantia de Preos Mnimos ). In operating electronic systems for the provision of public and private electronic auctions for the trading of commodities and agribusiness securities, the Brazilian Commodities Exchange centralizes the trading of agricultural commodities and OTC agribusiness securities, such as rural product notes, or CPRs, of farming certificates of deposit and related farming warrants, or CDAs and WAs, agribusiness credit bills, or LCAs, agribusiness credit certificates, or CDCAs, and agribusiness receivables certificates, or CRAs. The Brazilian Commodities Exchange stands out as a transaction venue for the agribusiness. In the year to December 2010 a total of 7.9 million tons of agricultural commodities worth R$778.6 million were sold in CONAB auctions operated by the Brazilian Commodities Exchange. Moreover, the highlight among transactions in OTC-traded agricultural commodities were cotton contracts whose financial value reached R$6.9 billion, whereas trading in OTC agribusiness securities registered financial value of R$3.4 billion. Highlights for 2009 included (i) 6.7 million tons of agricultural commodities sold in CONAB auctions totaling R$1.84 billion; (ii) 2.3 million tons of agricultural commodities sold in CONAB options auctions; (iii) OTC-traded cotton contracts in aggregate financial value of R$3.5 billion, and; (iv) trades in OTC agribusiness securities with financial value of approximately R$4.4 billion. In 2008, 4.1 million tons of agricultural commodities worth R$1.038 billion were sold in trades at CONAB auctions. Coffee auctions administered by the Brazilian Ministry of Agriculture, Livestock Breeding and Supply totaled R$33 million. In addition, transactions for physical delivery of agricultural commodities and trades in agribusiness securities totaled R$2.77 billion.
BM&F Settlement Bank

The BM&F Settlement Bank offers our clearing houses and participants with access to our clearing houses facilities that simplify the clearing, settlement and custody of securities and other financial assets. Service offerings include settlement of transactions registered and accepted at our clearing houses, the operation of a depositary facility and the central registration facility; clearing and settlement of bonds, securities, derivatives and foreign exchange transactions; local representation and custody services for non-resident investors; and support to investment clubs. The BM&F Settlement Bank provides important risk mitigation and operational support for our clearing houses and for market participants. It performs activities in line with the strategies and guidelines of the parent and in accordance with its corporate purposes.
Bovespa segment Trading. We offer market participants several tools and mechanisms for the trading of variable and fixed-income securities
and equity-based derivatives. We operate the only domestic exchange and organized OTC markets for the trading of equities
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and equity-based securities, including stocks, share receipts, depository receipts representing shares of Brazilian and foreign issuers (Brazilian Depository Receipts, or BDRs), equity-based derivatives, subscription warrants, stock warrants, units of closed-end investment funds, units representing cinematic investment certificates (certificados de investimento audiovisual), and for the trading of corporate debt securities and other securities authorized by the CVM, all of which are traded cleared and settled in our integrated electronic systems, resulting in a fully automated process covering the entire chain of trading.
Clearing and settlement. We are the only CCP for the domestic equities and corporate debt securities markets, provider of
risk management services and other protection mechanisms we adopt to handle payment default or failed delivery. We act as central counterparty for all clearing agents, absorbing the risks of the counterparties in-between a trade transaction and its clearing and settlement, carrying out multilateral activities to ensure the financial settlement and clearing of securities. In addition, we provide gross settlement services without acting as CCP, so participants may set date and time for settlement. We also provide clearing and settlement services for securities offerings that take place on the non-organized OTC market. The average financial value cleared and settled by us relative to transactions carried out on exchange and OTC markets within the Bovespa segment varies in close correlation to the average value traded on these markets. The primary revenue components related to activities we perform within the Bovespa segment are trading fees and fees for clearing and settlement transactions, which we charge at rates that in either case vary depending on type of investor and type of transaction. The table below sets forth data on our fee rates, as extracted from our fee schedule.
Equities markets Cash market Retail and other investors Investment funds; investment clubs Day traders (regardless of investor type) Options exercise of written call positions Options on indices exercise of spread options Options market Retail and other investors Investment funds; investment clubs Day-traders (regardless of investor type) Options on indices market Retail and other investors Investment funds; investment clubs Day-traders (regardless of investor type) Forward market Retail and other investors Investment funds; investment clubs Trading Clearing & settlement Transaction registration TOTAL
0.0285% 0.019% 0.019% 0.019% 0.0275% 0.058% 0.040% 0.025% 0.033% 0.024% 0.025% 0.031% 0.031%
0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.070% 0.049% 0.014% 0.045% 0.030% 0.014% 0.028% 0.028%
0.0345% 0.025% 0.025% 0.025% 0.0335% 0.134% 0.095% 0.045% 0.084% 0.060% 0.045% 0.065% 0.065%
Our equities markets, meaning the markets for stocks, equity-based securities and derivatives that comprise the Bovespa segment, include the cash market, a forward market, options market, single-stock futures market and fixed-income market. Set forth below are brief descriptions of each of these markets.
Cash market. This is the market where buy and sell orders are executed for immediate delivery within a three-businessday settlement cycle. Stocks traded on this market are bought and sold either as round lots (and their multiples) or as odd lots (less than the standard trading unit).
Forward market. This is the market where buy and sell orders are executed for clearing and settlement as of a date set
by both buyer and seller based on any of a number of dates predefined by us. Based on the agreed conditions for clearing and settlement, a forward transaction may relate to: (i) ordinary forward contracts, an agreement to buy or sell an asset at an agreed price with clearing and settlement taking place at a specified future time; (ii) flexible forwards, agreements to buy or sell where the underlying stocks deliverable at expiration may be replaced with the equivalent; or (iii) index forwards, in which case the agreed price is adjusted by an agreed index or rate on a daily basis in the period between the execution date and the settlement date (while other indices or rates may be used, indexation is frequently agreed on the basis of the foreign exchange rate or the IGPM, an inflation index).
Options market. This is the market for the trading of option contracts where a seller gives the option buyer the right,
but not the obligation, to buy (call) or to sell (put) a specified stock, equity-based security or stock index (the underlying) on or before the option expiration date, at an agreed price (strike price), pursuant to option series that are previously authorized for trading by us. Depending on whether or not they are exercisable at any time before the option expiry date, or only upon expiration, these put or call options are said to be American-style or European-style options (respectively). The following types of options may be traded on this market: (i) stock options, which are rights to buy or sell stock lots exercisable at specified exercise dates at a predefined strike price; and (ii) index options, which are rights to buy or sell the index on or before the expiration date. Exercising a stock option entails making physical delivery of the underlying stocks, whereas exercising an index option implies paying or receiving upon exercise or at expiration an amount of cash equal to the difference between the strike price and the closing price for the underlying index. In any
49
event the strike price under a stock option or a stock index option may be indexed to either the foreign exchange rate or the IGPM or any other index.
Fixed-Income market. We provide two platforms for the trading of corporate debt securities, namely, Bovespa Fix, a trading platform on our stock exchange, and Soma Fix, a trading platform on our organized OTC market. Trading,
clearing and settlement transactions in our fixed-income markets, in addition to custodial services, are carried out through our integrated fully-electronic systems. Assets traded on these platforms include debentures (bonds), commercial papers and securities originating in the securitization market, as well as real estate receivables certificates, or CRIs, units of receivables investment funds, or FIDCs, and units of receivables funds of funds, or FIC-FIDCs. The average daily value traded in 2010 on markets within the Bovespa segment hit the historical record high of R$5.6 billion, a 22.7% climb from 2009. The year-end exchange market capitalization of R$2.6 trillion was up 10.1% year-over-year, with the year-on average capitalization having soared 27.8%. In contrast, at the end of 2009 the average daily value traded had fallen 4.3% year-on-year, to R$5.3 billion from R$5.5 billion in 2008, whereas the average exchange market capitalization had declined by 10.3%.
Exchange market capitalization 2010 2009 (in R$ billions) 2008 2010 vs. 2009
(%)
2009 vs. 2008

(%)
Year-end exchange market capitalization Average exchange market capitalization
2.569,41 2.334,86
2,334.72 1,826.91
1,375.27 2,037.27
10.1% 27.8%
69.8% -10.3%
The average daily number of trades, which in 2008 had climbed 60.1% from the prior year, picked up 35.7% year-on-year in 2009. As a result, we saw a reduction in the average ticket which is currently down to R$15.9 thousand from R$32.0 thousand in 2007 primarily due to the increase in number of retail investors, in particular those that trade through our HomeBroker platform, as the flow from orders entered through this platform accounted for about 18.0% of the overall volume for the segment in 2009.
Equities Markets
Average daily trading value 2010 2009 (in R$ millions) 2008 2010 vs.2009
(%)
2009 vs.2008
(%)
Cash market Forward market Options market Total
6.031,6 147,4 307,9 6.488,6
4,943.7 96.5 245.0 5,285.2
5,162.3 177.8 180.2 5,520.3
22.0% 52.7% 25.7% 22.8%
-4.2% -45.7% 36.0% -4.3%
Financial value traded by investor category. The order flow from institutional buyers accounted for 33.3% of the average value
of executed trades carried out on the equities markets. The chart below sets forth data on shares of the 2010 average daily trading value by investor category.
Bovespa segment Share of average trading volume by investor category
10%
2%
10%
2%
8% 35%
3%
7%
34%
2%
8%
2%
36%
35%
30%
27%
30%
27%
26%
33%
25%
23%
27%
31%
26%
2006
2007
2008
Foreign Investors Estrangeiro
2009
Financial Institutions Inst. Financ. Corporate Empresas
2010
Other Outros
Retail Pes. Fsicas Institutional buyers Institucional
As for market concentration, the table below sets forth data indicating the concentration of volumes traded in the 10, 50 and 100 most liquid stocks listed on our exchange between 2008 and 2010. The share of overall value traded attributable to the 10 most liquid stocks declined to 43.42% over this two-year period (from 54.97% in 2008), primarily due to a higher number of listings and heightened liquidity of stocks of issuers conducting follow-on offerings over the same period.
Stock Market Concentration
Concentration of volumes traded 2010 (%) 2009 (%) 2008 (%)
In the largest, most liquid stock .................................................................................. In the top 10 largest, most liquid stocks ...................................................................... In the top 50 largest, most liquid stocks ......................................................................
10.5 43.42 81.08
9.80 44.84 82.92
19.92 54.97 87.35
50
In the top 100 largest, most liquid stocks ....................................................................
95.18
95.31
96.75
In addition, the tables below set forth data on market concentration by issuer industry, including financial intermediaries, which currently concentrate 21.1% of the overall exchange capitalization and 14.0% of the average daily trading value; oil & gas, and biofuels, which concentrate 17.9% of the exchange capitalization and 27.1% of the value traded; mining, with 11.3% of the exchange cap and 22.2% of value traded, which figures are attributable mainly to top stocks of issuers as ItauUnibanco, Bradesco and Banco do Brasil (banks; financial intermediaries), Petrobras (oil & gas, and biofuels) and Vale (mining).
Market capitalization by industry
Industry 2010
(in R$ billions)
%
2009
(in R$ billions)
%
2008
(in R$ billions)
%
Financial intermediaries Oil & gas, biofuels Mining Electric power Beverages Telecommunications Metallurgy, iron and steel Processed food Transportation Financial services Other
TOTAL Industry
542.48 458.97 290.89 189.08 144.42 128.77 111.13 72.80 72.57 66.27 492.02
2,569.41 2010
(in R$ billions)
21.1% 17.9% 11.3% 7.4% 5.6% 5.0% 4.3% 2.8% 2.8% 2.6% 19.1%
100.0%
520.91 403.23 254.01 186.00 98.31 133.78 129.70 83.16 58.50 70.36 396.75 2,334.72
2009
22.3 17.3 10.9 8.0 4.2 5.7 5.6 3.6 2.5 3.0 17.0
100.0
298.93 241.13 141.92 137.52 56.60 115.87 72.46 49.35 24.67 30.43 206.40
1,375.27 2008
21.7 17.5 10.3 10.0 4.1 8.4 5.3 3.6 1.8 2.2 15.0
100.0
Financial value traded by industry

%
(in R$ billions)
(in R$ billions)
Oil & gas, biofuels Mining Financial intermediaries Metallurgy, iron and steel Financial services Electric power Processed food Transportation Telecommunications Beverages Other
TOTAL
288.5 236.3 149.6 111.4 70.1 66.6 41.0 40.6 34.3 16.4 303.0
1.357.8
21.2% 17.4% 11.0% 8.2% 5.2% 4.9% 3.0% 3.0% 2.5% 1.2% 22.3%
100.0%
223.7 188.6 129.9 108.3 78.0 66.5 32.5 24.9 45.0 12.0 199.8 1,109.2
20.2% 17.0% 11.7% 9.8% 7.0% 6.0% 2.9% 2.2% 4.1% 1.1% 18,.% 100.0%
273.6 200.7 133.3 124.7 55.6 82.3 30.8 19.7 52.4 15.0 185.4 1,173.7
23.3% 17.1% 11.4% 10.6% 4.7% 7.0% 2.6% 1.7% 4.5% 1.3% 15.8% 100,0%
Other services Securities lending

Our equities clearinghouse operates a securities lending facility known as BTC, which permits investors to lend or borrow securities traded on our exchange against collateral posted by borrowers that engage in short-selling or arbitrage transactions, thereby adding liquidity to these securities. We act as central counterparties to ensure the settlement of all securities lending transactions. In doing so, we adopt strict lending and risk management standards to ensure this market operates in an orderly fashion. Increase in the financial value of securities lending transactions has played a significant role in increasing stock market liquidity in the last few years. To a large extent, this increase in liquidity is a result of securities borrowed for sale in arbitrage transactions, followed by purchases of other securities with the proceeds from the arbitrage sale. When a lending transaction matures, reverse arbitrage takes place. As the facilitating agent in the lending process, our securities lending facility contributes to improving the efficiency of the clearing and settlement process related to these transactions, as in the event of failed delivery the BTC will promptly intervene and compulsorily procure so-called automatic loans to ensure the transaction is properly cleared and settled. Borrowers are charged fees on each lending transaction registered in our system, which fees are set at rate of 0.25% per annum on the financial value of open interest positions, calculated on a pro rata basis. The financial value of an open interest position is determined based on either the average market price for the borrowed securities as of the trading session immediately preceding the lending transaction date (i.e., on its registration), or the average market price for the underlying as of the trading session immediately preceding the maturity date, as defined by lender and borrower upon registering the transaction (such date being designated the fee base date). Additionally, we charge minimum R$10.00 fee per registered transaction. However, we do not charge minimum fees if we are required to procure automatic loans.
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With the aim of pushing volume growth in the securities lending market, in May 2009 our securities lending facility adopted a 0.05% rebate payable to local securities lenders. The volume of securities lending transactions taking place in our securities lending facility in 2010 hit record high R$465.6 billion and 971 thousand lending transactions, surging 80% year over year. The 2010 average number of open interest positions soared 61.5% from the year-ago average, whereas the 4Q10 average boomed 43.0% from the prior year fourth quarter. of 2010 of financial value transacted one year ago did bounce back from the financial crisis. In contrast, the financial value of open interest positions by end-2009 had soared 127.6% year-on-year, to R$15.8 billion from R$6.9 billion in 2008, after having plunged 71% year-on-year from the average for 2007. However, due to cooler demand in the first half of 2009, the average financial value of open interest positions had dropped 24.8% from the previous year average. The table below sets forth data on evolution of average financial value of open interest positions and average monthly number of transactions for the periods presented.
Evolution of average financial value of open interest positions and number of lending transactions
25,0 100,0
81.0
59.3
15,0
10,0 5,0
47.4 22.6
52.3
60,0
18.5
16.9
20.5 12.7
40,0 20,0
6.6
2006 2007
Average Open Interest (BRL billions)
2008
2009
2010
Average Monthly Number of Trades (thousands)
Securities listings
We maintain different listing segments on our exchange and the organized OTC market. Listing activities performed by us correlate with registering, i.e., placing on a list (or board) securities issued by a particular company (the issuer) to trade on our exchange or, as the case may be, the organized OTC market. Our revenues from the activity correlate with fees we charge from issuers on a annual basis at a rate computed over the amount of each issuers capital stock, the minimum fees currently amounting to R$35,000.00 and the maximum capped at R$850,000.00. In addition, from investment funds, incentivized companies and other companies whose units or shares are listed on our organized OTC market we charge fixed annual listing fees of R$7,700.00. Effective from early 2009, the new price schedule for listing and annual fees contemplated a transition period spanning two years (2009 and 2010) during which we granted discounts on our revised fee rates. At the end of the year to December 2010 we registered 471 listings on our stock exchange, versus 434 and 439 in each of the prior years, respectively. Listings on the organized OTC market totaled 70 (versus 77 in 2009 and 89 in 2008).
Total listings 2010 2009 2008
Stock market listings (1) Organized OTC market listings Funds; other Total
(1)
471 70 143 684
434 77 131 642
439 89 149 677
This number of listings includes securitization firms, bond issuers and issuers of real estate receivables certificates whose shares are not listed to trade on a stock exchange and, thus, are not taken into account in our calculation of exchange market capitalization.
Equity offering market

A 2010 highlight, the equity offering market rebounded to hit record high proceeds of R$74.4 billion from IPOs, follow-on and seasoned offerings, totaling R$74.4 billion, above the R$70.1 billion famously grossed in 2007. If we were to include the oil reserves assignment the Brazilian government and Petrobras have agreed in connection with the seasoned offering conducted by Brazils oil and gas giant Petrobras, the overall proceeds from offerings would rise to R$149.2 billion. A total of 22 offerings were completed over 2010, 11 of them IPOs, the remainder consisting of follow-on and seasoned offerings. This compares with 24 offerings in 2009, six being IPOs and the remainder 18 being follow-on or seasoned offerings which in the aggregate raised gross
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Number of trades
20,0
80,0
Open interest
proceeds of R$46.0 billion, versus 12 offerings (four IPOs, 8 follow-on offerings) and gross proceeds of R$34.3 billion in 2008.
Bovespa segment Equity offerings (in R$ billions)
70.1
74.4
14.5 46.0
30.4 34.3
63.2 22.2 23.8
8.8 2004
4.3 4.5
13.9 8.5 5.4 2005
15.1
55.6 26.8 7.5 2007 2008 Follow on 2009 11.2 2010
15.4 2006 IPOs
Listing segments
Issuers listing securities to trade on our stock exchange may elect to have them trade on any of four segments: the Novo Mercado, Corporate Governance Standards Level 1 or Level 2 (Nvel 1 or Nvel 2 ) or the traditional market. The Novo Mercado, Nvel 2 and Nvel 1 segments are special listing segments that require companies to voluntarily adopt additional corporate governance practices not prescribed by law or applicable regulations. These requirements typically focus on (i) achieving more transparent corporate management practices through heightened disclosure and reporting standards, and (ii) better balancing the rights of shareholders to ensure both controlling and minority shareholders are extended fair treatment. Adherence to any of these special listing segments is voluntary and takes place by means of execution of an agreement between the issuer, its controlling shareholders and management team (including members of the board of directors, fiscal council members and executive officers), and our company. Additionally, an issuer must amend the bylaws for compliance with the set of requirements particular to each segment. As of December 31, 2010, listings on our special corporate governance segments included securities of 167 issuers, meaning 112 Novo Mercado listings, 18 Level 2 listings and 37 Level 1 listings. In addition, as of that date there were 295 listings on our traditional market. In addition, we have established the Bovespa Mais, a special trading segment for the organized OTC market mirrored on the stock exchanges Novo Mercado segment, which also adopts heightened corporate governance standards. The Bovespa Mais segment was established with the aim of enhancing the role of the capital markets as a source of financing for a wider universe of domestic companies, and a natural path for a move onto the Novo Mercado listing segment. Bovespa Mais is a segment designed for companies that wish to adopt a more measured approach towards accessing the capital markets, such as issuers that wish to launch lower volume equity offerings than would be typical in the Novo Mercado or other segment, or issuers seeking to conduct offerings designed for a limited number of investors or even those that would only conduct an offering at a later date after listing the shares.
Listings At December 31, 2010 At December 31, 2009 At December 31, 2008
Stock exchange special listing segments
Novo Mercado
Corporate Governance Standards Level 2 (Nvel 2 ) Corporate Governance Standards Level 1 ( Nvel 1 ) Foreign issuers Traditional stock market Total exchange listings BOVESPA Mais (organized OTC market)
167 112 18 37 9 295 471 1
159 105 19 35 10 265 434 1
160 99 18 43 9 270 439 1
The specific requirements to join each of our special listing segments have been all included in their respective listing regulations and generally aim at enhancing transparency in corporate management, promoting widespread share ownership, and better balancing the rights of shareholders.
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Central Securities Depository (CSD); Custody and back-office services

We operate the only central securities depository, or CSD, existing in Brazil. As such we provide depository and safe custody services to customers in our equities and fixed-income securities markets. We also provide fungible custody services pursuant to which we hold fiduciary title to securities under custody. For assurance of the integrity of these securities we adopt a process for daily reconciliation with the underlying assets, and keep the securities in book-entry form, as identified by an ISIN code (International Securities Identification Number) under a segregated account structure that identifies the ultimate beneficial owner. These service offerings are provided to issuers and investors in equities and in fixed-income securities alike, and include custody accounts identified by investor, provision of account and position statements by mail or online through the Internet; incident treatment, money transfer and payment receipt, recording of conversion, exchange and other transactions in the securities, and account operations processed in real time. In addition, we communicate with issuers and fiduciary agents to facility interaction with customer investors for more streamline processes. The number of active investors in the Bovespa segment went up 11.2% year-on-year, to a universe comprising 640.2 thousand investors at the end of 2010 from 575.7 thousand one year ago. Retail investors accounted for about 95.4% of this total, or a universe of 610.9 thousand investors. In the three year period between 2008 and 2010, the number of active investors grew on average 3.1% by year, reflecting the sound performance of the stock market in recent years and our concentrated efforts in making the stock market a popular investment alternative.
CSD financial value of assets held in custody and number of custody accounts
2.400,0
558.6
1.800,0
575.7
640.2
700,0
600,0
477.9
500,0
400,0
1.200,0
233.7
600,0
300,0
729.8
-
1,123.3 650.4 2007 2008 Value under custody (BRL billions)
872.6
1,239.8
200,0
100,0
2006
2009 # of accounts (thousands)
2010
Revenues we derive from depository and custodial activities correlate with charges of a monthly fee of R$6.90 by custody account registered at our depository facility and, since May 2009, also a percentage fee we charge for open interest positions in excess of R$300 thousand.
Custody fees.
We charge custody fees as a rate of the financial value of assets held in custody, calculated on a pro rata basis. The tables below set forth data on our current fee schedule, as revised and effective from June 2010.
Custody fee schedule (charged on assets under custody)
Variable and fixed income securities
Value range From R$0 to R$1,000,000.00 Between R$1,000,000.01 and R$10,000,000.00 Between R$10,000,000.01 and R$100,000,000.00 Between R$100,000,000.01 and R$1,000,000,000.00 Between R$1,000,000,000.01 and R$10,000,000,000.00 In excess of R$10,000,000,000.01
Yearly rate 0.013000% 0.007200% 0.003200% 0.002500% 0.001500% 0.000500%
Participant access permits

Under applicable legislation and regulations, trading activities on regulated organized markets, including ours, are typicall y performed through intermediation agents, in particular brokerage firms. In our structure, intermediation agents holding permits for access to our exchange and organized OTC markets are called market participants. The requirements applicable to intermediation agents applying for rights of access to our trading markets and clearing and settlement facilities have been released by means of Circular Letter No. 078/2008, and include the following:
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a.
Fee requirements Permit applications for access rights to either of BM&F or Bovespa markets. Applicants for permits granting access rights to either market segment are required to commit to the following fee requirements: Licensing fee: this is a one-time charged for the application processing and licensing procedure; Trading rights access fee: this is a one-time fee charged upon issuance of a permit granting trading rights; Settlement rights access fees: this is a one-time fee charged upon issuance of a permit granting clearing and settlement rights; and, Annual fees: this fee is intended to cover brokerage auditing costs. It is charged at 5% over the base access fee (permits granting trading or settlement rights, as applicable). As of the date of this Form, we have yet to start collecting this fee.
b.
Technology infrastructure Brokerage firms holding (or applying for) permits for access to our markets are required to meet certain technology infrastructure and other IT requirements which are set forth in our Manual for Access to BM&FBOVESPAs Technology Infrastructure, released through our Circular Letter 038/2010 (or OC-038/2010). In addition, our service provision policy was disseminated through circular letters 031/2010 and 016/2011, which set forth our rates, among other things, for the following: MegaBolsa workstations (MegaBolsa being a trading system); Gateways for transmission of orders; Additional contingency SLC servers for use at trading desks and brokerage branches; Contracting of order turnaround by minute, based on agreed volume bands, as selected pursuant to the order flow (volume) and operating strategy of each particular brokerage firm.
As of December 31, 2010, 85 licensed brokerage firms had been granted permits for access to our equities markets, while 6 7 held permits to operate in our derivatives markets, 38 held permits for the forex market and 61 held permits to operate in the bonds market. Brokerage firms are entitled to apply for permits to operate in more than one market or segment.
Registered brokerage firms Equities markets Derivatives markets Forex market Bonds market 2010 85 67 38 61 2009 81 62 66 80 2008 76 119 90 124
Market Data
We distribute to local and international authorized vendors across the world market data and information generated in our equities and fixed-income markets, in our financial and commodity derivatives markets, and information on our stock indices, in addition to news reports on market developments. We currently authorize vendors and brokers to broadcast our information signals. Vendors are companies that purchase directly from us the rights to broadcast or retransmit our information signals, thereby benefiting from our infrastructure and technical support for the receipt of signals directly transmitted by us or indirectly by other intermediating vendors. We also distribute market data and information to brokers and broker-dealers, who access our information signals in either of two ways: (i) directly from us, in which case they benefit from our infrastructure and technical support for signal receipt, or (ii) indirectly through a vendor or HomeBroker provider. As of December 31, 2010, we had 365,1 thousand vendor customers for our market data, 346.4 thousand being local customers and 18.7 thousand international customers, down 11.1% from one year ago, as set forth in the table below.
Customers December 31, 2010 December 31, 2009 December 31, 2008
Brazil Overseas Total
346,421 18,694 365,115
391,386 19,130 410,516
363,183 18,319 381,502
Commodity classification services

We operate commodity classification and grading facilities through which we provide services for classification and grading of cotton and coffee beans. We provide cotton classification services from our facilities located in city of So Paulo and in the cities of Sorriso and Rondonpolis, the latter two located in the state of Mato Grosso (the region is the largest cotton producer in Brazil). These facilities have combined yearly capacity to classify 2.7 million samples, which corresponds to approximately 30% of domestic cotton production. In 2010 the cotton classification volume increased by 24% from the prior year due mainly to growth of the customer base.
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Coffee beans are classified and graded with the ultimate aim of determining bean quality (best cup quality) and thereby securing higher market prices. In order to ensure proper clearing and settlement of transactions carried out on our commodities markets for physical delivery of Arabica Coffee, we require the coffee beans to have been classified and graded. We provide classification and grading services from our facilities located in the cities of So Paulo (classification) and Santos (grading). Additionally, to ensure accurate, high quality grading we have established a panel of experienced, well-recognized grading experts. For improved competitiveness, based on demand from international markets, we now require the coffee beans deliverable under contracts we settle to have been graded at least type 4-25 4/5, which allows for maximum 36 defects and -25 point rating. The minimum grade previously required was type 6 (86 defects, -100 point rating).
b. Revenues derived by each relevant operating segment, including as a percentage of total net revenues.
For clearer presentation and better comparability of our consolidated financial information, in 2010 we reclassified certain line items in the revenues group, with no impact on net income, shareholders equity or cash flows. However, because of the integration and corporate restructuring processes that in 2008 combined the two former independent exchanges into BM&FBOVESPA, which also had diverse charts of accounts, we have not prepared retrospective financial information, nor incorporated these changes into our financial information for the year ended December 31, 2008, which thus allow for limited comparability only.
Years ended December 31, 2010 2009 (in R$ thousands) % (in R$ thousands) 2,102,554 100,0% 1,672,894 722,065 701,545 20,427 93 1,049,300 737,074 254,904 57,322 331,189 49,443 44,392 88,263 48,234 67,629 3,898 5,669 8,043 15,618 34,3% 33,4% 1,0% 0,0% 49,9% 35,1% 12,1% 2,7% 15,8% 2,4% 2,1% 4,2% 2,3% 3,2% 0,2% 0,3% 0,4% 0,7% 534,189 513,185 20,849 155 837,326 605,244 207,914 24,168 301,379 32,989 39,549 72,167 46,051 64,650 4,304 7,146 8,290 26,233 Variation
10 vs. 09
Gross operating revenues Transaction fees - BM&F segment markets (trading, clearing, settlement) Derivatives Forex Debt securities Transaction fees - Bovespa segment markets (trading, clearing, settlement) Trading trading fees Clearing and settlement transactions fees Other Other operating revenues Securities lending fees Listing fees Depositary, custody and back-office fees Participant access fees Market data sales (vendors) Commodity classification fees Brazilian Commodities Exchange BM&F Settlement Bank Other
100.0% 31.9% 30,7% 1,2% 0,0% 50.1% 36,2% 12,4% 1,4% 18.0% 2,0% 2,4% 4,3% 2,8% 3,9% 0,3% 0,4% 0,5% 1,6%
25.7%
35.2% 36.7% -2.0% -40.0% 25.3% 21.8% 22.6% 137.2% 9.9%
49.9% 12.2% 22.3% 4.7% 4.6% -9.4% -20.7% -3.0% -40.5%
c.
Income (loss) ascertained by each relevant operating segment, including as a percentage of total net income.
We do not calculate income or loss for each operating segment. 7.3. Products and services comprising each operating segment discussed under 7.2 above
a.
Production process characteristics
Organized markets
The regulated securities markets include the exchange market and the organized OTC market (organized markets). Features typically found in these organized markets include: Provision of electronic trading systems and environments for the registration of previously agreed transactions; Trading system or environments that adopt specific price formation standards; Permission to trade directly with no assistance from an intermediation agent; Permission to delay disclosure of market data and information; The order flow entered and executed in a markets electronic systems; Type of investor for whom a market caters. Brazilian law grants powers and authority for the Brazilian Securities Commission, or CVM, the Brazilian National Monetary Council (CMN) and the Central Bank to regulate activities in the Brazilian financial and capital markets, each of them acting within its own sphere of competence. As the operator of organized markets (meaning securities and derivatives exchanges, as
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well as OTC market), our company is required to perform a dual role of market manager and regulatory entity licensed by the CVM. For this purpose applicable regulations and the CVM recognize BM&FBOVESPA as a self-regulatory entity with powers and authority to regulate activities in these markets and those of market participants.
Exchange markets
Exchange markets typically operate centralized and multilateral platforms for trading (entry, matching and execution of buy and sell orders) in securities, with assistance from an intermediation agent, or having as counterparty a market maker which is required to hit bids and take offers posted by other market participants for fulfillment of its market making role. A particular trait of exchange markets is that securities and derivatives traded on these markets consist of standardized securities and contracts, such that those that have similar characteristics constitute fungible things which are mutually replaceable for thins of the same kind and volume. We manage two exchange markets, one being the derivatives market, or BM&F segment, for trading in derivatives contracts, spot U.S. dollar, and government debt securities, the other being the equities market, or Bovespa segment, for trading in equities and private debt securities. In either segment we adopt a vertically integrated business model and our service offerings include the entire trade life cycle (from order entry to matching to execution, to risk management, to clearing and settlement activities, where we consistently act as CCP to ensure multilateral settlement). In addition, we provide intermediation agents and investors with access to trading systems and provide depository, custodial and back-office services (except derivatives, for which we provide registration services only).
Organized and non-organized OTC markets

An OTC market may operate in either of two ways: centralized and multilateral platforms for trading (entry, matching and execution of buy and sell orders) in securities, whether or not with assistance from an intermediation agent, or having as counterparty a market maker which is required to hit bids and take offers posted by other market participants, or, in the alternative, through the registration of previously agreed transactions. OTC derivatives are tailor-made, or standardized privately-negotiated agreements traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary, the value is derived from the value of an underlying asset which unlike certain exchange-traded equities and fixed-income securities, are typically not fungible. In addition, trading sand price formation standards and practices differ from those that are adopted in a stock exchange market. OTC derivatives transacted in the BM&F segment are non-standard registerable contracts, whereas OTC equities traded on the Bovespa segment include lower liquidity shares of mid- to small-cap issuers or issuers that adopt a gradual access strategy, in addition to private debt securities, units of funds and units of funds of funds and other securities.
Trading and post-trade Evolution of the electronic trading platforms

For a great many years trading activities on stock exchanges and on futures exchanges were performed on the trading floor, in open outcry environments where traders and stock brokers gathered around the pit would hand signal frantically to outdo the competition in buying and selling equities, futures and other derivatives, with demand determining market prices. Such was the case with trading activities performed on Bovespa and BM&F segments. In recent years however technology developed to a point where the market was ready to forego the trading floor, which in both our segment markets was replaced with electronic trading systems, platforms and environments where matching engines replaced hand signaling in matching orders for execution. This transformation deeply changed the pace of business, as technology developments permitted the electronification of the entire trading cycle, providing the market with all sorts of communication resources and ever faster, higher-capacity data feeds, trade-matching and quoting engines. In the context of electronic trading, we believe having the ability to offer very low latency, high throughput capacity and scalability to support market growth are crucial factors and key competitive strengths, which require us to make substantial investments in technology. We invest heavily in developing our technology infrastructure and, in particular, our trading platforms for BM&F segment (GTS system), for Bovespa segment (MegaBolsa system), the Sisbex system for the trading of government bonds and securities, and the BovespaFix system, for the trading of private debt securities.
BM&F segment
The electronic trading system for derivatives first launched in 2000 as the GTS platform (acronym for Global Trading System). This first version of the platform had been developed by then Bourse de Paris (currently NYSE Euronext). Early in 2008 that system was replaced with a new proprietary system we developed and implemented internally, but still call GTS platform. After the trading floor shut down in June 2009, all trading activity for the derivatives markets is processed through the GTS platform.
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In addition, technology developments implemented in recent years and over the course of 2009 brought the round-trip time, or RTT, down to 10 milliseconds at year-end from 70 milliseconds at end of year in 2007. Throughput capacity in turn supports 200.0 thousand daily trades since before 2009, for average daily demand at year-end comprising approximately 50.0 thousand daily trades. RTT is the time required to send a signal in both directions over a particular communication link and is the soonest that it is possible to receive acknowledgement of a message through a particular system. In the context of electronic trading systems, RTT is the primary metric to determine a trading systems performance. Our investments in technology aim to place our GTS system amongst the most advanced across the world. Throughput capacity in turn currently supports 400.0 thousand daily trades, up from 55.0 thousand daily trades at the end of 2007.
BM&F segment Round-trip time (in milliseconds) Derivatives markets Throughput (in thousands of daily trades) Derivatives markets Daily average Peaks 2010 10-15 2009 400 66 152 2009 20 2009 200 39 76 2008 25 2008 200 29 49 2007 70 2007 55 23 42
Bovespa segment
The electronic trading system of Bovespa, then an independent exchange, first launched in 1990 as the CATS trading platform (acronym for Computer Assisted Trading System). Later, in 1997, it was replaced with the MegaBolsa system, an advanced system developed by then Bourse de Paris (currently NYSE Euronext). Since then, the MegaBolsa underwent different stages of development to reach the current configuration as V900 version of the MegaBolsa system. As with the GTS system, technology developments implemented in recent years and over the course of 2009, including the upgraded version for the MegaBolsa system, brought the round-trip time, or RTT, down to 10 milliseconds at year-end from 450 milliseconds at end of year in 2007, whereas throughput capacity increased tenfold.
Bovespa segment Round-trip time (in milliseconds) Stock market Throughput (in thousands of daily trades) Stock markets Daily average Peaks 2010 10-15 2010 3,000 431 800 2009 20 2009 1,500 332 591 2008 300 2008 770 245 414 2007 450 2007 390 153 343
Common investments in technology

In 2010 we entered into a technology agreement with the CME Group whereby we will cooperate in the development and implementation of a multi-asset class electronic trading platform with throughput capacity below one millisecond, which in time will replace our existing trading platforms. While we were quite successful in cutting latency down in both our GTS and MegaBolsa systems (round-trip time in each system decreased by 80% and 97%, respectively), we are still planning to develop and implement a new and improved multiasset class electronic trading platform. Our investment plan contemplates, among other things, a system designed to operate with on-peak 50% idle capacity. Beyond offering lower latency and higher throughput capacity, improvements recently implemented also included investments in direct access infrastructure and connectivity. For example, in July 2009 we launched the BM&FBOVESPA Communication Network, or RCB, which was designed to supply demand associated with the expansion and increased sophistication of the Brazilian capital markets and to supplement services previously offered through the Financial Community Communication Network, or RCCF. The RCB is an open communication network for high speed connectivity between market participants and the exchanges electronic trading systems, based on a high performing structure with heightened data transmission capacity and greater flexibility, which gives participants the ability to make choices as to alternative telecommunications providers, data transmission technologies, network capacity and velocity, and contingency resources. Furthermore, we adopt the FIX protocol (Financial Information eXchange) in our messaging and trading systems. FIX protocol is an open specification intended to streamline electronic communications in the financial securities industry, which supports multiple formats and types of communications between market participants and the trading systems, including email, trade allocation, order submissions, execution reporting. It is technology commonly used in our industry, making it easier for new participants to access our markets.
DMA program development

In addition to reducing latency and increasing capacity, we implemented a number of alternative types of connection to our systems thus ensuring we provide customers with efficient channels for direct market access, or DMA, to our trading systems, while at the same time enhancing our market data distribution and transmission capacity. Moreover, developing efficient direct market access through electronification of the entire flow, whereas offering streamlined order execution and friendly
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environments for high frequency trading (high frequency traders make use of computer programs to enter orders with the computer algorithm deciding on aspects of the order, such as timing, price, and quantity). Already high frequency trading accounts for significant portions of the volumes traded in sophisticated international markets, but in Brazil high frequency flows are still incipient, and account for a very small portion of consolidated volumes (in December 2010 high frequency volumes accounted for 3.9% of the volumes traded in derivatives and 4.0% of the financial value traded in equities.). The rationale behind the concept for our DMA program is to give investors the ability to access from his workstation our market data feeds and the order book for a number of securities, and to enter buy and sell orders directly into our trading systems. However, we should note that provision of these services will not dispense with the role of the intermediation agents, as any investor will only be permitted to have access to DMA facilities through his brokers and under their authorization given in the context of a fully established commercial relationship. In addition, a broker offers services that no access model could fulfill and performs a key role in the trade life cycle and liability chain, which therefore also includes the clearing and settlement process. The figure below shows how the DMA models operate.
NET
Traditional DMA
NET
Via DMA Provider
NET
NET
Provider of DMA
Direct Connection
NET
Via DMA Co-location

Remote access tracking and maintenance
Application of Co-location
Below is a brief description of each of the four DMA models we have implemented:
Type 1 Traditional DMA - takes advantage of the infrastructure of participant brokerage firms to connect end users to the Exchange; Type 2 DMA via Provider - uses the infrastructure of online routing providers for the order routing process, including order routing to the CME Globex system; Type 3 DMA via Direct Connection - permits users to hire a direct link to the Exchange and forego usage of brokers trading screens or specific interface tools; and Type 4 DMA via Co-location arrangement - we host the customers server in our data center for automated order execution and registration.
These four DMA models were previously available to participants and investors dealing within the BM&F segment, and have been fully operational and generating business for over one year. The traditional DMA connection (Type 1) and access for order routing to the CME Globex system (Type 2) were implemented in August and September 2008, respectively. These were followed by implementation of all other connections for DMA via Provider (Type 2), which now includes five licensed providers. Then in June 2009 we implemented the DMA via Co-location model (Type 4) and in October 2009 the DMA via Direct Connection. These same DMA models are available to market participants and investors doing business within the Bovespa segment since September 1, 2010. However, none of these models dispenses with broker intermediation, which is a legal requirement. Our traditional DMA model first launched in 1999 to provide retail investors with direct market access to our HomeBroker platform.
Post-trade activities at our clearing houses

In the course of the exchange integration process that merged BM&F and Bovespa into BM&FBOVESPA, we absorbed the following clearing facilities, which act as central counterparty clearing houses and the Central Bank deems to perform systemically material roles: (i) equities clearinghouse (formerly known as CBLC), (ii) derivatives clearinghouse, (ii) FX clearinghouse; and (iii) government securities clearinghouse. Our clearing facilities operate pursuant to Law No. 10,214 dated March 27, 2001, which authorizes mul tilateral clearings and settlements, regulates the role of central counterparty performed by systemically material clearing facilities, and permits t he
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use of collaterals posted by defaulting participants to settle their obligations within the scope of our clearing and central counterparty activities, including in the event of insolvency, intervention, bankruptcy and extrajudicial liquidation. As trades are executed in one of our trading segment, data on these trades are automatically fed to the systems in our clearing houses and promptly relayed to intermediation agents for them to designate the actual principal under each transaction, in a process known as specification. In the next phase of the trading cycle, the relevant clearing house will act for physical delivery (for transfer of the security or the underlying or, as the case may be, for registration of the transaction) or financial settlement (for transfer of monetary resources) to be carried through, as applicable. In doing so, our clearing houses may act or not act as central counterparty to ensure multilateral settlement. The role as central counterparty is mandatory for the clearing and settlement of exchange-traded derivatives, FX derivatives, government securities and stocks, but is voluntary where the clearing and settlement of trades in OTC derivatives and private debt securities. Our clearing houses typically act as central counterparty (CCP) for the derivatives market (including futures, forward, options and swap markets), the spot U.S. dollar market, the government debt securities markets (cash, forward repo and securities lending markets), for the equities markets (cash, forward options, futures and securities lending markets) and the private fixedincome securities market (cash and securities lending markets). Our central counterparty clearing houses are responsible for providing efficiency and stability to the market by ensuring trades are properly cleared and settled. A CCP interposes itself between counterparties to financial transactions, becoming the buyer to the seller and the seller to the buyer. Acting in the capacity of central counterparty, our clearing houses absorb the risks of the counterparties in-between a trade transaction and its clearing and settlement, carrying out multilateral activities for financial settlement and clearing of securities and financial assets, in the event of default resorting to certain safeguard mechanisms, or in extreme situations resorting to our own net assets. In modeling and managing CCP risks, we focus on calculation, controls and mitigation of credit risk intrinsic to clearing participants. For proper risk mitigation, each clearing house has its own risk management system and safeguard structure. These structures comprise the universe of mechanisms and remedies a clearing house may resort to in order to cover losses from failed settlement by a participant. he key components of these safeguard structures include collateral deposited by market participants, often as margin, plus special funds intended to cover possible losses due to defaults and, in addition, co-liability undertaken by broker and clearing agents regarding transactions they intermediate or clear. The models we adopt in calculating margins are stress-test based, meaning they seek to assess market risk by taking into account not only recent historical volatility in market prices, but also the possibility that unexpected events could change historical behavior patterns for prices and the market as a whole. The principal parameters we use in calculating margin are stress scenarios our market risk committee defines for risk factors that typically affect the prices of securities, contracts and financial instruments traded on our markets. The primary risk factors for stress testing include, among other things, the Brazilian real to U.S. dollar rate, the Real-denominated fixed rate curve; the forward structure of the U.S. dollar-denominated Brazilian yield curve (cupom cambial), the Bovespa index and the cash prices for stocks. As of December 31, 2010, collaterals posted by participants totaled an aggregate of R$143,087.7 million, up 40.8% from R$101,641.1 million in the prior year. This fall correlates mainly with a 44.4% climb in the volume of collaterals pledged in connection with the clearing and settlement of transactions in derivatives and a 39.1% rise in the volume of collaterals pledged for transactions in stocks and other equity or debt-based securities, in either case a clear indication of more active trading and the improved market conditions in the periods under observation.
Pledged collaterals
Clearinghouses December 2010 (in R$ millions) December 2009 (in R$ millions) December 2008 (in R$ millions)
Equities and corporate fixed-income securities Government bonds Stocks Other* Derivatives Government bonds Bank letters of guarantee Other* Forex Debt securities Total
50,702.5 22,749.9 25,809.8 2,142.7 87,534.7 76,979.3 3,538.5 7,016.9 3,921.7 928.8 143,087.7
36,437.4 15,665.7 17,208.3 3,563.3 60,605.5 53,754.9 1,479.3 5,371.3 3,766.1 832.1 101,641.1
21,481.3 10,185.9 9,101.8 2,193.5 99,047.8 89,760.7 3,690.8 5,596.2 3,724.3 1,423.5 125,676.8
BM&F Settlement Bank

With the purpose of providing services that meet the specificities and peculiarities of the markets in which we operate, we have established the BM&F Settlement Bank, a wholly-owned subsidiary which offers our clearing houses and holders of access rights to our clearing houses custodial services for securities and financial assets pledged as collateral for transactions carried out in
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our markets. Conceived as an operating support vehicle, the BM&F Settlement Bank operates pursuant to the same high standards of efficiency and security adopted by us and our clearing houses, offering custody and settlement-related services in an exclusive, transparent, technical and skilled environment. Service offerings include settlement of transactions registered with the registration facility, the depository and the central registration system; clearing and settlement of securities, derivatives and foreign exchange; local representation and custodial services provided to non-resident investors; and support services provided to investment clubs. The BM&F Settlement Bank provides important risk mitigation and operational support for the clearing houses that integrate the BM&FBOVESPA system, and for market participants. It performs activities in line with the strategies and guidelines of the parent company and in accordance with its corporate purposes.

Acting through the Brazilian Commodities Exchange we provide services and an electronic transaction facility for agribusiness products, public and private electronic auction services for the trading of commodities and agribusiness services, centralizing the trading of agricultural commodities and OTC agribusiness securities. We also provide clearing and settlement services, acting as central counterparties to ensure multilateral settlement, in addition to offering depositary services for agribusiness securities.
b.
Features of the distribution process
Distribution channels
Commodity and securities brokerage firms are market participants with direct access to our trading systems, entitled to engage in proprietary trading and perform intermediation activities on behalf of their customers. Brokerage firms currently licensed by us and holding permits that give them rights to access our markets include 67 brokerage firms operating as participants in derivatives markets, 85 securities brokerage firms operating as participants in the equities markets, 38 firms operating in the foreign exchange market and 61 brokerage firms operating in the bonds market. With the purpose of organizing and expanding our base of participants, thereby driving volume growth to BM&F segment, we created different categories of access permits which grant different rights of access to our markets. Brokerage firms are eligible to apply for one or more categories of access permit provided they fulfill certain related requirements. These requirements include minimum net equity and net current assets for protection of liquidity, in addition to professional qualification, technology infrastructure, operating and other requirements. Permit cate gories are classified according to market and practice area. Permits granting rights of access to Bovespa segment markets in turn are granted only to securities firms, and are classified into (i) full access permits; (ii) regional access permits; and (iii) pioneering access permits. In addition to brokerage firms, investment banks and securities dealers are also eligible to apply for permits to access our fixed-income market and organized OTC markets. Permits granting access rights for participants to trade and intermediate trading on BM&F segment markets may entail either full or restricted trading rights, depending on the terms of the permit application. In the latter case, a permit would carry rights to trade or intermediate trading on certain markets and in certain types of derivatives, including, as the case may be, trading in financial derivatives or commodity derivatives (grains, coffee, sugar) or OTC derivatives or government bonds and debt securities, or rights for access to the spot FX market (foreign currency for physical delivery). Moreover, a permit carrying restricted rights for the trading of financial derivatives may restrict trading to certain types of contracts (such as interest rate contracts or FX derivatives or index-based derivatives or energy or metal derivatives, or a combination thereof). Our board of directors reviews and evaluates applications for access permits submitted by any new brokerage firm.
Operational Qualification Program PQO

Brokers and brokerage firms typically represent important distribution channels for our products. For the very nature of their business they work actively in prospecting and expanding our end customer base. In addition, because broker-intermediated trading is a requirement of Brazilian law, we take concerned in ensuring local brokerage firms operate pursuant to high standards. For this reason, we launched in 2005 a quality certification program for brokers and brokerage firms operating in derivatives markets. More recently, we expanded the program to encompass brokers and brokerage firms that operate in any market within each of the BM&F and Bovespa segments. Our quality certification program includes training and professional guidance on standards with the aim of strengthening their position as market participants, whereas ensuring minimum efficiency and performance standards in intermediation activities, as well as sound market practices. In addition, we adopted several criteria to grant qualification seals, which include segmentation by category of intermediation activities. Accordingly, qualification seals may be granted under any of the following five categories of brokerage activities: Home Broker this seal identifies individuals or brokerage firms that focus on a customer base primarily made up of retail investors to whom they provide direct market access (typically through the Internet) pursuant to simple, objective guidance requiring very little human interference. Retail Broker this seal identifies individuals or brokerage firms whose customer base comprises mainly corporate
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investors (which trade in a wider range of financial products), and whose qualification requirements include professional trading education skills and advisory capabilities, trade capture and distribution capabilities. Agro Broker this seal identifies individuals or brokerage firms that operate within the BM&F segment focusing mainly on intermediation of transactions in agricultural commodity derivatives. Agro brokers frequently interact with participants across the commodities production chain. The agro broker qualification requirements include customer interaction and commercial penetration skills, financial planning and financial structuring capabilities, in addition to tax knowledge. Carrying Broker this seal identifies individuals or brokerage firms that in addition to providing trading intermediation services focus on operating as clearing agents and as custodians for securities. The qualification requirements for carrying brokers include heightened capabilities and efficiency in sizing and managing customer positions, in tackling the clearing and settlement cycles and credit-related issues, including securities lending and collateral management, risk management and position consolidation skills. Execution Broker this seal identifies individuals or brokerage firms that focus on providing professional trading services, and pursue nimbleness and efficiency in high-speed, high-volume execution and order flow management
For purposes of obtaining a qualification seal, brokerage firms are required to operate pursuant to certain standards and practices based on which qualification is recognized. Every brokerage firm is required to observe and practice certain genera l standards, which constitute minimum qualification requirements, in addition to special standards applicable to each qualification category, which a brokerage firm must meet and practice. Adherence to both general and special quality standards is verified pursuant to audit processes conducted by exchange auditors. In addition, a qualification seal is granted only upon issuance of an opinion by our PQO Qualification Committee (composed of exchange executives and officers) advising that the applicable requirements are fulfilled and recommending the brokerage qualification. At the end of 2010 we had granted qualification seals to 90 brokerage firms that operate within the BM&F segment. The high standards by which brokerage firms operate in our markets underpin the development of Brazilian capital markets, and provide an important channel for efficient distribution of our products and services. For this reason, started from 2010, we extended our qualification program to the participants of the Bovespa segment, and plan to grant the same categories of certification seal discussed above, except the agro broker certification.
c.
Market characteristics in relevant operating segments, in particular: i. Share of each relevant market segment
Because we operate the only domestic exchange markets for listed equities and derivatives, in December 2010 our share of these markets was 100%. In the case of the organized OTC markets, our share of the market for OTC equity securities was close to 100%, while our share of the market for OTC derivatives was approximately 20%. In addition, as compared to other Latin American exchanges, at the end of 2010 our exchange accounted for approximately 81.0% of the financial value traded in equities and 59.6% of the overall combined market capitalization of all Latin American exchanges.
Distribuio do Volume Financeiro Negociado na on Latin American Exchanges in 2010 Amrica Latina - 2010
Shares of the overall financial value traded
Distribuio da capitalizao de mercado das empresas market capitalization (December 2010) listadas na Amrica Latina - dez 2010
Share of the combined overall Latin American
8%
11%
12,7%
11,3%
16,4% 59,6%
81%
BM&FBOVESPA Mexico Mxico BM&FBOVESPA
Outras Other
BM&FBOVESPA BM&FBOVESPA
Mxico Mexico
Santiago Santiago
Outras Other
Source: World Federation of Exchanges (WFE)
In addition, transactions carried out on our stock exchange accounted 55.43% of the overall financial value traded in stocks of Brazilian issuers over 2010, whereas the remainder has been traded on U.S. exchange markets, such as the New York Stock Exchange, or NYSE, in the form of depositary receipts. In 2009 and 2008 transactions in stocks of Brazilian issuers carried out on our stock exchange accounted for 51.73% and 46.42%, respectively, of the overall financial value traded in these stocks, whereas trades on U.S. exchange markets accounted for the remainder. In 2009 and 2008 trades on our stock exchange accounted for 51.73% and 46.42%of the overall financial value traded, respectively. It should also be noted that between 2007 and 2010 our stock market registered 85 new listings, with just one entrant applying for dual listing (with us and the NYSE).
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Bovespa segment 2007 2008 2009 2010 53.12% 46.42% 51.73% 55.43%
USA 46.88% 53.58% 48.27% 44.57%
ii. Competitive market conditions
Brazilian Stock Market Industry

The Brazilian stock market industry began in 1845 with the creation of the Rio de Janeiro Stock Exchange ( Bolsa de Valores do Rio de Janeiro), or BVRJ. Other stock exchanges emerged later, including in 1890 the So Paulo Stock Exchange, under the name of Free Exchange (Bolsa Livre), which in 1895 changed to So Paulo Government Funds Exchange (Bolsa de Fundos Pblicos de So Paulo). In the mid-1960s it was renamed BOVESPA. In 2000 an agreement was signed to consolidate the nine stock exchanges then operating in Brazil. Pursuant to this agreement, all trading of equity securities on stock exchanges in Brazil moved to Bovespa. Five of those exchanges were later terminated by their members. In the case of the derivatives market, BM&F was organized in 1985 under the name Brazilian Mercantile & Futures Exchange, and has since been the only domestic exchange for the trading of derivatives contracts. Two well-defined trading segments emerged from the consolidation of the domestic stock markets into Bovespa, meaning the equities and fixed-income securities segment operated by Bovespa, and the derivatives segment, comprising the trading of commodities, derivatives based on equities, indices, interest rates and currency rates, in addition to federal, state and local government debt securities, which was operated by BM&F. Then, on May 8, 2008, the shareholders of Bovespa Holding S.A. and of BM&F S.A. approved the integration of the two exchanges under a single company named BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros, the Brazilian Securities, Commodities and Futures Exchange. As of December 31, 2010, we had no local competition in either the securities or the derivatives exchange markets, or in the organized OTC market for equity securities. However, we did have competition in the OTC markets for derivatives and government and private debt securities, in addition to having competition for certain of the services provided by the BM&F Settlement Bank. The tables below set forth 2010 information on rankings of world exchanges both by financial value traded and market capitalization, based on data compiled by the World Federation of Exchanges, or WFE. At December 31, 2010 our exchange ranked 15th by financial value traded and 11th by exchange market capitalization. In addition, according to data released by the Futures Industry Association, or FIA, our derivatives market ranked 6th in number of contracts traded.
Top 10 largest Exchanges across international markets
By financial value traded Exchange 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 NYSE Euronext (US) NASDAQ OMX Shanghai SE Tokyo SE Group Shenzhen SE London SE NYSE Euronext (Europe) Deutsche Brse Korea Exchange Hong Kong Exchanges TSX Group BME Spanish Exchanges Australian SE Taiwan SE Corp. BM&FBOVESPA National Stock Exchange India SIX Swiss Exchange NASDAQ OMX Nordic Exchange Istanbul SE MICEx
(In US$ millions)
By market capitalization Exchange 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 NYSE (Euronext) US NASDAQ OMX Tokyo SE Group London SE Group NYSE Euronext (Europe) Shanghai SE Hong Kong Exchanges TSX Group Bombay SE National Stock Exchange India BM&FBOVESPA Australian SE Deutsche Brse Shenzhen SE SIX Swiss Exchange BME Spanish Exchanges Korea Exchange NASDAQ OMX Nordic Exchange MICEx Johannesburg SE
(In US$ millions)
Year ended December 31, 2010 17,795,600.20 12,659,197.92 4,496,193.54 3,787,952.33 3,572,529.12 2,741,324.64 2,018,076.73 1,628,496.44 1,607,247.27 1,496,432.51 1,368,953.60 1,360,909.64 1,062,649.54 903,061.74 868,813.04 801,017.16 788,360.82 750,278.69 411,203.43 408,078.05
Year ended December 31, 2010 13,394,081.80 3,889,369.88 3,827,774.20 3,613,063.97 2,930,072.44 2,716,470.22 2,711,316.16 2,170,432.73 1,631,829.54 1,596,625.26 1,545,565.66 1,454,490.57 1,429,719.05 1,311,370.08 1,229,356.54 1,171,624.98 1,091,911.46 1,042,153.74 949,148.86 925,007.15
Source: WFE
Source: WFE
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2010 Top-10 Futures Exchanges

Rank Exchange
(data as at December 2010)

Number of contracts traded (2010)
1 2 3 4 5 6 7 8 9 10
Sources: WFE; FIA
Korea Exchange Chicago Mercantile Exchange (CME) Eurex (includes ISE) NYSE Euronext (includes all EU and US markets) National Stock Exchange of India BM&FBOVESPA Chicago Board Options Exchange (includes CFE) Nasdaq OMX Group (includes all EU and US markets) Multi Commodity Exchange of India (includes MCX-SX) Russian Trading Systems Stock Exchange
3,748,861,401 3,080,492,118 2,642,092,726 2,154,742,282 1,615,788,910 1,422,103,993 1,123,505,008 1,099,437,223 1,081,813,643 623,992,363
d.
Seasonality, if any.
We have no records suggesting our business is significantly influenced by seasonal factors, as we observe that trading volumes may fluctuate for a number of reasons not clearly attributable to any seasonal event.
e.
Principal raw materials and supplies
Our relationships with suppliers and service providers are conducted in strict compliance with the notion of cooperative relationships based on mutual good faith commercial relations. Our main suppliers are technology and IT solutions providers, including servers, network equipment, mainframes and other hardware, equipment maintenance services, technical support and specialist providers (in the case of special projects). Typically, contracts and prices are negotiated by project or program. Where the price is agreed in foreign currency we will be subject fluctuations in exchange rate, and where agreed in Brazilian reais there may be adjustments for inflation, which typically track the fluctuations of either the extended consumer price index (IPCA) or the general market price index (IGPM). In some cases the price may be tied to performance, such as in the case of the MegaBolsa trading system, as the maintenance fees for this system closely correlate with throughput. We have a service agreement with Primesys, the network communications provider for the Financial Community Communication Network (Rede de Comunicao da Comunidade Financeira ), or RCCF, the open communication network for connectivity between market participants and our trading systems. We rely on Primesys for the provision of network communications related to post-trade services. Our main suppliers and service providers include the following: IT (software and hardware): HP; EMC Computer; Hitachi Data System; IBM; Compusoftware; AtosEURONEXT (NYSE); Services: 7COMm; IBM; Multirede; Hitachi Data Systems Specialist providers: 7COMm; GPTI; 3CON Consultoria and Stefanini. 7.4. Customers whose purchases account for over 10% of total net revenues
In our case customer revenue concentration is not a factor of dependence, as our customer are the principals in trades carried out on our markets, who for this purpose use our services. 7.5. Material effects of government regulations on the business
a.
Special licensing requirements related to the business; track record of relation with licensing authorities.
Regulation of the industry
Overview
The Brazilian capital markets and financial system are regulated by several government agencies. The overall regulatory framework governing the Brazilian financial system and capital markets, however, is based on two main laws: (i) Law No. 4,595/64, dealing with the organization of the Brazilian financial system and the roles of its agents, including the Central Bank; and (ii) Law No. 6,386/76, or Brazilian Securities Market Law, dealing with the organization of the Brazilian capital markets and the role of its agents, creating the CVM, and defining its powers, sphere of competence and responsibilities.
Market Regulators
The Brazilian National Monetary Council (Conselho Monetrio Nacional), or CMN, the Central Bank and the Brazilian Securities Commission (Comisso de Valores Mobilirios), or CVM, are primarily responsible for regulating activities conducted in the Brazilian financial and capital markets and for monitoring the participants in these markets, each within its own sphere of competence.
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CMN
The CMN consists of the Minister of Finance, the Minister of Planning and Budgets and the Governor of the Central Bank. It was created with the purpose of formulating the monetary and credit policies for the financial and capital markets. These policies address matters as systemic credit availability, form of remuneration for credit transactions, operating limits attributable to financial institutions, regulations regarding foreign investments in Brazil and foreign exchange.
Central Bank
The Central Bank is a federal agency under the Ministry of Finance responsible for implementing the monetary and credit policies established by the CMN, regulating the foreign exchange market and foreign investment flows in Brazil, licensing financial institutions to operate in the domestic market and overseeing the operations of financial institutions. Additionally, acting within the realm of the Brazilian payment system, the Central Bank is responsible for issuing operating licenses to clearing facilities and clearing and settlement agents.
CVM
The CVM is the primary regulatory and market oversight entity for the Brazilian capital markets. It is a federal agency under the Ministry of Finance, dedicated to regulating and monitoring the capital markets and its agents. Financial institutions and other institutions licensed to operate by the Central Bank are also subject to CVM oversight when conducting business in the capital markets. In order to have the ability to ensure the capital markets operate properly and to prevent or correct improper behavior, the CVM has authority to: (i) approve, suspend or cancel registrations; (ii) approve, suspend or cancel public offerings of securities; (3) oversee the activities of publicly held companies, and the stock, commodities and futures markets, as well as the members of the securities distribution system; (4) release information or set guidelines for clarification or guidance to market participants; (5) forbid market participants from engaging in practices, and ban practices that could be detrimental to the capital markets and the investors in these markets, and to impose sanctions in the event of violations of applicable rules.
Government licenses and consents

As stated in article 3 of the Bylaws, three of the activities included in our corporate purposes are particularly important for purposes of determining the applicability of certain regulatory licensing and consent requirements, as follows: (i) operation and management of organized securities markets; (ii) provision of services for registration, clearing and settlement of transactions carried out in any of our markets; and (iii) provision of services as central securities depository and (iv) provision of fungible and non-fungible custodial services for securities and bonds. Under article 18 of the Brazilian Securities Market Law, the operation and management of organized securities markets by us are subject to consent and oversight by the CVM. In addition, dated 2007 the CVM issued Instruction 461/07, which regulates the formation, organization, operation and extinction of exchange markets (whether for stocks, commodities or derivatives) and of organized over-the-counter market markets, or OTC markets. This means our organization and operations are subject to oversight directly by the CVM, which in addition has authority to validate regulatory rules we may issue in connection with the operation of markets we manage, including rules concerning requirements for the granting of access permits to prospective market participants and events of access permit withdrawal, issuance of standard-setting rules and guidelines, definition of contract specifications, rules on order characteristics and on transactions permitted in markets we manage as well as rules on surveillance and auditing structures and processes, among other things. Following the completion of the integration process that combined the activities of Bovespa and BM&F into a single company named BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros, and in accordance the requirements of CVM Instruction 461/07, the CVM full board in a plenary session held on May 19, 2009, confirmed our license to operate and manage organized exchange and OTC markets. Under article 17, paragraph 1 of the Brazilian Securities Market Law, we are a market manager and clearing and settlement facility operator which in such capacity acts as an ancillary regulatory and market surveillance entity, responsible for monitoring market participant activities and the transactions carried out in our markets. BM&FBOVESPA Superviso de Mercados (BSM) was established as a not-for-profit mutual association, a financially autonomous functional entity, with its own budget, infrastructure and specialized employees, to perform market surveillance activities, ensuring market integrity, enhanced investor protection and sound market practices. BSM and the CVM maintain close relations. BSM is also responsible for keeping the CVM abreast of market developments and provide it with periodic reports on its market surveillance activities Moreover, pursuant to CVM Instruction 89/88, which provides on granting of licenses for provision of securities bookkeeping and custodial services, and CVM Instruction 115/90, which issued rules on provision of fungible custodial services, the CVM is responsible for licensing our Company to provide these services. Accordingly, on November 28, 2008, which was the date of the merger with CBLC (formerly named Brazilian Clearing and Depository Corporation) as part of the abovementioned integration process, our Company was licensed to operate these services. Prior to the merger, these services were provided by CBLC.
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Under Law No. 10,214/01, activities involving clearing and settlement services, which we provide through our four clearing facilities (the derivatives, FX and debt securities clearinghouses for BM&F segment and the equities clearinghouse for Bovespa segment) are subject to the regulatory and oversight authority of both the CVM and the Central Bank. Law No. 10,214/01 governs clearing and settlement activities within the scope of the Brazilian Payment System. Supplementary regulations have been issued by the CMN and the Central Bank, in particular under CMN Resolution 2,882, which regulates payment systems and transactions related to securities and delegates authority for the Central Bank to issue additional regulation concerning (i) clearing facilities, (ii) licenses for the operation of clearing and settlement systems; and (iii) surveillance of these activities and enforcement of related rules, include imposition of sanctions. Pursuant to Communiqu 9,419 dated April 18, 2002, the Central Bank granted BM&F licenses to operate the derivatives clearinghouse and the FX clearinghouse and, in addition, granted Bovespa and CBLC a license to operate the equities clearinghouse; Communiqu 13,750 dated September 29, 2005, authorized the derivatives clearinghouse to expand the range activities and services; and Communiqu 12,789 dated December 21, 2004, granted BM&F license to operate the debt securities clearinghouse. We are in close contact with both the Central Bank and the CVM due to both the nature of our business and their oversight responsibilities. b. Adopted environmental responsibility policy and practices, including adherence to international environmental protection standards; compliance costs.
We have not expressly adhered to international environmental standards and our activities are not subject to special environmental regulatory requirements because the nature of our business is not one entailing direct negative impact on the environment. As a result we incur no material compliance costs and do not adopt any particular set of practices for protection of the environment. Still, sustainability as well as social and environmental responsibility are matters of global concern and we increasingly recognize the need to develop systems to evaluate and manage the wider impact of our business on the environment and the community, and are deeply committed to building social and environmental responsibility awareness and encouraging sound responsible practices vis--vis internal and external stakeholders and the community. Accordingly, we participate in the Global Compact, a voluntary corporate citizenship initiative sponsored by the United Nations, which relies on public accountability, transparency and the enlightened self-interest of companies and civil society to initiate and share substantive action in pursuing principles associated with global sustainability and overcoming social inequalities. In addition, in response to the Carbon Disclosure Project, a UK-based international organization whose 2010 questionnaire we have answered, we issued in 2010 our first Energy Use and Greenhouse Gas Emissions Inventory Report (for 2009), prepared in accordance with the method recommended by the GHG Protocol Brazil Program, established within the scope of the GHG Protocol Initiative, a joint collaboration of the World Business Council for Sustainable Development, or WBCSD, and the World Resources Institute, or WRI, coordinated locally by the Center for Sustainability Studies of Getlio Vargas Foundation (CES-FGV). According to our GHG Inventory Report for 2009, as measured in standards metric tons of equivalent carbon dioxide, or MT eCO2, for assessment of global warming potential, our greenhouse gas emissions for 2009 reached 1,577 metric tons CO2-equivalent. We are currently preparing our GHG Inventory Report for 2010. Amidst other socially and environmentally responsible initiatives and projects, we adopt a waste management program pursuant to which we provide special recycling bins for collection of recyclable waste from our employees. A recycling company retrieves this waste for the recycling process and separates the organic waste, which is delivered for composting at the appropriate facility. In 2004, based on a partnership with the Brazilian Ministry of Development, Industry and Foreign Trade, we started to implement the Brazilian carbon market. Within the scope of this market, we developed and implemented the following projects:
Carbon facility. An electronic system, accessed via the Internet, for the registration of emissions reduction projects in
line with the Clean Development Mechanism, or CDM, which is one of the sustainable development mechanisms defined in the Kyoto Protocol. The goal is to simplify access by potential buyers of Certified Emission Reductions, or CERs, to carbon credit generating projects approved for implementation under the terms of the Kyoto Protocol.
Carbon credit trading system.
An electronic environment for the trading of CERs (Certified Emission Reductions) derived from carbon credit generating projects developed within the scope of the Kyoto Protocol. The transactions are currently carried out via electronic auctions over the Internet. The auctions are scheduled by us at the request of the selling participants and are physically settled. We do not act as central counterparty to these transactions.
Carbon Market Infrastructure and Institutional Advancement Project: Based on a cooperation we agreed with the
World Bank and FINEP(*), between 2009 and 2010 we put in place a project geared towards advancing the
( )
* FINEP is a science and technology research financing agency established by the Brazilian Ministry of Science and Technology, which agreed a collaboration with the government of Japan for implementation in Brazil of a professional qualification program within the scope of the Clean Development Mechanism developed under the Kyoto Protocol, aimed to educate, train and transfer professional skills for development of carbon credit generating projects. BM&FBOVESPA is the designated coordinator of this program.
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infrastructure and institutional development of the domestic carbon market. As part of our marketing efforts towards accomplishing these objectives and garner future business for the local carbon market, we organized a qualification workshop to educate, train and transfer professional skills for development of carbon credit generating projects. Furthermore, our initiatives towards encouraging and disseminating environmentally responsible practices and sustainable development of public companies include the following:
BVS&A The Environment and Social Investment Exchange (Bolsa de Valores Sociais e Ambientais).
This is a pioneering program inspired in the operating model of a stock exchange, which works as a hub for persons and companies interested in contributing financial resources to domestic NGOs engaged in projects oriented towards environmental improvements, the advancement of education and community projects;
Corporate Sustainability Index, or ISE (ndice de Sustentabilidade Empresarial). This index measures return on a
portfolio composed of shares of companies that are highly committed to sound practices in social and environmental responsibility, corporate sustainability and higher corporate governance standards. The ISE is a benchmark for the Brazilian market and a driver of recommended social and environmental and sustainability practices amongst public companies;
Carbon Efficient Index, or ICO2 (ndice Carbono Eficiente). In December 2010, during the 16th UN Climate Change
Conference (COP-16) in Cancun, Mexico, BM&FBOVESPA and the Brazilian Social and Economic Development Bank (Banco Nacional de Desenvolvimento Econmico e Social), or BNDES, announced the launch of the Carbon Efficient Index, or ICO2, designed to measure the carbon footprint performance of large cap companies. With this index we aim to encourage public companies to adhere to GHG inventory reporting, to pursue, adopt and share efficient, innovative, sustainable and environmentally sound practices, redoubling efforts to cut their greenhouse gas emissions, a fundamental step in terms of climate change management. The Carbon Efficient Index was structured around the IBrX50, a liquidity-weighted, total return index of the 50 most actively traded stocks listed on our stock exchange, except that each stock in the new index theoretical portfolio will be weighed also by the issuers inventory of carbon emissions associated with its activities, or carbon footprint, calculated as MTeCO2/Gross Revenues. In terms of carbon footprint performance, the lower the ratio of greenhouse gas emissions to revenues, the greater the carbon efficiency. As a result, the stocks of more carbon efficient and better performing companies will tend to increase in weight when compared to the ranking provided by the IBrX-50, whereas the stocks of less efficient companies will tend to decrease in weight vis--vis their weight in the IBrX-50. As of January 2011, the index theoretical portfolio included 42 large cap companies. c. Dependence on patents, trademarks, licenses, concession grants, franchise arrangements or other royalty-related contracts, which are material for the course of business.
1)
Patents and trademarks
BM&FBOVESPA and its subsidiaries own a number of registered trademarks, in addition to trademark applications previously filed with the National Institute of Industrial Property (Instituto Nacional da Proppriedade Industrial), or INPI, the local patent and trademark office (see the discussion under subsection 9.1(b) of this Form). Our main trademarks and service marks include BM&FBOVESPA, BM&FBOVESPA A Nova Bolsa, BM&F, BM&F Brasil, GTS - Global Trading System, Bolsa Brasileira de Mercadorias, BM&F Trading System, Sisbex, Bovespa e Ibovespa, and are duly registered or the subject of trademark applications previously filed with the INPI, as applicable, classified as trademarks and services marks in the several classes of services and product we and our subsidiaries provide. Previously, BM&F being a highly recognizable trademark, we applied to secure highly renowned trademark status for the brand. Recognition of highly renowned status secures special protection rights for the trademark throughout Brazilian territory and across the spectrum of economic activity. Currently, the application proceeding is still pending. In addition, as of December 31, 2010, we had 63 trademarks and service marks registered in other countries in South America, Europe, Asia and the United States, including the Bovespa Bolsa de Valores de So Paulo, Ibovespa and Bovespa So Paulo Stock Exchange trademarks. Currently, having completed the integration process which combined BM&F and Bovespa into BM&FBOVESPA, we are in the process of reviewing our portfolio of brands, marks and logos. Additionally, the process to update trademark registrations and amend trademark applications existing at the INPI is still ongoing. Moreover, as of December 31, 2010, we had three patent applications pending at the INPI in Brazil and two in Argentina, all related to the GTS trading system. However, three patent deposit applications filed in 2009 (International PCT/BR2009/00120, PCT/BR2009/00154 and PCT/BR2009/00153) have been discontinued and are no longer in our database.
2)
Domain names
As of December 31, 2010, BM&FBOVESPA and its subsidiaries owned 140 domain names registered in Brazil (112 of which on behalf of BM&FBOVESPA) and 20 domain names registered elsewhere, all of them on behalf of our company. As of that date, our main registered domain names were bmfbovespa.com.br, bmfbovespa.com, bvmf.com.br, bmf.com.br, bbmnet.com.br, sisbex.com.br, www.bovespa.com.br, www.abolsadobrasil.com.br and www.bovespaonline.com.br.
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3)
Computer programs and software
Computer programs and software performs a fundamental role in our business operations. Accordingly, we keep strict controls for the licensing of computer programs and software we use or implement. For additional information on program and software licensing, see subsection 9.1(b) of this Form. 7.6. Material revenues derived from activities performed in Brazil and elsewhere
a.
Revenues attributable to customers based in the issuers home country, including as a percentage of total net revenues
The charts below provide data on the allocation of revenues attributable to the different categories of investors. These data show that trading activities by retail investors, institutional buyers, corporate investors and financial institutions accounted in 2010 for aggregate 70.4% of the financial value traded on markets comprising the Bovespa segment (versus 65.8% in 2009 and 64.6% in 2008), whereas having accounted for aggregate 77.6% of the volume traded in 2010 on markets comprising the BM&F segment (versus 79.9% in 2009 and 81.1% in 2008). These are revenues attributable to customers located in Brazil.
Allocation of trades by type of investor- Bovespa segment

7.8% 2.8% 7.4% 2.2% 8,4% 2,3%
29,6%
35.3%
34.2%
27.1%
25.7%
33,3%
26.8%
30.5%
26,4%
2008 Retail Investors Corporate Investors
2009 Institutional Financial Institutions
2010 Foreign Investors Other
Allocation of trades by type of investor - BM&F segment

0.15% 2.90% 0.11% 2.53% 1.71%
47.60%
45.46%
42.40%
3.88% 7.97% 18.79% 7.63% 22.40% 20.02%
22.60%
24.26%
29.61%
2008 Institutional Financial Institutions
2009 Foreign Investors Non financial Institutions Retail Investors Central Bank
2010
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b.
Revenues attributable to customers based elsewhere, other than in the issuers home country, including as a percentage of total net revenues
The tables below set forth data on financial value (Bovespa markets) or volume traded (BM&F markets) by foreign investors in the periods presented, as distributed by country based on statements provided by these investors. Bovespa markets
2010 COUNTRY Financial value traded % of Overall Value Traded COUNTRY 2009 Financial value traded % of Overall Value Traded COUNTRY 2008 Financia l value traded % of Overall Value Traded
(in R$ billions)
(in R$ billions)
(in R$ billions)
UNITED STATES UNITED KINGDOM URUGUAY LUXEMBOURG JAPAN FRANCE HOLLAND IRELAND CANADA NORWAY SOUTH KOREA CHILE AUSTRALIA PORTUGAL CAYMAN ISLANDS SAUDI ARABIA SWITZERLAND THE EMIRATES (UAE) SWEDEN SPAIN OTHER TOTAL FOREIGN INVESTORS
397.7 187.7 123.6 59.4 24.5 22.4 21.2 18.4 16.2 9.5 8.3 5.1 5.1 4.5 4.3 3.9 3.7 2.9 2.7 2.6 19.9
42.15% 19.89% 13.09% 6.30% 2.60% 2.37% 2.25% 1.95% 1.72% 1.01% 0.88% 0.54% 0.54% 0.48% 0.46% 0.41% 0.39% 0.30% 0.28% 0.28% 2.11%
943.7 100.00%
UNITED STATES UNITED KINGDOM URUGUAY LUXEMBOURG FRANCE HOLLAND IRELAND JAPAN CANADA SOUTH KOREA NORWAY CAYMAN ISLANDS AUSTRALIA CHILE SWITZERLAND PORTUGAL THE EMIRATES (UAE) DENMARK SAUDI ARABIA SINGAPORE OTHER TOTAL FOREIGN INVESTORS
395.2 186.7 107.9 47.8 34.6 24.7 13.4 10.8 8.9 7.7 7.4 6.9 4.8 3.4 3.2 2.8 2.4 2.4 2.0 2.0 13.8 888.6
44.47% 21.00% 12.14% 5.38% 3.89% 2.78% 1.50% 1.21% 1.00% 0.87% 0.84% 0.77% 0.55% 0.39% 0.36% 0.32% 0.27% 0.27% 0.23% 0.23% 1.55% 100.00%
UNITED STATES URUGUAY UNITED KINGDOM LUXEMBOURG HOLLAND FRANCE IRELAND CAYMAN ISLANDS JAPAN SOUTH KOREA ARGENTINA CANADA SWITZERLAND NORWAY PORTUGAL THE EMIRATES (UAE) AUSTRALIA SPAIN CHILE SINGAPORE OTHER TOTAL FOREIGN INVESTORS
497.0 152.9 104.3 56.3 25.5 23.7 14.5 14.0 10.3 10.2 9.5 6.4 6.0 5.1 4.8 4.7 3.7 3.5 2.9 2.1 16.2
51.06% 15.71% 10.71% 5.78% 2.62% 2.43% 1.49% 1.44% 1.06% 1.05% 0.98% 0.66% 0.61% 0.52% 0.49% 0.49% 0.38% 0.36% 0.29% 0.22% 1.63%
973.4 100.00%
BM&F markets
2010 COUNTRY Volume traded % of Overall Volume Traded COUNTRY 2009 Volume traded % of Overall Volume Traded COUNTRY 2008 Volume traded % of Overall Volume Traded
(number of contracts)
UNITED STATES GREAT BRITAIN (UK) URUGUAY LUXEMBOURG JAPAN FRANCE HOLLAND IRELAND CANADA NORWAY SOUTH KOREA CHILE AUSTRALIA PORTUGAL CAYMAN ISLANDS SAUDI ARABIA SWITZERLAND THE EMIRATES (UAE) SWEDEN TOTAL -
135,512,067 85,699,214 9,354,013 7,200,400 7,039,708 4,760,962 4,218,438 4,012,745 3,004,102 1,223,811 756,913 628,442 66,262 34,280 33,791 31,040 26,669 12,365 29,115 263,644,337
51.4% 32.5% 3.5% 2.7% 2.7% 1.8% 1.6% 1.5% 1.1% 0.5% 0.3% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
UNITED STATES UNITED KINGDOM PORTUGAL CANADA FRANCE SPAIN THE NETHERLANDS URUGUAY ISRAEL BERMUDAS IRELAND LUXEMBOURG MEXICO COLOMBIA GERMANY THE EMIRATES (UAE) CAYMAN ISLANDS ARGENTINA OTHER TOTAL -
81,163,287 30,972,258 7,419,419 5,990,514 3,397,235 3,392,101 2,986,465 2,707,426 1,588,147 748,120 445,655 163,788 106,070 42,290 30,911 7,950 5,565 2,245 13,878
57.49% 21.9% 5.26% 4.24% 2.41% 2.40% 2.12% 1.92% 1.12% 0.53% 0.32% 0.12% 0.08% 0.03% 0.02% 0.01% 0.00% 0.00% 0.01%
UNITED STATES UNITED KINGDOM PORTUGAL SPAIN FRANCE URUGUAY THE NETHERLANDS CANADA COLOMBIA BERMUDAS IRELAND LUXEMBOURG CAYMAN ISLANDS MEXICO ARGENTINA ISRAEL GERMANY AUSTRALIA OTHER TOTAL -
85,370,297 27,904,770 9,996,410 4,391,576 3,278,664 2,584,006 2,554,661 2,009,846 1,211,075 591,710 229,825 192,072 40,461 18,145 11,219 6,620 7,986 6,215 6,188
60.81% 19.9% 7.12% 3.13% 2.34% 1.84% 1.82% 1.43% 0.86% 0.42% 0.16% 0.14% 0.03% 0.01% 0.01% 0.01% 0.00% 0.00% 0.00%
141,183,324 100.00%
140,413,746 100.00%
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FOREIGN INVESTORS
FOREIGN INVESTORS
FOREIGN INVESTORS
c.
Total revenues attributable to customers based elsewhere, other than in the issuers home country, including as a percentage of total net revenues
The charts above show that foreign investors accounted for 29.6% of the overall volume traded on Bovespa markets in 2010, versus 34.2% of the volume in 2009, whereas having accounted for 22.4% of the volume traded on BM&F markets in 2010, versus 20.0% in 2009. 7.7. Subordination to the laws and regulations of foreign jurisdictions and influence on the business.
We are subject to the regulatory authority of the U.S. Commodity Futures Trading Commission, or CFTC, which is the independent agency created by the U.S. Congress in 1974 with the mandate to regulate commodity futures and option markets in the United States. The regulatory framework provided by the CFTC applies to us to the extent we: Provide local market participants with direct electronic access to U.S. derivatives markets. On September 26, 2008, the CFTC issued a no-action letter indicating that no civil or criminal action will be taken against BM&FBOVESPA for engaging in the activity of providing direct access to trading systems in U.S. derivatives markets, nor against any market participants (meaning local brokerage firms or clearing agents for BM&F segment markets) or authorized U.S. persons accessing electronic trading systems in U.S. derivatives markets through BM&FBOVESPA, provided certain CFTC requirements are met. Among other things, these include reporting requirements concerning volumes and types of contracts traded, new contract offerings, changes to the organizational structure of the Company and so forth. Offer and sell in the United States derivatives contracts based on the Bovespa Index. We have been granted CFTC approval to offer and sell in the United States full-sized and mini-sized futures contracts and options based on the Ibovespa (or Bovespa Index). Under applicable U.S. law, offerings by a foreign exchange of derivatives based on a stock index must meet certain contract requirements and criteria for composition and compilation of the index (as provided under Section 2(a)(1)(C)(ii) of the U.S. Commodity Exchange Act of 1936, as amended). These criteria include the underlying stock index constituting a broad-based index (as opposed to a narrow-based security index, as defined). Dated August 26, 2009, the CFTC permitted us to offer and sell to U.S. persons any of the following futures contracts and strategies: Ibovespa Futures; Mini-sized Ibovespa Futures; American-Style Call Options on Ibovespa Futures; American-Style Put Options on Ibovespa Futures; Forward Points on Ibovespa Futures (FWI); Ibovespa Rollover (IR1). On that same occasion, the CFTC also authorized us to provide direct access to our electronic platforms through an order routing program established with the CME Group (routing through the CMEs Globex system). In addition, we have applied to offer and sell in the United States derivatives contracts based on the IBrX50 index. This latter application to the CFTC is currently pending response. 7.8. Material long-term relationships not discussed elsewhere in this form.
Our material long-term relationships have been discussed elsewhere in this form. 7.9. Other information deemed to be material.
Market Ombudsman
In 2001, in an initiative to enhance the credibility and transparency of the Brazilian capital markets, we created the office of the market ombudsman. The role of the market ombudsman is to hear and investigate complaints, pursuing and mediating fair settlements in the event of conflict between investors and market participants with access to our markets. These complaints may refer to trading, clearing and settlement or securities custody processes and in most cases are the result of some clerical error or irregular procedure by a market participant, or ensue from limited knowledge on the part of the investor. In 2010 the role of the Ombudsman took on a wider, more proactive character. He will thus act also as liaison officer for our external audiences, including our shareholders and brokerage firms, regulatory entities and the investing public, and other stakeholders. In addition, moving forward the Ombudsman will be appointed for two-year terms, and may be reappointed twice at most. In addition, in 2010 the office of the Ombudsman was awarded ISO 9001 quality certification. Ombudsman Service
70
A satisfaction survey we conducted amongst a sample audience comprising 24.8% of the stakeholders we serviced in 2010, resulted in 97.7% satisfaction score.
Social and Environmental Projects

In addition to operations within the realm of our core business, we also engage in activities aimed to providing financial and market education and training courses, in addition to exercising our corporate citizenship by engaging in socially and environmentally responsible practices and projects, such as discussed below.
BM&FBOVESPA Educational Institute

The mission of BM&FBOVESPA Educational Institute is to disseminate knowledge about the securities and derivatives markets amongst the public at large, including specialized knowledge amongst market professionals, pursuant to high standards of integrity and teaching knowledge. In disseminating specialized knowledge, the Institute is responsible for informational, training and qualification, and specialization and postgraduate courses provided to persons from the public at large, and to brokers, traders and other market professionals, including regulatory agencies personnel. Moreover, the Educational Institute is responsible for conducting the process of certification of professionals for the Operating Qualification Program, or PQO, for which it offers a professional development program which permits a person acquiring specialized knowledge and building a career in the intermediation industry. In addition to regular courses taught at our premises in downtown So Paulo, in 2010 the Institute also organized in-company training courses targeted for employees of financial and non-financial institutions. As the primary center in Latin America for dissemination of specialized knowledge on securities and derivatives markets, in 2010 the Institute taught 5,158 students enrolled in personal attendance courses and distance learning courses. In 2009 the Institute launched a MBA program with focus on Capital Markets and Derivatives, in addition to a program on introduction to capital markets. The Institutes library has a catalog of over eight thousand works, in addition to specialized local and international periodicals.
BM&FBOVESPA Institute
As part of our corporate citizenship and social investment initiatives, in 2007 we organized the Institute (Instituto BM&FBOVESPA de Responsabilidade Social e Ambiental) as a public interest non-governmental organization locally known as OSCIP (organizao da sociedade civil de interesse pblico) for the purpose of integrating and coordinating the Companys social and environmental projects. The three principal initiatives the Institute manages are: Sports and Cultural Space (Espao Esportivo e Cultural) located in Paraispolis, a poor and overpopulated district in the city of So Paulo, it is a center for the practice of sports and cultural and artistic activities by children and teenagers of the region. The Space also offers a library with a catalog comprising over four thousand books. In 2010, we had average 800 youngsters and teenagers enrolled in sports classes, and our book lending center recorded 2,415 book withdrawals for average 694 enrolled participants; BVS&A The Environment and Social Investment Exchange (Bolsa de Valores Sociais e Ambientais) this is a pioneering program inspired in the operating model of a stock exchange, which works as a hub for investors interested in contributing to environmental improvements and the advancement of education and community projects in search of sponsors and financing. In 2010 the program amassed R$645 thousand to finance 19 community-oriented and environmental projects); Contributions to nonprofit and anchor institutions active in different sectors of the community contributions in excess of R$1.35 million were made to 69 such institutions in 2010.
BM&FBOVESPA Job Training Association

Created in 1996, this job training association (Associao Profissionalizante BM&FBOVESPA) is committed to promoting social inclusion. For this it implements social assistance and education actions aimed to modify present conditions to ensure that young adults are given an opportunity to build on their capabilities and skills for a better future. Programs offered by the Association include Building Employability Skills (Capacitao para Empregabilidade), Handyman (Faz Tudo) and Beauty Space (Espao Beleza). In addition to activities in its base, So Paulo, the association developed a partnership with the Mangueira Samba School (originated in the Mangueira favela of Rio de Janeiro) to implement the Handyman program in the city of Rio de Janeiro. Previously, in 2008, it had already implemented the Beauty Space program in Rio de Janeiro as well. Over 520 young adults benefited from these programs in 2010, both in So Paulo and Rio de Janeiro.
BM&FBOVESPA Athletic Club

The Company actively supports sports since 1988, when the Ouro Olmpico award (Olympic Gold award) was established to reward Brazilian athletes for outstanding performance in Olympic Games. In 2002, the Athletic Club was organized to permit us
71
to take a more inclusive approach to corporate citizenship and a more active role in the preparation and sponsorship of track and field athletes. Track and field athletics is very popular and has a highly positive impact on lower income communities. In addition to working with youngsters from the community with a view to promoting social inclusion, our Athletic Club sponsors a number of outstanding track and field athletes, 111 of whom were competing in 2010 at an international level under sponsorship of the Company, which funds the athletes expenses with uniforms, equipment and gear, transportation, training, pays a stipend and in some cases housing allowance as well. Also in 2010, the Club won the Brazilian Track and Field Trophy for the ninth consecutive time and held a ceremony at which we laid the cornerstone of a new Training Center which will be built in the city of So Caetano do Sul, state of So Paulo.
Sustainability Committee and Commission

The sustainability committee has been established within the scope of our sustainability program. The committee is chaired by the chief executive, Edemir Pinto, three other executive officers, three officers, the market ombudsman and one external member. The very existence and standing of this committee evidence our deep commitment to sustainability and our decision to taking a multidisciplinary approach to the matter, in a way that engages all of us, from top to bottom, in the effort. The primary responsibility of the committee is to provide strategic guidance in setting our sustainability agenda, to approve and oversee implementation of the sustainability plan and macro initiatives, and other related actions and campaigns. Additionally, the committee is supported by a sustainability commission created at the level of middle management with the responsibility of developing the sustainability agenda and tackling day-to-day activities, reporting to the sustainability committee. 8. Economic group 8.1. Description of the economic group in which the issuer is a member.
a.
direct and indirect controlling shareholders
We have no direct or indirect controlling shareholder or controlling group of shareholders sharing similar interests. In addition, there are no shareholders agreements regulating rights to elect members of our board of directors or the exercise of voting rights by shareholders.
b.
subsidiaries and affiliates
BM&F Settlement Bank (Banco BM&F de Servios de Liquidao e Custdia S.A.)

The BM&F Settlement Bank was first organized in 2004 as a wholly-owned subsidiary of BM&F, formerly an independent commodities and futures exchange, with the purpose of providing services that meet the specificities and peculiarities of the markets in which we operate, offering our clearing facilities and participants with access to these facilities services that simplify the clearing, settlement and custody of securities and other financial assets, in addition to performing important r isk mitigation and operating support roles. For additional information on our settlement bank, see section 7 of this Form under the heading Business.
BM&F (USA) Inc.

BM&F USA Inc. is a wholly-owned subsidiary based in New York, which also operates a representative office in Shanghai, China. It operates in these regions as our cross-border representative offices, establishing professional relationships with other exchanges and regulatory agencies, and prospecting customers for BM&FBOVESPA markets.
BM&FBOVESPA (UK) Ltd.

In the second half of 2010, we started a restructuring process involving our subsidiaries abroad. Ultimately, according to corporate documents dated February 1, 2011, BM&FBOVESPA (UK) Ltd., based in London, which previously was a whollyowned subsidiary of BM&F (USA) Inc. is now directly under our wholly-owned control. It has similar objectives as BM&F (USA) Inc.

The Brazilian Commodities Exchange is a mutualized not-for-profit entity in which BM&FBOVESPA holds a 50.12% majority membership interest consisting of 203 membership certificates. It is based in the city and state of So Paulo, and operates (through branches) regional market centers in the states of Gois, Mato Grosso do Sul, Cear, Minas Gerais, Paran and Rio Grande do Sul. The corporate purpose of the Brazilian Commodities Exchange is to develop and (through branches) provide regional market centers, including cash and forward markets for the trading of agricultural commodities and OTC agribusiness securities, for the development of an organized, wide and active domestic market and reliable price-formation mechanisms for the Brazilian agribusiness. For additional information, see section 7 of this Form under the heading Business.
Rio de Janeiro stock exchange, or BVRJ (Bolsa de Valores do Rio de Janeiro)

BVRJ is an inactive stock exchange. BVRJ is an inactive stock exchange. Beginning from 2004 it rents out space in part of the
72
building where its registered office is located.The Rio Exchange Convention Center is leases space for seminars, congresses, conferences, professional training sessions, private meetings, and similar other events.
c.
Equity holdings in companies belonging to the economic group

Equity holding(%) 100.00% 50.12% 86.09% 100.00% 100.00%
Subsidiaries and affiliates BM&F Settlement Bank Brazilian Commodities Exchange Rio de Janeiro Stock Exchange BM&F (USA) Inc. BM&FBOVESPA (UK) Ltd.
d. e.
Interest held in our shares by companies belonging to the economic group. Companies under common control.
There are no such holdings by our subsidiaries or affiliates. We hold no interest in companies under common control with other parties. 8.2. Organizational chart of the economic group. BM&FBOVESPA GROUP ORGANIZATIONAL CHART
8.3. Description of the restructuring processes within the economic group, including spin off, consolidation, merger or share merger transactions, dispositions or acquisitions of ownership control or of material or substantial assets. There have been no restructuring transactions materially impacting our economic group, other than the transactions set forth in subsection 6.5 of this Form. 8.4. Other material information.
There is no additional material information related to our economic group and this subsection. 9. Relevant assets 9.1. Noncurrent assets which are relevant to the development of Company activities a. Fixed assets, including fixed assets which are objects of rental or leasing, reporting their locations
73
Type of property
Property address
City
State
Rented/Leased from third parties
Building Building Building Building Office space Office space Office space Office space Office space Office space(*)
Praa Antonio Prado 48 Rua XV de Novembro 275 Rua Florncio de Abreu 195 Rua 3 de Dezembro 38 Rua Marechal Deodoro 344 Rua dos Carijs 126 Rua do Mercado 11 (ground floor / mezzanine) Rua dos Andradas 1,234 Rua Lbero Badar 471, 6 floor Praa XV de Novembro 20 Estrada Vinte e Seis, no number Rua Boa Vista 208 Jockey Club Building (1st to 5th floors, 11st floor) Rua Alta Floresta 20 Rua Pernambuco 1,267 Rua Urutagu (Commodity classification, grading)
th
So Paulo So Paulo So Paulo So Paulo Curitiba Belo Horizonte Rio de Janeiro Porto Alegre So Paulo Rio de Janeiro Santana de Parnaba So Paulo Sorriso Rondonpolis So Paulo
So Paulo So Paulo So Paulo So Paulo Paran Minas Gerais Rio de Janeiro Rio Grande do Sul So Paulo Rio de Janeiro So Paulo So Paulo Mato Grosso Mato Grosso So Paulo
No No No No No No No No No No No Yes Yes Yes Yes
Plot of land
Classrooms Warehouses Warehouses Commodity grading facility (shed)
( )
* This building belongs to BVRJ, a mutual association in which we hold 86.09% of the membership certificates.
a.
Patents, trademarks, licenses, concessions, franchises, and technology transfer agreement 1) Registered trademarks and registration applications in Brazil
Trademark Case Record No. Status Class Deposit date Registration date
BM&F IBOVESPA BOVESPA
812290143 813834600 813878128 813878144 815089414 816169683 816690154 820693081 200010476 820833193 821874640 821877259 821877348 822059380 822744260 822472791 822472813 823194264 823411656 823411680 823411710 823454258 826745741 826745750 826745768
Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Applied for Registered Registered Registered Applied for Registered Registered Registered
36.50/60/70 NCL 36 NCL 36 NCL 36 NCL 36 NCL 36 36.70 NCL 36 NCL 42 NCL 36 36.10/70 36.10/70 36.10/70 NCL 36 NCL 36 NCL 36 NCL 38 NCL 36 NCL 36 NCL 36 NCL 36 NCL 36 NCL 36 NCL 16 NCL 42
11/7/1985 9/22/1987 10/29/1987 10/29/1987 9/22/1989 7/4/1991 5/19/1992 5/28/1998 5/29/1998 8/10/1998 12/15/1999 12/16/1999 12/16/1999 3/14/2000 5/222000 7/27/2000 7/27/2000 4/23/2001 7/5/2001 7/5/2001 7/5/2001 7/20/2001 10/14/2004 10/14/2004 10/14/2004
10/27/1987 2/6/1990 2/6/1990 2/6/1990 3/17/1992 7/12/1994 1/25/1994 4/3/2001 6/19/2001 2/17/2004 8/25/2009 4/18/2006 4/18/2006 10/13/2009 8/22/2006 9/12/2006 9/12/2006
FUTURO IBOVESPA
BM&F
BOLSA DE MERCADORIAS & FUTUROS - BM&F BOLSA DE MERCADORIAS DE SO PAULO BOVESPA BOLSA DE VALORES DE SO PAULO BOVESPA BOLSA DE VALORES DE SO PAULO
BOVESPA
BTC - BANCO DE TTULOS CBLC

BRAZILIAN CLEARING AND DEPOSITORY CORPORATION - CBLC CBLC MULTIBROKER SISBEX
CBLC COMPANHIA BRASILEIRA DE LIQUIDAO E CUSTDIA CBLC COMPANHIA BRASILEIRA DE LIQUIDAO E CUSTDIA BOVESPA FIX MERCADO DE TTULOS DE DVIDA CORPORATIVA
BM&F GLOBAL TRADING SYSTEM BM&F BRAZILIAN MERCANTILE & FUTURES EXCHANGE
2/21/2007 2/21/2007 2/21/2007 12/9/2008 9/11/2007 9/11/2007
BM&F BRASIL
GTS - GLOBAL TRADING SYSTEM BM&F TRADING SYSTEM BM&F TRADING SYSTEM BM&F TRADING SYSTEM
74
BM&F TRADING SYSTEM BM&F TRADING SYSTEM MEGABOLSA MB
826745776 826745784 827242328 827634048 828056102 828232202 828232296 828232253 900170212 829295089 829344411 829344420 829344438 829549455 829549463 829678557 829678565 830006273 830006281 830006524 830006532 830050159 830322876 830323465 830323511 830323520 830404660 830467351 830501428 830501410
Registered Registered Registered Registered Registered Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for Applied for
NCL 41 NCL 36 NCL 36 NCL 36 NCL 36 NCL 36 NCL 36 NCL 36 NCL 36 NCL 16 NCL 36 NCL 42 NCL 16 NCL 36 NCL 41 NCL 41 NCL 36 NCL 41 NCL 36 NCL 41 NCL 36 NCL 36 NCL 36 NCL 41 NCL 36 NCL 42 NCL 36 NCL 41 NCL 36 NCL 35
10/14/2004 10/14/2004 3/17/2005 8/12/2005 1/20/2006 3/29/2006 3/29/2006 3/29/2006 1/30/2007 9/4/2007 10/9/2007 10/9/2007 10/9/2007 2/15/2008 2/15/2008 5/6/2008 5/6/2008 12/8/2008 12/8/2008 12/8/2008 12/8/2008 2/5/2009 8/6/2009 8/7/2009 8/7/2009 8/7/2009 10/23/2009 12/21/2009 1/6/2010 1/6/2010
9/11/2007 9/11/2007 11/20/2007 12/26/2007 3/18/2008 7/27/2010 7/27/2010 7/27/2010
BOVESPA MAIS BRASIL ISE NDICE DE SUSTENTABILIDADE EMPRESARIAL NVEL 1 BOVESPA BRASIL NOVO MERCADO BOVESPA BRASIL NVEL 2 BOVESPA BRASIL BANCO BM&F
BOVESPA
MERCADO INTERNACIONAL BOVESPA BDR - NO PATROCINADO MERCADO INTERNACIONAL BOVESPA BDR - NO PATROCINADO MERCADO INTERNACIONAL BOVESPA BDR - NO PATROCINADO BVS&A BOLSA DE VALORES SOCIAIS E AMBIENTAIS BOVESPA BVS&A BOLSA DE VALORES SOCIAIS E AMBIENTAIS BOVESPA
Bm&f Bovespa Bm&f Bovespa
BM&F BOVESPA A NOVA BOLSA BM&F BOVESPA A NOVA BOLSA

IBOVESPA IBOVESPA SINACOR iMERCADO BVMF BVMF BVMF
2/1/2011
DESAFIO BM&FBOVESPA Educar BM&FBOVESPA ndice BM&FBOVESPA Financeiro - IFNC ndice BM&FBOVESPA Financeiro - IFNC
i.
Term
Under the Brazilian Industrial Property Law (Law No. 9,279/96, as amended), the legally prescribed term of effectiveness of a trademark registration is 10 years from the grant, successively renewable for additional ten-year periods with no limitation. ii. Brazil. iii. Events triggering loss of rights on these assets Other than legally prescribed events, we are not aware at this time of any circumstance which could lead to loss of rights on any particular trademark. Also, we do not anticipate facing any event or circumstance which could result in loss of rights on any particular trademark. No trademark or trademark application has been contested or challenged in any way, whether administratively or before the courts. iv. Potential effects of a loss of rights for the issuer A loss of rights would result in obligation to discontinue use of the relevant trademark, which despite being a possibility is not anticipated or likely to occur. 2) Registration of relevant trademarks abroad
Country Trademark Case record Status Class Deposit date
Territory
Argentina
IBRX
2.039.057
Registered
NLC 36
1/7/2004
75
Argentina Argentina Argentina Canada Canada Chile Chile Chile Chile Chile Singapore EU Office for Harmonization in the Internal Market (Trade Marks and Designs) Spain United States of America United States of America United States of America France Hong-Kong Hong-Kong Japan Mexico Paraguay Paraguay Paraguay Paraguay Paraguay Paraguay Paraguay Portugal Portugal The United Kingdom of Great Britain and Northern Ireland The United Kingdom of Great Britain and Northern Ireland The United Kingdom of Great Britain and Northern Ireland South Korea Switzerland Taiwan Taiwan Uruguay Uruguay Uruguay
INDICE BOVESPA BOVESPA BOLSA DE VALORES DE SO PAULO BOVESPA BOLSA DE VALORES DE SO PAULO INDICE BOVESPA
IBOVESPA
1.980.146 1.983.386 1.983.387 TMA502264 TMA502354 680.921 680.922 681.837 681.838 703.162 T9502807G 003657641 1.996.972 3112388 3187956 3247943 95557762 199803186 199806844 4055845 509.242 256303 259791 259792 260020 260021 260022 270402 307.429 307.430 2021172
Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered
NLC 36 NLC 36 NLC 41 NLC 16/35/36 NLC 16/35/36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36 NLC 36/41 NLC 36 NLC 36 NLC 36 NLC 36 NLC 42 NLC 36 NLC 36 NLC 41 NLC 36 NLC 36 NLC 36 NLC 35 NLC 36 NLC 16/35/36
12/1/2003 4/20/1993 2/2/2004 5/12/1995 5/12/1995 12/15/1992 12/15/1992 4/21/1993 4/21/1993 2/12/2004
INDICE BOVESPA
IBOVESPA BOVESPA SO PAULO STOCK EXCHANGE
BOVESPA BOLSA DE VALORES DE SO PAULO

IBRX IBOVESPA IBRX IBOVESPA IBRX
2/10/2004 5/23/1995 2/18/2004 7/13/2004 7/27/2004 2/10/1995 4/25/1995 4/25/1995 4/14/1995 3/3/1995 11/17/1992 11/16/1992 5/22/2003 5/7/1993 4/23/1993 4/23/1993 1/9/2004 2/17/1995 2/17/1995 5/22/1995
PIBB PAPIS DE NDICE BRASIL BOVESPA

IBOVESPA IBOVESPA
INDICE BOVESPA
IBOVESPA IBOVESPA IBOVESPA BOVESPA
INDICE BOVESPA
IBOVESPA
BOVESPA BOLSA DE VALORES DE SO PAULO BOVESPA BOLSA DE VALORES DE SO PAULO

BOVESPA SO PAULO STOCK EXCHANGE IBRX IBOVESPA IBOVESPA IBOVESPA
PIBB PAPIS DE NDICE BRASIL BOVESPA PIBB PAPIS DE NDICE BRASIL BOVESPA
IBOVESPA IBOVESPA IBOVESPA IBOVESPA IBRX IBOVESPA
2367095A
Registered
NLC 36
6/30/2004
2367095B 34906 427536 83189 84268 352.300 347.426 348.234
Registered Registered Registered Registered Registered Registered Registered Registered
NLC 36 NLC 36 NLC 16/35/36 NLC 35 NLC 36 NLC 36 NLC 36 NLC 36
6/30/2004 4/6/1995 3/29/1995 3/9/1995 3/9/1995 1/13/2004 11/17/1992 4/23/1993
BOVESPA BOLSA DE VALORES DE SO PAULO
i.
Term of effectiveness
76
The term of effectiveness of trademarks we registered abroad is as provided in the applicable law of each relevant jurisdiction (usually, 10 years from the grant date, successively renewable for additional ten-year periods with no limitation). ii. Territory Argentina, Canada, the European Union Office for Harmonization in the Internal Market (OHIM), Switzerland, Chile, Spain, France, United Kingdom, Hong Kong, Japan, South Korea, Mexico, Portugal, Paraguay, Singapore, Taiwan, United States and Uruguay. iii. Events triggering loss of rights on these assets Other than legally prescribed events, we are not aware at this time of any circumstance which could lead to loss of rights on any particular trademark. Also, we do not anticipate facing any event or circumstance which could result in loss of rights on any particular trademark. No trademark or trademark application has been contested or challenged in any way at either the administrative sphere or before the courts. iv. Potential effects of a loss of rights for the issuer A loss of rights would result in obligation to discontinue use of the relevant trademark, which despite being a possibility is not anticipated or likely to occur. 3)
Application date
Patent applications in Brazil

Deposit date Publication date Title Status
PI 0801789-1 PI 0801983-5 PI 0801982-7
4/30/2008 5/29/2008 5/29/2008
Pending publication 2/9/2010 2/9/2010
EXCHANGE TRADING SYSTEM PRICING SYSTEM AND COLLECTION PROCESSING STRAIGHT-THROUGH TRADE PROCESSING AND ASSISTANCE SYSTEM
Patent application in effect Patent application in effect Patent application in effect
i.
Under the Brazilian Industrial Property Law (Law No. 9,279/96, as amended), the legally prescribed term of effectiveness of a patent of invention is 20 years from the deposit date. Our patent applications have yet to be granted. ii. Brazil. iii. Events triggering loss of rights on these assets Other than legally prescribed events, we are not aware at this time of any circumstance which could lead to loss of rights on any particular invention for whose patent we have filed application. Also, we do not anticipate facing any event or circumstance which could result in loss of rights on any such invention. No patent application of ours has been contested or challenged in any way, whether administratively or before the courts. iv. Potential effects of a loss of rights for the issuer A loss of rights would result in obligation to discontinue use of the relevant trademark, which despite being a possibility is not anticipated or likely to occur given the information provided in the preceding item. 4)
Country
Territory
Patent Applications Abroad

Application No. Deposit date Status
Argentina Argentina
P 09 01 01948 P 09 01 01947
May 29, 2009 May 29, 2009
Patent application in effect Patent application in effect
i.
The term of effectiveness of patents of invention in other countries is as provided in the applicable law of each relevant jurisdiction (usually, 20 years from the grant date). However, our patent applications have yet to be granted. ii. Argentina. iii. Events triggering loss of rights on these assets Other than legally prescribed events, we are not aware at this time of any circumstance which could lead to loss of rights on any particular trademark. Also, we do not anticipate facing any event or circumstance which could result in loss of rights on any particular trademark. No patent application of ours has been contested or challenged in any way at either the administrative sphere or before the courts. Territory
77
iv.
Potential effects of a loss of rights for the issuer
A loss of rights would result in obligation to discontinue use of the relevant trademark, which despite being a possibility is not anticipated or likely to occur given the information provided in the preceding item. 5) Technology transfer agreements Technology Transfer Agreement CME BM&FBOVESPA Technology recipient: BM&FBOVESPA Technology provider: the CME Group Subject-matter of the agreement: development of a multi-asset class electronic trading system for the trading of individual equities and other equity securities; equity, financial and commodity derivatives; private debt securities and government bonds; agricultural commodities, spot products and foreign exchange and other products covering all markets operated by BM&FBOVESPA. In addition, as implemented the new multi-asset class trading platform will permit the Company to process more efficiently and with no interruption transactions typically carried out on other markets it may organize and operate in the future. i. Term of effectiveness We estimate the agreement, which was executed in 2010, will be effective for twelve (12) years commencing from the execution date. ii. Brazil. iii. Events triggering loss of rights on these assets We are currently not aware of any events that could trigger loss of our rights under the technology transfer agreement. In addition, no third party has challenged or contested nor is expected to challenge or contest our rights under such agreement. iv. Potential effects of a loss of rights for the issuer We do not anticipate any event that could potentially result or threaten to result in loss of our rights under the technology transfer agreement. Additionally, even if the agreement were to terminate, we could resort to existing alternative technology solutions. 6) i. Other material technology agreements Term of effectiveness Territory
Each contract has its own renewal time frames and methodologies, which meets market standards or BM&FBOVESPAs specific operational needs. ii. iii. Territory Events triggering loss of rights on these assets Mostly in Brazil, with possible effects on other countries due to the nature of the activities performed by BM&FBOVESPA. We are currently not aware of any events that may cause the loss of rights arising from the aforementioned contracts applications. Furthermore, these contracts are not subject to any administrative or judicial dispute by third-parties iv. Potential effects of a loss of rights for the issuer No events that may cause the loss of the rights arising from the aforementioned contracts are currently envisaged. In addition, there are alternative solutions to those currently used by the company, which could be replaced in case of termination of the contractual relationship. 6.1) Overview Currently, the technology contracts that are relevant for the development of our activities are as follows: (i) software assignment and transfer contract, signed with Multibroker S.A, through which we were assigned ownership of the web-based transaction management and processing software called Multibroker Electronic Securities Trading System; (ii) license and maintenance contracts for use of (a) the software applications for the trading engine of our electronic trading platforms (Megabolsa and GTS described below) and (b) a trading system, also for the GTS, called GLWin, with GL Trade, in addition to RiskWatch, which measures the risk of the regular equities settlement cycle; (iii) license contracts for use of the software applications used to develop our activities, signed with the holders of the rights on the aforementioned software applications; and (iv) contracts for the update, technical support and maintenance of equipment used to develop our activities, including the technological platforms of our trading systems, signed with information technology service providers. We and the CME Group executed in 2010 a technology agreement according to which we will collaborate in the joint development and implementation of a multi-asset class electronic trading platform with lower than one-millisecond processing capacity, based on technology derived from the CME Globex trading system and new technology we will develop jointly. This
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trading platform will provide the infrastructure required for the trading of individual equities, derivatives (futures and options) on individual equities, derivatives (futures and options) on equity indices, other futures, options on futures and options on spot products, forward contracts, spot foreign exchange currencies and a number of other products covering all markets we operate, and shall include components and modules providing functionalities that will gradually replace our existing trading platforms and systems (per item 6.2 below). In addition, we will develop a new block-trading platform. We and the CME will be co-owners of this new multi-asset class trading platform and, through mutually granted perpetual, irrevocable, non-exclusive and worldwide rights and licenses, joint holders of the related intellectual property rights, including rights on improvements, upgrades and derivative software. In addition, within the scope of this partnership, the CME will transfer to the Company, and grant rights to use the complete source code and object code of the CME software (the Globex system software), along with all the knowledge required for joint development, implementation and operation of the new trading platform, which will enable the Company to use, understand and exploit the CME software, the system, the jointly developed modules and any independently developed modules, including commercially exploit them in certain regions and under certain conditions. In addition to the aforementioned contracts, we have executed contracts with companies (vendors) specialized in the distribution of market data generated in our markets, including market information on executed trades and market quotes. 6.2) Electronic Trading Systems We provide electronic trading systems for the execution of purchase and sale transactions, auctions and special transactions for derivatives, equities and fixed income in the Exchange and OTC markets. 6.2.1) MegaBolsa After seven years using a version of the CATS system, which was developed by the Toronto Exchange, in 1997 we began to use MegaBolsa electronic trading platform, which was developed by the SBF-Paris Bourse, currently called Atos Euronext Market Solution, which, in 1995, after its open-outcry platform was closed, assumed the processing of all equities transactions carried out in our markets. In addition, our trading, clearing and settlement systems and depository services are fully integrated. Our equities trading system processes bids and asks electronically, with reliability, agility and transparency, allowing investors, Intermediary Institutions and online data agencies to visualize all offers in real time via Internet or via private networks connected to our system. In addition, the MegaBolsa system allows transactions to be monitored in order to track and identify any problems in the case of a deviation in response time, permitting not only the collection of data for control analysis purposes, but also the development of tools that speed up the transmission of orders to the market and make possible the automatic registration of stock purchases and sales via automated offers (program trading). Via automated connections or gateways, the Exchange allows orders to be received through the order routing system, which is geared to the following types of investors: a) Retail Investors individual investors, non-financial companies and investment clubs; b) Institutional Investors mutual funds, pension funds, insurance companies and others; and c) Portfolio managers customer portfolios managed by duly authorized and registered managers. The available order routing functionalities are limited when compared to those available in the MegaBolsa terminals. 6.2.2) GTS and Sisbex Introduced in 2000, the Global Trading System, or GTS, is our electronic trading platform for the (exchange-traded) derivatives market, the bonds market, the spot foreign currency market and the carbon market. GL Trade developed the GTS system and provided also the trading screen software, GL WinFix, also known as GTS Fix, which we provide for dealings on these specific markets. All derivatives contracts authorized by BM&FBOVESPA can be traded on GTS, except for the OTC contracts. We also have an electronic trading system, called the Sisbex, which was especially adapted for the execution of transactions with federal government bonds, particularly definitive purchase and sale transactions, repo transactions and stock lending transactions. 6.2.3) Bovespa Fix and Soma Fix The electronic fixed income trading system is the SIOPEL, which was developed by Mercado Abierto Electronico S.A. (MAE), the main debt securities market in Argentina. In 2001, after acquiring the trading platform, BVSP entered into a partnership with MAE and Bolsa Electronica de Valores del Uruguay S.A. (BEVSA) to further develop and enhance the software. Since the software was originally developed for the debt securities market, it includes features trading characteristics of that market, such as trading in rate, price quotation requests and spread orders. Besides providing the fixed income market with a safe, modern and reliable environment, one of the SIOPEL systems major advantages is the flexibility that it provides to market managers and traders. In addition to being used by BM&FBOVESPA (for its government bond market), the SIOPEL system is also used by the Colombia
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Exchange and the Colombia Republic Bank. 6.3) Sinacor In addition, we also develop and offer the Integrated Brokerage House Management System (SINACOR), which provides services with safety, efficiency and efficacy and can process various middle and back office activities for brokerage houses and other Intermediary Institutions. b.
Name Registered office Business
Companies in which the issuer holds ownership interest

BM&F Settlement Bank (Banco BM&F de Liquidao e Custdia S.A.) So Paulo, Brazil Facilitates the clearing and settlement of the transactions carried out on BM&FBOVESPA markets; provides operating support; acts as important risk mitigation vehicle Brazilian Commodities Exchange (Bolsa Brasileira de Mercadorias) Brasilia, Brazil Facilitates the trading of agricultural commodities, provides services for the public sector by operating the electronic auctions system and for the agribusiness sector operating a market for agricultural commodities. 50.1% Subsidiary Not registered as a public company (privately-held) R$ 8,011 Not applicable
Ownership interest Subsidiary or affiliate CVM Registration Investment carrying value (In R$ thousands) Investment market value (as per stock quote as at year-end) (In R$ thousands) Appreciation or depreciation in carrying value in the last three years (In R$ thousands) Appreciation or depreciation in market value in the last three years (as per stock quote as at year-end) (In R$ thousands) Total dividends received in the last three years (In R$ thousands) Reasons for the acquisition and maintenance of this ownership interest
100.0% Subsidiary Not registered as a public company (privately-held) R$ 44,935 Not applicable
None, other than our share of the profit of equity-method investment amounting to R$4,980 Not applicable
None, other than our share of the profit of equity-method investment amounting to R$2 Not applicable
Offering participants with access to our clearinghouses access to convenience services involving settlement and custody activities.
Facilitating the development and operation of trading systems for a wider range of commodities; facilitating the creation of a major domestic market for agricultural commodities. BM&F (USA) Inc. New York, USA Acts as our cross-border representative office, establishing professional relationships with other exchanges and market regulators; tackles distribution of market data and other information abroad; prospects for strategic alliances and opportunities with other exchanges, as well as potential customers for our markets; provides support to securities and commodities brokerage firms that service foreign customers with local business. 100.0% Subsidiary Not registered as a public company (privately-held) 348
Rio de Janeiro Stock Exchange (BVRJ)
(Bolsa de Valores do Rio de Janeiro BVRJ)

Rio de Janeiro, Brazil BVRJ is not currently active. Since 2004 it now rents space in its main office building (the former exchange premises, now converted into a convention center). The Rio Exchange Convention Center leases space for seminars, congresses, conferences, professional training sessions, private meetings, and similar other events. The space allows for different set-up configurations and types of social or institutional events. 86.1% Subsidiary Not registered as a public company (privately-held) 51,427
Ownership interest Subsidiary or affiliate CVM Registration Investment carrying value (In R$ thousands)
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Investment market value (as per stock quote as at year-end) (In R$ thousands) Appreciation or depreciation in carrying value in the last three years (In R$ thousands) Appreciation or depreciation in market value in the last three years (as per stock quote as at year-end) (In R$ thousands) Total dividends received in the last three years (In R$ thousands) Reasons for the acquisition and maintenance of this ownership interest
Not applicable
Not applicable
None, other than our share of the profit of equity-method investment amounting to R$132 Not applicable
None, other than our share of the profit of equity-method investment amounting to R$3,683 Not applicable
In the interest of the evolution of the Brazilian stock market, in 2000 we agreed with other regional exchanges a program aimed to concentrate the trading of Brazilian equities in the So Paulo Stock Exchange. In 2002, the Brazilian Commodities & Futures Exchange (BM&F) took over BVRJ and in the process acquired the rights to manage and operate the Sisbex system for the trading of government bond.
CME Group
Establishing professional relationships with other exchanges and market regulators; prospecting for strategic alliances and opportunities with other international exchanges; prospecting foreign customers for our local markets.
BM&FBOVESPA (UK) Ltd. (*)
Chicago, USA The CME Group serves the risk management needs of customers around the world. It owns and operates large derivatives and futures exchanges in Chicago and New York City, as well as online trading platforms. As an international marketplace, it attracts buyers and sellers to its electronic trading systems, (CME Globex) and open-outcry system. It also owns the Dow Jones stock and financial indexes. And it provides the widest range of benchmark futures and options products available on any exchange, covering all major asset classes. The contracts CME exchanges trade include futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, rare and precious metals, weather and real estate. 5.0% Affiliate Registered with the SEC (Securities and Exchange Commission) 2,248,325 1,838,568
London, UK Acts as our cross-border representative office, establishing professional relationships with other exchanges and market regulators; tackles distribution of market data and other information abroad; prospects for strategic alliances and opportunities with other exchanges, as well as potential customers for our markets; provides support to securities and commodities brokerage firms that service foreign customers with local business.
Ownership interest Subsidiary or affiliate CVM Registration Investment carrying value (In R$ thousands) Investment market value (as per stock quote as at year-end) (In R$ thousands) Appreciation or depreciation in carrying value in the last three years (In R$ thousands) Appreciation or depreciation in market value in the last three years (as per stock quote as at year-end) (In R$ thousands) Total dividends received in the last three years (In R$ thousands) Reasons for the acquisition and maintenance
100.0% Subsidiary Not registered as a public company (privately-held) -
None registered, other than our share of the profit of equity-method investment amounting to R$ 38,238 (see subsection 9.2) 2010 69,617 2009 - 117,266 2008 - (697,893) 2010 - 18,169 2009 - 12,592 2008 - 20,650 Global preferred strategic partnership whereby
Establishing professional relationships
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of this ownership interest
the two exchanges collaborate in identifying strategic joint investment and commercial partnership opportunities in securities and derivatives markets, in addition to joint development of a new multi-asset class trading platform.
with other exchanges and market regulators; prospecting for strategic alliances and opportunities with other international exchanges; prospecting foreign customers for our local markets.
( )
* We have restructured our subsidiaries abroad, such that according to corporate documents and agreements dated February 1, 2011, BM&FBOVESPA (UK) Ltd., based in London, which previously was a wholly-owned subsidiary of BM&F (USA) Inc. is now directly controlled by BM&FBOVESPA.
9.2. Other information that the Company deems relevant Starting from July 2010, when we acquired additional 3.2% of the outstanding shares of CME, our aggregate ownership interest in the CME Group climbed to 5.0% (from 1.78% previously), which made us the largest shareholder of the CME Group. As a result, we now account for our investment in CME under the equity method of accounting, and recognize our share of the profit or loss of this equity-method investment through profit or loss (in the statement of income). 10. Managements discussion and analysis of financial condition and results of operations 10.1 The following discussion and comparative analysis have been based on our consolidated financial statements for the periods presented. a. financial condition and net equity position
Year ended December 31, 2010 compared with year ended December 31, 2009.
The Brazilian economy consolidated in 2010 the recovery started late in 2009 in the wake of the global economic downturn driven by the 2008 international financial crisis. This economic environment has positively impacted on the average daily volume traded on BM&F segment markets, which soared 64.7% year-on-year, and the average daily value traded on Bovespa segment markets, which surged 22.7% from one year ago. This strong operating performance resulted in 25.7% rise in our gross revenues, a 29.9% jump in net income 1 and 34.9% increase in EBITDA2, which shot EBITDA Margin3 to 69.6% from 64.9% in the prior year. In the Bovespa segment, two primary factors influenced our financial performance: a prolonged market overhang sparked by uncertainties around the then-upcoming Petrobras offering slowed trading volumes significantly, but trading volumes sprang back promptly after the offering closed. a rebound in the market prices for stocks followed to boost trading volumes further, and while at year-end the Ibovespa, or Bovespa Index, the primary index of the Brazilian stock market, had climbed just 1.0% year-on-year, the average Ibovespa had risen 27.8% over the 2009 average. Volume growth in the BM&F segment in turn was driven primarily by strong trading in Brazilian-interest rate futures contracts, the most actively traded group of contracts, whose average daily volume traded rose nearly 100% mainly as a result of increased credit availability and volatility pushed by differing perceptions and expectations about the Central Banks decisions on the direction and size of the Selic rate, which is the Brazilian base interest rate. Further denoting the economic recovery is the rebound seen in the equity offering market, where IPOs, follow-on and seasoned offerings made for the best year on record, placing the Brazilian equity offering market as the third largest worldwide by gross proceeds from offerings, in no small part due to the largest ever equity offering conducted by Brazils oil and gas giant Petrobras. Moreover, having previously completed our initial efforts to consolidate the integration of BM&F and Bovespa, the two formerly independent exchanges, we shifted our focus towards (i) enhancing our technology infrastructure through adoption of an investment program designed to support our future growth (ii) pursuing opportunities in international markets, in particular by strengthening our strategic partnership with the CME Group (iii) spurring growth in the equity offering market by increasing the number of listings, (iv) developing new products, and, in particular (v) investing in financial education and forming an
1 2
Net income attributable to BM&FBOVESPA shareholders. EBITDA is Earnings before interest, taxes, depreciation and amortization. 3 EBITDA divided by net revenue.
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investment-minded middle class so as to widen capital markets penetration, which in the long run should revert to us in the form of a broader investing public.
Year ended December 31, 2009 compared with year ended December 31, 2008.
Year 2009 dawned in anxiety amid the uncertainties of a distressed economic environment, bleak projections for the global economic future, which redoubled at every turn of events, with every news headline or market development. This was the economic landscape that emerged from the worst global financial crisis since the 1930s, started in 2008. As a result, the scenario that emerged early in 2009 after the financial crisis peaked was one of a severe credit crunch pointing to general deleveraging amidst a lively debate over the need for more stringent and efficient regulation for the financial and capital markets, strong contraction in the prices of commodities and financial assets, and governments across the board moving towards quantitative easing. This combination of factors directly impacted performance in our markets. In the equities market (Bovespa segment), volumes tumbled due mainly to the falling prices of stocks prompted by bearish sentiments and risk aversion, whereas in the derivatives market (BM&F segment), hedging activities sank due mainly to the credit crunch, which coupled with general risk aversion and strong deleveraging significantly depressed volumes. This low-volume scenario prevailed for most of the first half of 2009. As a result of these factors the average daily volume traded on derivatives markets (BM&F segment) gave back 3.3% yearover-year, while the average daily value traded on equities markets (Bovespa segment) tumbled 4.3% year-over-year when compared to 2008 averages, pushing a 6.2% decline in our gross revenues. However, given that we successfully implemented certain cost savings plan (as discussed below), net income for the year shot up 36.5% year-over-year, EBITDA climbed 6.7% and EBITDA Margin jumped to 64.9% from 57.0% one year earlier. Despite the doom-and-gloom facing world economies however, and differently from developments in previous crises, Brazil reacted positively and was one of the few countries to emerge relatively unscathed from the crisis. While the level of economic activity did decrease, the country was less affected by the downturn than most other countries and the flow of foreign investments increased in strides in the second half of the year, pushing strong appreciation in the Brazilian real to U.S. dollar exchange rate. An improved landscape in the latter half of the year and brighter prospects for the domestic economy positively impacted on the equities markets. The Bovespa Index soared in the highest rise on record, to rank the biggest gainer among securities markets across the world. The equity offering market rebounded to boom as the worlds most active after China, having closing 2009 as our second best year on record in total proceeds, which made Brazil the 4 th best performing country in terms of proceeds from IPOs, and 7th by overall offering proceeds, in addition to having hosted the countrys largest IPO ever, conducted by Banco Santander Brasil. These movements were topped by a surging stock market, which in the fourth quarter reached the highest ever average daily trading value. Meanwhile, in the BM&F segment, the market moves towards deleveraging continued to affect volumes traded negatively including in the second half of 2009. b. Capital structure and likelihood of redemption of shares, including:
The Companys capital structure showed the following compositions: (i) On December 31, 2010 - 85.8% equity and 14.2% liabilities, (ii) On December 31, 2009 92.8% equity and 7.2% liabilities, (iii) On December 31, 2008 - 94.4% equity and 5.6% liabilities.
(In thousands of Reais) Current and non-currrent liabilities Shareholders equity Total liabilities and shareholders equity 2010 3,214,927 19,419,048 22,633,975 % 14.2% 2009 1,494,946 % 7.2% 2008 1,138,365 % 5.6% 94.4% 100.0%
85.8% 19,342,893 100.0% 20,837,839
92.8% 19,291,724 100.0% 20,430,089
Out of the overall liabilities, there is a portion of onerous liability related mainly to the debt issued abroad on July 16, 2010 (see section 10.1.f of this Reference Form):
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(In thousands of Reais) Total onerous liability Interes payable on debt issued abroad and loans Debt issued abroad and loans Shareholders equity Total onerous liability and shareholders equity
2010 1,043,213 33,154 1,010,059 19,419,048 20,462,261
2009 11,790 9,295 2,495
%
0.1%
2008 4,087 4,087 -
%
0.0%
5.1%
94.9% 19,342,893 100.0% 19,354,683
99.9% 100.0%
19,291,724 19,295,811
100.0% 100.0%
According to data presented above, the Company presents conservative levels of leverage, considering overall liabilities (current liabilities and non-current liabilities) or just the onerous liabilities (debt and interest on debt). i. ii. events of redemption redemption price calculation method
Other than as legally provided, we are not contemplating any share redemption, nor any event that would trigger redemption rights. c. Capacity to service the debt.
Net interest income for the year to December 2010 hit R$298,024 thousand and was up 17.4% year-on-year. Interest revenues climbed to R$354,806 thousand from R$289,686 thousand one year ago, influenced by an increase in interest rates earned on financial investments the higher average cash invested. However, net interest income was negatively affected by an increase in interest expenses, which were up to R$56,782 thousand from R$35,824 thousand in the prior year due to the bond offering we completed in July 2010. Comparatively, our net interest income for the year to December 2009 reached R$253,862 thousand, as the result of interest revenues totaling R$289,686 thousand (down 20.6% year-on-year from 2008, mainly due to decline in the average interest rate earned on financial investments) and R$35,824 thousand in interest expenses (which were 39.2% down from one year earlier). EBITDA for 2010 amounted to R$1,315,046 thousand, a 34.9% rise over EBITDA for 2009, which amounted to R$975,108 thousand, in a 6.7% rise from R$913,493 thousand in 2008. The 2010 EBITDA Margin climbed 69.6% year-on-year, as compared with 64.9% and 57.0% in 2009 and 2008, respectively. Net income for the year to December 2010, amounted to R$1,144,561 thousand, climbing 29.9% year-on-year and is attributable mainly to our improved performance and a profit on equity method investment related to our ownership interest in the CME Group. In turn, net income for the year to December 2009 amounted to R$881,050 thousand, up 36.5% year-on-year primarily due to reduction in expenses. This reduction included a 27.4% dive in expenses with data processing and 37.8% plunge in expenses with marketing and promotion, in each case pushed by our cost savings plan designed to capture synergies from the process of integrating BM&F and Bovespa, the two formerly independent exchanges. Additionally, in 2008 we incurred R$19.6 million in expenses with the integration process, which have not recurred in 2009. Our net debt closing balance at December 31, 2010, was a negative number (R$2,392,132 thousand, negative) which compares with equally negative numbers in 2009 and 2008 (respectively R$3,919,993 thousand and R$2,988,600 thousand, negative), in each case denoting our low degree of financial leverage and very strong capacity to pay interest and repay principal. In addition, cash and cash equivalents plus short- and long-term financial investments at December 31, 2010, totaled R$3,435,345 thousand and accounted for 15.2% of total assets, whereas having amounted to R$3,236,211 thousand to account for 15.3% of total assets in the prior year. Given the nature of our available cash flows, which include our own financial resources as well as cash pledged as collateral by customers, our policy calls for lower-risk investing of cash balances, which we typically accomplish by seeking very conservative, highly liquid and safe investments, often by taking positions in Brazilian government bonds and debt-securities whose yield and coupon rates typically track the base rate (interbank deposit rates or the Selic rate), whether or not including a spread. We therefore believe our Company is fully capable of servicing its debt both in the short- and long-term. d. Sources of working capital and capital expenditure financing.
We finance working capital and capital expenditure requirements primarily from our operating cash flow, which is sufficient to
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support all of the former and most of the latter. In certain cases we have also accessed the capital markets (by issuing global notes) and entered into lease agreements as an alternative to finance certain noncurrent assets. For additional information on the nature and characteristics of debt obligations, see the discussion under subsection 10.1(f) below. e. Sources of working capital and capital expenditure financing that the company intends to use to cover liquidity deficiencies.
As previously noted, operating cash flow generated by us constitutes the primary source for funding our own working capital and capital expenditure requirements. In addition, we may in certain cases consider alternative sources of funding, which include taking bank loans or accessing government financing programs or the domestic or international capital markets. In any event, while there are no reasons to believe we could experience liquidity deficiencies, should there be any need for us to source additional funding in order to cover such deficiencies, we would benefit from investment grade ratings4 (foreign and local currency) recently assigned to us by Moody's Investors Service and Standard & Poors in order to obtain financing through any of the aforementioned sources. f. Indebtedness level and characteristics of existing debt obligations
On July 16, 2010 BM&FBOVESPA completed an offering of global senior unsecured notes priced at 99.635% of the aggregate principal nominal amount of US$612,000 thousand, which after deducting underwriting discounts netted proceeds of US$609,280 thousand (at the time equivalent to R$1,075,323 thousand). The notes, which mature on July 16, 2020, were issued with interest coupon of 5.50% per annum payable every six months, in January and July. However, as computed to include the transaction expenses, in particular underwriting discounts, commissions paid to the arranging and structuring banks and other offering expenses, listing fees, legal fees, rating fees paid to Standard & Poors and Moodys, and ongoing administration and custody expenses, the actual cost will represent a rate of 5.64% per annum. As translated into Brazilian reais and including accrued interest of R$30,179 thousand, the balance of our debt under the global notes as of December 31, 2010, was R$1,041,238 thousand. We used the offering proceeds to purchase additional interest in the shares of the CME Group effective July 16, 2010. Starting from the notes issue date, we have designated as hedging instrument that portion of the principal under the notes which correlates with changes in exchange rates in order to hedge the foreign currency risk affecting that portion of our investment in the CME Group Inc which correlates with the notional amount of US$612 million (a hedging instrument in a hedge of net investment in a foreign operation, per Note 7 to our financial statements as of and for December 31, 2010). Accordingly, we have adopted net investment hedge accounting pursuant to accounting standard CPC-38 (Financial Instruments: Recognition and Measurement), for which purpose the hedging relationship has been formally designated and documented, including as to (i) risk management objective and strategy for undertaking the hedge, (ii) category of hedge, (iii) nature of the risk being hedged, (iv) identification of the hedged item, (v) identification of the hedging instrument, (vi) evidence of the actual statistical relationship between hedging instrument and hedged item (retrospective effectiveness test) and (vii) a prospective effectiveness test. Under CPC 38 (IAS 39) we are required to assess the hedge effectiveness periodically by conducting retrospective and prospective tests. On testing backward-looking effectiveness, we adopt the ratio analysis method, also called dollar offset method, as applied on a cumulative and spot-rate basis. In other words, this method compares changes in fair values of the hedging instrument and hedged item attributable to the hedged risk, as measured on a cumulative basis over a given period (from the hedge inception to the reporting date) using the foreign currency spot exchange rate as of each relevant date in order to determine the ratio of cumulative gain or loss on the notes principal amount to cumulative gain or loss on the net investment in a foreign operation over the relevant period. And on testing forward-looking effectiveness, we adopt stress scenarios which we apply to the hedged variable in performing foreign currency sensitivity analysis to determine degree of sensitivity to changes in exchange rates. We have tested the hedge effectiveness retrospectively and prospectively, having determined that at December 31, 2010, there was no realizable ineffectiveness. Moreover, at that date, the fair value of our debt under the notes, as determined based on market data, was R$1,037,774 (Source: Bloomberg).
4
Standard & Poors Counterparty credit rating of BBB+ / Notes issue rating of A2; and Moodys Issuer ratings of A1 on the global scale and Aaa.br on the Brazilian national scale / Notes rating of Baa2.
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In addition to the funding transaction discussed above, BM&FBOVESPA has entered into borrowing transactions in the form of computer equipment finance leases. As of December 31, 2010, the balance of such leases totaled R$2,975 thousand (versus R$11,790 thousand at December 31, 2009; and R$ 4,087 thousand at January 01, 2009). These finance leases are set to mature in April 2011. The table below sets forth our principal total indebtedness indicators.
Indebtedness ratios 2010 Total-Debt-to- EBITDA ratio EBITDA-to-Interest Coverage ratio Net Debt * (in R$ thousands)
( ) ( )
Year ended December 31, 2009 (3,919,993) 2008 (2,988,600) 0.80 40 (2,392,132)
* Net Debt = Remunerated Debt (Cash and cash equivalents + Financial investments)
g.
Restrictions on use of the proceeds of financing previously undertaken.
The indenture governing our issuance of senior unsecured notes includes certain limitations and requirements customary in similar transactions found on the international debt markets, which we believe will not restrict our normal operating and financial activities. Provisions containing such limitations and requirements include mainly the following:
Limitation on liens a provision limiting our and our subsidiaries ability to secure debt by creating liens (other than
certain permitted liens, as defined);
Limitation on sale and lease-back transactions; General liens basket a provision permitting us to undertake additional debt provided the sum of (a) the aggregate
principal amount of all debt obligations secured by liens other than certain permitted liens (as defined), and (ii) debt attributable to all our and our subsidiarys sale and lease-back transactions (with certain exceptions), should not exceed 20% of our consolidated net tangible assets (as defined);
Limitation on mergers, consolidations or business combinations a provision restricting our ability to merge,
consolidate or otherwise combine with any other person unless the resulting or surviving company assumes obligation to repay the principal and pay interest on the notes, and meets certain other requirements designed to ensure compliance with the terms and conditions of the indenture.
However, these limitations and requirements include a number of exceptions which are set forth in the indenture. For a comprehensive discussion of such limitations and requirements, and related exceptions, see the section Description of the Notes Covenants of the Offering Memorandum for the Notes, and article IV of the notes Indenture under the heading Covenants. h. Significant changes to line items of the financial reports.
Our consolidated financial statements as of and for December 31, 2010, and the comparative financial statements as of and for December 31, 2009, have been prepared and are presented in accordance with the accounting standards generally accepted in Brazil, observing the accounting guidelines provided by Brazilian Corporate Law (Law No.6,404/76, as amended and including the provisions introduced by Law No. 11,638/07 and Law No. 11,941/09), as supplemented by new accounting standards, implementation guidance and interpretations issued by the Brazilian Accounting Standards Board (Comit de Pronunciamentos Contbeis), or CPC, approved for promulgation pursuant to resolutions of the Brazilian Federal Council of Accounting (Conselho Federal de Contabilidade), or CFC, and the rules promulgated by the Brazilian Securities Commission ( Comisso de Valores Mobilirios), or Brazilian Securities Commission. These accounting standards, implementation guidance and interpretations, whose primary objective is the convergence between the accounting practices previously adopted in Brazil and the International Financial Reporting Standards, or IFRS, adopted by the International Accounting Standards Board, or IASB, were issued over the course of 2009 and are effective for compulsory adoption from January 1, 2010, and include, for comparability purposes, a requirement for presentation of financial statements revised and adjusted for retrospective application of international financial accounting standards.
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Earlier, up to and including the six-month period ended June 30, 2010, we prepared and presented financial information according to previously prevailing Brazilian accounting standards, which included the accounting guidelines mandated by Brazilian Corporate Law, as amended to include the accounting guidelines introduced by Law No. 11,638/07 and Law No. 11,941/09, and supplemented by CPC accounting standards, implementation guidance and interpretations (CPC 01 through CPC 14) approved and promulgated by the CFC and the CVM before December 31, 2008. Now, pursuant to CVM Resolution 609/09, which promulgated accounting standard CPC 37 (First-time Adoption of International Financial Reporting Standards ) and CVM Resolution 610/09, which promulgated accounting standard CPC 43 (First-time Adoption of Brazilian Accounting Standards CPC 15 to 40), in preparing and presenting our consolidated financial statements as of and for December 31, 2010, and the comparative financial statements as of and for December 31, 2009, we have adopted the international financial reporting standards (IFRS) and changed accounting practices accordingly, on a retrospective basis, starting from January 1, 2009 (the date for transition to IFRSs). Additionally, for clearer presentation of our consolidated financial information, in 2010 we reclassified certain line items within the revenues group, with no impact on net income, shareholders equity or cash flows. However, these changes are not incorporated into our financial information for the years ended December 31, 2009 and 2008, thus allowing for limited comparability only. For additional information on accounting reclassification, see Note 2 to our financial statements as of and for September 30, 2010. STATEMENTS OF INCOME
Year ended December 31, 2010 compared with year ended December 31, 2009 Gross operating revenues
Gross operating revenues of R$2,102.554 thousand in 2010 were up 25.7% from R$1,672.894 thousand in 2009 primarily due to the recovery in volumes traded on both stock and derivatives markets, which climbed 22.7% and 64.7%, respectively.
Trading and/or settlement system BM&F segment
Revenues from trading and settlement fees derived in the BM&F segment totaling R$722.065 thousand accounted for 34.3% of total gross revenues, having soared 35.2% year-on-year from R$534,189 thousand in the prior year due primarily to the following factors:
Derivatives
Revenues from fees charged on trades in derivatives went up 36.7% to R$701,545 thousand from R$513,185 thousand in the prior year, due primarily to a 64.7% year-on-year upsurge in volumes traded, which however was not captured in full due to a 16.9% drop in average rate per contract (RPC.
Forex
Revenues from fees charged on spot currency trades went down 2.0% year-on-year, to R$20,427 thousand from R$20,849 thousand earlier, due mainly to the appreciation of the Brazilian real against the U.S. dollar.
Government bonds and securities
Revenues from fees charged on transactions in government bonds and debt securities dropped 40.0% year-on-year, to R$93 thousand from R$155 thousand previously. Despite a mere 1.6% drop in volumes traded, the mix of transactions resulted in lower revenues in particular on account of repo transactions, for which we charge lower fees when compared to other types of transactions, explaining the fall in revenues for this line item.
Trading and/or settlement system Bovespa segment
Revenues from trading and settlement fees derived in the Bovespa segment climbed 25.3% year-on-year and amounted to R$1,049,300 thousand, accounting for 49.9% of total gross revenues, versus R$837,326 thousand in the prior year, due mainly to the following factors:
Trading Fees trading systems
This revenue line item went up 21.8% year-on-year, to R$737,074 thousand from R$605,244 thousand earlier, reflecting a 22.7% surge in total value traded in the year. However this growth in revenues from trading fees was somewhat curbed by a drop in margin attributable to the mix of investors more actively trading in the period, which included increased trading activities (and value traded) by domestic institutional investors, which are charged lower average fee rates.
Transaction fees clearing and settlements systems
Revenues from fees charged by our equities clearing house on clearing and settlement transactions related to trades carried out
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in the Bovespa segment went up 22.6% year-on-year, to R$254,904 thousand from R$207,914 thousand previously, which is explained by the same factors discussed above.
Other trading or settlement fees
Revenues from other trading or settlement fees derived in the segment soared 137.2% year-on-year, to R$57,322 thousand from R$24,168 thousand in the earlier year primarily due to the increase in number of equity offerings and the massive Petrobras offering, from which we derived settlement revenues of R$47,394 thousand, as compared with R$14,228 thousand one year ago.
Other operating revenues
Other operating revenues climbed 9.9% to R$333,189 thousand from R$331,189 thousand in the prior year. This increase is attributable to the following factors:
Securities lending services
Revenues from securities lending services amounting to R$49,443 thousand went up 49.9% from R$32,989 thousand in the prior year due mainly to a 61.5% upsurge in the average financial value of open interest positions, which rose to R$20.5 billion from R$12.7 billion one year earlier.
Listing fees
Revenues from listing fees amounting to R$44,392 thousand went up 12.2% year-on-year from R$39,549 thousand earlier due mainly to the revenues from offering registration application fees, which soared 83.6% year-on-year, the revenues from listing annuities, which went up 7.5% from the prior year; and a reduction in discounts previously granted on listing annuities.
Depository, custody, back office services
This line item climbed 22.3% year-on-year, to R$88,263 thousand from R$72,167 thousand earlier. Revenues derived from the operations of our central securities depository rose 18.4%, to R$69,169 thousand from R$58,404 thousand in the prior year primarily on account of a 10.3% rise in average number of custody accounts (610.8 thousand in 2010 versus 553.7 thousand one year ago) and 25.8% lift in average financial value of assets under custody (R$472.6 billion versus R$375.6 billion in the prior year), not including custody of ADRs and custody services provided to foreign investors.
Participant access fees
We charge access fees from market participants acquiring trading and other rights for access to our markets. Revenues from access fees charged from market participants climbed 4.7% year-on-year, to R$48,234 thousand from R$46,051 thousand previously, mainly as a result of the increase in volumes traded in the segment.
Market data sales vendors
Revenues from market data sales rose 4.6% year-on-year to R$67,629 thousand from R$64,650 thousand due mainly to a 4.0% growth in number of customer terminals.
Commodity grading fees
Revenues from grading fees fell 9.4% year-on-year, to R$3,898 thousand from R$4,304 thousand one year ago due mainly to the lower volume of coffee samples tested at our laboratories.
Revenues from transaction fees charged on the trading of agricultural commodities on the exchange operated through the Brazilian Commodities Exchange declined 20.7% year-on-year, to R$5,669 thousand from R$7,146 thousand earlier, as a result of the lower number of subsidized coffee and cotton contracts auctioned by government-controlled Brazilian Supplies Company (Companhia Nacional de Abastecimento), or CONAB, as part of the Brazilian governments agricultural policy for certain commodities.
Settlement Bank
The revenues from fees charged by BM&FBOVESPA Settlement Bank fell 3.0% year-on-year, to R$8,043 thousand from R$8,290 thousand one year ago. However, no item under this revenue line presented meaningful change from the prior year.
Other
Other revenues dropped 40.5% year-on-year, to R$15,618 thousand from R$26,233 thousand previously, mainly because we no longer report dividends received from the CME Group under this line item, since starting from July 2010 our investment in shares of the CME Group is accounted for under the equity method of accounting. In addition, in 2009 we reported revenues from a Campos do Jordo congress organized by us, which are not annually recurring as these congresses take place every two years.
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Deductions from revenue
Deductions from revenue totaled R$212,797 thousand from R$170,350 thousand one year ago, a 24.9% climb consistent with the increase in gross operating revenues for the year.
Net operating revenue
As a result of the changes in revenue line items discussed above, net operating income amounted to R$1,889,757 thousand, up 25.8% from R$1,502,544 thousand in the prior year.
Operating expenses
Operating expenses totaled R$633.504 thousand, climbing 11.2% year-on-year from R$569,832 thousand earlier. The principal changes in expense line items were the following:
Personnel and related expenses
Expenses with personnel and related expenses of R$290,107 thousand increased slight 0.1% year-on-year, and were virtually unchanged from R$289,806 thousand one year ago. This movement is explained by the following factors: an August 2010 salary increase required under the existing collective bargaining agreement, which represented a 6% increase in payroll; and a 12.3% year-on-year climb in headcount, in line with our growth strategy, such that most new hirings occurred in technology area and the business development department. Expenses with the stock options plan in turn dropped 48.1% year-on-year, to R$30.9 million from R$59.6 million one year ago. In addition, in 2009, personnel expenses were impacted by first-quarter severance payments in the aggregate of R$18.0 million due to terminations on account of the functional restructuring process.
Data processing
Data processing expenses totaling R$101,690 million were substantially flat (0.9% drop) from R$102,596 thousand in the prior year. The slight drop is due to the increase in time billed by outsourced providers in connection with certain capital expenditure projects (which costs are allocated to the relevant projects), counterbalanced by rent payments, starting from July 2010, for the premises at which our new backup data center is located.
Depreciation and amortization
The expenses with depreciation and amortization went up 29.3% year-on-year, to R$54,818 thousand from R$42,396 thousand one year ago, primarily as a result of a 51.7% increase in property and equipment over the year.
Outsourced services
Expenses with outsourced services went up 5.7% year-on-year, to R$48,102 thousand from R$45,495 thousand previously, primarily as a result of legal fees paid in connection with international partnership agreements we entered into over the year.
Communications
Expenses with communications rose 10.2% year-on-year to R$25.819 thousand from R$23,428 thousand in the prior year, due mainly to increase in number of trades on Bovespa markets, as the Exchange sends investors, by mail, execution confirmation notices for their transactions and custody account statements.
Marketing and promotion
Marketing and promotion expenses reached R$42,376 thousand soaring 116.7% year-on-year from R$19,555 thousand one year ago, primarily as a result of redoubled financial education initiatives and marketing campaigns, in particular those that are designed to attract prospective retail investors.
Taxes
Expenses with taxes paid by us soared 450.3% year-on-year to R$12,784 thousand from R$2,323 thousand one year ago, primarily as a result of taxation related to our share of dividends paid by the CME Group.
Profit (loss) on equity method investments
Starting from the third quarter of 2010, when we increased to 5.0% our ownership interest in shares of the CME Group, we now account for this investment under the equity method of accounting and recognize gains and losses through profit or loss (in the statement of income). For the year ended December 31, 2010, we recognized a profit on the investment amounting to R$38,238 thousand.
Interest income, net
Net interest income of R$298,024 thousand climbed 17.4% year-on-year, from R$253,862 mil one year ago. Interest revenues for the year increased to R$354,806 thousand from R$289,686 thousand in the prior year, influenced by the rising interest rates earned on financial investments and higher average cash invested. In turn, net interest income was influenced by an increase in
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interest expenses for the year, which shot to R$56,782 thousand from R$35,824 thousand in the prior year due to the bond offering we completed in July 2010.
Income before taxation on profit
Income before taxation on profit climbed 34.2% year-on-year, to R$1,592,515 thousand from R$1,186,574 thousand one year ago, and correlates primarily with the degree of operating leverage, evidenced by proportionally higher revenues as compared to the increase in expenses.
Income tax and social contribution
Income tax and social contribution for the year totaled R$448,029 thousand, up 47.1% from R$304,505 thousand in the prior year, as follows: The line item for current income tax and social contribution registered an expense of R$5,408 thousand at December 31, 2010, as compared to revenue of R$32,085 thousand in the prior year. The line item for deferred income tax and social contribution registered an expense R$442,621 thousand at December 31, 2010, as compared to expense of R$336,590 thousand at December 31, 2009, rising 31.5%. This line item substantially correlates with deferred tax liabilities related to temporary differences from amortization of goodwill for tax purposes, with no impact on cash flow and amounting to R$445.155 thousand at December 31, 2010 versus R$333,917 thousand in the prior year.
Net income for the year
Net income for the year increased 29.8% year-on-year to R$1,144,486 thousand at December 31, 2010, from R$882,069 thousand in the earlier year.
Net income attributable to BM&FBOVESPA shareholders
Net income attributable to BM&FBOVESPA shareholders went up 29.9% year-on-year, to R$1,144,561 thousand from R$881,050 thousand one year ago, primarily due to the 25.7% increase in gross revenues, 17.4% rise in net income interest and a R$38,238 thousand profit on equity method investment, which we now recognize in the income statement.
Net income attributable to non-controlling interests
Non-controlling interests relate to interest attributable to other members in our subsidiaries Brazilian Commodities Exchange (Bolsa Brasileira de Mercadorias) and Rio de Janeiro Stock Exchange (Bolsa de Valores do Rio de Janeiro), whose financial statements are combined in our consolidated financial statements despite not being wholly-owned subsidiaries. The share attributable to non-controlling interests totaled loss of R$75.0 thousand at December 31, 2010, versus profit of R$1,019 thousand in the prior year. MAIN LINE ITEMS OF THE BALANCE SHEET STATEMENT
Year ended December 31, 2010 compared with year ended December 31, 2009 Current assets
Current assets at December 31, 2010, fell 26.6% year-on-year to R$2,547,589 thousand (11.3% of total assets) from R$3,468,852 thousand one year ago (16.6% of total assets).
Cash and cash equivalents; financial investments
Cash and cash equivalents comprise cash on hand and demand deposits, in addition to short- and long-term liquid investments with prime banks and in financial investment funds, government bonds and other financial assets. As of December 31, 2010, cash and cash equivalents and financial investments amounted to an aggregate of R$3,435,345 thousand, which accounted for 15.2% of our total assets at that date, and represented decline of 12.6% from R$3,391,783 thousand one year ago, when they accounted for 18.9% of total assets. The primary factor justifying this fall in total cash and cash equivalents and financial investments was the account reclassification of our now larger investment in shares of the CME Group, currently accounted for as equity method investment under the investments line item (investment in associate) at R$695,572 thousand as of December 31, 2010.
Accounts receivable, net
Accounts receivable largely comprise trading and transactions and other fees receivable from customers, and market data transmission fees receivable from vendors. Accounts receivable rose 27.8% year-on-year to R$51,399 thousand from R$40,205 thousand in the prior year, mainly as a result of 46.7% rise in trading fees receivable in line with the increase in volumes
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traded, and a 69.4% climb in depositary and custody service fees receivable.
Deferred income tax and social contribution
Deferred income tax and social contribution dropped by 80.7% year-on-year to R$54,687 thousand from R$283,824 thousand previously. Deferred tax assets of R$237,283 thousand were originally recorded in December 2008 for recognition of impairment loss on the carrying value of our investment in shares of the CME Group, than classified as available-for-sale. Following our acquisition of additional ownership interest in the CME Group in July 2010, the aggregate of this investment was reclassified as investment in associate under noncurrent assets, with which both the impairment loss and related deferred tax asset were fully reversed against retained earnings.
Noncurrent assets
Noncurrent assets climbed 15.6% year-on-year to R$20,086,386 thousand (88.7% of total assets) from R$17,368,987 thousand one year ago (83.4% of total assets). Set forth below is a brief discussion of the main changes to line items under noncurrent assets not previously discussed.
Judicial deposits
Judicial deposits totaled R$92,378 thousand at December 31, 2010, rising 8.8% year-on-year from R$84,895 thousand in the prior year due to additional collateral pledged to the courts in connection with ongoing litigation cases.
Investments
Investments substantially consist of investment in associate and relate to ownership interest we hold in shares of the CME Group recorded at R$2,248,325 thousand. In July 2010, after we increased our overall equity interest in CME shares to 5% (from 1.8% previously) the investment, which we previously recorded as available-for-sale financial investment, was reclassified as investment in associate and accounted for under the equity method of accounting.
Property and equipment
Property and equipment climbed 51.7% year-on-year to R$367,134 thousand, representing 1.6% of total assets at December 31, 2010, from R$241,939 thousand earlier, when it accounted for 1.6% of total assets. This rise is due mainly to capital expenditures involving technology improvements and acquisition of new computer equipment and IT facilities.
Intangible assets
Intangible assets went up slightly by 0.5% year-on-year to R$16,215,903 thousand R$16,215,903 thousand previously. Intangible assets consist of (i) goodwill, which kept a steady line at R$16,064,309 thousand by year-end in each year, and accounted for 71.0% and 77.1% of total assets as of December 31, 2010 and 2009, respectively; and (ii) software and projects, which went up 136.8% to R$151,594 thousand in 2010 from R$64,023 thousand one year ago due mainly to acquisition, implementation and development of new software and systems.
Current liabilities
Current liabilities rose 24.0% to R$1,416,204 thousand at December 31, 2010 (6.3% of total liabilities) from R$1,142,074 thousand one year earlier (5.5% of total liabilities). Set forth below is a brief description of the main changes to line items under current liabilities.
Collaterals for transactions
Collaterals for transactions which at end of year amounted to R$954,605 thousand (4.2% of total liabilities) jumped 17.8% when compared to R$810,317 thousand one year ago (3.9% do total liabilities). This change is due to increase in cash collateral pledged as margin by participants and correlates with the 2010 surge in number of transactions within the scope of our clearing houses and central securities depository.
Noncurrent liabilities
Noncurrent liabilities in the amount to R$1,798,723 thousand at December 31, 2010 (7.9% of total liabilities) soared 409.7% when compared to R$352,872 thousand in the prior year (1.7% of total liabilities). This change is due primarily to debt we undertook with our bond offering and to our having recognized deferred income tax and social contribution amounting to R$257,216 thousand at year-end, as resulting from temporary differences between the tax base of goodwill and its balance sheet carrying value.
Loans and financing
Loans and financing amounted to R$1,010,059 thousand at December 31, 2010, as compared to R$2,495 thousand one year ago, primarily on account of debt we undertook from issuing global senior notes abroad under a bond offering completed on July 16, 2010, as funding for our acquisition of additional ownership interest in the shares of the CME Group, which investment currently represents 5.0% of the CME shares (up from 1.8% previously). For additional information on this acquisition, see
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subsection 10.1(f) of this form.
Shareholders equity
Shareholders equity rose by 0.4% year-on-year to R$19,419.048 thousand (85.8% of total liabilities) from R$19,342,893 thousand in the prior year (92.8% of total liabilities). This slight increase resulted from incremental allocation to our statutory reserve (under the revenue reserve line item) for the funding of safeguard mechanisms and guarantee funds we keep in connection with clearing and settlement activities, as required under our bylaws, which was counterbalanced by an increase in the treasury shares line item attributable to implementation of our share buyback program. STATEMENTS OF INCOME
Year ended December 31, 2009 compared with year ended December 31, 2008 Gross operating revenues
Gross operating revenues in the amount of R$1,672,894 thousand for the year to December 31, 2009, declined 6.2% from R$1,783,358 thousand one year ago, primarily as a result of a 4.3% fall in volumes traded on the equities markets and a 3.3% drop in volumes for the derivatives markets, in either case due to factors correlated with the global financial crisis which peaked in 2008 but continued to adversely affect the capital markets primarily in the first half of 2009.
Trading and/or settlement system BM&F segment
Revenues from transaction fees we charge on trading and clearing activities on the derivatives markets (BM&F segment) tumbled 12.9% to R$552,492 thousand at year-end from R$634,230 thousand in the prior year. This decrease correlates mainly with the following items:
Derivatives
Revenues from fees charged on derivatives trading and clearing transactions (derivatives clearing house) fell 14.2% year-onyear, to R$516,052 thousand for the year from R$601,275 thousand previously, as a result of the 3.3% decline in volume traded in derivatives contracts and 10.3% slump in average revenue per contract (RPC).
Forex
Revenues from fees charged on forex trading and clearing transactions (foreign exchange clearing house) tossed 2.1% year-onyear, to R$20,849 thousand for the year from R$21,302 thousand in the earlier year, due mainly to appreciation of the Brazilian real against the U.S. dollar.
Government bonds and securities
The revenues from fees charged on trades in government bonds and debt securities, and on clearing transactions (debt securities clearing house) sank 53.0% year-on-year, to R$155 thousand at end of year from R$330 thousand the year before, as a result of the 76.9% plunge in volume traded.
Revenues from trades in agricultural commodities on the exchange operated through the Brazilian Commodities Exchange fell 9.1% year-on-year, to R$7,146 thousand for the year from R$7,865 thousand in the year before, due to the fall in volume traded in agricultural notes.
Settlement bank
Revenues from the operations of BM&FBOVESPAs settlement bank increased by 139.7% year-on-year, to R$8,290 thousand at end of year from R$3,458 thousand previously, as a result of the rise in volume of services sold.
Trading and/or settlement system Bovespa segment
Revenues from trading and transaction fees we charge on trading and clearing activities in the equities markets (Bovespa segment) fell 2.2% year-on-year, to R$1,032,201 thousand for the year from R$1,055,028 thousand one year earlier. This drop correlates mainly with the following items:
Trading Fees trading systems
Revenues from fees charged on trading in equities tossed 2.2% year-on-year, at R$617,000 thousand at year-end from R$635,091 thousand one year ago, reflecting the 4.3% decline in volumes traded on the equities markets.
Transaction fees clearing and settlements systems
Revenues from fees charged on clearing and settlement transactions tumbled 10.5% year-on-year, to R$232,166 thousand at the close of year from R$259,355 thousand in the year before, also the 4.3% decline in volumes traded on the equities markets
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and due to a change in our pricing policy.
Securities lending services
Revenues from securities lending services operated by our depository facility (known as BTC) fell 32.0% year-on-year, to R$48,528 thousand for the year from R$32,989 thousand in the prior year, due to a slump in the volume of securities lending.
Listing fees
Revenues from listing fees we charge on securities listings climbed 32.8% year-on-year to R$39,549 thousand from R$29,776 thousand in the previous year, mainly due to implementation of a new price schedule for listings of securities which we adopted in January 2009, gradually terminating discounts we had been granting in the last few years to promote listings in our special corporate governance trading segments.
Depository, custody and back office services
Revenues from fees charges for depository, custody and back-office services increased by 12.3% year-on-year, to R$62,523 thousand at year-end from R$70,231 thousand in the earlier year, primarily as a result of a 3.1% increase in the number of custody accounts, and to implementation of our new pricing policy as of May 2009, which adopted a custody fee by volume deposited with the depository facility.
Participant access fees
We charge access fees from market participants acquiring trading and other rights for access to our markets. The revenues from access fees soared 103.8% year-on-year to R$40,266 thousand from R$19,755 thousand one year ago due primarily to the new policy for access to our markets which we adopted in January 2009.
Other operating revenues
Other operating revenues decreased 6.3% year-over-year to R$88,201 thousand from R$94,100 thousand in the previous year. This drop correlates mainly with the following items:
Market data sales - vendors
Revenues from distribution and sale of market data comprising quotations and other market information were up 33.1% yearon-year to R$57,691 thousand from R$43,359 thousand the year before, as a result of our new pricing policy for these services implemented as of April 2009.
Commodity grading fees
Revenues from fees we charge for grading commodities have climbed 21.8% year-over-year, to R$4,304 thousand at end of year from R$3,535 thousand in the prior year, due mainly to increase in the volume to cotton bags graded at our testing facilities.
Other
Other revenues dropped 44.5% year-on-year, to R$26,206 thousand at end of year from R$47,206 thousand in the earlier year, due primarily to lower than average dividends paid to us by the CME Group, and to the reversal of provisions recorded in previous years.
Deductions from revenue
Deductions from revenue decreased by 6.1% to R$170,350 thousand at end of year from R$181,347 thousand previously, which is consistent with the fall in gross operating revenues.
Net operating revenue
As a result of the year-over-year changes in revenues discussed above, net operating revenue fell 6.2% to R$1,502,544 thousand for the year versus R$1,602,011 thousand one year ago.
Operating expenses
Operating expenses tossed 21.3% year-on-year to R$569,832 thousand from R$723,658 thousand one year ago, due primarily to the synergy identification plan we established in connection with the integration of BM&F S.A. and Bovespa Holding S.A., and implemented with the aim of capturing synergy savings by eliminating duplicate work and through action related to the items discussed below.
Personnel and related expenses
Expenses with personnel and related charges increased by 17.2% year-on-year to R$289,806 thousand from R$247,349 thousand in the previous year, due primarily to increase in expenses for the year with stock options granted to key management personnel 2009, which reached R$59,634 thousand versus R$26,359 thousand in the year before.
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Data processing
Data processing expenses dropped 27.4% year-on-year to R$102,596 thousand from R$141,282 thousand in the prior year, due primarily to synergy savings captured from the integration process (Bovespa and BM&F).
Depreciation and amortization
Expenses with depreciation and amortization increased by 20.6% year-on-year to R$42,396 thousand from R$35,140 thousand one year earlier, due primarily to acquisitions in the asset group of computer equipment and IT facilities.
Outsourced services
Expenses with outsourced services remained virtually unchanged with slight rise of 3.3%, to R$45,495 thousand for the year versus R$44,043 thousand the year before. The synergy savings we had captured in connection with this line item were more than cancelled out by expenses with outsourced services related to specific and strategic projects, in particular in the quarter to December 2009 when ongoing projects included, among other things, some of the magnitude of the partnerships with the CME Group and Nasdaq OMX, and the operating qualification program (PQO) for brokerage firms.
General maintenance
Expenses with general maintenance dropped by 18.7% year-on-year to R$11,007 thousand from R$13,536 thousand in the earlier year, due to synergy savings captured from the integration process (Bovespa and BM&F).
Communications
Expenses with communications were up 25.1% year-on-year to R$23,428 thousand from R$18,721 thousand in the prior year, due mainly to increase in volume traded on Bovespa segment, as the exchange sends notices of trade execution by mail addressed to the investors, for confirmation of the transactions.
Rents
Expenses with rents incurred in the year to December 31, 2009, dropped 30.3% to R$3,032 thousand from R$4,351 thousand one year ago, due to synergy savings captured from the integration process (Bovespa and BM&F).
Supplies
Expenses with supplies fell 30.8% year-on-year to R$2,510 thousand from R$3,629 thousand one year ago, due to synergy savings captured from the integration process (Bovespa and BM&F).
Marketing and promotion
Expenses with promotion and marketing declined 37.8% year-on-year to R$19,555 thousand from R$31,446 thousand the year before, due to synergy savings captured from the integration process (Bovespa and BM&F).
Taxes
Expenses with taxes paid by us increased by 40.4% year-on-year to R$2,323 thousand from R$1,655 thousand one year ago, primarily due to taxes charged on remittances abroad for payment of outsourced services related to certain specific and strategic projects of ours.
Directors compensation
Expenses with remuneration paid to directors in the year to December 31, 2009, dropped 43.0% year-on-year to R$5,252 thousand from R$9,219 thousand in the earlier year. This decline is due to the existence of two exchanges and two different boards prior to the May 2008 integration process that combined Bovespa and BM&F into BM&FBOVESPA, and due also to the fact that the members of both boards continued to provide services to our Company for a few more months during the transition period towards our consolidation.
Integration expenses
Expenses with the integration process amounted to R$129,576 thousand in the year ended December 31, 2008, and did not recur in the year to December 31, 2009.
Sundry
Sundry expenses dropped 48.7% year-on-year to R$22,432 thousand form R$43,711 thousand one year earlier, due to synergy savings captured from the integration process (Bovespa and BM&F).
Goodwill amortization
The expenses with amortization of goodwill which in the year to December 31, 2008, amounted to R$324,421 thousand collapsed to R$0 (naught) in the year to December 31, 2009, due to the change in the accounting standard determining the
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accounting treatment of goodwill, as under certain CPC pronouncements issued in 2008, starting from January 1, 2009, goodwill is no longer subject to amortization recognized in the income statement.
Interest income, net
Net interest income for the year ended December 31, 2009, dropped 17.0% to R$305,972 thousand from R$ 253,862 thousand in the prior year, due mainly to the decline of the base interest rates (interbank deposit rate and Selic rate) that remunerate our financial investments.
Income before taxes
Income before taxes increased by 38.0% to R$1,186,574 thousand for the year from R$859,904 thousand a year ago, and correlates mainly with the 21.3% decrease in operating expenses and the change in the accounting standard that determines the accounting treatment of goodwill, as previously discussed.
Income tax and social contribution
Income tax and social contribution for the year increased 43.1% and represented an expense of R$304,505 thousand at end of year, as compared to R$212,741 thousand one year earlier as follows: The line item for current income tax and social contribution, which at December 31, 2008, registered an expense of R$331,879 thousand, at December 31, 2009, registered revenue of R$32,085 thousand. The line item for deferred income tax and social contribution, which at December 31, 2008, registered a revenue of R$119,138 thousand, at December 31, 2009, registered an expense of R$336,590 thousand. After Bovespa Holding S.A. merged with BM&F S.A. in November 2008, the goodwill came to be deductible for purposes of income tax and social contribution on net income. As a result, starting from December 2008 we took advantage of the tax benefit, such that the portion of goodwill which had been amortized but not taken as a deduction gave rise to income tax and social contribution credits recorded as tax assets in the amount of R$76,702 thousand. In addition to recording tax assets from amortized goodwill, we recorded tax assets for tax losses in the amount of R$35,036 thousand. Deferred income tax and social contribution liabilities as of December 31, 2009, derived from recognition of the temporary difference between the tax base of goodwill and its balance sheet carrying value, considering that while goodwill continued to be amortized for tax purposes, starting from January 1, 2009, goodwill is no longer amortized for accounting purposes, thus resulting in a goodwill tax base that is lower than its carrying value. As of December 31, 2009, the total deferred tax liabilities related to amortization of goodwill for tax purposes was R$333,917 thousand. In the second quarter of 2009, we recognized income tax and social contribution credits in the amount of R$35,503 thousand, as related to tax losses and negative tax base of social contribution of the former Bovespa Holding, which had not been used at the time of the merger of Bovespa Holding due to the supposed deductibility limitation set at 30% of adjusted net income. We revisited this procedure in the second quarter of 2009, based on opinions from our internal and external legal advisers, and the understanding that this limitation is not applicable in the event of a merger of the investee given that in this case there is no continuity and the investee ceases to exist, such that the purported limitation on deductibility is removed and the tax losses may be used in full. As a result, the Company has recorded the tax credits previously mentioned.
Minority interests
Minority interests refer to those portions of our subsidiaries Brazilian Commodities Exchange ( Bolsa Brasileira de Mercadorias) and Rio de Janeiro Stock Exchange (Bolsa de Valores do Rio de Janeiro) consolidated in our financial statements, which are not owned by us. Minority interests amounted to R$1,019 thousand in the year to December 31, 2009, versus R$1,567 thousand the year before, a 35.0% decrease.
Net income for the year
Net income for the year of R$881,050 thousand surged 36.5% year-over-year from R$645,596 thousand one year ago. This rise is due primarily to the 21.3% reduction in operating expenses and expenses from the change in the accounting standard determining the accounting treatment of goodwill, which were only partially counterbalanced by the 43.1% increase in the income tax and social contribution line item, resulting from recognition of deferred tax liabilities. MAIN LINE ITEMS OF THE BALANCE SHEET STATEMENT
Year ended December 31, 2009 compared with year ended December 31, 2008 Current assets
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Current assets as of December 31, 2009, increased 41.4% year-on-year to R$2,778,968 thousand (13.1% of total assets) from R$1,965,461 thousand one year earlier (9.6% of total assets). The main changes to current assets were the following:
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with short- and long-term, liquid investments through prime banks, financial investment funds, government bonds and so forth. As of December 31, 2009, cash and cash equivalents and financial investments amounted to an aggregate of R$3,236,211 thousand, which accounted for 15.3% of our total assets at that date, and represented increase of 34.0% over R$2,414,241 thousand one year ago, when they accounted for 11.8% of our total assets. This increase in cash and cash equivalents and financial investments was pushed by the higher volume of cash collaterals deposited by market participants as margin for transactions, which in turn was driven by the soaring volume of trades on the equities markets in the quarter to December 2009, versus the same quarter one year earlier. The collaterals are included in current assets and in current liabilities.
Accounts receivable, net
Accounts receivable largely comprise trading and transactions and other fees receivable from customers, and market data transmission fees receivable from vendors. Accounts receivable dropped by 61.8% year-over-year, to R$40,205 thousand from R$105,169 thousand in the prior year. This fall is attributable to change in the due date for payment of most trading and transaction fees charged in the equities markets, which starting from October 1, 2009, we collect as of the third business day after the trade date, whereas previously these fees would be paid up to two months after the trade date.
Deferred income tax and social contribution
Deferred income tax and social contribution recorded under both current and noncurrent assets were reduced by 61.9% yearon-year, from R$122,070 thousand in the prior year to R$46,541 thousand as of December 31, 2009. This decrease resulted from a change in the accounting standard related to the accounting treatment of goodwill amortization, according to which we now recognize a deferred tax liability on tax amortizations of goodwill. The balance of deferred tax assets recorded one year ago (in the amount of R$76,702 thousand) was reclassified as a liability in 2009, thus representing the net amount of tax credit attributable to goodwill.
Noncurrent assets
Noncurrent assets were substantially unchanged, with slight drop of 0.2% to R$18,422,215 thousand as of December 31, 2009 (86.9% of total assets) from R$18,464,628 thousand one year ago (90.4% of total assets). Other than previously explained, the main changes to noncurrent assets were the following:
Judicial deposits
Judicial deposits totaled R$84,895 thousand at end of year, a 9.6% declined as compared to R$93,885 thousand in the prior year. This drop correlates mainly with deposits withdrawn from court in 2009.
Other investments
Other investments which at end of year amounted to R$1,319,439 thousand, representing 6.2% of total assets, kept a steady line from the year before when it totaled R$1,318,282 thousand representing 6.5% of total assets. This line item correlates primarily with our ownership interest in the CME Group recorded at R$1,276,199 thousand. In 2010 this investment will be reclassified pursuant to the standard provided by technical pronouncement CPC 38, as discussed in item 10.4.b below.
Property and equipment
Property and equipment climbed 8.5% to R$268,895 thousand at end of year, representing 1.3% of total assets, from R$247,850 thousand one year earlier when it represented 1.2% of total assets, mainly as a result of increase in computer equipment and IT facilities.
Intangible assets
Intangible assets went up slightly by 0.2% year-on-year to R$16,117,930 thousand from R$16,089,633 thousand previously. Intangible assets comprise (i) goodwill, which kept a steady line at R$16,064,309 thousand at end of year in either year, and represented 75.8% and 78.6% of total assets as of December 31, 2009 and 2008, respectively; and (ii) software and projects, which went up 111.7% to R$53,621 thousand at end of year from R$25,324 thousand one year ago, due mainly to acquisition, implementation and development of new software and systems.
Current liabilities
Current liabilities rose 8.0% to R$1,162,075 thousand as of December 31, 2009 (5.5% of total liabilities) from R$1,075,744 thousand one year earlier (5.3% of total liabilities). The main changes to current liabilities were the following:
Collaterals for transactions
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Collateral for transactions which at end of year amounted to R$810,317 thousand (3.8% of total liabilities) jumped 38.3% when compared to R$585,963 thousand one year ago (2.9% do total liabilities). This change correlates with an increase in margin received from market participants and deposited in the form of cash, as a result mainly of volume growth in the quarter to September 2009 as compared to the same period in the prior year.
Earnings and rights on securities in custody
The 11.4% decline in earnings and rights on securities in custody, which at end of year amounted to R$31,897 thousand as compared to R$36,020 thousand one year ago, is due primarily to the fall in earnings from judicial deposits.
Financing
The 127.4% climb in financing, which at end of year amounted to R$9,295 thousand as compared to R$ 4,087 thousand in the year before, is due mainly to financial lease arrangements for IT-related equipment.
Other liabilities
The line item other liabilities climbed 15.7% to R$194,895 thousand at end of year (0.9% of total liabilities) from R$168,404 thousand in the previous year (0.8% of total liabilities), which correlates primarily with deposits and repurchase agreements related to the operations of Banco BM&F, the settlement bank.
Noncurrent liabilities
Noncurrent liabilities in the amount to R$313,002 thousand at December 31, 2009, (1.5% of total liabilities) surged 569.8% when compared to R$46,729 thousand at the end of the prior year (0.2% of total liabilities). This change is due primarily to our having recognized deferred income tax and social contribution at end of year in the amount of R$261,060 thousand, as derived from the temporary difference between the tax base of goodwill and its carrying value in the balance sheet, considering that while goodwill continues to be amortized for tax purposes, starting from January 1, 2009, goodwill is no longer amortized for accounting purposes, thus resulting in a goodwill tax base that is lower than its carrying value.
Shareholders equity
Shareholders equity rose 2.2% to R$19,709,749 thousand at December 31, 2009, when it represented 93.0% of total liabilities, from R$19,291,724 thousand one year earlier, when it represented 94.4% of total liabilities, and as resulting from the formation of a reserve for investments and funding of safeguard mechanisms and guarantee funds we keep in connection with clearing and settlement activities, as required under our bylaws (under the statutory reserve line item) and pursuant to the proposal on allocation of net income for the year. 10.2. Managements discussion and analysis of a. The results of operations and, in particular: i. Material revenue components
Year ended December 31, 2010 compared to year ended December 31, 2009
Our consolidated gross operating revenues of R$2,102,554 thousand for the year ended December 31, 2010, up 25.7% from R$1,672.894 thousand one year ago primarily due to the recovery in volumes traded on both stock and derivatives markets (Bovespa and BM&F segments, respectively). Revenues from trading and settlement fees derived in the Bovespa segment climbed 25.3% year-on-year and amounted to R$1,049.300 thousand, which accounted for 49.9% of total gross revenues, reflecting a 22.7% yearover-year rise in total value traded, in addition to increase in number of equity offerings, from which we derived settlement revenues of R$47,394,660 thousand, as compared to R$14,227,787 thousand one year ago. However, margins dropped as a result of a change in the mix types of investors more actively trading in the period, including a boom in trading activities by domestic institutional investors, from whom we charge lower average fee rates. Revenues from trading and settlement fees derived in the BM&F segment soared 35.2% year-on-year and amounted to R$722.065 thousand, accounting for 34.3% of total gross revenues, due primarily to a 64.7% year-on-year upsurge in volumes traded, which tough was not captured in full due to a 16.9% drop in average rate per contract (RPC). Revenues unrelated to trading and settlement activities rose 9.9% year-on-year to R$331.189 thousand (15.8% of total gross revenues) from R$301.379 thousand (18.0% of the total) one year earlier.
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Our consolidated gross operating revenues for the year ended December 31, 2009, totaled R$1,672,894 thousand, down 6.2% from R$1,783,358 thousand one year ago, primarily reflecting the following: revenues from transaction fees we charge on trading and clearing activities on the equities markets (Bovespa segment) accounted for 50.8% of gross operating revenues, or R$849,166 thousand, in a 5.1% year-on-year decline as a result of the 4.3% drop in volumes traded when compared to the prior year. Despite having tumbled in the first half of 2009, volumes bounced significantly in the second half, and revenues from fees on trading and clearing transactions surged 34.5% over the period to June 2009, to peak in the quarter to December 2009, which registered record high volumes; and revenues from transaction fees we charge on trading and clearing activities in BM&F segment accounted for 32.1% of gross operating revenues, or R$537,056 thousand, plunging 13.8% year-over-year. This decline correlates with a 10.3% fall in average revenue per contract (RPC), while overall volume traded tossed 3.3% from one year earlier. As a result, revenues derived from transaction fees we charge on trading and clearing activities in the equities and derivatives markets accounted for 82.9% of our total revenues in the year to December 2009, versus 85.1% of total revenues for 2008. Taxes charged on these revenues amounted to R$170,350 thousand, or approximately 10.2% of our gross operating revenues. ii. Factors materially influencing the results of operations
The Brazilian economy consolidated in 2010 the recovery started earlier in the aftermath of the global economic downturn driven by the international financial crisis of 2008. While other countries still wrestled with the longer-term effects of the downturn and European policy makers tackled market mistrust trying to prevent a sovereign-debt collapse driven by the additional economic difficulties faced by certain eurozone countries, the Brazilian economy was visibly coming around. Evidencing the recovery, the Brazilian economy grew, credit availability and domestic consumption increased, and the Brazilian real registered strong appreciation against the U.S. dollar. This economic environment has positively impacted on our financial and operating performance. Volumes traded in 2010 hit unprecedented record highs in both the stock market (Bovespa segment) and the derivatives markets (BM&F segment). In the Bovespa segment, where for months market overhang sparked by uncertainties around the then-upcoming Petrobras offering had slowed trading significantly, but deal flows sprang back promptly after the offering closed. In addition, a subsequent rebound in the market prices for stocks positively influenced volumes traded on the equities markets. In the BM&F segment, heightened credit availability and volatility driven by differing perceptions and expectations about the Central Banks decisions on the direction and size of the Selic rate, which is the Brazilian base interest rate, coupled with a boost in foreign trade, pushed the volumes traded decisively. However, while not having affected the fundamentals of the Brazilian economy, the international economic landscape did impact on our markets, particularly the stock market, as the eurozone crisis sparked by the sovereign debt crisis among EU nations deepened, leading to uncertainties about the future of the Euro, to negative market sentiment and high volatility. In addition, the October 2010 changes in IOF taxation (tax on financial transactions), which the Brazilian government adopted in an exercise designed to curb the appreciation of the Brazilian real against the U.S. dollar, affected trading volumes negatively by containing market sentiment on account of uncertainties about additional future measures towards the same end.
Year 2009 dawned in anxiety, amid the uncertainties that emerged from the worst global financial crisis since the 1930s, started in 2008. In the years before the crisis, in the folly of the housing derivatives feeding frenzy, lending behavior changed, credit policies became ever more liberal, securitization ubiquitous, players operated in highly-leveraged mode, regulation was lax or lacking and there was too little transparency in over-the-counter transactions. As a result, the scenario that emerged early in 2009 after the crisis peaked was one of a severe credit crunch pointing to general deleveraging, amidst a lively debate over a need for more stringent and efficient regulation for the financial and capital markets, strong contraction in the prices of commodities and financial assets, and governments across the board moving towards quantitative easing.
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This combination of factors directly and negatively affected performance in markets BM&FBOVESPA operates. In the equities market (Bovespa segment), volumes tumbled due mainly to the falling prices of stocks prompted by bearish sentiments and risk aversion, while in the derivatives market (BM&F segment) hedging activities sank due mainly to the credit crunch, which coupled with general risk aversion and deleveraging significantly depressed volumes. Another factor influencing performance in our markets was the creation of two new types of taxes on financial transactions (IOF). With the stated objective of arresting the appreciation of the Brazilian real, the Brazilian government adopted a 2.0% tax on money inflows for portfolio investments (stocks, fixed-income securities and derivatives) in domestic capital markets and a 1.5% IOF tax on issuances of American Depositary Receipts (ADRs). These two government measures negatively influenced the flow of foreign capital to our markets and adversely affected trading activities, particularly in the Bovespa segment, due to the increased cost of trading in local markets and the uncertainties about additional measures the Brazilian government could take in the future. Regarding the expenses, in 2009 we were spared certain nonrecurring expenses with the integration of the former two exchanges, BM&F S.A. and Bovespa Holding S.A., which were all concentrated in 2008, when they topped R$129,576 thousand. In addition, also in 2008 we recognized through profit and loss the expense related to proportionate amortization of goodwill from the merger of shares of Bovespa Holding S.A., in the amount of R$324,421 thousand, with net impact of R$235,075 thousand. In turn, in 2009, we recorded deferred tax liabilities of R$333,917 thousand related to temporary differences from tax amortization of goodwill in the year, with no impact on cash flow. Taking the above amounts into account, the actual tax rate for 2009 was 25.7%. b. Changes in revenues attributable to fluctuations in market prices, exchange rates, inflation rates, changes in volumes and offerings of new products or services
Changes in revenues attributable to changes in our pricing policies or to fluctuations in exchange rates include:
Listing fees: revenues up 12.2% year-on-year due mainly to the revenues from offering registration application fees, which
soared 83.6% year-on-year, the revenues from listing annuities, which climbed 7.5% from the prior year, and a reduction in discounts previously granted on listing annuities.
Market data sales - vendors: revenues up 4.6% year-on-year due mainly to a 4.0% growth in number of customer
terminals. In addition, revenues from sales of market data were influenced by implementation in August 2010 of a new pricing policy designed to attract retail trading through our Home Broker system, and by the 11.7% appreciation of the Brazilian real against the U.S. dollar over the year, which negatively affected our revenues from fees charged to foreign customers, which account for approximately one-third of our revenues under this line item.
Market participant access fees: revenues climbed 4.7% year-on-year mainly as a result of the increase in volumes traded,
however partially counterbalanced by the effects of our new pricing policy for the technology package used by market participants.
High Frequency Traders: under our new policy for high frequency traders operating in either the Bovespa or BM&F
segments, which took effect in November 2010, high frequency traders holding HFT registration accounts are granted progressive discounts based on intraday trading volume bands.
Changes in revenues attributable to changes in our pricing policies or to fluctuations in exchange rates include:
Listing fees: a 32.8% year-on-year climb in listing fees, due to a change in prices and the end of certain discounts
previously granted to companies listing securities to trade on our special corporate governance trading segments;
Central securities depository: revenues from depositary and custody and back office services went up 12.3% from one year
ago, following a change in our pricing policy which established an additional fee charged from Brazilian-resident investors holding custody accounts in excess of R$300,000 thousand, which is based on the market price of securities and other assets held in custody;
Market participant access fees: revenues from access fees surged 103.8%, as a result of the policy for access to markets
within both segments;
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Market data sales - vendors: sales of market data rose 33.1% year-on-year due to implementation of our revised pricing
policy in April 2009;
Securities lending: revenues from securities lending dropped 32.0% primarily due to the plunge in transaction volume in
the first half of 2009, after which however volumes in this market bounced back to show significant improvement; and
Average revenue per contract (RPC) traded on BM&F segment: RPC fell 10.3% from a year ago primarily due to (i) the
August 2008 decision to terminate certain discounts on transaction fees after November 2008. The discount period had pushed volumes driving revenue per contract upwards in the period; (ii) appreciation of the Brazilian real against the U.S. dollar, which negatively influenced revenues from FX contracts, from USD interest rate contracts, and from commodities contracts; and (iii) the granting of discounts for access to our systems via certain DMA (Direct Market Access) models, and for high frequency traders. c. Impact on financial condition and results of operations attributable to inflation rate; changes in market prices for the principal raw materials and other supplies; changes in exchange and interest rates.
Not applicable. 10.3. Managements discussion and analysis of actual or expected material effects of the factors set forth below on the financial statements or results of operations. a. Creation or disposition of operating segment.
No new operating segment has been created or sold in the years ended December 2010 and 2009. Accordingly, no such event has had or is expected to have effects on our financial statements and results of operations. b. Company organization; acquisition or disposition of ownership interest.
In July 2010 we acquired an additional 3.2% interest in the shares of the CME Group, thereby raising our aggregate ownership interest to 5% of the shares (from 1.78% previously) and making BM&FBOVESPA CMEs largest shareholder 5. Following this additional acquisition, the investment has been accounted for under the equity method of accounting, and the effects of thereof were recognized and accounted for in the year ended December 31, 2010. c. Unique or extraordinary events or transactions.
There have been no unique or extraordinary events or transactions related to us or our activities in the years to December 2010 and 2009, which has had or is expected to have materially influence our financial statements or results of operations. 10.4. Discussion and analysis of a. Significant changes in accounting practices
Our consolidated financial statements as of and for December 31, 2010, are the initial consolidated financial statements prepared under Brazils CPC and IFRS. These consolidated financial statements were prepared and are presented in accordance with accounting standards CPC 37 (IFRS 1 First-time Adoption of International Financial Reporting Standards) and CPC 43 (First-time Adoption of Brazilian Accounting Standards CPC 15 to 41), in addition to IFRS 1 (First-time Adoption of International Financial Reporting Standards). The transition date for adoption of international financial reporting standards is January 21, 2009. Accordingly, Management prepared the opening balance sheet in accordance with Brazils CPC and IFRS applied retrospectively to January 1, 2009. b. Significant effects of changes in accounting practices
Set forth below is a reconciliation of shareholders equity and net income for the year from previous GAAP to IFRSs.
BM&FBOVESPA and Consolidated (in thousands of Brazilian reais)
Source: Thomson Reuters
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Equity reconciliation Equity disclosed in accordance with previous Brazilian GAAP .... Impairment loss on investment in CME Group shares (a) . Adjustment for mark-to-market measurement of shares in CME Group classified as available for sale (b) . Dividend recognized in excess of the mandatory dividend at the balance sheet date (c) .. Contribution to establishing BSM previously treated as investment..
At December 31, 2009 19,709,749 (460,610) 77,396 20,000 (20,000) 19,326,535
At January 1, 2009 19,291,724 (460,610) 200,001 (20,000) 19.011.115 15,339 19.026.454
Non-controlling interests (d) .. Equity disclosed in accordance with IFRS
16,358 19,342,893
Consolidated (in thousands of Brazilian reais) Net Income reconciliation Net income disclosed in accordance with previous Brazilian GAAP Non-controlling interests (d) Net income disclosed in accordance with IFRS
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At December 31, 2009 881,050 1,019 882,069
(a) Under previous GAAP, which were effective through December 31, 2009, the investment in CME was recorded at historical cost un der noncurrent assets, in accordance with CPC 14 (IAS 39 and 32- parts) Financial Instruments: Recognition, Measurement and Disclosures , such that the investment was subject impairment testing using the discounted cash flow method to determine value in use, acco rding to as required under CPC 01 (IAS 36) - Impairment of Assets in connection with investments valued at cost. After CPC 38 (IAS 39) took effect in 2010, the investment was reclassified under the financial instruments group, designate d as availablefor-sale financial asset, and adjusted to fair value. Thus, for purposes of fair value measurements the adopted standard was that of quoted market price in an active market (stock exchange). Thus, after the investment was designated an available-for-sale financial asset, impairment tests would compare the market value of the shares at the valuation base date with the investment acquisition cost (CPC 38/IAS 39), using significant or sustained decline in market price as indication of impairment loss. As a result, given the significant decline in the market price for CME shares over the last quarter of 2008, BM&FBOVESPA adjusted the investment in CME Group to its recoverable value recognizing impairment loss of R$697,893 thousand and deferred tax asset amo unting to R$237,283 thousand, with net-of-tax impact of R$460,610 in equity for 2008. After the acquisition of additional ownership interest in the CME Group in July 2010, the aggregate investment was re -designated as investment in associate under CPC 18 (IAS 28) Investment in Associates and accounted for under the equity method of account, whereas the net-of-tax impairment loss of R$460,610 thousand previously registered was reversed against equity, establishing the new cost basis for the investment. (b) Mark-to-market measurements over 2009 for comparison with the new cost basis established for the investment in CME Group shares resulted in a positive effect, net of taxes, amounting to R$77,396 thousand. Then, starting from July 2010, as a result of the increase in the aggregate ownership interest in CME shares (to 5% from 1.8% previously), we began to account for this investment under the equity method of accounting. (c) According to the CPC Interpretation 08, or ICPC 08 - Accounting for Dividend Payment Proposal , that portion of net income which is in excess of the annual mandatory dividend (as computed to include interest on shareholders equity) should be kept in equity, under a special account, pending final decision by the shareholders. Under CPC 25 (IAS 37) - Provisions, Contingent Liabilities and Contingent Assets , a provision should be recognized only where there is liability proper, i.e., a present obligation resulting from past events. (d) CPC 26 (IAS 1) Presentation of Financial Statements . Non-controlling interests (the new name for minority interests) are now presented within equity.
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(e)
The following CPCs (IFRSs) accounting standards have been implemented with no impact on equity or net income: i. Segment Information (CPC 22/IFRS 8 Operating Segments ) The consolidated financial statements of BM&F BOVESPA have been prepared and are presented by operating segment (Note 24); ii. Earnings per share, or EPS (CPC 41/IAS 33 Earnings per Share) - Earnings per share are now presented as straightforward pershare profit or loss for the period attributable to shareholders and as divided by the weighted average number of shares outstanding (the denominator) during the period, not including treasury stock. In addition, we present diluted EPS as calculated by adjusting the earnings and number of shares for the effects of dilutive options and other potentially dilutive securities (as calculated after giving effect to outstanding securities convertible, exchangeable or exercisable for newly-issued shares). Optional exemptions to full retrospective application of CPCs/IFRSs. Consistent with CPC 37 (IFRS 1) First-time Adoption of International Financial Reporting Standards) , In preparing our initial and comparative financial information under current Brazilian and (f)
international financial reporting standards (CPCs/IFRSs), we applied mandatory except ions to, and certain optional exemptions from the general principle of retrospective application. Set forth below are the main exemptions under CPC 37/IFRS 1 which are not applicable to us. i Business combinations We elected to adopt the exemption permitting BM&FBOVESPA to forgo application restating business combination transactions (mergers) occurred prior to the transition date and opening balance sheet date of January 1, 2009; ii Deemed cost of fixed assets - We elected to adopt the exemption permitting BM&FBOVESPA to forgo the deemed-cost exemption, and preferring rather to adopt the carrying value for which our fixed assets had been registered under previous GAAP; iii Leases We elected to revisit existing contracts and, consistent with IFRIC 4 issued by the International Financial Reporting Interpretations Committee, reconsider whether in light of facts and circumstances as of the transition date any arrangement c ontained a lease not previously recognized as such, having found that all had been properly ide ntified and recognized under previous GAAP, which in this regard were in line with the international financial reporting standards (CPCs/IFRSs); iv Share-based payments Share-based payments had been accounted for under previous GAAP, which in this regard were in line with the international financial reporting standards (CPCs/IFRSs); and v Assets and liabilities of subsidiaries First-time adoption of IFRS has been implemented concurrently and consistently by us and all our subsidiaries. (g) Exceptions to retrospective application of CPCs/IFRSs. The estimates we used in preparing our opening and comparative financial statements as of January 1, 2009, and December 31, 2009, are consistent with estimates used as of the same dates under previo us GAAP. Other mandatory exceptions to retrospective application were not applicable as there were no significant differences in accounting practices under previous GAAP and current CPCs/IFRSs.
c.
Qualifications and emphasis of matter paragraphs included in the independent auditors report
Our consolidated financial statements have been prepared in accordance with current Brazilian GAAP, which adopts the accounting standards issued by the CPC for convergence with IFRS. However, these accounting standards differ from IFRS applicable to separate financial statements in that under CPC standards our investments in subsidiaries and affiliates are accounted for, and valuated under the equity method of accounting, whereas under IFRS they would be accounted for at cost or fair value. 10.5. Critical accounting policies and analysis, in particular, of accounting estimates requiring Management to exercise judgment and make subjective assumptions about future events and uncertainties which can materially influence the financial condition and results of operations. Critical accounting estimates may relate to provisions, contingencies, recognition of revenues, tax credits, long-term assets, the useful life of noncurrent assets, pension schemes, adjustments for foreign currency translations, environmental recovery costs, impairment and recoverability testing standards for fair value measurement of assets and financial instruments, among other things. a. Financial instruments. (i) Recognition and measurement The Company classifies financial assets under the following categories: designated at fair value through profit or loss, loans and receivables, held to maturity and available-for-sale. The classification depends on the purpose for which a financial asset is acquired. Management determines a financial asset classification at the time of initial recognition.
Financial assets designated at fair value through profit or loss
Financial assets designated at fair value through profit or loss are financial assets held for active and frequent trading or assets we designate as measurable at fair value through profit or loss upon initial recognition. Derivatives are also classified as held-for-trading and, as such, are recorded under this category. Assets of this category which are held for trading are classified under current assets. A gain or loss on a financial asset classified at fair value through profit or loss resulting from changes in fair value is recognized in profit or loss, in the statement of income under the interest income line item, in the period in which these changes occur.
Loans and receivables
These comprise loans granted and receivables that are non-derivative financial assets with fixed or determinable payments,
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not quoted in an active market. Loans and receivables are recorded under current assets, except for those maturing more than 12 months after the balance sheet date (which are classified under noncurrent assets). Our loans and receivables comprise trade accounts receivable and other accounts receivable. Loans and receivables are measured at amortized cost on an effective interest rate basis.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives designated on initial recognition as available for sale, or any other instruments that are not classified in any other category. They are recorded under noncurrent assets, unless management intends to sell the investment within 12 months after the balance sheet date. Available-for-sale financial assets are measure at fair value. Interest on available-for-sale securities, as computed using the effective interest method, is recognized in the statement of income as interest revenue. The cumulative gain or loss from changes in fair value is recognized in equity, in a fair value adjustment account, and recognized (realized) through profit or loss when the asset is sold or becomes impaired.
Fair value measurements
Fair value measurements of securities quoted in an active market are based on current market prices. If a market for a financial instrument is not active or a security is unquoted, fair value is measured through valuation techniques, such as, for example, option pricing models. At the balance sheet date, Management makes an objective assessment to determine whether a given financial asset or group of financial assets is impaired. (ii) Derivative instruments and hedge activities
Derivatives are recorded at fair value on initial recognition, as of the date of the derivatives instrument, and subsequently measured at fair value, with changes in fair value recognized through profit or loss except where a derivative is designated as a cash flow hedge. (iii) Hedge of a net investment in a foreign operation A gain or loss on a hedging instrument attributable to the effective portion of the hedge is recognized in comprehensive income. A gain or loss attributable to any ineffective portion of the hedge is promptly recognized through profit or loss included in other gains (losses), net". Cumulative gains or losses recognized in equity are recognized through profit or loss in the statement of income at the time all or some of the foreign operation (the hedged item) is sold or otherwise disposed of. b. Intangible assets.
Goodwill
Goodwill or negative goodwill on the acquisition of an investment is calculated as the difference between the consideration paid or payable for a business at the acquisition date and the net fair value of the assets and liabilities of the entity acquired. Goodwill paid for control of an entity (subsidiary) is recognized under intangible assets. In turn, negative goodwill paid for a subsidiary is a gain recognized immediately through profit or loss for the period (as determined by the acquisition date). Goodwill is assessed for impairment on an annual basis. Goodwill is stated at cost less impairment losses. Recognized Impairment losses on goodwill are not reversed.
Goodwill is allocated to cash generating units (CGU) for impairment testing purposes. Specifically, allocations are made to such cash generating units as are expected to benefit from the business combination originating goodwill, which are identified based on operating segment.
Software and projects

Software licenses we acquire are capitalized at cost incurred and amortized over the estimated useful life. The costs for software development or maintenance are expensed as incurred. Expenditures related directly to unique, identifiable software we control, and which are likely to generate economic benefits greater than the costs for over a oneyear period, are recognized as intangible assets. Direct expenditures include remuneration of the software development team. Expenditures for development of software recognized as assets are amortized using the straight-line method over the useful life. c. Affiliates - Step Acquisitions The cost of an affiliate acquired in stages is measured by the total amount paid under each transaction.
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Cumulative gain or loss previously recognized in comprehensive income, while classified as an available-for-sale asset, is subsequently reversed against the investment account and restated as part of the acquisition cost. Goodwill is calculated at each acquisition step as the difference between acquisition cost and the fair value of net assets in proportion to interest acquired. The investment total book value is assessed for impairment by comparing carrying value and recoverable value (determined as the higher of selling value less costs to sell or value in use) when the requirements of the CPC 38/IAS 39 suggest an impairment loss on the investment may have occurred. d. Contingent assets and liabilities and legal obligations
The recognition, measurement, and disclosure of contingent assets and liabilities and legal obligations observe the criteria defined in CPC 25/IAS 37.
Contingent assets - These are not recognized unless management has full control over their realization, or there are
secured guarantees, or a final, unappealable court decision is in place, permitting assumption that a gain will materialize. Contingent assets, whose realization is deemed to be probable, as applicable, are just disclosed in the financial statements.
Contingent liabilities - These are recognized based on a number of factors including: the opinion of counsel; the
nature of the lawsuit; similarity to previous lawsuits (precedents); complexity of the proceedings; and court precedents. Contingent liabilities are recognized where a loss is assessed as probable, since this would imply probable outflow of resources for settlement of the obligation, as long as the sums involved are measurable with sufficient reliability. Contingent liabilities assessed as a possible loss are not recognized but are disclosed in notes to financial statements, whereas those that are assessed as a remote loss are neither recognized nor disclosed.
Legal obligations - Legal obligations result from tax lawsuits in which the Company is discussing the legality, validity
or constitutionality of certain taxes and charges. These are fully recognized in the financial statements regardless of any assessment as to the prospects for a win or defeat.
Other Provisions - Provisions are recognized where BM&FBOVESPA has a present obligation, whether legal or
constructive, resulting from past events, and it is probable an outflow of resources will be required to settle the obligation, provided a reliable estimate of amount can be made. e. Impairment of assets Assets with indefinite useful life, such as goodwill, are not amortized but are assessed for impairment on an annual basis. Assets that are subject to amortization are assessed for impairment at any time events or changes in circumstances suggest the carrying value may not be fully recoverable. Where carrying value exceeds recoverable value the impairment loss is recognized of fair value less costs to sell or value in use. Recoverable value is defined as the higher of fair value less costs to sell or value in use. For impairment assessment purposes, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units, or CGUs). An impairment loss for a non-financial asset (Except for goodwill) is subsequently reversed if at the date of a report there has been a change in the estimates used to determine recoverable value. f. Foreign currency translation Items included in separate financial information of each company included in our consolidated financial statements are measured using the currency of the primary economic environment in which we operate ("functional currency"). Our financial statements are presented in Brazilian reais, which is the functional currency of BM&FBOVESPA. Transactions in foreign currency are translated into our Brazilian reais (our functional currency) using the exchange rates as of the transaction dates or, as the case may be, the relevant measurement dates. A foreign exchange gain or loss arising from the settlement of these transactions or from the translation, at end-of-period exchange rates, of monetary assets and liabilities in foreign currency, are recognized through profit or loss, unless deferred in comprehensive income as part of a hedge of a net investment in a foreign operation. In the case of changes in foreign currency affecting the value of a net investment in a foreign operation whose functional currency differs from ours, the effects of changes correlated solely with foreign exchange rates are recognized in
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comprehensive income, under the "Equity Adjustment Account," and recognized through profit or loss only when the investment is sold or written off. In applying the equity method of accounting, unrealized gains on transactions with subsidiaries and associates are eliminated. The exchange gains and losses on non-monetary financial assets related to the investment in shares of the CME Group, which was classified as available-for-sale until July 2010, were included in comprehensive income. After July 2010, when switched to accounting for our investment in the CME Group under the equity method of accounting, the effects of changes in foreign currency were recognized in comprehensive income. g. Deferred income tax and social contribution Deferred taxes are calculated on income tax and social contribution losses and the temporary differences between the tax calculation bases of assets and liabilities and the respective book values in the financial statements. Deferred tax assets are recognized to the extent that it is probable sufficient future taxable profit will be available to be offset against temporary differences and/or tax losses, considering projections of future income performed on the basis of internal assumptions and future economic scenarios which present uncertainties and may ultimately differ from actual events. Deferred tax liabilities are recognized in relation to all taxable temporary differences, that is, differences that should result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying value of an asset or liability is recovered or settled. Deferred income tax and social contribution are not recorded if resulting from initial recognition of an asset or liability in a transaction other than a business combination, which at the time of the transaction does not affect net income or taxable income (tax loss). Deferred income tax and social contribution are determined using tax rates (and tax laws) promulgated, or substantially promulgated at the balance sheet date, which are applied when the related deferred tax asset is realized or the deferred tax liability is settled. h. Critical accounting estimates and assumptions i) Equity method of accounting BM&FBOVESPA applies the equity method of accounting for its investments when it has the ability to exercise significant influence over the operations and financial policies of the investee. Managements judgment regarding the degree of influence we exercise over an investee include key factors as proportionate interest in the shares, representation at board level, whether or not we have a say on defining business guidelines, corporate and financial policies, and on material intercompany transactions. ii) Impairment Pursuant to We assess assets for impairment on an annual basis, including in particular goodwill and fixed assets, which are tested pursuant to the accounting practices set forth under subsection 10.5(b). iii) Recognition of financial instruments BM&FBOVESPA classifies financial assets under the following categories of (i) measured at fair value through profit or loss and (ii) available for sale. The classification depends on the purpose for which these financial assets were acquired. Management determines the designation of financial assets upon initial recognition. For additional information on the treatment and management of these assets, see subsection 10.5.(a). iv) Stock options plan BM&FBOVESPA offers its employees and executives the benefit of a stock options plan. The fair value of these options is recognized as expense in the period in which the right is acquired. Management revisits its estimate of the number of options that are likely to meet vesting requirements and subsequently recognizes the effects of changes in initial estimates, if any, in the statement of income, with an offset to the capital reserve account in equity, as shown in note 3(o) to our financial statements. 10.6. Internal controls adopted to ensure reliable financial reporting a. Degree of effectiveness of the internal controls; deficiencies and corrective actions.
Our internal controls serve the primary function of providing control over financial reporting, in particular where accounting, financial and statistical data depend on elements such as variance analyses, balance validations, reconciliation with operating systems and support documentation. Internal controls are routinely performed and are designed to provide reasonable
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assurance that the values and balances recorded in the accounts and financial statements reflect with reasonable reliability the balances of equity and profit and loss accounts. The improvements to internal controls we developed and implemented over 2010 or are in the course of implementing are part of an internal audit action plan designed to ensure we keep effective and reliable financial reporting controls and processes across Company departments, including our subsidiaries. These include the following: a coordinated ERP workflow model for all purchases, hirings and payments (in line with our payment policy); developing a plan and implementing in our financial department certain recommendations of our internal audit team and the independent auditors; improvements to monitoring indicators related to certain accounting and financial processes; integration and automation of information flowing from information originators and the financial department; review of the user access profile structure for the financial department. These initiatives, coupled with those that are ongoing, should heighten the effectiveness of our internal controls system, in line with the high standards we expect to maintain, while driving gains in efficiency and security. b. Remarks on internal controls deficiencies and recommendations included in the independent auditors report.
Our independent auditors have conducted a survey and assessment of our accounting and internal controls systems in connection with their audit of our financial statements, with the aim of determining the nature, timing and extent of audit procedures and substantive testing, but not for the purpose of expressing any opinion on the effectiveness of our internal controls. Accordingly, we have received recommendations on possible improvement to our internal controls system. These recommendations were given due consideration and incorporated into an action plan for additional improvements to our internal controls, the implementation of which is under supervision of our internal auditors. 10.7. Discussion of any offering previously completed.
See subsection 10.1(f) of this form. 10.8. Description of off-balance sheet arrangements. a. Off-balance sheet items.
Collaterals for transactions Customer transactions carried out in markets we operate are secured by collateral these customers are required to pledge as margin or otherwise. Collaterals consist mainly of cash, government bonds, corporate debt securities, bank letters of guarantee and stocks, among other things. These collaterals are segregated and treated off-balance sheet, except for cash collateral deposited as margin. For additional information, see the discussion under item 10.9 below. b. Other off-balance sheet arrangements
Our Settlement Bank (Banco BM&F) manages BM&F FoF (FIC BM&F), a fund of funds called Fundo BM&F Margem Garantia Referenciado DI Fundo de Investimento em Cotas de Fundos de Investimento, with net assets of R$173,365 thousand at December 31, 2010 (versus R$97,376 thousand in the prior year). In performing activities as custodian, the Banco BM&F is responsible for the custody of: Securities held on behalf of nonresident investors, which at December 31, 2010, totaled R$118,610 thousand (versus R$77,229 thousand one year earlier); (ii) agricultural securities registered with the custody registration system operated by our Company, which at December 31, 2010 amounted to R$51,216 thousand (versus R$260,606 thousand one year ago). 10.9. Discussion of off-balance sheet arrangements reported under subsection 10.8
Central counterparty risk Credit risk BM&FBOVESPA performs the role of central counterparty to ensure multilateral clearing and settlement of transactions. We operate four central counterparty clearing facilities, which we absorbed during the exchange integration
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process that combined BM&F and Bovespa (the former two independent exchanges), which the Central Bank considers to perform systemically material roles. We call them (i) equities clearing house (commonly known as CBLC), (ii) derivatives clearing house, (ii) FX clearing house; and (iii) government bonds clearing house. Our clearing facilities operate pursuant to Law No. 10,214 dated March 27, 2001, which authorizes multilateral clearings and settlements, regulates the role of central counterparty performed by systemically material clearing facilities, and permits the use of collaterals posted by defaulting participants to settle their obligations within the scope of our clearing and central counterparty activities, including in the event of insolvency, intervention, bankruptcy and extrajudicial liquidation. Through these clearing facilities, BM&FBOVESPA acts as central counterparty to ensure multilateral clearing and settlement (CCP) for transactions carried out on derivatives market (including futures, forward, options and swap markets), the spot FX market, the bonds markets (cash, forward and repo markets, in addition to securities lending market) and, in addition, trades carried out on equities markets (including cash, forward options, futures and securities lending markets), including the corporate debt market (cash and securities lending markets). This means that in acting as central counterparty, to ensure transactions carried out or registered in our trading and registration systems BM&FBOVESPA is responsible for ensuring full completion to a substantial portion of all trading activity in the domestic capital markets. The central counterparty clearing facilities are responsible for providing efficiency and stability to the market by ensuring trades are properly cleared and settled. A CCP interposes itself between counterparties to financial transactions, becoming the buyer to the sellers and the seller to the buyers. Acting in the capacity of central counterparty, we absorb the risks of the counterparties in-between a trade transaction and its clearing and settlement, carrying out multilateral activities for financial settlement and clearing of securities and financial assets, and in the event of default resort to certain established safeguard mechanisms, or in extreme situations may have to resort to our own net assets. In modeling and managing CCP risks, we focus on calculation, controls and mitigation of credit risk related to clearing participants. Our clearing facilities are not directly exposed to market risks, as they do not hold net long positions or net short positions in either contracts or assets traded in our markets. However, an increase in price volatility could affect the magnitude of amounts to be settled by market participants, which in turn could increase the default rate amongst these participants. In addition, as the clearing facilities ensure clearing and settlement of transactions carried out by participants including in the event of failed settlement or default, this could result in losses if settlement amounts were to exceed those of existing margin. Thus, while we are not directly exposed to market risks, they may impact and heighten the credit risks to which we are exposed. For proper risk mitigation, each clearing facility has its own risk management system and safeguard structure. Each of these structures comprises the universe of mechanisms and remedies a clearing house may resort to in order to cover losses from failed settlement by a participant. The key components of these safeguard structures include collateral deposited by market participants, often in the form of margin, plus special funds intended to cover possible losses due to default and, in addition, coliability undertaken by brokers and clearing agents regarding transactions they intermediate or clear. These risk management systems and safeguard structures are described in detail in applicable rulebooks and the operating manuals adopted by our clearing houses, which were tested and homologated by the Central Bank, pursuant to Resolution 2,882 of 2001 issued by the Brazilian National Monetary Council and Central Bank Circular 3,057 of 2001. Set forth below are the principal elements comprising the safeguard structure of our derivatives clearing house in the year to December 2010. Collaterals pledged by participants of derivatives markets; Co-liability undertaken by brokers and clearing agents regarding transactions they intermediate or clear, and collateral pledged by these market participants; Special Clearing Participant Fund (Fundo de Desempenho Operacional), whose net assets at December 31, 2010, totaled R$1,162,122 thousand (versus R$1,126,126 thousand in the prior year and R$1,145,908 thousand at the transition date of January 1, 2009). This special clearing fund is a pool of funds made up of contributions from clearing agents that also hold access permits granting settlement and trading access permits, and was formed to ensure settlement of transactions in the event of default by one or more clearing agents; Agricultural Market Trading Fund (Fundo de Operaes do Mercado Agropecurio), whose net assets at December 31, 2010 and 2009 totaled R$50,000 thousand. This fund was set up as a mutual fund to ensure the settlement of transactions where the underlying are agricultural commodities; Special Clearing Member Fund (Fundo Especial dos Membros de Compensao), whose net assets at December 31, 2010 and 2009 totaled R$40,000 thousand. This fund was set up as a mutual fund to ensure the settlement of transactions cleared and settled by the derivatives clearing house regardless of category; Clearing Fund (Fundo de Liquidao de Operaes), whose net assets at December 31, 2010, totaled R$408,509 thousand (versus R$378,113 thousand in the prior year and R$387,235 thousand at the transition date of January 1,
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2009). This is a pool of financial assets contributed as collateral by clearing participants, which was set up to ensure transactions are settled even after the previously mentioned funds are depleted; Segregated assets, which we hold pursuant to article 5 of Law No. 10,214 dated March 27, 2001, which governs the operation of a clearing house, as supplemented by Central Bank Circular 3,507 dated August 31, 2011. At December 31, 2010, we held segregated net assets totaling R$34,807 thousand (versus R$31,678 thousand one year ago and R$28,808 thousand at the transition date of January 1, 2009). Set forth below are the principal elements comprising the safeguard structure of our FX clearing house in the year to December 2010. Collaterals pledged by participants of forex markets; Participation Fund (Fundo de Participao), whose net assets at December 31, 2010, totaled R$162,235 thousand (versus R$154,056 thousand in the prior year and R$140,584 thousand at the transition date of January 1, 2009). This fund was set up as a pool of financial assets in the form of cash and financial instruments contributed by FX clearing participants to ensure the settlement transactions registered at our FX clearing house; FX Operating Funds (Fundo Operacional da Clearing de Cmbio), whose net assets at December 31, 2010 and 2009 totaled R$50,000 thousand. This fund was set up to cover financial losses arising from errors or administrative or operating failures by market participants; Segregated assets, which we hold pursuant to article 5 of Law No. 10,214 dated March 27, 2001, which governs the operation of a clearing house, as supplemented by Central Bank Circular 3,507 dated August 31, 2011. At December 31, 2010, we held segregated net assets totaling R$34,848 thousand (versus R$31,714 thousand one year ago and R$28,808 thousand at the transition date of January 1, 2009). Set forth below are the principal elements comprising the safeguard structure of our government bonds clearing house in the year to December 2010. Collaterals pledged by participants of government bonds markets; Bonds Market Operating Fund (Fundo Operacional da Clearing de Ativos), whose net assets at December 31, 2010 and 2009 totaled R$40,000 thousand. This fund was set up to cover financial losses arising from errors or administrative or operating failures by market participants; Segregated assets, which we hold pursuant to article 5 of Law No. 10,214 dated March 27, 2001, which governs the operation of a clearing house, as supplemented by Central Bank Circular 3,507 dated August 31, 2011. At December 31, 2010, we held segregated net assets totaling R$24,536 thousand (versus R$22,373 thousand one year ago and R$20,277 thousand at the transition date of January 1, 2009). Set forth below are the principal elements comprising the safeguard structure of our equities clearing house in the year to December 2010. Collaterals pledged by participants of the equities markets, including corporate debt securities markets; Co-liability undertaken by brokers and clearing agents regarding transactions they intermediate or clear, and collateral pledged by these market participants; Settlement Fund (Fundo de Liquidao), whose net assets at December 31, 2010, totaled R$485,409 thousand (versus R$322,268 thousand in the prior year and R$350,210 thousand at the transition date of January 1, 2009). comprises contributions from clearing agents to ensure settlement of transactions in the event of default by one or more clearing agents; Segregated assets, which we hold pursuant to article 5 of Law No. 10,214 dated March 27, 2001, which governs the operation of a clearing house, as supplemented by Central Bank Circular 3,507 dated August 31, 2011. At December 31, 2010, we held segregated net assets totaling R$37,210 thousand (versus R$33,877 thousand one year ago and R$30,374 thousand at the transition date of January 1, 2009). The risk management policy we adopt at our clearing houses is established by our Market Risk Committee, which is composed of BM&FBOVESPA officers, including the chief clearing, depository & risk officer, the chief operations and IT officer, the chief product development officer, the risk management officer and the settlement officer. The responsibilities of this committee include (i) evaluating macroeconomic conditions and government policies, and the effects on our markets; (ii) assessing and determining risk management models, margin calculation methods and stress testing models adopted at our clearing houses, including models and methods to control exposure to intraday trading risks; (iii) setting parameters for these models, in particular stress scenarios for primitive risk factors, (iv) defining eligible collaterals and determining valuation methods, use limits and haircuts, and (v) conducting other related surveys and analyses. Collaterals pledged by market participants make up the principal element of the safeguard structures of our clearing houses as they account for the larger portion of these structures.
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Margin requirements for most derivatives contracts and transactions in securities and other financial assets are determined at a level sufficient to cover exposure to market risk, i.e., price fluctuations, typically over a two-day time horizon, which is the expected time of settlement in case a participant defaults, although this time horizon may vary depending on type or nature of a contract or transaction. Margin calculation models are typically based on stress analysis for assessment of market risk based not only on recent historical volatility, but taking into account unanticipated events that could result in unexpected breakdown of historical correlations, i.e., unexpected departure from historical price and market behavior. The principal parameters we use in our margin calculation models are stress scenarios (as defined by the market risk committee for (implied and primitive) risk factors affecting the prices of derivatives and securities traded on our markets. The primary risk factors affecting these prices include, among other things, the Brazilian real to U.S. dollar exchange rate, Brazilian forward fixed rate yield curve, the U.S. dollar-denominated Brazilian forward yield curve, the Bovespa Index and the cash prices for stocks. In defining stress scenarios, the market risk committee combines both quantitative and qualitative analyses. Quantitative analysis is performed based on statistical models for risk assessment, such as, for example, Extreme Value Theory (EVT), estimation of implied volatilities, and Garch family models, in addition to historical simulations. Qualitative analysis in turn considers elements related to domestic and international macroeconomic conditions and government policies, and predictable effects on our markets. Market risk - Investment of cash funds Given the importance of that our net equity as a worst-case remedy within the safeguard structure for our clearing and settlement activities, our investment policy calls for lower-risk investing of cash balances, which we typically accomplish by seeking very conservative, highly liquid safe investments. This is evidenced by the significant volume of positions we take in Brazilian government bonds and debt-securities whose yield and coupon rates typically follow the base rate (interbank deposit rates or the Selic rate), whether or not including a spread. We generally buy them directly by entering into repo transactions whose underlying consists of government bonds and debt securities, and by investing in exclusive open-ended investment funds. Transactions carried out on our markets are secured by collateral pledged as margin in the form of cash, government bonds and corporate debt securities, bank letters of guarantee and stocks, among other things. At December 31, 2010, we held collaterals totaling R$143,087,657 thousand (versus R$101,640,805 thousand on year ago and R$125,676,805 thousand at the transition date of January 1, 2009), as follows:
At December 31, 2010 Derivatives clearing house Brazilian government bonds Bank letters of credit Stocks Bank certificates of deposit (CDBs) Gold Cash (1) Other Subtotal FX Clearing house Brazilian government bonds Cash (1) Subtotal Government bonds clearing house Federal government bonds Equities clearing house (2) Brazilian government bonds Stocks At December 31, 2009 At January 1, 2009
(in thousands of Brazilian reais)
76,979,261 3,538,492 4,934,328 1,150,998 105,958 652,290 173,340 87,534,667 3,855,147 66,520 3,921,667 928,786 22,749,941 25,809,847
53,754,858 1,479,341 3,351,593 1,307,762 60,865 555,106 95,938 60,605,463 3,766,090 3,766,090 832,125 15,665,732 17,208,344
89,760,722 3,690,835 2,678,991 2,161,736 319,831 327,644 108,008 99,047,767 3,550,223 174,060 3,724,283 1,423,484 10,185,946 9,101,835
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Sovereign bonds; ADRs (3) Bank certificates of deposit (CDBs) Bank letters of credit Cash (1) Other Subtotal Total collaterals
_____________________________
736,905 580,066 448,054 235,806 141,918 50,702,537 143,087,657
1,944,896 997,944 296,442 247,230 76,539 36,437,127 101,640,805
1,219,499 467,649 239,625 101,927 164,790 21,481,271 125,676,805
(1) The balance of cash deposits is recorded in current liabilities under the collaterals for transactions line item. We manage these resources and their availability; any investing is contingent on, and changes in correlation to, the aggregate level of required clearing margin at the time. (2) Clearing house for stocks and corporate debt securities, known in the market as CBLC. (3) US Treasuries and German federal securities, in addition to ADRs (American Depositary Receipt).
a.
Other information Clearing Fund (Fundo de liquidao de operaes) - Derivatives Clearing House
The clearing fund comprises dedicated contributions required from clearing agents specifically to ensure the clearing and settlement of transactions registered at the clearinghouse in the event of default by one or more clearing participants. Contributions to the participation fund may be made in the form of cash, gold and bank letters of guarantee or, subject to prior approval by us, government bonds, corporate debt securities or other financial instruments satisfactory to us, in our discretion. Clearing participants are jointly and severally liable for replenishing the fund, subject to a limit by member. The table below sets forth data on balances of contributions deposited in the fund at the transition date and each balance sheet date.
Composition At December 31, 2010 At December 31, 2009 At January 1, 2009
Brazilian government bonds Letters of credit Bank certificates of deposit (CDBs) Stocks Gold Cash (1) Total contributions Aggregate minimum contribution required from participants Surplus contributions
_________________________________
354,256 35,012 14,700 4,541 408,509 (313,000) 95,509
314,304 33,000 20,200 6,634 2,925 1,050 378,113 (319,500) 58,613
324,980 30,000 18,560 7,763 1,928 4,005 387,236 (333,500) 53,736
(1) The balance of cash deposits is recorded in current liabilities under the collaterals for transactions line item. We manage these resources and their availability; any investing is contingent on, and changes in correlation to, the level of required clearing margin at the time.
The minimum contribution required from clearing participants has been set at R$2,000 thousand, R$3,000 thousand or R$4,000 thousand, depending on the type of clearing access permits they hold. Moreover, clearing participants that provide services to other brokers (holders of trading access permits) do so under formal contractual arrangements we register, and are required to pay additional R$500 thousand per customer trading participant. At December 31, 2010, the aggregate of collaterals deposited with the fund amounted to R$408,509 thousand (versus R$378,113 thousand on year ago and R$387,236 thousand at the transition date of January 1, 2009).
b.
Special Clearing Participant Fund (Fundo de desempenho operacional) Derivatives Clearing House
The special clearing participant fund was set up to ensure the settlement of transactions in the event of default by one or more clearing participants that also hold access permits granting then settlement and trading rights. Participants are required to make minimum contributions and, as fund members, are liable for replenishing the fund. Contributions may be in the form of cash,
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gold and bank letters of guarantee or, subject to prior approval by us, government bonds, private debt securities or other financial instruments satisfactory to us, in our discretion. The table below sets forth data on balances of collaterals deposited with us at the transition date and balance sheet dates.

Brazilian government bonds Bank letters of credit Bank certificates of deposit (CDBs) Stocks FIC BM&F Other Cash (1) Total contributions Aggregate minimum contribution required from participants Surplus contributions
____________________________
921,678 172,210 52,801 15,358 75 1,162,122 (989,200) 172,922
859,804 156,200 81,310 20,098 1,781 582 6,351 1,126,126 (1,009,500) 116,626
863,451 160,730 98,683 17,647 4,177 1,220 1,145,908 (1,026,700) 119,208
(1) The balance of cash deposits is recorded in current liabilities under the collaterals for transactions line item . We manage these resources and their availability; any investing is contingent on, and changes in correlation to, the level of required clearing margin at the time.
The minimum contribution clearing participants are required to make to this fund has been set at R$5,500 thousand, R$6,500 thousand or R$7,500 thousand, depending on the type of clearing access permits they hold. The minimum contribution required from commodity brokers holding full trading access permits has been set at R$6,000 thousand. Brokerage firms holding restricted trading access permits (rights to trade in interest rates, exchange rates and Bovespa Index) pay minimum contribution of R$4,000 thousand. Holders of access rights permitting a broker to trade in other categories of contracts which are cleared and settled by our derivatives clearing house are required to pay minimum contribution of R$3.000 thousand. Scalpers may apply for scalper access permits and are required to pay minimum contribution of R$1,600 thousand in the case of full access permits or, R$1,000 thousand in the case of restricted scalper access permits (granting rights to trade in interest rates, exchange rates and Bovespa Index).
c.
Participation fund (Fundo de participao) Foreign Exchange Clearinghouse
The participation fund was set up to cover financial losses resulting from risks related to banking operations carried out in our FX clearing house. Banks holding permits to operate in our FX clearing house are required to contribute to the fund. Contributions may be in the form of cash deposits, currencies or financial instruments. The table below sets forth data on balances of collaterals deposited with us at the transition date and balance sheet dates.

Brazilian government bonds 162,235 154,056 140,584
d.
Settlement Fund (Fundo de liquidao) Equities Clearing House
Every clearing participant is required to contribute to this dedicated settlement fund, which is intended solely to cover possible losses due to default. The table below sets forth data on balances of collaterals deposited with us at the transition date and balance sheet dates.
At December 31, At December 31, At January 1,
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Composition
2010
2009
2009

Brazilian government bonds Shares in exclusive funds, bonds, repo transactions Cash (1) Total contributions
_____________________________
485,409 485,409
322,261 7 322,268
190,629 159,580 350,209
(1) The balance of cash deposits is recorded in current liabilities under the collaterals for transactions line item . We manage these resources and their availability; any investing is contingent on, and changes in correlation to, the level of required clearing margin at the time.
10.10. Key components of the business plan. a. Investments

i)
Quantitative and qualitative description of ongoing and planned investments.
We have been investing heavily on our technology infrastructure and in strengthening our international partnerships in order to establish a solid foundation on which to accomplish our strategic growth plan and build our future. Moreover, we have redoubled our focus on pursuing new growth opportunities in Brazil and elsewhere, and on realizing our clear objective of investing in financial education and forming an investment-minded middle class so as to widen capital markets penetration, on spurring growth in the equity offering market by increasing the number of listings, and on developing new products. Technology developments BM&FBOVESPA aims to offer prime information technology resources and services to customer market participants and investors. To this end, we invested in 2010 an aggregate of R$219.261 thousand in a number of projects. The discussion below highlights the main projects on whose implementation we have been working.
New trading platform.
In the first half of 2010, consistent with our partnership agreement with the CME Group, we have started the joint development of a multi-asset class trading platform for the trading of equities, derivatives, fixed income securities and other exchange-traded or OTC-traded assets, which is set for phased implementation over the course of the coming year, as it will ultimately replace our four trading systems, which operate trading platforms for the equities, derivatives, corporate securities and bonds markets. This new trading platform will give us a state-of-the-art technology structure and technology independence, will provide customers and participants with streamlined, efficient access to deal-making across markets, and place BM&FBOVESPA high amongst the fastest, most reliable, efficient and technologically advanced exchange-based marketplaces in our industry. In developing and implementing our new, fully integrated electronic trading platform, we face challenges of multiple dimensions, including as related to application of new technologies, the transmission of knowledge inside our company, implementation, testing and deployment to market participants, and not least importantly, sticking to the implementation schedule. This schedule calls for a three-staged implementation process, where the first, the derivatives module, is set to implement in June 2011, followed by the equities module between the last quarter of 2011 and the first quarter of 2012, and at a later date the fixed-income module. The step comprising analysis and specification of system functionalities for this last stage is set to start in April 2011.
New Data Center.
As a result of the 2008 exchange integration process that combined BM&F and Bovespa we absorbed four data centers, meaning the primary and backup centers of each exchange. We are now in the process of reorganizing and streamlining our technology infrastructure, for which purpose we have planned two new data centers that will be more efficient, provide heightened security features and offer greater capacity than the existing ones they are set to replace, and should thus better support our strategic growth plan. Construction of our new primary data center has begun and is scheduled to end in the second half of 2012, whereas since June 2010 our new backup data center is located at a leased hosting facility.
Partnership with Trading Technologies.
As announced in April 2010, we agreed a partnership with Trading Technologies International (TT), an independent software vendor and developer of high-performance trading software, including the X-TRADER platform and front-end screen, their flagship order entry product. TT will have a server connected to our data center under a co-location arrangement and the ability to connect their customers to our trading systems.
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Brazil Easy Investing.
Brazil Easy Investing is a data feed and order routing software system developed in partnership with Chi-X Global, a company specializing in electronic trading systems, which software system is designed to convert stock quotes into different foreign currencies in real time, and give foreign investors the ability to transmit orders to the Brazilian exchange in their local currencies.
Improvements to technology infrastructure, services, management.
In addition, we hired an international consulting firm to assess our electronic trading technology infrastructure, processes and support services. We were presented with a report on their findings, which includes certain improvement recommendations to both the infrastructure and the technology support services provided to market participants. These recommendations were integrated into a number of action plans for staged-implementation. Consistent with the experts recommendations, the five action plans we considered to be our top priorities and were selected for prompt implementation (now ongoing and set to complete early in 2012) tackle the following: (i) model of a customer and electronic trading support center, (ii) IT performance management, (iii) IT monitoring strategy, (iv) knowledge transfer with regard to the new electronic trading platform, and (v) crisis management.
ii)
sources of financing for these investments.
The primary source of funds we use to finance our strategic investment plans is operating cash flow. We may also consider alternative sources of financing, such as bank loans or some government or development bank financing program, or financing through accessing the either the local or the international capital markets.
iii)
planned and ongoing material divestments.
Not applicable. b. Disclosed acquisitions of plants, equipment, patents and other assets, which are expected to materially influence production capacity.
New trading platform. In the first half of 2010, consistent with our partnership agreement with the CME Group, we have started
the joint development of a multi-asset class trading platform for the trading of equities, derivatives, fixed income securities and other exchange-traded or OTC-traded assets, which is set for phased implementation over the course of the coming year, as it will ultimately replace the four existing trading systems.
Purchase of land for the new data center. We have recently purchased 20,000 square meters of land in Santana do Parnaba,
state of So Paulo, Brazil, where we intend to build our new data center. Construction is set to start in 2011 and should be completed by the second half of 2012. c. new offerings of products and services, including:
i)
previously disclosed and ongoing product research.
Not applicable.
ii)
total expenses incurred in research for development of new products or services.
Not applicable.
iii)
previously disclosed and ongoing development projects.
BM&F Segment: Mini-sized cash-settled soybean futures contracts whose final cash settlement prices would be based on similar derivatives traded on the Chicago Mercantile Exchange (CME); Contractual arrangements have been made for development of middle and back office services targeting Futures Commission Merchants (FCM); and ISVs (Independent Software Vendors): Trading Technologies (TT) will provide X-TRADER platform and front-end screens for the BM&F segment. Bovespa Segment:
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Block Trade Facility; Market markers for options on stocks; Foreign ETFs: Bovespa segment listings of foreign market indexes; Brazil Easy Investing data feed and order routing system designed to convert stock quotes into different foreign currencies in real time; E-mini S&P 500 futures contracts. Both segments:
New multi-asset class trading platform; New data centers: lease of the premises for our new backup center and purchase of land for construction of the primary data center; ISVs (Independent software vendors): FlexTrade will provide trading screens for both segments (but mostly the Bovespa segment); EntryPoint: unified order entry interface for both segments; Integration of clearing facilities: we intend to integrate our four clearing houses into a single clearing facility, which will permit cross-margining, improve risk management processes and the management of cash participants deposit as margin.
iv)
total expenses incurred in developing new products or services.
Over the year to December 2010 we disbursed R$219,261 thousand in IT projects, such as the development of a new multiasset class trading platform, a joint cooperation with the CME Group within the scope of the global preferred strategic partnership we have mutually agreed in February 2010, the expansion of our throughput capacity in both segments and the purchased 20,000 square meters of land, where we intend to build our new data center. 10.11. Discussion of additional factors materially influencing operating performance and not previously identified or discussed in this section. Expansion of throughput capacity. In the third quarter we completed the expansion of throughput capacity for the BM&F segment (which climbed to 400 thousand daily trades from 200 thousand previously), and in the fourth quarter we completed the implementation in the Bovespa segment, where throughput went up to 3.0 million daily trades from 1.5 million earlier. New DMA models for the Bovespa segment. In August 2010 the CVM authorized, and in September 2010 we launched three additional Direct Market Access connection models, i.e., DMA via Provider, via Direct Connection and via CoLocation Arrangements (we call them DMA models 2, 3 and 4), which for their efficiency should attract more sophisticated investors to the Brazilian equities markets, including high frequency traders. Projections a. the projections subject
11.
11.1. Projections should identify: We projected and budgeted for 2009 capital expenditures on the order of R$116,000 thousand and operating expenses (adjusted to eliminate depreciation expenses and expenses with stock option plan, severance payments and allowance for doubtful accounts) totaling R$450,000 thousand. Our 2010 budget projected capital expenditures on the order of R$302,100 thousand and R$550,000 thousand in operating expenses (adjusted to eliminate depreciation expenses, provisions, expenses with stock option plan and taxes on dividends the CME Group paid to us). On June 22, 2010, our projections for investments were revised down to R$272,000 thousand, whereas operating expenses, as adjusted for depreciation, stock option plan and taxes on dividends received from the CME Group, were revised down to R$520,000 thousand. On November 9, 2010, we reviewed the guidance for adjusted operating expenses to an interval between R$540,000 thousand and R$545,000 thousand and investments to an interval between R$250,000 thousand and R$272,000 thousand. Additionally, our 2011 budget contemplates investments at an interval between R$235,000 thousand and R$255,000 thousand and operating expenses (adjusted to eliminate depreciation expenses, provisions, expenses with stock option plan and taxes on dividends paid by the CME Group) on the order of R$625,000 thousand, allowing for a R$10 million upward or downward variance. On November 8, 2011, our projections for investments were revised down to an interval between R$180,000 thousand and R$210,000 thousand, where as operating expenses, as adjusted for depreciation, stock option plan and taxes on
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dividends received from the CME Group, were revised down to an interval between R$580,000 thousand and R$590,000 thousand. Our 2012 budget for operational expenses (adjusted to eliminate depreciation expenses, provisions, expenses with stock option plan and taxes on dividends paid by the CME Group) is on the interval between R$580,000 thousand and R$590,000 thousand and investments at an interval between R$230,000 thousand and R$260,000 thousand. b. the projections time frame and valid time The 2009 budget was prepared for a 12-month time frame, having ended December 31, 2009, while the 2010 budget, which covered a 12-month time frame, ended December 31, 2010. The 2011 budget covers a 12-month time frame and ends December 31, 2011. The 2012 budget was prepared for a 12-month time frame, and ends December 31, 2012. c. the underlying assumptions, including indication of those that may be influenced by Management and those beyond Managements control
Our projections for 2010 took into account estimated capital expenditures and expenses we expected to make or incur in the following areas and projects:
Technology and post-trading: investments will be allocated to expanding business capacity; to the joint development
(with the CME Group) of a new multi-asset class electronic trading platform (therefore, for derivatives, equities, fixed income and other exchange-traded or OTC assets); to restructuring our data centers (primary and contingency centers); to improving IT systems , to integrating our clearing facilities;
Expansion of the customer base and revenues:
investments will be allocated to strengthening the market popularization and the financial education program targeting prospective retail investors; to boosting our issuer prospecting activities (BovespaMais, Novo Mercado and BDRs); to implementing a new pricing policy for the Bovespa segment; to attracting high frequency traders; to developing new products; to expanding to international markets; and
Institutional strengthening: creation of the research and business projects department; bolstering the sustainability
area; improvements to internal controls and project management.
Our estimates for capital expenditures and expenses may be influenced by Management. Under our 2011 budget, forecast operating expenses we expected to incur with, and capital expenditures we plan to make in the following: Operating expenses Based on our plans for the future, in 2010 we revised the number of personnel required for the following business areas: IT, business and product development, post-trade services; Resources required for development and implementation of our new multi-asset class trading platform, post-trade systems, new structure of our data centers, maintenance and development of our technology infrastructure; Redoubling our marketing and promotion activities targeting mainly financial education initiatives designed to better prepare prospective retail investors. IT Investments: New multi-asset class trading system; Building of new data center; Integration of all our clearing facilities; Improvements in IT infrastructure; Other capital expenditures.
Capital expenditures
For 2012, our forecast opex and capex includes: Operating expenses Maintenance of our headcount Continuous effort to reduce other expenses Capital expenditures IT investments: Puma Trading System for equities; Building of new data center; Integration of our four clearing facilities; New OTC platform; Improvements in IT infrastructure; Other capital expenditures.
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Our estimates for capital expenditures and expenses may be influenced by Management. d. the value of the existing indicators for the subject of the projection There was no proper budget or other forecast for 2008 because this was the year of the merger and integration of the businesses of BM&F and Bovespa Holding into our Company. Our 2009 budget contemplated capital expenditures on the order of R$116,000 thousand and operating expenses (adjusted to eliminate depreciation expenses and expenses with stock option plan, severance payments allowance for doubtful accounts) totaling R$450,000 thousand. Actual capital expenditures amounted to R$95,585 thousand and actual adjusted operating expenses totaled R$446,677 thousand. Our 2010 budget forecast capital expenditures at an interval between R$250,000 thousand and R$272,000 thousand, whereas having estimated operating expenses (as adjusted to eliminate depreciation expenses, expenses with stock option plan and taxes on dividends the CME Group paid to us) at an interval between R$540,000 thousand and R$545,000 thousand. Actual capital expenditures amounted to R$268,362 thousand and actual adjusted operating expenses totaled R$543,881 thousand, in either case thus within the budget. Additionally, our 2011 budget contemplates investments at an interval between R$180,000 thousand and R$210,000 thousand and operating expenses (adjusted to eliminate depreciation expenses and expenses with stock option plan and taxes on dividends paid by the CME Group) at an interval between R$580,000 thousand and R$590,000 thousand. On 2012, our budget contemplates investments at an interval between R$230,000 thousand and R$260,000 thousand and operational expenditures (adjusted to eliminate depreciation expenses and expenses with stock option plan and taxes on dividends paid by the CME Group) between R$580,000 thousand and R$590,000 thousand. 11.2. Projections related to the evolution of its indicators in the past three financial years: a. indicate any data for which updated projections are included herein, and which repeat previous projections
The same kind of capital expenditure and operating expense budgets we released in 2009 were prepared for 2010, pursuant to updated estimates and forecasts. The same kind of capital expenditure and operating expense budgets we released in 2010 were prepared for 2011, pursuant to updated estimates and forecasts. The same kind of capital expenditure and operating expense budgets we released in 2011 were prepared for 2012, pursuant to updated estimates and forecasts. b. Comparison of the projected data with the actual performance of the indicators There was no proper budget or other forecast for 2008 because this was the year of the merger and integration of the businesses of BM&F and Bovespa Holding into our Company. Our 2009 budget contemplated capital expenditures on the order of R$116,000 thousand and R$450,000 thousand in operating expenses (adjusted to eliminate depreciation expenses and expenses with stock option plan, severance payments allowance for doubtful accounts), whereas actual capex totaled R$95,585 thousand and opex amounted to R$446,677 thousand. One of the principal reasons why our actual capital expenditures fell below the forecast was we postponed for 2010 the implementation of our new data center, originally forecast at R$26,500 thousand. This, coupled with appreciation of the Brazilian real to U.S. dollar exchange rate ultimately resulted in actual capital expenditures falling short of the budget. Our 2010 capital expenditure budget was set at an interval between R$250,000 thousand and R$272,000 thousand, whereas the adjusted operating expense budget were set at an interval between R$540,000 thousand and R$545,000 thousand. Actual capital expenditures amounted to R$268,362 thousand and actual adjusted operating expenses totaled R$543,881 thousand, in either case thus within the budget. c. with regard to projections for ongoing periods, indicate whether the projections stand as of the date of this form
Additionally, our announced Capex and Opex budgets for 2011 contemplates capital expenditures at an interval between R$235,000 thousand and R$255,000 thousand and operating expenses (adjusted to eliminate depreciation expenses and expenses with stock option plan and taxes on dividends received from the CME Group) on the order of R$625,000 thousand, allowing for a R$10 million upward or downward variance. As of the date of this reference form, our 2011 budget forecasts still stand. 12. Shareholders meeting and management a. responsibilities of each administrative body and committee;
12.1. Administrative structure
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Responsibilities of the board of directors. Our board of directors is responsible for (a) setting the general business guidelines for us and our subsidiaries, approving or amending the annual budg ets, and periodically establishing targets and business strategies, whereas overseeing the budget execution and our performance; (b) electing and removing the officers, whereas approving the internal management regulation pursuant to the Bylaws; (c) moni toring the activities of the Officers, inspecting books and records at any time, as well as requesting information on contracts and agreements, whether executed or set for execution, and any other managerial acts; (d) deciding on whether to convene shareh olders' meetings; (e) submitting to the shareholders' meeting, along with its opinion, the managements report and discussion and analysis, in addition to the financial statements as of and for the year ended; (f) submitting to the annual shareholders' m eeting the proposal for allocation of net income for the year; (g) giving prior consent for contracts of any type, and for transactions or waivers of rights entailing obligations in excess of the reference amount and not contemplated in the annual budge t, except liquidity facility transactions (per article 38, indent e of the bylaws). Under our Bylaws, reference amount is defined as one percent of the book value of our shareholders equity; (h) granting prior approval for investments in excess of th e reference amount, if not contemplated in the annual budget; (i) granting prior approval for any loan, financing, issuance or cancellation of simple, non-convertible and unsecured debentures, and for the rendering of collateral or fiduciary guarantees on behalf of subsidiaries, if in excess of the reference amount and not contemplated in the annual budget; (j) authorizing management to acquire, dispose of, or give collateral or establish any liens on permanent assets, for amounts implying liability in excess of the reference amount and not contemplated in the annual budget; (k) granting prior approval for execution of partners or shareholders agreements by us or our subsidiaries; (l) approving voting instructions for representatives representing us in shareholders' meetings of companies in which we hold equity interest, or give prior consent for amendments to their bylaws, in the event our interest in any such company exceeds the reference amount; (m) appointing the executive officers of subsidiaries, which shall defer to the recommendations of the chief executive officer, unless otherwise decided upon affirmative vote of a qualified majority representing 75% of our directors; (n) deciding on purchases of our own shares by us, whether to be kept as treasury stock or for later cancellation or reissuance; (o) deciding on acquisitions of ownership interest in other companies, and on our membership in charitable associations or organizations, in case any such interest is in excess of the reference amount, and except for interest acquired as part of our financial investments policy; (p) authorizing the rendering of any guarantee on behalf of third parties, whether or not in transactions related to our operating activities, in particular where we may be act ing as central counterparty to settlement transactions related to our or a subsidiarys clearing and settlement activities; (q) providing shareholders with the triple list of specialized firms with ability to evaluate our shares and prepare the valuation report, in the event a tender offer is to be conducted in the course of a going-private process (with cancellation of our registration as a public company) or for our delisting from the Novo Mercado ; (r) approving the hiring of a bookkeeping agent; (s) giving regard to applicable legislation, deciding on distributions of interest on shareholders equity; (t) hiring and replacing the independent auditor s, based on a proposal of the audit committee; and (u) appointing the members of our standing advisory committees, and those of other committees and temporary work groups the board may establish. Additionally, the responsibilities of the board of directors comprise: (a) approving regulations for access to our markets, and rules related to the granting, suspension and cancellation of access permits, as well as other regulatory, operational, and clearing and settlement rules to regulate market operations and define transactions in securities, bonds and contracts listed to trade on our markets and in registration, clearing and settlement systems operated by us or a subsidiary; (b) approving rules related to listing, suspension and delisting of securities and contracts, and relevant issuers or writers, as applicabl e; (c) approving operational regulations and the rules on our clearing facilities and systems for registration, clearing and settlement of transactions carried out on markets operated by us or a subsidiary ; (d) approving the code of ethics for participants in markets operated by us, which should provide the rules of conduct for proper market practices and to ensure market operations are conducted pursuant to highly ethical standards, in addition to regulating the operations and composition of the Ethics Committee and to elect the members of said committee; (e) establishing the penalties that shall apply in the event of violations to regulatory rules approved by the board of directors ; (f) deciding on the granting of access permits to prospective market participants, which decisions may be appealed within a thirty-day period for reconsideration by the shareholders meeting, which shall then issue a final decision on the matter, whereas giving regard to applicable regulations; (g) deciding on whether to suspend or cancel access permits, in addition to reviewi ng permits in the event of a transfer of control of a market participant and upon replacement of the upper management members of participants holding access permits; (h) ordering limited or full-scale trading halt in the event of serious emergency in markets operated by us or a subsidiary adversely affecting regular market operations, promptly giving notice of the decision and justification to the Brazilian Securities Commission ( Comisso de Valores Mobilirios ), or CVM; (i) approving our and our subsidiaries annual reports on our operational risk control systems and business continuity plan; and (j) deciding on the formation, resource allocation and management of guarantee funds and other safeguard mechanisms in connection with transactions carried out in our markets and systems, including by regulating instances and processes for their use . Responsibilities of the board of executive officers. The board of executive officers represents us and is responsible for managing our business, having powers to (a) abide by and enforce the provisions of these Bylaws and the decisions of the board of directors and the shareholders meetings; (b) within its sphere of authority, perform all acts necessary to ensure the regular course of business and fulfill our corporate purpose, and (c) coordinate the activities of our subsidiaries.
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The responsibilities of the board of executive officers include (a) deciding on opening, closing or moving branches, representative offices, warehouses, depository facilities or any other establishments in Brazil or abroad; (b) submitting to our board the annual management report, the financial statements and the auditors report, along with the proposal on allocation of net income for the year; (c) preparing yearly and multi-year budget proposals, and proposals on strategic plans, expansion plans and investment programs; (d) granting prior consent for the acquisition or disposition of chattel or real property by us or a subsidiary, and for the rendering of collateral or liens of any nature on our assets, the taking of loans or financing and the granting of in rem or fiduciary guarantees, in any event for amounts below the reference amount, and (e) authorize the Company to enter into or renew liquidity facility transactions, whether or not collateralized, and/or asset monetization schemes with the aim of ensuring timely fulfillment of obligations undertaken in the capacity of central counterparty clearing, regardless of the amount involved in the transaction; and (f) prompted by the chief executive officer, deciding on any matters not allocated to be exclusive sphere of competence of the board of directors or the shareholders meeting. Additional responsibilities of the board of executive officers include (i) declaring default by participants in our clearing facilities and organized OTC markets, and ordering appropriate action, whereas giving regard to applicable regulations; (ii) setting the operating, credit and risk limits attributable to participants in registration or clearing facilities; (i ii) defining processes for common adoption by registration and clearing facilities, and for their integration with our trading systems, ri sk management and margin systems; and (iv) order the closing out of open positions held by permit -holding market participants in any of our markets. Responsibilities of the board advisory committees
Audit Committee. The primary responsibilities of the audit committee include making recommendations concerning
the independent auditors, as well as assessing the effectiveness of our internal controls system and internal and independent auditing processes, in addition to assessing the quality and integrity of our financial information and supervising the financial reporting activities and performing other functions established in our bylaws and under applicable. This committee is composed of five members, as follows: Renato Diniz Junqueira (director), Paulo Roberto Simes da Cunha (external independent member), Srgio Darcy da Silva Alves (external independent member), Luis Nelson Guedes de Carvalho (external independent member, currently under temporary leave of absence), Alexsandro Broedel Lopes (external independent member and Mr. Carvalhos interim replacement for the leave of absence period), and Tereza Cristina Grossi Togni (external independent member and ad-hoc Committee Coordinator substituting for Mr. Carvalho during his leave of absence).
Compensation Committee. The primary responsibilities of the audit committee include evaluating and adjusting our
compensation guidelines, standards and policy, including as to benefits for directors, committee and management members. This committee is composed of three members, as follows: Candido Botelho Bracher (director), Claudio Luiz da Silva Haddad (independent director) and Ren Marc Kern (independent director).
Nomination and Governance Committee. The primary responsibilities of the nomination and governance committee
include tackling corporate governance, protecting our and our subsidiaries credibility and ensuring we practice high business standards. This committee is composed of three members, as follows: Arminio Fraga Neto (independent director and chairman of the board), Pedro Pullen Parente (independent director) and Luis Stuhlberger (director).
Risk Committee. The primary responsibilities of the risk committee include monitoring and assessing risks, including
market, liquidity and systemic risks affecting markets we operate from a strategic and structural standpoint. This committee is composed of four members, as follows: Arminio Fraga Neto (independent director and chairman of the board), Julio de Siqueira Carvalho de Arajo (director), Luis Stuhlberger (director) and Jos Roberto Mendona de Barros (independent director). Responsibilities of the executive advisory committee
Market Risk Committee: The primary responsibilities of the market risk committee include (i) evaluating
macroeconomic conditions and prospective impact on market risks; (ii) setting standards and guidelines for the determination of margin requirements; (iii) setting standards and guidelines for the valuation of assets accepted as collateral; (iv) setting guidelines determining the form and levels of collaterals required under transactions carried out or registered in any of our trading, registration, clearing and settlement systems, including transactions carried out through our subsidiaries and collateral under open positions; (v) proposing policies for management of collaterals; (vi) analyzing systemic leveraging; (vii) proposing standards, limits and gu idelines for control of credit risk by market participants; (viii) analyzing and proposing measures for improvement of risk management systems; and (ix) conducting other analytic processes, as deemed befitting matters within the sphere of competence of the chief executive officer. This committee is composed of eight members, as follows: Ccero Augusto Vieira Neto (chief operating, clearing and depository officer), Viviane El Banate Basso (settlement officer), Marcos Costa Santos Carreira (derivatives officer), Andr Eduardo Demarco (operations officer), Bernard Appy (strategy and planning officer), Marcos Jos Rodrigues Torres (corporate risk officer), Sergio Goldenstein (fixed income and FX officer) and Luis Antnio B. G. Vicente (risk management officer).
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In addition, under item (g) of article 35 of our Bylaws, the Chief Executive Officer may decide to establish other executive advisory or operational committees and work groups., and standardization and regulations committees, commodity classification and mediation committees and other special committees, whose role, responsibilities, composition and operation will be defined at the time they are created. b. the date the fiscal council was established (if not permanently active), and the dates on which the co mmittees were established;
Our fiscal council is has not been active since our incorporation. We take the view that the absence of an active fiscal coun cil is adequately supplemented by our audit committee because it has been conceived and established to i nclude, among other things, responsibilities (listed under article 47 of our Bylaws) that overlap those legally ascribed to a fiscal council unde r Brazilian Corporate Law. As with our compensation committee and nomination and governance committee (both pr eviously comprising one body named compensation and nomination committee), our audit committee was established at the extraordinary shareholders meeting held on May 8, 2008. Our risk committee was established by the board of directors at a meeting held o n May 12, 2009. The executive market risk committee was created on May 8, 2008. c. the mechanisms for evaluation of performance by each administrative body or committee; We have no mechanisms for evaluation of the performance of either the board of executive officers or the market risk committee, as collective bodies per se. In addition, the board of directors has adopted a yearly evaluation process whose dimensions are twofold: what and how. The what dimension means evaluating data compiled and grouped into three categories we call (a) strategic focus, (b) knowledge and information on the business, and (c) independence, whereas the how dimension means evaluating data compiled and grouped into categories we call (a) decision-making process, (b) role at meetings and (c) motivation and interest alignment. The objective of the process is to facilitate structured discussions on continuing performance improvements for systematically enhanced efficiency of the role of the board. The first stage encourages mu lling over individual performance through a questionnaire that proposes intensity-rated responses (on a 1 to 5 scale) that fall within one of the above dimension categories. Results are compiled and discussed at a meeting of the board, which then establish es the related improvement action plan. d. the individual powers and responsibilities of the executive officers;
Chief executive officer . The chief executive officer is assigned powers and responsibilities to (a) convene and chair the
meetings of the board of executive officers; (b) propose to our board the internal regulation and the composition of the board of executive officers; (c) direct and coordinate the activities of the other officers; (d) coordinate general planning activities for us and our subsidiaries; (e) approve our organizational structure, hiring executives and directing the upper and middle management members, and expert professionals, assistants and consultants, as he may deem necessary or appropriate, defining positions, functions and compensation, assigning powers and responsibilities, whereas giving regard to guidelines set in budget forecasts approved by our board; (f) establish the executive market risk committee and the regulation governing the committees operations, composition, role and responsibilities, setting the compensation of committee members, as applicable, whereas giving regard to guidelines set by compensation committee; (g) establish other executive or advisory or operational committees and work groups, and standardization and regulations committees, commodity classification and mediation committees, and other special committees, in addition to defining their role, responsibilities, composition and operating regulation; (h) set prices, fees, commissions and other dues payabl e by participants holding permits for access to our markets and by other parties, as compensation for our offerings of products and services provided in connection with our core business activities, including our regulatory and surveillance activities, auditing and grading activities, whereas ensuring wide dissemination of price schedules amongst customers and participants; (i) submit to our board proposals on regulatory, operational, clearance and settlement rules to regulate market activities an d transactions in equities and derivatives listed to trade on our markets and the operation of our electronic trading, registration, clearing and settlement systems and environments; (j) define securities, bonds and contracts that may be listed to trade on our markets or registered, cleared and settled on our systems, in addition to powers to order halts on trading in any securities, bonds or contracts, or delisting them altogether; (k) monitor and inspect in real -time trades and other transactions carried out on our trading, registration, clearing and settlement systems; (l) acting within the scope of our market surveillance activities, take measures and adopt procedures to prevent unfair or illegal or irregular market practices ; (m) in the event of serious emergency in markets operated by us or a subsidiary, which adversely affects regular market operations, to order limited or full-scale trading halt, promptly giving notice of this decision and justification to the board and the Brazilian Securities Commission; (n) to take the cautionary measure of suspending the access permit of participants in certain instances contemplated in the access regulation and other rules enacted by our board of directors, or in the event of suspected violation of the code of ethics, whereas promptly communicating the suspension to the CVM and the Central Bank;
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(o) prevent the completion of transactions entered in our trading, registration, clearing and settlement systems where there are indications of violation of the legislation and regulations which we are responsible for surveilling and enforcing; (p) cancel transactions entered or registered in our trading, registration, clearing and settlement systems, as long as any such transaction is pending settlement, and to halt clearing and settlement of transactions, in any instance where there are indications of violation of the legislation and regulations which we are responsible for surveilling and enforcing; (q) determine special procedures for transactions entered and or registered in our t rading, registration, clearing and settlement systems, in addition to establishing clearing and settlement requirements in connection therewith; (r) promptly communicate the CVM of the occurrence of events, including transient events, that affect the marke ts operated by us; and (s) forward to the CVM, as required from us and within the assigned deadline, information and reports related to transactions entered or registered in our trading, registration, clearing and settlement systems.
Chief financial officer; Investor relations officer . The chief financial officer accumulates responsibilities as investor
relations officer and officer for corporate affairs. As such, this officer has powers and responsibilities to (a) plan and prepare yearly and multi-year budget forecasts, work plans and capital expenditure plans; (b) control the execution of our yearly and multi-year budgets; (c) manage and invest our financial resources, and to supervise performance of these activities by our subsidiaries; (d) direct our accounting, financial planning and taxation departments; (e) perform reporting and disclosure activities, and interface with shareholders, the CVM, the market, other exchanges or markets on which securities issued by us are listed to trade, and to keep current registration information as required by applicable CVM regulation, in addition to fulfilling other requirements of said regulation; (f) provide administrative services as may be required by our business, in particular with regard to contract management, asset management, asset security, supplies and logistics, engineering and maintenance; and (g) supervise the legal team in connection with legal advice on corporate, litigation and tax matters, as well as regarding our regulatory activities.
Chief operating, clearing and depository officer . The chief operating, clearing and depository officer is responsible for
(a) administer and monitor the operations and external connectivity in the electronic trading platforms (b) administering all clearing activities for the equities, derivatives, fixed-income, commodities and foreign exchange markets, pursuant to transactions carried out in our trading systems, and supervising public offerings and the settlement of transactions carried out within the scope of these offerings; (c) directing and administering the services of the central securities depository and the custody activities provided for equities, fixed-income securities, gold and agricultural securities which are registered or deposited with our central securities depository and our other custody systems; (d) directing our activities as central counterparty to ensure multilateral settlement of transactions at our clearing faciliti es; and (e) managing the processing of applications for permits for access to our markets and the Brazilian commodities exchange operated by the Brazilian Commodities Exchange ( Bolsa Brasileira de Mercadorias ), our subsidiary.
Chief information technology and security officer. The chief information technology and security officer directs our
information technology and information security activities, and is responsible for (a) monitoring the connections to our electronic trading platforms; and (b) developing and managing operating systems control tools and market surveillance mechanisms, in addition to technology solutions related to the processing of transactions within the scope of the capital markets.
Chief products and customers officer. The chief products and customers officer is responsible for (a) coordinating
research and development of new products, trading structures, researching market requirements, operating in cooperation with market participants, regulatory entities and private capital market institutions; (b) by acting in cooperation with mar ket participants, regulatory entities and private capital market institutions, promote market efficiency, market education and develop solutions to tackle technical hurdles and (c) establish guidelines for the activities of business development in local and international markets, (d) identify and design strategies for new business opportunities and establish business relationship with participants seeking to expand distribution channels; and (e) develop a direct relationship with the clients of the Company's products and services. e. the mechanisms for evaluation of performance by directors, committee members and officers. Evaluations of the officers are conducted at the beginning of the year, at which time we set performance targets for the next year in line with our strategic plan. In determining whether performance targets are met, the evaluations are conducted based on a process whose dimensions are twofold: what and how. The what dimension evaluates project realization, adherence to budget and key operating indicators, whereas the how dimension evaluates competencies. In addition, upper management team leaders perform half-yearly evaluations of each upper management member, including members of the board of executive officers, and define evaluation scores which provide feedback for determination of both the shortterm variable compensation (profit sharing bonuses) and the long-term variable compensation (stock options under our stock option plan). The evaluations and scores are subsequently submitted to the board of direct ors, along with the proposed compensation. Given that the executive market risk committee is composed only by upper management members (meaning executive officers elected under the Bylaws and other officers), we conduct no evaluation of the individual per formance of committee members, as each of their overall performance is evaluated as discussed above.
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In addition, while we have no mechanisms for individual evaluation of directors, their performance as a collective body is evaluated pursuant to the process discussed above, in item c of this subsection. 12.2. Description of the rules, policies and practices regarding shareholders meetings: a. call notice periods;
Shareholders meetings are called at least fifteen days prior to the date scheduled for the meeting on first call, and eight days prior to the date of the meeting on second call. b. powers and responsibilities; In addition to powers allocated to a shareholders meeting under Brazilian Corporate Law and our Bylaws, the powers and responsibilities of our shareholders convened in properly called meetings include (a) reviewing the management report and judging the financial statements; (b) deciding on the proposal for allocation of net income for the year and on dividend and other distributions of net income; (c) electing and removing the directors and the fiscal council members, if the fiscal council is established; (d) setting the aggregate compensation of the directors and executive officers, and that of fiscal council members, if this is active; (e) approving stock or subscription option plans benefitting our and our subsidiaries management and employees and other service providers; (f) giving regard to existing legal limits and in accordance with our human resources policy, approving profit sharing plans for the benefit of management and our employees; (g) approving our delisting from the Novo Mercado segment of the Brazilian stock exchange, or the cancellation of our registration as a public company upon a going private process; (h) from a list of candidate appointees, designating a specialized firm to determine the fair value of our shares and prepare the valuation report in the event of a going -private process or our delisting from the Novo Mercado; (i) suspending the rights of shareholders in breach of the law or our Bylaws (Article 120 of Brazilian Corporate Law and Article 18 of our Bylaws); (j) deciding on our holding ownership interest in other companies and/or associations, consortiums or joint ventures, where any such interest involves an am ount in excess of three times the reference amount; (k) deciding on any material disposition of our assets or trademarks; (l) deciding on merger transactions whereby our company or our shares are proposed to be absorbed into another company, and on conso lidation or spin-off transactions, and on a transformation of our corporate type and on our dissolution, for which purpose the legally prescribed quorum to resolve will be fulfilled, unless the Brazilian Securities Commission ( Comisso de Valores Mobilirios), or CVM, shall have consented to a lower quorum to resolve, such as permitted under paragraph 2 of article 136 of Brazilian Corporate Law. c. locations (street address and website or e-mail address) at which the documents related to a shareholders meeting are made available for analysis by shareholders;
Street address: our registered office, at Praa Antonio Prado, 48, Downtown, So Paulo, State of So Paulo Electronic addresses: www.bmfbovespa.com.br/ri; and www.cvm.gov.br d. identification and management of conflicts of interest; Under applicable Brazilian legislation, if the interests of any shareholder conflict with our interests in any particular mat ter on which a shareholders meeting is to vote, the conflicted shareholder will be prevented from voting his shares. The same is provided in article 19 of our Bylaws, which prohibits conflicted shareholders from voting in the event of a conflict of interest. In addition, under article 115 of Brazilian Corporate Law, a vote cast by a conflicted shareholder would constitute abuse of shareholder rights. At this time we adopt no mechanism to detect and identify events where the interests of a shareholder conflicts with our interest in any matter submitted to a shareholders meeting. e. proxy requests by management (for purposes of delegating voting rights); Pursuant to current practices, we consent to have certain management members act as proxies for shareholders that wish to do so and provide sufficient voting instructions on how these proxies are to vote the shares at the relevant shareholders meeting. f. formal requirements for acceptance of proxies and powers of attorney granted by shareholders, including indication as to whether proxies sent via computer are acceptable;
We accept electronic proxies (powers of attorney) granted by shareholders that meet certain requirements, including original or certified copies of the corporate documents that prove authority of the signatory to grant a proxy (or power of attorney). However we do not require these proxies (or powers of attorney) to be notarized or consularized. In order to facilitate attendance and encourage shareholder participation, we have adopted the practice of making availab le the Online General Meetings platform provided by Assembleias Online for electronic voting or voting by proxy. We first put this solution into practice for the combined annual and extraordinary shareholders meetings held on April 20, 2010, and then again for the annual and extraordinary meetings held 2011, when shareholders were permitted to register for remote voting, or voting by proxy, and were issued digital certifications by either a private certificate provider or by ICP -Brasil, the certification authority for the Brazilian public key infrastructure established pursuant to Provisional Measure No. 2200-2 dated August 24, 2001.
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g.
forums or gateways for receipt via computer of shareholder statements on matters included in the agenda of shareholders meetings;
We keep no forums or gateways for receipt of shareholders statements via computer, regarding matters included in the agenda for any shareholders meetings. h. i. online video and/or audio transmission of shareholders meetings; mechanisms for inclusion of shareholder proposals in meeting agendas. We provide no online video or audio transmission of our shareholders meetings. We adopt no special mechanisms for shareholders to add proposals to the order of business. While thus far no such request has been made by any shareholder, if any such request is actually received we will review the matter on a case -by-case basis, at which time we may agree to do add a proposal to the order of business. 12.3. Dates and newspapers where notices to shareholders have been published to announce (a) release of financial statements; (b) call notices related to annual shareholders meetings; (c) minutes of annual shareholders meetings held to judge the financial statements; (d) the financial statements .
2010 Event Publication date(s) Not published Not published March 18, 2011 March 21, 2011 March 22, 2011 March 18, 2011 March 19, 2011 March 22, 2011 Newspaper(s) N/A N/A Publication date(s) Not published Not published March 19, 2010 March 20, 2010 March 23, 2010 March 20, 2010 March 23, 2010 March 24, 2010 2009 Newspaper(s) N/A N/A Publication date(s) March 19, 2009 March 20, 2009 March 19, 2009 March 20, 2009 March 31, 2009 April 1, 2009 April 2, 2009 March 31, 2009 April 1, 2009 April 2, 2009 2008 Newspaper(s)
Notice of release of financial statements
Valor Econmico
Official Gazette of the State of So Paulo
Call notices for annual shareholders meetings
Valor Econmico
Valor Econmico
Valor Econmico
Date of the meeting Minutes of the annual shareholders meeting that judged the financial statements Financial statements
April 18, 2011, 3 pm April 20, 2011 April 20, 2011 February 18, 2011
April 20, 2010, 11 am April 22, 2010 April 23, 2010 February 24, 2010 February 24, 2010
April 28, 2009, 11:30 am May 14, 2009 May 14, 2009 March 18, 2009 March 19, 2009
Valor Econmico
Valor Econmico
Valor Econmico
Valor Econmico
Valor Econmico
Valor Econmico
Official Gazette of February 18, 2011 the State of So Paulo
12.4.
Description of the rules, policies and practices regarding the board of directors
Our board has the mission of ensuring that business is conducted for protection and appreciation of our assets, whereas maximizing long-term return for shareholders and caring for the health of good order of the markets we operate. Our board of directors is a collective decision-making body, responsible for setting our general business guidelines and deciding on strategic issues. As set forth in our Bylaws, our board is composed of a minimum of seven and a maximum of eleven members, all of whom are elected for two-year terms, reelection being permitted, and may be removed by the shareholders meeting at any time. Our directors may not accumulate responsibilities as our executive officers, nor as officers of our subsidiaries. The chairman and vice chairman of the board are appointed by the absolute majority (50% plus one of all acting directors) of directors attending the first board meeting after their election and investiture. The presence of an absolute majority of our directors (50% plus one of all acting directors) constitutes a quorum to convene any board meeting on first call. On second call, any number of attending dir ectors constitutes a quorum to convene. Except as provided in our Bylaws, the decisions of the board require a majority of affirmative votes of attending directors, provided the chairman of our board has the casting vote. a. frequency of board meetings; Under article 26 of our Bylaws, the board of directors meets regularly every two months, pursuant to the annual calendar
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our chairman releases in January every year. In addition, if urgent business so require extraordinary board meetings may be called based on a three-day prior notice given by the chairman or in his absence, the vice chairman, or also by 2/3 of the board members. The table below sets forth the dates of board of directors held in the last three full years.
2010 February 23, 2010 March 25, 2010 May 11, 2010 June 22, 2010 August 12, 2010 September 14, 2010 September 28, 2010 November 9, 2010 December 14, 2010 December 16, 2010 2009 January 20, 2009 February 17, 2009 March 17, 2009 March 27, 2009 April 14, 2009 April 28, 2009 May 12, 2009 May 18, 2009 June 25, 2009 August 11, 2009 September 24, 2009 October 23, 2009 November 10, 2009 December 17, 2009 2008 May 8, 2008 May 20, 2008 June 18, 2008 July 3, 2008 August 12, 2008 August 14, 2008 August 19, 2008 September 16, 2008 September 24, 2008 October 21, 2008 November 11, 2008 December 16, 2008 December 19, 2008 -
b.
provisions of shareholders agreements, if any, establishing restrictions on, or in any way tying the votes of directors at board meetings; rules for identification and management of conflicts of interest.
There are no shareholders agreements filed at our registered office. c. Under article 22, paragraph 4, of our Bylaws, no person may be elected to our board if he or she is a director of a competito r of ours or of a subsidiary, or has a conflict of interest with us or any of our subsidiaries. A person is deemed to have a conflict of interest if, cumulatively, (i) the shareholder seeking to elect such person also has appointed a director of any competitor; and (ii) the person has subordination relations with the shareholder seeking to elect such person. Additionally, to determine whether or not a conflict of interest exists in the above circumstance, our Bylaws make an extrapolation from the votes cast to elect any particular director, by providing that a director is deemed to have been elected by (i) the shareholder or group of shareholders individually electing said director; or (ii) the shareholder or group of shareholders whose votes, in a cumulative voting system, per se, were sufficient to elect the director, or whose votes would have been sufficient had the cumulative voting system been adopted, taking into account the number of shareholders attending the meeting; or (iii) the shareholder or group of shareho lders whose votes, per se, would have been sufficient to achieve the minimum percentage (10%) set under paragraph 4 of article 141 of Brazilian Corporate Law for exercise of the right to elect a director by a separate vote. Under Brazilian Corporate Law and paragraph 5 of article 26 of our Bylaws, a conflicted director must not have access to information, take part in board deliberations, or vote on the matter regarding which he or she has a conflicting interest. Moreover, under paragraphs 8 and 9 of article 22 of our Bylaws our board members must not include two directors having ties with a single participant with access to our markets or with a single entity, conglomerate or economic group. Our Bylaws define ties as any of the following: (a) (b) (c) a continuing relationship based on an employment contract or service provision agreement or an office as director, executive officer, committee member, governing committee or fiscal council member; directly or indirectly holding ownership interest in shares representing at least 10% of the capital stock or voting stock of the relevant participant, entity conglomerate or economic group; or being a spouse, common law spouse or relative to the second degree of another director.
Paragraph 10 of article 22 of our Bylaws further provides that if a supervening event occurs, or a previously unknown event comes to light, such that a particular director no longer meets the appointment requirements, said director must promptly be replaced. Under the sole paragraph of article 21 of our Bylaws, directors and officers are required to adhere to our policy on material disclosures and securities trading, by singing the instrument of adherence to the policy manual. While for the most part our board is composed by independent directors, the interests of all our directors are in line with our interests.
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Under our Bylaws, independent director is defined as a director (a) that meets all of the independence standards set in the Novo Mercado listing regulation and in CVM Instruction 461/07; and (b) whose interest in our shares, whether directly or indirectly held, represents less than five percent of our shares of common stock and if the director has ties with a shareholder, the latter must not hold an interest representing five percent or more of our shares of common stock. In addition, under section 4 of our policy on conflicts of interest and related party transactions and under subsection 15.7 of the board regulation, our directors are required to disclose promptly any existing conflict of interest and are also required to abstain from taking part in deliberations and any decision-making process related to the pertinent matter. Moreover, also under section 4 of our policy on conflicts of interest and related party transactions the chairm an may request a conflicted director to attend a board meeting to provide additional information on the conflict of interest, the relevant matter, the parties involved, and so forth, provided the conflicted director must not vote or take part in the decisi on-making process regarding the pertinent matter. Additionally, if any director that would potentially ascertain a personal gain from any given decision were to silence about a conflict of interest, any cognizant peer may reveal the conflict of interest. The conflicted director would be in breach of our policy (for the conflict per se and his disclosure failure), and the matter would be submitted to the nomination and corporate governance committee for evaluation and a recommendation to the board of directors as to possible corrective actions. In any event, the conflict of interest disclosure and the conflicted directors abstentions from voting must be properly recorded in the minutes of the relevant board meetings. On taking office, our directors are required to sign a statement acknowledging being aware of, and committing to abide by the requirements of our policy on conflicts of interest and related party transactions. 12.5. Description of the Bylaws provision on arbitration commitment for settlement of disputes among shareholders, or between shareholders and the registrant. Our Bylaws (article 76) require our shareholders, directors, officers and, if in office, also our fiscal council members, to settle by arbitration any disputes which is related to the application, legality, effectiveness, interpretation, violation and effects of violation of the provisions of the agreement for participation in the Novo Mercado or the rules of the Novo Mercado, the arbitration regulation of the market arbitration chamber, the provisions of the Brazilian Corporate Law, the rules issued by the Brazilian Monetary Council (Conselho Monetrio Nacional), or CMN, the Central Bank or the CVM, and other rules generally applying to the Brazilian capital markets. The arbitration proceedings should be carried out before the market arbitration chamber, under its rules. 12.6. 12.6.1 Information on the directors, executive officers and fiscal council members Board of Directors
Arminio Fraga Neto Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date 53 Economist 469.065.257-00 Chairman (Independent Director) April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Nominations and Governance Committee Candido Botelho Bracher 52 Business Administrator 039.690.188-38 Director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Compensation Committee member Charles P. Carey 58 Manager Director May 10, 2012 May 10, 2012 Claudio Luiz da Silva Haddad 64 Industrial and mechanical engineer 109.286.697-34 Independent director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Compensation Committee member Jos Roberto Mendona de Barros 66 Economist 005.761.408-30 Independent director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Risk Committee member Julio de Siqueira Carvalho de Arajo 56 Banker 425.327.017-49 Director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Risk Committee member
Term of office
Through to the date of the next annual shareholders meeting
Other positions
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member; Risk Committee member Appointed by controlling shareholder No No No No Pedro Pullen Parente 58 Executive 059.326.371-53 Vice-Chairman (Independent director) April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Nominations and Governance Committee member No No Renato Diniz Junqueira 58 Business Administrator 679.361.308-10 Director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Audit Committee member No No
Luis Stuhlberger Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date 56 Engineer 881.983.918-00 Director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Nominations and Governance Committee member; Risk Committee member No
Marcelo Fernandez Trindade 46 Lawyer 776.785.247-49 Independent director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements
Ren Marc Kern 47 Businessman 356.047.0115 Independent director April 18, 2011 April 18, 2011 Through to the date of the annual shareholders meeting that convenes to judge the 2013 financial statements Compensation Committee member No
Term of office
Other positions Appointed by controlling shareholder
Audit Committee member No
12.6.2
Board of Executive Officers

Edemir Pinto 57 Economist 614.304.988-20 Chief Executive Officer May 5, 2011 May 5, 2011 2 years No Ccero Augusto Vieira Neto 38 Economist 128.501.208-98 Chief Operating, Clearing and Depository Officer May 5, 2011 May 5, 2011 2 years Member of the Market Risk Committee No Eduardo Refinetti Guardia 45 Economist 088.666.638-40 Chief Financial Officer (IRO) May 5, 2011 May 5, 2011 2 years Lus Otvio Saliba Furtado 45 System Analyst 926.046.687-34 Chief Information Technology and Security Officer Sep 1, 2011 Sep 1, 2011 2 years No No No Marcelo Maziero 44 Engineer 087.083.368-57 Chief Products and Customers Officer Sep 1, 2011 Sep 1, 2011 2 years
Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions Appointed by controlling shareholder
12.6.3
Fiscal Council
The fiscal council has not been established. We take the view that the absence of an active fiscal council is adequately supplemented by our audit committee because it has been conceived and established to include, among other things, responsibilities (listed under article 47 of our Bylaws) that overlap those legally ascribed to a fiscal council under Brazilian Corporate Law. Our audit committee is composed of five independent members (one independent director and four external members) appointed by our board for two-year terms, based on recommendations of our nomination and corporate governance committee. In addition, to ensure this committee operates in an exempt and objective fashion, and for the benefit of our company and shareholders, audit committee members are required to be well versed or experienced in either
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auditing and accounting and taxation or compliance and internal controls, as well as meet the independence standards set forth in article 46 of our Bylaws. 12.7. Standing board advisory committees Audit Committee
Luis Nelson Guedes de Carvalho Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office 65 Accountant 027.891.838-72 Committee Coordinator June 16, 2011 June 16, 2011 2 years Alexkandro Broedel Lopes 37 Accountant 031.212.717-09 External member May 10, 2012 May 10, 2012 In office during Mr. Carvalhos leave of absence Renato Diniz Junqueira 58 Business Administrator 679.361.308-10 Member May 10, 2012 May 10, 2012 2 years Paulo Roberto Simes 61 Accountant 567.047.048-68 External member June 16, 2011 June 16, 2011 2 years Srgio Darcy da Silva Alves 66 Financial Consultant 050.933.687-68 External member June 16, 2011 June 16, 2011 2 years Tereza Cristina Grossi Togni 62 Accountant 163.170.686-15 External member June 16, 2011 June 16, 2011 2 years Ad-hoc Committee Coordinator, substituting for Mr. Carvalho
Currently, the Committee Interim Member of the Coordinator is Other positions replacement for Director Regulation under Mr. Carvalho Committee(*) temporary leave of absence ( ) * The Regulation Committee is an advisory committee established to support Management on regulatory issues.
Nominations and Governance Committee

Arminio Fraga Neto Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions Appointment by controlling shareholder 53 Economist 469.065.257-00 Committee Coordinator June 16, 2011 June 16, 2011 2 years Independent director (Chairman of the Board) No Pedro Pullen Parente 58 Executive 059.326.371-53 Committee member August 09, 2011 August 09, 2011 2 years Independent director No Luis Stuhlberger 56 Engineer 881.983.918-00 Committee member June 16, 2011 June 16, 20119 2 years Director No
Compensation Committee
Candido Botelho Bracher Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions Appointed by controlling shareholder 52 Business Administrator 039.690.188-38 Committee member June 16, 2011 June 16, 2011 2 years Director No Claudio Luiz da Silva Haddad 64 Industrial and mechanical engineer 109.286.697-34 Committee Coordinator June 16, 2011 June 16, 2011 2 years Independent director No Ren Marc Kern 47 Businessman 3560470115 Committee member June 16, 2011 June 16, 2011 2 years Independent director No
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Risk Committee
Arminio Fraga Neto Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions Appointed by controlling shareholder 53 Economist 469.065.257-00 Committee member June 16, 2011 June 16, 2011 2 years Independent director (Chairman of the Board) No Julio de Siqueira Carvalho de Arajo 56 Banker 425.327.017-49 Committee Coordinator June 16, 2011 June 16, 2011 2 years Director No Luis Stuhlberger 56 Engineer 881.983.918-00 Committee member June 16, 2011 June 16, 2011 2 years Director No Jos Roberto Mendona de Barros 66 Economist 005.761.408-30 Committee member August 9, 2011 August 9, 2011 2 years Independent director No
Executive advisory committees Market Risk Committee

Andr Eduardo Demarco Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions Appointment by controlling shareholder 38 Business Administrator 157.259.728-64 Committee member May 13, 2009 May 13, 2009 Indefinite term Operations officer No Marcos Costa Santos Carreira Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions Appointment by controlling shareholder 39 Engineer 072.442.928-05 Committee member February 10, 2010 February 10, 2010 Indefinite term Derivatives officer No Bernard Appy 49 Economist 022.743.238-01 Committee member February 01, 2011 February 01, 2011 Indefinite term Strategy and planning officer No Marcos Jos Rodrigues Torres 46 Economist 168.206.222.-87 Committee member February 01, 2011 February 01, 2011 Indefinite term Corporate Risk officer No Ccero Augusto Vieira Neto 38 Economist 128.501.208-98 Committee member May 8, 2008 May 8, 2008 Indefinite term Chief operating, clearing and depository officer No Sergio Goldenstein 42 Economist 013.868.647-57 Committee member February 01, 2011 February 01, 2011 Indefinite term Fixed income and FX officer No Luis Antnio B. G. Vicente 42 Mathematician 975.138.577-68 Committee member May 8, 2008 May 8, 2008 Indefinite term Risk management officer No Viviane El Banate Basso 34 Economist 267.030.438-92 Committee member July 05, 2011 July 05, 2011 Indefinite term Settlement officer No
12.8. Brief biographical description of the directors, executive officers, fiscal council members and audit committee a. Curriculum b. Judgments of guilt issued in administrative or court proceedings (including of a regulatory or criminal nature) against the directors, officers and fiscal council members
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Board of directors Arminio Fraga Neto
Chairman of the board
Mr. Fraga Neto holds a bachelors and a masters degree in economics from the Catholic University of Rio de Janeiro (1981) and a PhD degree in Economics from Princeton University (1985). He is the founding partner of Gvea Investimentos (2003), an independent investment management company which focuses on structured investments and private equity. He is a former governor of the Brazilian Central Bank (March 1999 through December 2002). Previously, he was a managing director of the Soros Fund, based in New York, director for International Affairs and member of the Central Bank board of governors, a vice president at the Salomon Brothers, in New York, and Chief Economist and Oper ations Manager of Banco Garantia. In addition, is a former professor for the masters program of the Catholic University of Rio de Janeiro, of the school of Economics of Fundao Getlio Vargas, the School of International and Public Affairs of Columbia U niversity (U.S.) and a visiting assistant professor in the Finance Department at Wharton School of the University of Pennsylvania. Other positions in public companies. Mr. Fraga Neto is a former director of Unibanco Unio de Bancos Brasileiros S.A., whose registration as a public company was cancelled following the merger with Banco Ita in April 2009. He was also a member of the advisory committees of the Bunge group in Brazil (Bunge Alimentos S.A. and Bunge Fertilizantes S.A). No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Candido Botelho Bracher
Director
Mr. Bracher holds a graduate degree in business administration from Fundao Getlio Vargas. Since 2005, he has been the chief executive officer of Banco Ita BBA. Previously, he was a vice president of Banco Ita BBA (2003 -2005), an executive officer of Banco BBA Creditanstalt (1988-2003), of Banco Itamarati (1987-1988), executive officer and vice chief executive of Banco de Desenvolvimento do Estado de So Paulo (1985-1987), executive officer of Bahia Corretora and a manager of Banco da Bahia Investimentos (1983-1985), a trader in commodities futures at the Paris offices of the Commodities Corporation (1982), a forex trader at the Swiss Bank Corporation, based in Zrich, Switzerland (1982), and assistant manager for exports at Braswey Indstria e Comrcio S.A. (1980). Other positions in public companies. Mr. Bracher has been vice chief executive of Ita Unibanco Holding S.A. since May 2005 and a member of the board of directors since December 2008. In addition, Mr. Bracher is a former member of the board of directors of Unibanco Unio de Bancos Brasileiros S.A., whose registration as a public company was cancelled following the merger with Banco Ita in April 2009. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Charles P. Carey
Director
Mr. Carey is a member of the Board of Directors of the CME Group. Earlier, he served as Vice Chairman in the CME Board of Directors between July 2007 and May 2010. In addition, Mr. Carey served as Chairman of Chicago Board of Trade (CBOT) from 2003 to 2007. Previously, he served on the CBOT board of directors for 11 years in various roles, including Vice Chairman, First Vice Chairman, and Full Member Director. As chairman of the CBOT, Mr. Carey oversaw its demutualization and stockmarket listing. Additionally, Mr. Carey is President of the Chicagoland Sports Hall of Fame. Other positions in public companies. Mr. Carey has not been on the board of directors or senior management of any local public company. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Claudio Luiz da Silva Haddad
Independent director
Mr. Haddad holds a graduate degree in mechanical and industrial engineering from the Engineering Military Institute of Rio de Janeiro (1969), a masters and doctorate degree in economics from the University of Chicago (1974) and is a graduate of the Harvard Business School Owner/President Management Program (1987). He was formerly a full -time professor at the post-graduate School of Business Administration of Fundao Getlio Vargas (1974-1979); chief economist at Banco de Investimentos Garantia S.A. (1979); Central Bank director for sovereign debt and open market (1980-1982); partner and officer for corporate financing and, later, for investment banking at Banco de Investimentos Garantia S.A. (1983 -1992); chief executive officer of Banco de Investimentos Garantia S.A (1992- 1998). He is the president of Instituto Veris, which owns and maintains the IBMEC So Paulo, and chairman of the board of directors and principal shareholder of Veris Educacional S.A, a higher education organization which also controls the IBMEC schools. Additionally, he is the president and founding member of Instituto Futuro Brasil, member of the board of directors of the Abril Group, member of the Visiting Committee of the Harvard Business School, and a member of the boards of the Davi d Rockfeller Center for Latin American Studies at Harvard University, of Hospital Israelita Albert Einstein, of Ideal lnvest S. and Instituto Unibanco. He is also a member of the International Advisory Committee of the Capital Group and director of the Brazil-Israel Chamber of Commerce.
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Other positions in public companies. Mr. Haddad was a director of Petrobras (2002-2006).
Jos Roberto Mendona de Barros
No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings.
Mr. Barros holds a graduate degree and a PhD in economics from the University of So Paulo and a post -doctorate degree from the Economic Growth Center at Yale University. He is an independent consultant, founder and managing partner of Mendona de Barros Associados S/S Ltda. (1978), a member of the advisory committee of the Estado de So Paulo publishing group, of the Brazilian Federation of Banks (Febraban) and of Link Partners. He is also a member of the advisory committee for our Novo Mercado listing segment. He is a former Secretary for Economic Policy of the Ministry of Finance and executive secretary of the Presidents Office of Foreign Trade. In addition, he was also a visiting professor at the agricultural economics and rural sociology department at Ohio State University and assistant PhD professor of the economics and business school at the University of So Paulo. Other positions in public companies. Mr. Barros is a former member of the board of directors of CESP - Companhia Energtica de So Paulo, Eletropaulo, CPFL and Comgas (1983-1985), member of the strategic committee of Vale (20022006), of Fertilizantes Fosfatados S.A. Fosfertil (2004-2006), of GP Investments (2006- 2009), of Frigorfico Minerva (20072008). He was also a member of the board of directors of Bovespa Holding S.A., which then operated the So Paulo stock exchange, whose registration as a public company was cancelled in 2008 after the merger with BM&F, from which BM&FBOVESPA emerged. Additionally, he is currently a director of Tecnisa S.A, member of the advisory committee of Companhia Brasileira de Distribuio (Po de Acar group) and director of Banco Santander (Brasil) S.A. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Julio de Siqueira Carvalho de Arajo
Director
In March 1978, Mr. Arajo joined Banco BCN S.A., and became executive officer in October 1989. In 1997, the bank was acquired by Banco Bradesco. Since 2000, he has been the deputy chief executive officer of Banco Bradesco and in this capacity he also participates in the boards and committees of several companies within the Bradesco conglomerate. He is member of the steering committee and managing officer of the Bradesco Foundation, alternate member of the board of directors of the Interbank Payment Chamber and a sitting member of the deliberative council of the Brazilian Association of Real Estate Credit and Savings (Abecip). He was formerly a sitting member of the board of directors of the Brazilian Clearing and Depository Corporation (CBLC). Mr. Arajo was elected to our board in 2008. Other positions in public companies. Mr. Arajo is the deputy chief executive officer of Banco Bradesco and in this capacity participates in boards and committees of several other companies within the Bradesco conglomerate, including executive officer and director of Bradesco Leasing S.A. Arrendamento Mercantil. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Luis Stuhlberger
Director
Mr. Stuhlberger holds a graduate degree in engineering from Escola Politcnica of the University of So Paulo and a postgraduate degree in business administration from Fundao Getlio Vargas. Having begun his career as a futures and commodities trader in 1981, he is currently a minority shareholder of Credit Suisse Hedging -Griffo Investimentos S.A., controlling shareholder of Credit Suisse Hedging-Griffo Corretora de Valores S.A, of Credit Suisse Hedging-Griffo Asset Management S.A and of Credit Suisse Hedging-Griffo Servios Internacionais S.A. He is the executive officer in charge of portfolio management for these three companies, including the Green Investment Fund (Hedging-Griffo Verde) portfolio. Other positions in public companies. He holds no other position in public companies. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Marcelo Fernandez Trindade
Mr. Trindade holds a law degree from the Catholic University of Rio de Janeiro (PUC-Rio). He has been a member of the law firm of Trindade Sociedade de Advogados since 1986. In addition, since 1993 he has been a tenured Civil Law professor in the Law Department of PUC-Rio. He is currently a business law professor for the postgraduate program of the law school of Fundao Getlio Vargas, in Rio de Janeiro. Previously, he was a partner at the law firms of Cardoso, Rocha, Trindade e Lara Resende Advogados (19941998) and Tozzini Freire Teixeira e Silva Advogados (1999 2000 and 2002 2004). Between 2000 and 2002, he was a director of the Brazilian Securities Commission (CVM) and the CVM Chairman between 2004 and 2007. He was elected our independent director in May 2008. Other positions in public companies. Mr. Trindade has been a director of Redecard S.A. since 2011. Previously, he was a director of BM&F, then an independent commodities and futures exchange, whose registration as a public company was cancelled in 2008 following the merger with the So Paulo stock exchange (Bovespa), from which BM&FBOVESPA emerged. He was also a member of Globex Utilidades S.A. (2008-2009).
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No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Pedro Pullen Parente
Early in his civil service career, Mr. Parente worked for Banco do Brasil (1971-1973); he then transferred to the Central Bank (in either case open-competitive examination required), which he left in 2010 when he retired, after having held multiple higher-ranking positions in the Brazilian Central Bank's Financial Administration Department, in civil service and government; he served as Secretary of State and Consultant for the 1988 Brazilian Constitutional Assembly; he was Secretary of Planning from 1991 to 1992, Consultant of the International Monetary Fund, based in Washington D.C., from 1993 to 1994, Executive Secretary of the Finance Ministry from 1995 to 1999. Between April and July 1999, he was Minister of Planning, Budget and Management and in March 2001 acting Minister of Mines and Power. He served as Chief Minister for the Civil House and Executive of the Brazilian Ministry of Finance from 1994 to 2002. In 1999, he was a Minister of the Brazilian government, and his last assignment while in office was to coordinate the team overseeing President Ferna ndo Henrique Cardoso's transition. Between 2001 and 2002 he was chairman of the Energy Crisis Management Committee; Chief Operating Officer of Brazilian media company Grupo RBS from 2003 to 2009. Mr. Parente has been the Chief Executive Officer and President of Bunge Brazil at Bunge Ltd. since January 2010. He is also a member of the boards of AMCHAM Brasil, RBS, FNQ and Conex. Other positions in public companies. Mr. Parente was a director of Banco do Brasil, Petrobras, TAM, Bovespa (prior to the merger), CPFL, Alpargatas and Duratex. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Renato Diniz Junqueira
Director
Mr. Junqueira holds a graduate degree in business administration from Fundao Getlio Vargas. He was formerly an executive officer at Banco do Comercio e Industria de So Paulo (19731987), vice chairman of board of the Brazilian Commodities Exchange (20022007). He is currently chairman of the Brazilian Confederation of Exchanges and of the Rio de Janeiro stock exchange (BVRJ), a member of the board of directors of Usina Mand S/A , executive officer of Banco Intercap S/A (since 1987) and Brazilian Association of Securities, Forex and Commodities Brokers and Dealers ( Associao Nacional das Corretoras e Distribuidoras de Ttulos e Valores Mobilirios, Cmbio e Mercadorias ), or ANCORD. He is also a cattle raiser and a farmer and grower of sugarcane, soy and corn. Other positions in public companies. Mr. Junqueira was a director of BM&F (19972007) and vice chairman of its board of directors (20012007), prior to the merger with Bovespa from which BM&FBOVESPA emerged as the Brazilian securities, commodities and futures exchange. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Ren Marc Kern
Mr. Kern holds a B.S. degree from the University of California, Berkeley, and an M.B.A. a nd an M.A. degree from the University of Pennsylvania. He was formerly a consultant at Bain & Co, having worked previously at General Atlantic and Morgan Stanley. He is currently managing director of General Atlantic, a global growth equity firm where he is also the global lead executive. Mr. Kern is also a director of Getco Holding Company, LLC, an electronic liquidity provider and tradi ng firm, RiskMetrics Group, Inc., a leading provider of risk management and corporate governance solutions to the fina ncial community, and Intec Telecoms Systems Plc, a provider of business and operations support systems. He has been our independent director since May 2008. Other positions in public companies. Mr. Kern was formerly a director of BM&F, then an independent commodities and futures exchange, whose registration as a public company was cancelled in 2008 following the merger with the So Paulo stock exchange (Bovespa), from which BM&FBOVESPA emerged. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Board of executive officers Edemir Pinto
Chief executive officer
Mr. Pinto is an economist and joined BM&F in January 1986. In July 1987 he was elected Derivatives Clearing Officer, responsible for risk management, clearing and settlement, participant registration, margin requirements, custody and controllership. He was chief executive officer of BM&F between April 1999 and May 2008, in which capacity he was responsible for managing the company, supervising and coordinating the work of the officers, establishing the business plans and strategic guidelines. Following the merger with Bovespa in the integration process from which BM&FBOVESPA emerged as the Brazilian securities, commodities and futures exchange, he was elected our chief executive officer. Other positions in public companies. Prior to our merger with Bovespa Holding, Mr. Pinto was the CEO of BM&F, the Brazilian Mercantile and Futures Exchange (Bolsa de Mercadorias e Futuros BM&F S.A).
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Under appeal No. 7530 and with grounds on article 11 of Law No. 6,385/76, the Appeals Board of the Brazilian Financial System (CRSFN) reversed the earlier acquittal issued in CVM sanction proceedings No. 37/2000 to enter a jud gment of warning against Mr. Edemir Pinto for oversight failure related to transactions in Ibovespa futures. Ccero Augusto Vieira Neto
Chief operating, clearing and depository officer
Mr. Vieira Neto holds a graduate degree in economics from the school of economics of the University of So Paulo. He joined BM&F in 2001, was executive officer for the BM&F clearinghouses. At our company, prior to the merger with Bovespa, he was head of derivatives clearing and risk management. Since 2008 he has been our chief operations officer, responsible for operations, IT/Trading, IT/Post-trading, IT/Infrastructure & Architecture and IT/External Services. Other positions in public companies. Prior to our merger with Bovespa Holding, Mr. Vieira Neto was an executive officer of BM&F, the Brazilian Mercantile and Futures Exchange (Bolsa de Mercadorias e Futuros BM&F S.A). No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Eduardo Refinetti Guardia
Chief financial officer; Investor relations officer
Mr. Guardia holds a bachelors degree in economics from the economics and business administration school of the Catholic University of So Paulo (PUC-So Paulo), a masters degree from the Institute of Economics of the University of Campinas (Unicamp) and a doctorate degree from the Economic Research Institute of the school of economics of the University of So Paulo (USP). Between 1990 and 1997 he was a professor at PUC-So Paulo. He was also Secretary of the Brazilian Treasury (May to December 2002), Secretary of Finance for the State of So Paulo (January 2003 to January 2006), CFO and IRO of GP Investments (February 2006 to May 2007) and partner of Pragma Gesto de Patrimnio Ltda, an asset management firm, between June 2007 and May 2010. In addition, he is a former chairman of the board of Banco Nossa Caixa and COSESP (Insurance Company of So Paulo) and director of a number of Brazilian companies, including Droga Raia (2008-2010), ETC Participaes S.A (2008-2010), Ideal Invest (2007-2009), CESP/EMAE (2003-2004), Sabesp (2003), CTEEP (2003-2004), Cosipa (2000-2002). He was also a director (2003-2005) and chairman of the board (2005-2006) of the state savings and loans bank (Banco Nossa Caixa), and fiscal council member of Banco do Brasil (1999-2000) and of SABESP (1996-1998). No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Lus Otvio Saliba Furtado
Chief Information Technology and Security Officer
Mr. Furtado is a systems analyst graduated from Catholic University in 1989 with Advanced Management Program at Harvard Business School in 2008. He was IT manager at IBM, responsible for Latin America. From 2000 to 2002, he joined the Grupo Po de Acar, where his last position was Director of Electronic Commerce. He served as Vice President of Technology and Services of Sul America Seguros. In April 2011, he joined the staff of the BOVESPA as Director of Information Technology. In September 2011, became Director of Information Technology and Security of the Company. Other positions in public companies: Mr. Furtado was Executive Vice President of Sul America SA, from 2002 to 2011. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Marcelo Maziero
Chief Products and Customers Officer
Mr. Maziero holds a graduate degree in engineering from the University of So Paulo and a masters degree in business administration from the Massachusetts Institute of Technology. He worked for 10 years with the Ita Group, where he rose to the position of Managing Director responsible for product development, in particular derivatives products for customers of ItauUnibanco. He was a member of the Board of Directors of CETIP and Vice President of the Board of Directors of Febrabans Center of Derivatives Exposures (Central de Exposio a Derivativos), or CED. Other positions in public companies. Mr. Maziero was previously a member of the Board of Directors of CETIP. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Fiscal council The fiscal council is not active at this time. Audit Committee Luis Nelson Guedes de Carvalho Mr. Carvalho holds graduate degrees in Economics from the Economics, Business Management and Accounting School of the So Paulo University (FEA-USP) and in Accounting Sciences from Faculdades So Judas Tadeu (So Paulo, Brazil), in addition to masters and doctorate degrees in Accounting and Controllership from FEA-USP. He is a Professor at FEA-USP; a director of the Accounting, Actuarial and Financial Research Institute Foundation (Fundao Instituto de Pesquisas Contbeis, Atuariais e Financeiras), or FIPECAFI. Mr. Carvalho is also a member of the Brazilian Accounting Standards Board (Comit de
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Pronunciamentos Contbeis), or CPC, where he also serves as Coordinator for International Relations; as CPC Representative at
the Emerging Economies Group (EEG) of the International Accounting Standards Board (IASB) in London. Mr. Carvalho is a member of the International Integrated Reporting Committee (IIRC). He has been an arbitrator with the ICC International Court of Arbitration, based in Paris, France, and a member of the list of expert arbitrators of the Arbitration Chamber of ANBIMA, the Brazilian Financial and Capital Markets Association, based in Rio de Janeiro, Brazil. Mr. Carvalho is also a consultant specializing in mergers and acquisitions, corporate restructuring and organizational change; a corporate and law-firm adviser; and a scholar and specialist reviewer on topics and disputes related to financial and capital market affairs, financial auditing, corporate accounting and mergers and acquisitions; a contributing editor of the FIPECAFI Contabilidade e Finanas magazine; General Coordinator of Exame magazines special publication Melhores e Maiores, a comprehensive report that analyzes the 500 biggest and fastest-growing companies based in Brazil; Chairman of the Capacity-Building Working Group in the area of International Financial Reporting of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR), an UNCTAD initiative; and Assistant Coordinator of the Strategic Committee of the XBRL-CFC Brazil project. In addition, Mr. Carvalho is a member of the Board of Directors of Banco FIBRA and Coordinator of their Internal Controls Committee; a member of the Board of Directors of Fundao Amaznia Sustentvel FAS, a nongovernmental organization for the conservation and sustainable development of the state of Amazonas (Amazon region); a member of the Sustainability Committee of BM&FBOVESPA; a member of the Audit Committee of BMF&BOVESPA (from May 2012 under leave of absence). Previously, he was a member of the Board of Directors of XBRL International Inc. (20092011); between 2008 and 2010, a member of the Financial Crisis Advisory Group (FCAG), an initiative of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB); Chairman of the IASB Standards Advisory Council (SAC) from July 2005 to December 2008); member of the Consultative and Advisory Group (CAG) of the International Assurance and Auditing Standards Board of the International Federation of Accountants (IFAC) from 2005 to 2010. Other positions in public companies. Mr. Carvalho is a former member of the boards of directors of Banco Nossa Caixa S.A. and Vicunha Txtil S.A.; former Coordinator of the Audit Committee of Banco Nossa Caixa S.A. and of the Finance and Risk Committee of Vicunha Txtil S.A. No judgment of guilty (final or otherwise) has been entered against any of our committee members in any disciplinary or court proceedings. Alexsandro Broedel Lopes Mr. Lopes is currently a member of the Advisory Council and the Education Advisory Group of the IFRS Foundation. Earlier, between 2010 and 2011, he was a director of the Brazilian Securities Commission ( Comisso de Valores Mobilirios), or CVM, after having been an independent specialist consultant, a scholar and specialist reviewer on Accounting, Taxation and Finance topics for over ten years. Mr. Lopes holds a PhD degree in Accounting and Finance from the Manchester Business School, UK (formerly School of Management at UMIST). He also holds doctorate and college-professor degrees from the School of Economics, Business Management and Accounting of the So Paulo University (FEA-USP), Brazil, where he graduated. He is a Full Professor of Accounting and Finance at FEA-USP and Invited Professor at the Law School of the So Paulo University (FDUSP). He was earlier a Professor and Researcher at the London School of Economics and Political Science (LSE), UK; at the Manchester Business School (MBS), UK; at the Arizona State University (ASU), U.S.A.; and at the Business Administration School of the Getlio Vargas Foundation (EAESP-FGV), Brazil. He is also the author of several books and articles on accounting, finance and taxation topics. Other positions in public companies. Mr. Lopes currently holds no positions in other public companies. No judgment of guilty (final or otherwise) has been entered against any of our committee members in any disciplinary or court proceedings. Paulo Roberto Simes da Cunha Mr. Cunha holds a graduate degree in Accounting and Business Administration from and post-graduate degrees in Accounting and Auditing. Earlier, he had a 23-year career at the Central Bank of Brazil, where he worked mainly in banking supervision. He was also a partner of KPMG Auditores Independentes and lead executive for the Risk Advisory Services and Regulatory practice areas. He was a member of the Audit Committees of the Bradesco and Santander conglomerates. Currently, he is the Chairman of the Fiscal Council of Mahle Metal Leve S.A and member of the Audit Committee of BM&FBOVESPA. Other positions in public companies. Mr. Cunha is the Chairman of the Fiscal Council of Mahle Metal Leve S.A. No judgment of guilty (final or otherwise) has been entered against any of our committee members in any disciplinary or court proceedings. Renato Diniz Junqueira Mr. Junqueira is an Audit Committee member and our director. For biographical information on Mr. Junqueira, see subsection 12.8 above. Srgio Darcy da Silva Alves Mr. Alves graduated in Economics from the Rio de Janeiro Federal University. He has been as a member of the Audit Committee of Santander S.A since October 2006; Coordinator of the Regulation Committee and member of the Audit Committee of
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BM&FBOVESPA since January 2007; Chief Executive Officer of ATP Tecnologia S.A since April 2011; Chairman of the Board of Directors of Planet Finance; a consultant and adviser for the Brazilian Association of Credit, Financing and Investment Companies; a consultant and adviser for a number of financial market institutions; a Central Bank representative serving in the boards, and in committees and working groups of a number of entities based in Brazil; a Central Bank representative seating in the Sub-Group IV Committee (financial systems affairs) of the Mercosur Common Market Group. Other positions in public companies. Mr. Alves has been a member of the Audit Committee of Santander S.A since October 2006. No judgment of guilty (final or otherwise) has been entered against any of our committee members in any disciplinary or court proceedings. Tereza Cristina Grossi Togni Ms. Grossi holds degrees in Business Management and Accounting Sciences from the Minas Gerais Catholic University (1977). She attended specialization programs in Banking Supervision in Basel, Switzerland, and the United States. She made her career at the Central Bank of Brazil, where she rose to member of the Board of Governors and Banking Supervisory Officer (from April 2000 to March 2003), after having held positions as Expert Consultant, Adjunct Head of Department and Head of the Banking Supervision Department between February 1997 and March 2000, and as Inspector and Banking Supervision Coordinator between August 1984 and February 1997. As a Central Bank representative, Ms. Grossi was a member of the Core Principles Liaison Group (CPLG) of the Basel Committee on Banking Supervision and member of its Working Group on Capital from April 2000 to March 2003. She was also a member of Board of Directors of Banco Ita Holding Financeira S.A. from February 2004 to November 2008, where she also served as Financial Specialist member of its Audit Committee between July 2004 and May 2010; member of the Disclosures and Trading Committee between May 2005 and May 2010; member of the Accounting Policies Committee between May 2008 and May 2010. Also within the Ita Group, since 2010 Ms. Grossi has served as Coordinator of the Audit and Risk Management Committee of Itautec S.A, and member of its Disclosures Committee since May 2011. In addition, she has been Chairman of the Fiscal Council of Itasa - Investimentos Ita S.A since April 2011. Other positions in public companies. Ms. Grossi has served as Coordinator of the Audit and Risk Management Committee of Itautec S.A since 2010, and member of its Disclosures Committee since May 2011. In addition, she has been Chairman of the Fiscal Council of Itasa - Investimentos Ita S.A since April 2011. No judgment of guilty (final or otherwise) has been entered against any of our committee members in any disciplinary or court proceedings. 12.9. Marital relationships or domestic partnerships or family relationships (up to the second degree) between: a. the directors of the registrant There are no marital relationships or domestic partnerships or family relationships (up to the se cond degree) between any directors of the registrant. b. (i) the directors of the registrant, and (ii) the directors of its direct or indirect subsidiaries There are no marital relationships or domestic partnerships or family relationships (up to the second d egree) between any directors of the registrant and the directors of its direct or indirect subsidiaries. c. (i) the directors of the registrant and its direct or indirect subsidiaries, and (ii) the direct or indirect controlling shareholders Not applicable, as we have no controlling shareholders. d. (i) the directors of the registrant, and (ii) the directors of its direct or indirect controlling shareholders Not applicable, as we have no controlling shareholders. 12.10. Work or employment or service provision relationships, or other subordination relationships in the past three full years, tying any of registrants directors and officers to: a. any direct or indirect subsidiary of the registrant Between February 1998 and June 2008, executive officer Amarlis Prado Sardenberg was operations officer of the Brazilian Clearing and Depository Corporation (CBLC), a wholly-owned subsidiary which merged with BM&FBOVESPA in November 2008, and currently comprises our equities clearinghouse, securities lending facility and cen tral securities depository. b. any direct or indirect controlling shareholder Not applicable, as we have no controlling shareholders. c. any material supplier, customer, debtor or creditor of either the registrant, or a subsidiary, or controlling shareholder or companies under common control Director Charles P. Carey is a director of the CME Group Inc., which holds a 4.95% ownership interest in our shares and has an order routing agreement with us. In addition, we hold an interest in 5% of the outstanding shares issued by the CME
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Group. Additionally, we and the CME Group have entered into the following agreements: (i) an order routing agreement, whereby CME customers may have their orders for local trades routed to our trading systems through the CME Globex platform, whereas our customers route their orders for trades in CME products through our GTS (BM&FBOVESPA) platform; (ii) a technology agreement whereby we will cooperate in the development and implementation of a multi-asset class electronic trading platform with throughput capacity below one millisecond, which in time will replace our existing trading platforms; and (iii) a global preferred strategic partnership whereby, among other things, we will cooperate in identifying and pursuing opportunities for co-investment in, and joint commercial partnerships with, other international securities or derivatives exchanges on a shared and equal basis. 12.11. Description of directors and officers liability insurance policies We provide directors and officers liability insurance aimed to cover damages or defense costs in the event they suffer such losses as a result of a lawsuit for alleged wrongful acts while acting in their capacity as directors and officers for our organization. The basic principle underlying D&O insurance is that we and our shareholders are best served by knowledgeable directors and officers who take strategic risks based upon the information reasonably available to them at the time the decision is made, without the threat of personal liability. We purchase D&O insurance policies to cover our and our subsidiaries executive officers and other upper management members for potential losses related to functional activities performed both in Brazil and cross-border. The current D&O insurance policies are effective through September 29, 2011, but coverage for future claims regarding events through September 29, 2011, may in our discretion extend for an additional period covering up to 72 months. This policy contemplates no automatic renewal process. The premium we paid for a one-year coverage (ending September 29, 2011) totaling R$56,001 thousand amounted to R$295 thousand. 12.12. Other material information
Adherence to the ABRASCA Code of Self-Regulation and Good Practices of Public Companies
BM&FBOVESPA adhered the ABRASCA Code of Self-Regulation and Good Practices of Public Companies ("ABRASCA Code") on December 12, 2011, and declares that applies the principles and rules established in the ABRASCA Code, except the rule that the advisory committees of the Board of Directors must be chaired by board members. In BM&FBOVESPAs case, this rule applies to advisory committees, except in relation to the Audit Committee which is chaired by an external member. However, because it is an external member, independent, and with the technical expertise that the position requires, the Company believes that the choice of such member to act as coordinator of the Audit Committee aligns the functions of the Committee and the criteria for independence and empowerment that a committee of this nature requires.
Positions our directors hold in other companies or entities.

Arminio Fraga Neto Chairman of our board of directors (Independent director) Candido Botelho Bracher Non Executive Director
Board or senior management positions held in other companies or entities. Founding partner of Gvea Investimentos.
Board or senior management positions held in other companies or entities. Mr. Bracher has been vice chief executive of Ita
Unibanco Holding S.A. since May 2005 and a member of the board of directors since December 2008. In addition, Mr. Bracher is a former member of the board of directors of Unibanco Unio de Bancos Brasileiros S.A., whose registration as a public company was cancelled following the merger with Banco Ita in April 2009. Charles P. Carey Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Carey is a member of the Board of Directors of
the CME Group. Additionally, Mr. Carey is President of the Chicagoland Sports Hall of Fame. Claudio Luiz da Silva Haddad Independent Director
Board or senior management positions held in other companies or entities. Mr. Haddad is the president of Instituto Veris,
which owns and maintains the IBMEC So Paulo, and chairman of the board of directors and principal shareholder of Veris Educacional S.A, a higher education organization which also controls the IBMEC schools. Additionally, he is the president and founding member of Instituto Futuro Brasil, member of the board of directors of the Abril Group, member of the Visiting Committee of the Harvard Business School, and a member of the boards of the David Rockfeller Center for Latin American
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Studies at Harvard University, of Hospital Israelita Albert Einstein, of Ideal lnvest S. and Instituto Unibanco. He is also a member of the International Advisory Committee of the Capital Group and director of the Brazil-Israel Chamber of Commerce. Jos Roberto Mendona de Barros Independent Director
Board or senior management positions held in other companies or entities. Mr. Barros has been managing partner of Mendona de Barros Associados S/S Ltda. since 1978, a member of the advisory committee of the Estado de So Paulo
publishing group, of the Brazilian Federation of Banks (Febraban) and of Link Partners. He is also a member of the advisory committee for our Novo Mercado listing segment. He is currently a director of Tecnisa S.A, member of the advisory committee of Companhia Brasileira de Distribuio (Po de Acar group) and director of Banco Santander (Brasil) S.A. Julio de Siqueira Carvalho de Arajo Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Arajo is an executive officer of Aicar
Holdings Ltda.; Alvorada Administradora de Cartes Ltda.; Alvorada Cartes, Crdito, Financiamento e Investimento S.A.; Alvorada Companhia Securitizadora de Crditos Financeiros; Alvorada Servios e Negcios Ltda.; Andorra Holdings S.A.; Aquarius Holdings Ltda.; Banco Alvorada S.A.; Banco Boavista Interatlntico S.A.; Bankpar Arrendamento Mercantil S.A.; BCN Consultoria, Administrao de Bens, Servios e Publicidade Ltda.; BF Promotora de Vendas Ltda.; BCM Asset Management Distribuidora de Ttulos e Valores Mobilirios Ltda.; Bradescard Elo Participaes S.A.; Bradesco Leasing S.A. Arrendamento Mercantil; Bradesplan Participaes Ltda.; Brasilia Cayman Investments II Limited; Brasilia Cayman Investment III Limited; Caboquenas Empreendimentos e Participaes Ltda.; Caet Holdings Ltda.; Celta Holdings S.A.; Columbus Holdings S.A.; Companhia Securitizadora de Crditos Financeiros Rubi; Damaniv Holdings Ltda.; Elba Holdings Ltda.; Elo Holding Financeira S.A.; Embaba Holdings Ltda.; Everest Holdings Ltda.; Everest Leasing S.A. Arrendamento Mercantil; Ferrara Participaes S.A.; Itacar Holdings Ltda.; Itajuba Holdings Ltda.; Itana Holdings Ltda.; Japira Holdings S.A.; Lyon Holdings Ltda.; Lyra Holdings Ltda.; Manacs Holdings Ltda.; Marselha Holdings Ltda.; Miramar Holdings S.A.; Mississipi Empreendimentos e Participaes Ltda.; NCF Participaes S.A.; Nigara Participaes e Empreendimentos Ltda.; Nova Cidade de Deus Participaes S.A.; Nova Marlia Administrao de Bens Mveis e Imveis Ltda.; Nova Paiol Participaes Ltda.; Paineira Empreendimentos e Participaes Ltda.; Promosec Companhia Securitizadora de Crditos Financeiros; Quixaba Empreendimentos e Participaes Ltda.; Quixaba Investimentos S.A.; Rubi Holdings Ltda.; Serel Participaes em Imveis S.A.; Settle Consultoria, Assessoria e Sistemas Ltda.; STVD Holdings S.A.; Tapajs Holdings Ltda.; Tibre Distribuidora de Ttulos e Valores Mobilirios Ltda.; Tibre Holdings Ltda.; Titanium Holdings S.A.; Top Clube Bradesco, Segurana, Educao e Assistncia Social; Unio Participaes Ltda.; Veneza Empreendimentos e Participaes S.A. He is a Vice President of Banco Bankpar S.A., of Banco Bradesco BBI S.A.; Banco Bradesco Cartes S.A.; Banco Bradesco Financiamentos S.A.; Banco Bradesco S.A.; Banco Ibi S.A. Banco Mltiplo; Baneb Corretora de Seguros S.A.; Bankpar Brasil Ltda.; Bankpar Consultoria e Servios Ltda.; BEC Distribuidora de Ttulos e Valores Mobilirios Ltda.; BEM Distribuidora de Ttulos e Valores Mobilirios Ltda.; BP Promotora de Vendas Ltda.; Bpar Corretagem de Seguros Ltda.; Bradesco Administradora de Consrcios Ltda.; Bradescor Corretora de Seguros Ltda.; Bram Bradesco Asset Management S.A. Distribuidora de Ttulos e Valores Mobilirios; Finasa Promotora de Vendas Ltda.; Ganant Corretora de Seguros Ltda.; Ibi Corretora de Seguros Ltda.; Ibi Promotora de Vendas Ltda.; Imagra Imobiliria e Agrcola Ltda.; Instituto Assistencial Alvorada; PTS Viagens e Turismo Ltda.; Tempo Servios Ltda. He is also a member of the boards of directors of BBD Participaes S.A.; Cidade de Deus Companhia Comercial de Participaes; Fundao Instituto de Molstias do Aparelho Digestivo e da Nutrio; and Fundo Garantidor de Crditos FGC. He is a managing director Fundao Bradesco and Fundao Instituto de Molstias do Aparelho Digestivo e da Nutrio. Mr. Arajo acts as chairman of the deliberative council of Boavista Prev Fundo de Penso Multipatrocinado, a multi-sponsored pension fund, and member of the deliberative council of Caixa Beneficente dos Funcionrios do Bradesco, a Bradesco pension fund. He is alternate member of the board of directors of the Interbank Payments Chamber (Cmara Interbancria de Pagamentos), or CIP; acting executive officer of the Financial System National Confederation (Confederao Nacional do Sistema Financeiro), or CONSIF; alternate member of the Council for the Agribusiness, or CONSAGRO; and member of the Governing Board of the Bradesco Foundation. In addition, at Banco Bradesco S.A, he is a member of the Integrated Risk Management and Capital Allocation Committee, of the Ethical Conduct Committee, of the Disclosures Executive Committee, of the Operational Risk Management Committee, of the Basel II Implementation Executive Committee, of the Investments Executive Committee, of the Products and Services Executive Committee, of the Capital Markets Executive Committee, of the Acquisitions and New Business Integration Executive Committee, of the Human Resources and People Management Committee, of the Quality Executive Committee (as coordinator), of the Strategic Planning Executive Committee, and of the Sustainability Executive Committee, of the CRM (Customer Relationship Management) Executive Committee. Luis Stuhlberger Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Stuhlberger is chief asset management officer
of Credit Suisse Hedging-Griffo Asset Management and Credit Suisse Hedging-Griffo Servios Internacionais S.A; executive officer at Credit Suisse Hedging-Griffo Investimentos S.A.; president of the Hedging-Griffo Institute; director of the Association of Capital Market Investors (Associao de Investidores no Mercado de Capitais), or AMEC; member of the ethics committee of the Brazilian Financial and Capital Markets Association ( Associao Brasileira das Entidades dos Mercados
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Financeiro e de Capitais), or ANBIMA.

Marcelo Fernandez Trindade Independent Director
Board or senior management positions held in other companies or entities. Mr. Trindade has been a member of the law firm
of Trindade Sociedade de Advogados since 1986, and is a director of Redecard S.A. Pedro Pullen Parente Independent Director
Board or senior management positions held in other companies or entities. Mr. Parente has been the Chief Executive Officer
and President of Bunge Brazil at Bunge Ltd. since January 2010. He is also a member of the boar ds of AMCHAM Brasil, RBS, FNQ and Conex. Renato Diniz Junqueira Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Junqueira is currently chairman of the Brazilian
Confederation of Exchanges and of the Rio de Janeiro stock exchange (BVRJ), a member of the board of directors of Banco Intercap S/A (since 1987) and of the Brazilian Association of Securities, Forex and Commodities Brokers and Dealers (Associao Nacional das Corretoras e Distribuidoras de Ttulos e Valores Mobilirios, Cmbio e Mercadorias), or ANCORD. Ren Marc Kern Independent Director
Board or senior management positions held in other companies or entities. Mr. Kern is currently the managing director of
General Atlantic, a member of their Executive Committee, Investments Committee and Portfolio Committee, in addition to chairman of the Capital Committee of General Atlantic. He is also a director of Getco Holding Company, LLC, and of the Amedes Group. 13. Management Compensation
13.1 Description of compensation policy and practices of the board of directors, board of executive officers, members of management, the fiscal council members, the advisory committee members and the audit, risk, financial and compensation committee members as regards the following aspects.
a.
Purposes of compensation policy and practices.
As the Company is the result of the integration process that combined BM&F and BOVESPA into BM&FBOVESPA in May 2008 and as there were significant changes in the organization structure and new policies and practices were defined during the year, we have decided, for better understanding of the information disclosed herein and as permitted by CVM Instruction No. 480 of December 7, 2009, to provide information exclusively on the 2009 and 2010 fiscal years, as well as the forecast for the year ended December 31, 2011, wherever applicable. Our compensation policy seeks to encourage alignment with the corporate purpose of the Company, and drives our officers and employees productivity and efficiency, besides maintaining competitiveness in the market in which we operate.
b.
Compensation breakdown.
(i) Description and purpose of the compensation components

Board of Directors: For the directors, the compensation is in the form of a fixed monthly remuneration and, for the chairman of the board, the remuneration includes an additional semi-annual fixed payment equivalent to double the compensation received in the six-month period. The fixed component is intended to adequately compensate directors for their participation in meetings, while the additional remuneration of the Chairman of the Board is paid in return for a larger number of tasks required on his part. In the event an executive and management member (though not a member of the board of executive officers) or any other employee is appointed to a position on the board of directors, this professional will not be entitled to any additional compensation. In addition, under article 22, paragraph 1, of our By-laws, no director may be elected to the board of executive officers. Board of executive officers and members of management: The compensation policy for executive officers and other management members breaks down as follows: - A monthly base salary consisting of thirteen monthly payments per year, aimed at direct compensation for services rendered, in line with market practices; - Benefit package including health and dental care plan, life insurance, meal voucher, private pension fund, use of Company car, medical check-up, parking and use of Company cell phone. These benefits are aimed at offering an attractive package which is minimally consistent with market standards for performance of similar tasks;
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- Semiannual (short-term) variable remuneration established and paid under our profit sharing program according to Law No. 10101, dated December 19, 2000. Our profit sharing program defines potential multiples of monthly base salary attributable pursuant to profit-based overall performance targets, job level responsibilities and evaluation of individual performance, aimed at aligning officers with the Companys short and medium-term results; and - Long-term share-based remuneration structured so as to grant stock purchase options pursuant to the Companys stock option plan (option plan) with regard to profit-based overall performance targets, job level responsibilities and evaluation of individual performance. It is aimed at the alignment of the officers interests with those of the Company in the long term, as well as the retention of the Companys key management personnel. Committees: The members of the board advisory committees are entitled to a fixed monthly remuneration. Directors that take part in these committees are entitled to an additional fixed monthly remuneration, limited however to participation in three committees. At this time we have an audit committee, a nomination and corporate governance committee, a compensation committee and a risk committee, all advising the board of directors. To advise the board of executive officers, we have the following committees: agribusiness committee, market committee, market risk committee, athletic club committee and regulation committee. Only the members of the regulation committee receive a fixed monthly compensation. Officers (whether an executive officer or other management member) or other employees that are appointed to serve on any management advisory committee are not entitled to additional remuneration. The aforementioned fixed monthly remuneration is paid for the purpose of compensating officers for their participation in meetings. Fiscal Council: The Companys fiscal council is not active. The compensation policy for fiscal council members, if and when active, will be established in accordance with applicable law. The Company believes the absence of an active fiscal council is leveled and adequately covered by the audit committee, since under article 47 of our Bylaws the scope of the committee responsibilities goes far beyond that which is assigned to a fiscal council under Brazilian Corporate Law. The audit committee is composed of five independent members, four of them being outside members, and one an independent director. Audit committee members serve for two-year terms. The members of the audit committee are nominated by the nomination and corporate governance committee, and appointed by the board of directors. Outside members must have auditing, compliance/controls, accounting, taxation and similar other specialized knowledge and/or experience, in addition to being required to meet the independence standards established in article 46 of the Bylaws, so as to ensure they will perform their duties with exemption, for the benefit and in the interests of the Company and the shareholders.
(ii) Proportion of each component of the total compensation

The average proportion of each compensation component in the year 2010 according to our current compensation policy is set forth in the table below.
2010
Monthly remunerati on
Board of directors Board of executive officers and other members of management Committees 88.62% 38.73% 100%
Participatio n in committees
Benefit s
0% 6.26% 0%
Short-term variable remuneration (profitsharing)

0% 55.00% 0%
Long-term variable remuneration (Stock Option)

0% (*) 0%
Total
11.38% 0% 0%
100% 100% 100%
* At a meeting held on February 23, 2010, the Board of Directors approved that the grants under the option plan of the year ended December 31, 2010 shall always occur at the beginning of the subsequent year. Thus the option grant held within the scope of the option plan for the year ended December 31, 2010 occurred in January 2011 and, therefore, this will have an impact on the year ending December 31, 2011.
These percentages may vary each year, especially in due to the remuneration breakdown being heavily based on variable elements. However, it is expected that by the year 2011, the above ratios will be substantially different from those recorded in 2010. In 2010, with regard to long-term compensation (stock option), as per the Board of Directors approval, the granting of options for the year ended December 31, 2010 occurred only in January 2011 and this will have an impact on the year ending December 31, 2011.
(iii) Method of calculation and adjustment of each compensation component

The compensation paid to directors and officers is revised every year and submitted for approval at the annual shareholders meeting. The compensation paid to members of the audit committee, nomination and corporate governance committee, risk committee and compensation committee is revised every year and submitted to the board of directors for approval. The fixed monthly compensation paid to management is adjusted yearly at rates defined in a collective agreement entered into with the
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trade union. In addition, under our salary policy, an increase may possibly be given for individual merit. The rules and definitions of the policies for short-term variable compensation (profit-sharing) and long-term variable compensation (stock option) are proposed by the compensation committee and approved by the board of directors according to the guidelines set in the option plan, which was approved by the extraordinary shareholders meeting held on May 8, 2008. Typically, we conduct periodic salary surveys to ensure the Company is in line with good market practices and to sustain our retention strategy of paying fixed and long-term compensation that is both commensurate and competitive. These surveys comprise a sample of companies in the financial market and services sector, of similar size to the Company. From the results of the surveys, job matching is performed with respect to the corresponding positions and functions existing in the Company, for adjustments to the general amounts paid to different positions and levels in a comparative manner. The adjusted results are submitted for approval of the Compensation Committee and subsequent ratification by the Board of Directors, as described above. Moreover, in keeping with our retention policy we constantly survey market practices on benefits and make adjustments as necessary to remain competitive.
(iv) Reasons that justify compensation composition

Our compensation strategy seeks to balance the short-, medium- and long-term compensation components to ensure alignment with the Companys corporate purpose, whereas permitting us to offer a compensation package that is fair and competitive in our market, can influence attraction and retention, and motivates and compensates our professionals according to the responsibilities of their jobs. Our compensation strategy thus seeks to position the fixed remuneration of our executives at market average, while rewarding them with the differential of short- and long-term variable compensations in line with the overall performance of the Company and the individual. In the specific case of 2010, as per the Board of Directors approval at a meeting held on February 23, 2010, a change was made to the grant date. Therefore, the granting of options for the year ended December 31, 2010 occurred only in January 2011 and this will have an impact on the year ending December 31, 2011.
c.
Key performance indicators considered in defining each compensation component.
Performance target indicators we adopt in allocating short- and long-term variable compensation, meaning profit-sharing and stock option programs, consist of individual targets and goals we analyze in individual performance evaluations, which are based on factors that are specific to function and job level, and the overall performance target indicators. Such indicators are accounted for both in determining the overall value of profit-sharing to be distributed and in defining the eligibility and amount of grants of stock options to be held. In 2009, the overall performance indicator adopted by the Company was EBITDA margin. As of 2010, the overall performance target indicator established by the Board became the quarterly adjusted net income. The total amount of the short-term variable compensation to be paid to officers and employees at the end of each year will, therefore, be calculated based on the Companys adjusted quarterly net income actually ascertained and will represent 3.5% of this amount. In 2010, the amount ascertained by the Company was within the expected range, which was 70% to 130% of the target set for the corresponding fiscal year. Thus, the total amount of short-term variable remuneration which was paid to the Companys officers and employees during the year ended December 31, 2010 was calculated based on adjusted quarterly net income and represented 3.5% of this amount. As of 2011 inclusive, the total amount of short-term variable remuneration to be paid to the Companys officers and employees will be calculated based on adjusted quarterly net income effectively ascertained, considering the expenses limit forecast in the years budget, and will represent 3.5 % of this amount, if it falls within the 90% to 150% range. If adjusted quarterly net income actually ascertained falls under 90% of the target, the short-term variable remuneration will be reduced to 2.0% of adjusted quarterly net income. However, if the adjusted quarterly net income is more than 150% of the target established by the board, the aggregate short-term variable remuneration will equal the sum of: (i) the amount that corresponds to 3.5% computed over 150% of the target, and (ii) the amount that corresponds to 2.0% computed over that portion of adjusted net income which exceeds 150% of the target. If the expenses budgeted for the year exceed the limit, a reduction in the percentage of the aforementioned adjusted net income will be applied at exactly the same rate of increase of realized expense versus budgeted expense. A portion of this aggregate amount will be attributable to Company executive officers, as allocated pursuant to certain base salary multiples that will differ based on individual performance. In the case of long-term remuneration (stock option), in addition to the aforementioned criteria with respect to defining the option grants, it should be underscored that any benefit granted to the executive shall be obtained only to the extent that the Company shares are appreciated, allowing the Beneficiary to, after the deadline for exercising the options and/or restriction to transfer of shares, sell shares at a price higher than what was paid by the executive upon being granted the options. Therefore, the earning potential of the stock option beneficiary depends on the appreciation of the Company shares on the market. As for the fixed remuneration and benefits, no performance indicators are taken into account. These compensation components depend on the level of responsibility of the job, and in the specific case of additional fixed remuneration,
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qualification for the job is also taken into consideration.
d.
Discussion on how the compensation is structured to reflect the evolution of performance indicators.
According to our short- and long-term variable compensation policy, the pool of profit-sharing and stock options is affected by the scope of the overall performance target we adopt (adjusted net income); in other words, the size of the pool is determined according to year-end results of operations (in 2010, adjusted net income) and the extent to which the performance targets for the year were or were not achieved. In addition, our policy provides for different compensation levels based on individual performance by any of the officers, (meaning both the executive officers elected pursuant to the Bylaws and the executive performing functions as officers) and the employees, taking into account job level and responsibilities.
e. Discussion on how the compensation policy or practices are aligned with the interests of the Company on short, medium and long term.
We aim to keep a competitive compensation policy vis--vis the marketplace in order to attract and retain talent, and keep a capable team of skilled and dedicated people with ability to help the Company attain its short-, medium- and long-term goals and strategic objectives. Given that our integrated business model is inextricably linked to the Companys objectives of promoting, developing and expanding the domestic capital markets, which per se imply longer and sustainable cycles, it is crucial for us to have the ability to retain talent, such that our compensation policy must include mechanisms to encourage our people to stay with the us for the long haul. Pursuant to this compensation strategy, we aim to balance the fixed compensation represented by the base salary, short-term compensation (profit sharing) and medium- and long-term compensation (through the option plan). Therefore, our employees are thus encouraged to attain and exceed the half-yearly and yearly targets which are linked to our profit-sharing program. We also structure our compensation policy so our executives will be motivated to pursue medium- and long-term goals aimed to benefit the business, add value to the Company and drive share appreciation, the incentive for this being associated to the options granted within the scope of the option plan.
f. Existence of compensation supported by a subsidiary, affiliate or direct or indirect controlling shareholder.

There is no compensation supported by a subsidiary, affiliate or direct or indirect controlling shareholder of the Company.
g. Existence of any remuneration or benefit tied to occurrence of any particular corporate event, such as disposition of registrants control.
There is no compensation or benefit tied to occurrence of any corporate event involving the Company, such as disposition of control, forming strategic partnerships or otherwise. With regard to the option plan, it is forecast that in the event of dissolution of the Company, or of a transformation of the corporate type, or any merger, consolidation or spin-off transaction, or corporate restructuring transaction, from which the Company does not emerge as the surviving company, or if it does survive, in case of a delisting or going private process, any outstanding stock options may be transferred to the surviving company or vest at a predefined earlier date, in the discretion of our board, provided the option will then be exercisable within a limited period of time, following which, the option plan will end and options not exercised will forfeit lapse with no right to indemnity. 13.2 Information on compensation recognized in the income statement for the year to December 31, 2009 and December 31, 2010 and compensation forecast for the current year, as attributable to directors, officers and fiscal council members. The tables and notes below set forth the annual compensation allocated to directors, executive officers and audit committee members (it should be noted that the Company does not have an established fiscal council, but its duties are performed by the audit committee provided in its bylaws and functioning on a permanent basis), as (i) recognized in the income statement for the year to December 31, 2010 and December 31, 2009, taking into account the yearly average number of members by body, on a monthly basis, as shown in the table below 6; and (ii) the forecast for the current year. Year ended December 31, 2010
Month January February March April
6
Board of directors 11 11 11 11
Board of executive officers 6 6 6 6
Sum of number of members of each body in each of the months of 2010, divided by 12 (months). This calculation is made pursuant to CVM/SEP Official Letter/Circular No. 05/2010.
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May June July August September October November December Total Average
11 11 11 11 11 11 11 11 132 11
6 6 6 6 6 6 6 6 72 6.00
(*) At the end of December 2010, the board member Fabio de Oliveira Barbosa resigned and received the full salary for the month of December.
It should be underscored that with regard to long-term compensation (stock option grants according to the option plan) as per the board of directors approval, the granting of options for the year ended December 31, 2010 occurred only in January 2011 and this will an impact on the year ending December 31, 2011. (see note in item 13.1 b (ii)).
Year ended December 31, 2010 Board of Directors Number of members Yearly fixed remuneration (in R$) Salary or remuneration Direct and indirect benefits Compensation for service in committees Other Variable compensation (in R$) Bonuses Profit Sharing Compensation for participation in meetings Commissions Other (1) Post-employment benefits Benefits upon leaving job Share-based compensation Compensation amount
______________________________________
Board of Executive Officers 6 5.288.126,90 4.611.216,86 676.910,04 n/a n/a 9.592.419,87 n/a 8.416.729,19 n/a n/a 1.175.690,68 n/a n/a 0,00 14.880.546,77
Fiscal Council(*) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Total 17 9.123.861,76 8.010.261,22 676.910,04 436.690,50 n/a 9.592.419,87 n/a 8.416.729,19 n/a n/a 1.175.690,68 n/a n/a 0,00 18.716.281,63
11 3.835.734,86 3.399.044,36 n/a 436.690,50 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 3.835.734,86
(1) Additional rescissory amounts and sign-on bonuses

( )
* As discussed in paragraph 13.1 of the Reference Form, while the fiscal council is not active, its responsibilities are adequately covered by the audit committee whose scope of responsibilities under article 47 of the Bylaws goes beyond those Brazilian Cor porate Law prescribes for the fiscal council. The audit committee consists of five independent members, four of them being outside members, and one an independent member, all of whom serve for two-year terms. The compensation paid to the outside committee members in 2009 amounted to R$ 733,668.40 and in 2010 amounted to R$814,941.08 (these amounts are not included in the above table).
Year ended December 31, 2009

Month January February March April Board of directors 11 11 11 10 Board of executive officers 8 6 6 6
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May June July August September October November December Total Average
11 11 11 11 11 11 11 11 131 10,92
5 5 6 6 6 6 6 6 72 6.00
The table below provides information about the remuneration of the board of directors, board of executive officers and audit committee held in the year ended December 31, 2009. In this case, the stock-based compensation refers to the grant held on the March 1st, 2009 for a total of 2,490,000 options, or 0.12% of total shares issued at the time at the fair price of R$ 2.93 (as per item 13.6). It should be emphasized that the fair price, as provided for in the accounting rules, should consider the forecast conditions of the market at the time of the grant, as mentioned in items 13.6 and 13.9, excluding the specific table for the 2010 Program.
Year ended December 31, 2009 Board of directors Number of members Yearly fixed remuneration (in R$) Salary or remuneration Direct and indirect benefits Compensation for service in committees Other Variable compensation (in R$) Bonuses Profit Sharing Compensation for participation in meetings Commissions Other Post-employment benefits Benefits upon leaving job Share-based compensation Compensation amount 10,92 3.702.348,37 3.362.935,80 n/a 339.412,57 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 3.702.348,37 Board of executive officers 6,00 4.855.869,38 4.249.518,66 606.350,72 n/a n/a 5.674.487,40 n/a 5.674.487,40 n/a n/a n/a n/a n/a 7.295.700,00 17.826.056,78 n/a n/a n/a n/a n/a n/a Fiscal council(*) n/a n/a n/a n/a n/a n/a n/a n/a n/a Total 17 8.558.217,75 7.612.454,46 606.350,72 339.412,57 0 5.674.487,40 n/a 5.674.487,40 0 0 0 0 0 7.295.700.00 21.528.405,15
The table and note below provide information on the remuneration of the board of directors, board of executive officers and audit committee forecast for the year ending December 31, 2011, which is subject to approval at the Annual General Meeting to be held April 18, 2011. Given that the short-term variable remuneration of the board of executive officers (profit-sharing) is tied to the Company's overall target set for the year, the forecasts in the table below assume a likely outcome scenario and may change depending on the variation of adjusted net income and the expenses of the Company (defining basis for the profitsharing pool). For example, as per the rule described in item 13.1 "c " of the reference form, where the amounts at year end reach a level that is 10% above the forecast adjusted net income, considering the expenses limit forecast in the years budget, the amount of short-term variable remuneration (profit-sharing) will be added of R$953,484.67, which is equivalent to a 10% increase in the total estimated amount, as provided for in the rule described in item 13.1 "c ". In addition, as decided by our board of directors in connection with the long-term variable compensation, stock option grants under the 2010 program will only be awarded in January 2011 with an impact on the year ending December 31, 2011 (see note in item 13.1 b (ii)). The amount of options granted under the option plan in effect under the 2011 program for the board of
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executive officers, as approved by the board of directors, comprised a total of 3,420,000 shares, or 0.17% of the outstanding shares issued by the Company. The option strike price was defined based on the rules of the option plan at the closing price of the shares trade in the last 20 exchange sessions of 2010. It should be noted that the calculation of the fair price under the 2011 stock option grant ("2010 Program") considers the market variables at the time of the grant and are reflected in a final fair price amount (R$ 4.50), which is substantially higher when compared to the 2009 fair price. The pricing model has not changed and the variation results mainly from changes in market conditions that occurred during this period, as mentioned in items 13.6 and 13.9.
Current Year Forecast for 2011 Board of directors Number of members Yearly fixed remuneration (in R$) Salary or remuneration Direct and indirect benefits Compensation for service in committees Other Variable compensation (in R$) Bonuses Profit Sharing Compensation for participation in meetings Commissions Other Post-employment benefits Benefits upon leaving job Share-based compensation Compensation amount
______________________________________ ( )
Board of executive officers 6 5.528.760,20 4.787.305,79 741.454,41 n/a n/a 9.534.846,72 n/a 9.534.846,72 n/a n/a n/a n/a n/a 15.390.000,00 30.453.606,92
Fiscal council(*) n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Total 17 9.810.882,70 8.526.254,63 741.454,41 543.173,66 0 9.534.846,72 0 9.534.846,72 0 0 0 0 0 15.390.000,00 34.735.729,42
11 4.282.122,50 3.738.948,84 n/a 543.173,66 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a 4.282.122,50
* As discussed in section 13.1 of the reference form, while the fiscal council is not active, its responsibilities are adequately covered by the audit committee whose scope of responsibilities under article 47 of the Bylaws goes beyond those Brazilian Corporate Law prescribes for the fiscal council. The audit committee consists of five independent members, four of them being outside members, and one an independent member, all of whom serve for two-year terms. The estimated compensation for the year ending December 31, 2011 related to outside committee members amounts to R$992,924.53.
13.3 Information on variable compensation for the year to December 31, 2010, and variable compensation forecast for the current year. Our variable compensation policy for the executive officers is based on the concept of multiples of monthly base salaries varying based on job seniority. At each job level, individual performance accounts for the differences. The tables below set forth information on variable compensation for the executive officers, as (i) recognized in the income statement for the year ended December 31, 2010 and the year ending December 31, 2011, taking into account the number of members in each body actually granted the variable compensation; and (ii) the forecast for the current year.
Year ended December 31, 2010 Board of directors Number of members Bonuses (in R$) Minimum forecast in compensation plan Minimum forecast in compensation plan Amount forecast in compensation plan if the targets are attained Actually recognized in income statement n/a n/a n/a n/a n/a n/a n/a n/a n/a Board of executive officers 6 Fiscal council n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Total 6
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Year ended December 31, 2010 Board of directors Profit Sharing (in R$) Minimum forecast in compensation plan Minimum forecast in compensation plan Amount forecast in compensation plan if the targets are attained Amount actually recognized in income statement n/a n/a n/a n/a 8.308.036,10 10.154.266,35 9.231.151,23 8.416.729,19 n/a n/a n/a n/a 8.308.036,10 10.154.266,35 9.231.151,23 8.416.729,19 Board of executive officers Fiscal council Total
Year ended December 31, 2009 Board of directors Number of members Bonuses (in R$) Minimum forecast in compensation plan Minimum forecast in compensation plan Amount forecast in compensation plan if the targets are attained Actually recognized in income statement Profit Sharing (in R$) Minimum forecast in compensation plan Minimum forecast in compensation plan Amount forecast in compensation plan if the targets are attained Amount actually recognized in income statement n/a n/a n/a n/a 4,353,266.96 6,097,751.36 5,890.,667.01 5,674,487.40 n/a n/a n/a n/a 4,353,266.96 6,097,751.36 5,890,667.01 5,674,487.40 n/a n/a n/a n/a n/a n/a n/a n/a n/a Board of executive officers 6 Fiscal council n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Total 6
The table below sets forth information about the variable compensation forecast for year 2011. Since the short-term variable compensation for executive officers (profit-sharing) depends on whether and how the overall performance targets for the year are achieved, the forecasts set forth in the table below assume a scenario based on estimate of probable results, which thus may change based on actual results determining adjusted net income for of the year and the budgeted expense (basis of determination of the profit-sharing pool). According to the rule described in section 13.1 c, the total amount of the short-term variable compensation to be paid to officers and employees in 2011 will be 3.5% of adjusted net income of the Company actually ascertained, considering the expenses limit forecast for the years budget, if this income lies within the range of 90% to 150% of the target. If the adjusted net income is less than 90% of the target, the amount allocated to total short-term variable remuneration will be reduced to 2% of adjusted net income. If the adjusted quarterly net income is more than 150% of the target established by the board, the aggregate short-term variable remuneration will equal the sum of: (i) the amount that corresponds to 3.5% computed over 150% of the target, and (ii) the amount that corresponds to 2.0% computed over that portion of adjusted net income which exceeds 150% of the target. A portion of this aggregate amount will be attributable to Company executive officers, as allocated pursuant to certain base salary multiples that will differ based on individual performance. If the expenses budgeted for the year exceed the limit, a reduction in the percentage of the aforementioned adjusted net income will be applied at exactly the same rate of increase of realized expense versus budgeted expense. On forecasting the minimum and maximum amounts, it should be noted that the distribution of profit sharing, according to the aforementioned rules, is directly affected by adjusted net income, considering the expenses limit forecast for the years budget, so that: (i) if there is no net income, the amount paid as profit sharing is zero, (ii) there is no maximum amount set as a ceiling, while the distribution rules described above should be observed. For purposes of estimating the minimum and maximum amounts specified in the table below, we considered adjusted net income to be 10% below and 10% above, respectively, of the target set internally for the purpose of the profit sharing program.
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Current Year Forecast for 2011 Board of Directors Number of members Bonuses (in R$) Minimum forecast in compensation plan Minimum forecast in compensation plan Amount forecast in compensation plan if the targets are attained Actually recognized in income statement Profit Sharing (in R$) Minimum forecast in compensation plan Minimum forecast in compensation plan Amount forecast in compensation plan if the targets are attained Amount actually recognized in income statement n/a n/a n/a n/a 8.668.042,47 10.488.331,39 9.534.846,72 n/a n/a n/a n/a n/a 8.668.042,47 10.488.331,39 9.534.846,72 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Board of Executive Officers 6 Fiscal Council n/a Total 6
13.4 Information on share-based compensation plan for directors and executive officers as effective in the most recent full year and as forecast for the current year.
a.
General terms and conditions.
The Company has a stock option plan (option plan) approved at the Extraordinary General Assembly Meeting held on May 8, 2008, by which the directors and managers of the Company and its subsidiaries and, in special cases, employees appointed by the Chief Executive Officer (beneficiaries). The option plan gives ample powers for the board of directors to approve the stock option grants and manage them by means of stock option programs (programs), which should define, among other specific conditions: (i) the respective beneficiaries; (ii) the total number of shares to be granted; (iii) the division of option grants into lots, if applicable; (iv) the option strike price; (v) the vesting period and the period for exercise of the option; (vi) the restrictions on transfers of shares deriving from exercise of an option; and (vii) any penalties. The powers given to the board can be bestowed upon the compensation committee. Currently, the board of directors relies on the advice of the compensation committee to establish the grant conditions under the statutory authority of the compensation committee. The option plan provides further that each stock option program may establish at the discretion of the board of directors (who relies on the advice of the compensation committee for the formulation of corresponding proposals) and after hearing the chief executive officer, an elected percentage to the base number of stock options granted to each beneficiary based on the reach of overall and/or individual performance targets, limited however by the total number of options allocated for grant to that particular program. On adopting a particular program, the board will approve the terms and conditions of the stock options granted to each beneficiary under a stock option purchase agreement (stock option agreement or simply agreement) to be celebrated between the Company and each beneficiary. The stock option agreement must stipulate at least the following conditions: a) the number of shares that a beneficiary will be entitled to purchase or subscribe for upon exercising the option, at the strike price per share, pursuant to the corresponding program; b) the percentage increase in the base number of options allocated to the beneficiary and the criteria for determining it, as well as the period of management evaluation to determine it c) the initial vesting period during which the option may not be exercised and the option expiration date and last date for total or partial exercise of the option; d) transfer restrictions regarding the shares delivered upon exercise of the option and penalties for not respecting these restrictions; and e) any other terms and conditions not conflicting with the option plan or the relevant program. The shares resulting from exercise of an option will enjoy rights established in the option plan, in the relevant program and in the stock option agreement, in addition to being assured rights to dividends and other distributions after acquired under an option, whether through subscription or a purchase of shares. The programs and stock option agreements are also subject to the following general conditions: a) no share may be delivered to a beneficiary upon exercise of the option unless all legal and regulatory requirements have
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been fully satisfied; b) no provision of the option plan, of any program or the stock option agreement may be construed as assurance that the relevant beneficiary will continue to provide services to the Company as an officer or employee or service provider, or construed in any way that would hinder our right to remove an officer or terminate an employee or service provider as we may deem fit.; c) the stock options granted under the option plan, and the option exercise by a beneficiary, are not in any way related to, nor bound to the beneficiarys fixed remuneration or profit-sharing payment; d) the beneficiary will not have shareholder rights or privileges other than those that are provided under the option plan pursuant to the options in the stock option agreement; and e) the beneficiary will only enjoy full shareholder rights and privileges after having actually subscribed for, or purchased the shares for which the option was exercised. Currently, there are three stock option grant programs, which were approved by the board, respectively, "2008 BVMF option program", "2009 BVMF option program and "2010 BVMF option program. The conditions of the approved programs are substantially similar and are described in greater detail in subparagraphs below. In addition to the option plan, upon the integration of BM&F S.A., the Company incorporate the BM&F S.A. stock option plan (BM&F option plan), approved at the BM&F S.A. shareholders meeting held on September 20, 2007. This involved the assumption of 19,226,388 stock options by the Company representing an equal number of Company shares. Of this total, 5,461,546 options remain outstanding at December 31, 2010. These shares do not fall within the limits provided for in the current option plan. It should be noted that in the case of BOVESPA Holding SA there was no assumption of any part of the option plan, since all shares were vested and exercised at the time of the integration. Finally, as per the board of directors approval on February 23, 2010, the stock option grant for the year ended December 31, 2010 occurred only in January 2011 and it will have an impact on the year ending December 31, 2011 (see note in item 13.1 b (ii)).
b.
Key plan objectives.
The purpose of the Companys stock option plan, which was established according to article 168, paragraph 3, of Brazilian Corporate Law (Law No. 6404/76), is to give the officers, employees and service providers of the Company and of the companies in which it is the direct or indirect controlling shareholder the opportunity to become a shareholder of the Company. The aim is to align the interests of these officers, employees and service providers with those of the Company and the shareholders, including by having them share in the risks inherent in investments in the capital markets, whereas permitting the Company and its affiliates to attract and retain talent at any level, including officers, employees and service providers.
c.
Information on how the plan contributes to these objectives.
The objective of promoting a greater alignment of interests is achieved by offering the opportunity to officers and employees to become shareholders. Therefore, the grants are formatted in such a way that the beneficiaries may only enjoy a possible gain in the medium and long term as the Company shares appreciate in the market. The aim is for compensated officers and employees to commit themselves to the Companys long-term goals and to the generation of value in the medium and long term. Furthermore, the need for beneficiaries to remain bound to the Company so that they can exercise their options in the future is aimed at retaining talent among the Company's key personnel. In short, the possibility of future gains subject to the beneficiary's loyalty to the Company should contribute to maintaining the participants position in the Company in the long term.
d. Information on how the plan fits into the compensation policy.
The option plan contributes substantially to the total compensation of management members, and in this respect fits into the compensation policy goals to closely tie in individual performance with the Company goals, since it is an additional incentive for the officers to take medium and long-term actions that aggregate value to the Company. This incentive is ultimately reflected on the possibility of gains resulting from the appreciation of the Company shares in the market. Additionally, stock option grants provide the possibility of gains only through long-term commitment and act as a strong instrument for attraction and retention of talent.
e. Information on how the plan aligns the interests of management members with those of the Company on medium and long term.
The option plan provides for different levels of compensation based on performance, which is the incentive for redoubling efforts to attain the overall performance targets of the Company and taking medium and long-term actions to aggregate value to the Company, and positively influence the market price of the shares. The officers are strongly encouraged to pursue sustainable results for the Company to the extent that, as shareholders, they have a vested interest in pushing efficient management practices for enhanced results, and in attracting and retaining highly qualified professionals, driving growth and adding value to the business. The mechanisms that allow the alignment of beneficiaries interests over time include, for example, the vesting periods during which the options cannot be exercised and the timeframe for exercising the options. The
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division into option lots, with exercise over time, serves as encouragement for retention of talent during these periods, allowing them to become shareholders of the Company with progressively greater involvement and to earn a profit which will be increased the longer they remain in the Company. On the other hand, the restriction on transfer of shares allows this alignment of interests to be modulated for a longer period, so any gain can only be realized during the course of such period.
f.
Maximum number of shares allocated to the plan
According to the option plan approved at the extraordinary shareholders meeting of May 8, 2008, the options granted may not exceed the maximum number of shares up to 2.5% (two point five percent) of the Companys capital stock as of the grant date. Based on the number of shares issued by the Company as of December 31, 2010, the total number of shares included in the option plan may reach 51,100,357 shares. There are 10,849,191 outstanding options granted by the Company, so the Company could still grant, as of the year ending December 31, 2011 and based on the total amount referred to above, a balance of options totaling 40,251,166 shares, subject to the 2.5% limit of capital stock for each grant. In addition to the limit above, the option plan provides that, in succession to BM&F SA due to its incorporation by the Company on May 8, 2008, the option plan of that company (BM&F plan) was assumed by the Company. Therefore, the beneficiaries of the BM&F will be entitled to exercise the options for purchase of shares issued by the Company. This led to the assumption by the Company of 19,226,388 options, representing an equal number of shares of the Company. Of this total, 5,461,546 options remain outstanding at December 31, 2010. These shares do not fall within the 2.5% limit under the Companys option plan.
g. Maximum number of option grants.

The Company's option plan approved by the Extraordinary General Assembly Meeting held on May 8, 2008, provides that the options granted shall not comprise more than the maximum limit of shares up to 2.5% (two point five percent) of the Companys capital stock as of the grant date. Based on the number of shares issued by the Company on December 31, 2010, the total options covered by the option plan can be no more than 51,100,357 share options. There are 10,849,191 outstanding options to be granted by the Company, so the company can still grant as of the year ending December 31, 2011 and based on the total value referred to above, a balance of options 40,251,166 shares, subject to the 2.5% limit of capital stock for each grant.
h.
Conditions for acquisition of shares.
The rules for the existing option plan provides that the board of directors or the compensation committee, as appropriate, shall establish periodically stock option programs (Programs), which should define: (i) the respective beneficiaries; (ii) the total number of shares to be granted; (iii) the division of option grants into lots, if applicable; (iv) the option strike price; (v) the vesting period and the period for exercise of the option; (vi) the restrictions on transfers of shares deriving from exercise of an option; and (vii) any penalties. Each Program will establish, at the discretion of the board or committee, as appropriate and after hearing the opinion of Chief Executive Officer, a percentage increase in the base number of options granted to each beneficiary based on the overall and/or individual targets and respecting the limits provided for in the plan. For further information on the conditions for acquisition of shares under the option plan and its programs, see especially the subitems (a) (i) and (j) of this Item 13.4.
i.
Criteria for pricing the option (strike price).
The option plan establishes as an overall rule that the option strike price is the average of the closing price of the Company shares at the last 20 trading sessions before the date of the option grant. In approving any particular program, the board of directors may authorize up to 20% discount on the option strike price incurred on the basic amount as described above, provided that the circumstance of a given program authorizing a discount will not require the same or other discounts being authorized under subsequent stock option programs.
j.
Criteria determining the exercise period.
The rules of the option plan provide that options may be exercised fully or partially during the timeframe specified and the periods set for each program and in the respective stock option grant agreements at the discretion of the board or compensation committee, as appropriate. In any case, upon defining such deadlines, both these bodies should consider meeting the objectives of the option plan so that those deadlines envisage the medium to long term future, focusing on the alignment of interests and talent retention. With regard to the existing programs, the beneficiaries may exercise their options at a rate of one quarter per year. The 2010 program provided the following staggered exercise periods: (i) from January 3, 2011, (ii) from January 3, 2012, (iii) from January 3, 2013, and (iv) from January 3, 2014. For the 2008 programs, the staggered exercise periods were as follows: (i) from June 30, 2009, (ii) from June 30, 2010, (iii) from June 30, 2011, and (iv) from 30 June 2012. For the 2009 program, the staggered exercise periods were as follows: (i) from December 30, 2009; (ii) from December 30, 2010; (iii) from December 30, 2011; and (iv) from December 30, 2012. The existing program provisions stipulate that the options may be exercised fully or partially after the end of the vesting period but in any event within at most seven years from the date on which any portion of the option first vested. In case of partial exercise, the remainder of that particular option will be exercisable, pursuant to the terms and conditions of the relevant
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program, in any subsequent exercise period through to the expiration of the programs, at which time any unexercised options will be automatically forfeited with no right to indemnity.
k.
Form of settlement.
Assuming that other conditions and requirements are met, a beneficiary that wishes to exercise vested stock options under any particular program must give the Company written notice of exercise specifying the number of shares he/she aims to acquire. Validity and effectiveness of this notice are contingent on the options being exercised within the appropriate periods other applicable requirements of exercise is only valid and effective if delivered within the periods established on account of the need to program the availability of shares for acquisition under the programs. Upon receiving the written notice, the Company is responsible for informing the strike price to the beneficiary, while and the Company managers must take all steps necessary to formalize the acquisition of shares and exercise of options. The strike price will be paid by beneficiaries in the manner stipulated by the board or compensation committee, as appropriate. After the option is exercised, the Company, the beneficiary and any other parties concerned with the transaction will sign the relevant documents required for consummation of the transaction and delivery of the shares. The transaction documents will include provisions regarding transfer restrictions and ensure the formalities provided in the law and the Bylaws are fulfilled. Shares thus acquired will enjoy the same rights as the other shares issued by the Company. The company may temporarily suspend the exercise rights at any time applicable law or regulations restrict or prevent the beneficiary from trading in Company shares. Payment of the option strike price is to be made in one lump sum by the beneficiary, provided no share will be delivered to the beneficiary unless all the legal, regulatory and other requirements have been fully met.
l.
Transfer restrictions.
The option plan assigns to the board of directors or compensation committee, as is the case, the decision to establish a transfer restriction period during which a beneficiary may not sell, transfer or otherwise dispose of shares acquired under the option plan, or any additional shares he may have acquired as stock dividends, or as a result of a share split, share issuance or by any means other than a disbursement of additional funds, or any securities convertible into, or exercisable or exchangeable for shares issued by the Company, provided any such additional shares and other securities correlate with, and are attributable to ownership of shares acquired by exercise of a stock option granted under the option plan. Such transfer restriction period may not exceed two years from the option grant date. Nevertheless, a beneficiary may at any time sell any number of shares, as necessary to pay for all or some of the strike price (in the latter case, provided staggered payment arrangements are permitted under the relevant stock option program). Where staggered payment arrangements are permitted under a stock option program, shares acquired under the relevant program will be subject to transfer restrictions for as long as the strike price has not been paid in full, such that any sale during this period will require prior consent from the board of directors, including as the case may be consent granted upon recommendation of the compensation committee. If consent is granted, the proceeds from the sale will be used primarily to pay off any outstanding balance of the strike price. Additionally, a beneficiary will not be permitted to establish any lien on his shares as long as payment is pending for any portion of the strike price, and for as long as the shares are subject to transfer restrictions. In any event, beneficiaries will undertake not to encumber the shares in any way that would hamper enforcement of the provisions of the option plan. It should be noted that for the existing programs, no transfer restriction period has been set.
m.
Criteria and events triggering suspension, alteration or termination of the stock option plan.
The Option Plan may be terminated at any time by the board of directors, without prejudice the prevalence of restrictions on the negotiability of the shares, and without modifying rights and obligations of any agreement existing on the purchase option in effect. Additionally, in the event of dissolution of the Company, or a transformation of the corporate type, or any merger, consolidation or spin-off transaction, or corporate restructuring transaction, from which the Company does not emerge as the surviving company, or if it does survive, in case of a delisting or going private process, any outstanding stock options may be transferred to the surviving company or vest at a predefined earlier date, at the discretion of the board, provided that the option will then be exercisable within a limited period of time, following which the stock option program will end and options not exercised will forfeit with no right to indemnity. The beneficiaries will be given reasonable prior notice of any of the above events so that they can exercise their options at their discretion and within the period established by the board of directors or proposed by the compensation committee, as the case may be.
n. Information on how a director or officer leaving the Company impacts his rights under the share-based compensation plan.
In the event of removal from office for a violation of the office responsibilities or any fiduciary or other duties intrinsic to the
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position, or for dismissal with cause or for termination of service agreement with cause, as defined under Brazilian civil and labor law, any unexercised options will forfeit with no right to indemnity regardless of whether or not their respective options vested. If the legal relationship between the Company and a beneficiary, whether an employee or service provider, terminates without cause either through removal or resignation from a management office, or due to dismissal or termination of the service, or also due to voluntary resignation, then: (i) vested options will be exercisable within 90 days after the event , provided this period must not exceed the original exercise period set forth by the respective program; and (ii) vesting options will forfeit without right to indemnity. In the event of death or permanent disability of a beneficiary, whether an officer or employee or service provider, vesting options will vest, and his option rights under any existing options will be exercisable by the heirs and successors, or in case of disability, by the beneficiary, within one year after the death or permanent disability. Options not exercised within this one-year period will forfeit with no right to indemnity. In any such event the options will be exercisable either fully or partially for payment in one lump sum, provided that in the case of death of a beneficiary the option rights will be apportioned amongst the heirs and successors according to the relevant will or probate. Shares acquired in any such event will be free of any transfer restrictions and clear for sale at any time. The above applies similarly in the event of retirement, if the beneficiary agrees to a non-compete clause, meaning he must not work, as an employee or otherwise, for companies or institutions operate in any way in the same market as the Company for a 120-day period. No provision of the option plan, the program or the agreements under the option plan may be construed as assurance that the relevant beneficiary will continue to provide services to the Company as an officer or employee or service provider, or construed in any way that would hinder our right to remove an officer or terminate an employee or service provider. 13.5 Number of shares and convertible securities issued by the Company or its direct or indirect controlling shareholders, or subsidiaries or companies under common control, which at the end of year were held directly or indirectly, in Brazil or abroad, by directors, executive officers and fiscal council members, as grouped by body. 2010
Company Shares Board of directors Board of executive officers Fiscal council Total Company Shares 656.302 2.776.997 n/a 3.433.299 (%) 0,03% 0,14% n/a 0,17%
13.6 Share-based payments to directors and executive officers recognized in the income statement for the year ended December 31, 2009 and December 31, 2010, and share-based payments forecast for the current year. The tables below set forth information about the share-based remuneration of the board of executive officers (i) recognized in the year ended December 31, 2010 and December 31, 2009, considering the number of members of each body actually receiving share-based remuneration; and (ii) forecast for the current year.
Year ended December 31, 2010 Board of directors Number of beneficiaries Regarding each option grant: - Date of grant - Number of options grants - Vesting dates Last exercise date Transfer restrictions period Strike price: price-weighted average for the following option groups: - Outstanding at start of year n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Board of executive officers 0 Total 0
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Year ended December 31, 2010 Board of directors - Lost during the year - Exercised during the year - Expired during the year Fair value as of the option grant date Possible dilution for other shareholders after giving effect to exercise of all options granted n/a n/a n/a n/a n/a Board of executive officers n/a n/a n/a n/a n/a Total n/a n/a n/a n/a n/a
It should be noted that with regard to long-term compensation (stock option grants according to the option plan) as per the board of directors approval, option grants for the year ended December 31, 2010 occurred only in January 2011 and it will have an impact on the year ending December 31, 2011 (see note in item 13.1 b (ii)).
Year ended December 31, 2009 Board of directors Number of beneficiaries Regarding each option grant: - Date of grant - Number of options grants - Vesting dates n/a n/a n/a 3/1/2009 2,490,000 622,500 - 12/30/09 622,500 - 12/30/10 622,500 - 12/30/11 622,500 - 12/30/12 Last exercise date n/a n/a n/a n/a n/a n/a n/a n/a n/a 12/30/2016 n/a R$ 6.60 R$ 6.60 R$ 6.60 R$ 6.60 R$ 6.60 R$ 2.93 0.12% R$ 6.60 R$ 6.60 R$ 6.60 R$ 6.60 R$ 6.60 R$ 2.93 0.12% Transfer restrictions period Strike price: price-weighted average for the following option groups: - Outstanding at start of year - Lost during the year - Exercised during the year - Expired during the year Fair value as of the option grant date Possible dilution for other shareholders after giving effect to exercise of all options granted n/a Board of executive officers 6 Total 6
Due to the BM&F incorporation, the Company assumed 19,226,388 stock options from which 7,859,384 options were granted to the officers of the former corporation, entitling them to the acquisition of a similar number of Company shares at a set strike price of R$1.00 per share. As of December 31, 2010, there were 1,464,846 outstanding stock options granted to officers under the BM&F option plan, which have yet to vest thus remaining outstanding. Pursuant to the option plan, as of December 19, 2008, the Company granted a number of options which on vesting will be exercisable at a strike price of R$5.174 per share, which was the average closing price in the 20 trading sessions preceding the grant date. This lot comprised a total of 1,540,000 staggered options granted to Company officers, which vest evenly over a period of four vesting dates (the 2008 program). Since then lots 1 and 2 were vested and some officers who held stock options for the 2008 program have earned the right to exercise their options. On December 31, 2010, there were 280,000 stock options granted to officers in 2008 under the 2008 program which hat had not yet been vested. Under the option plan, on March 1, 2009, 2,490,000 stock options were granted to officers with a set strike price of R$6.60 per
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share. Thereafter, there were no new grants or changes in vesting conditions under this plan. On December 31, 2010, there were 955,000 stock options from officers which had not yet vested. On January 3, 2011 the amount of options granted to executive officers under the 2010 Program, as approved by the board of directors, comprised 3,420,000 million shares representing 0.17% of total shares issued by the Company, and their strike price was defined based on the share price at the last 20 trading sessions of 2010, in accordance with the option plan. It should be noted that with regard to long-term compensation (stock option grants according to the option plan) as per the board of directors approval, option grants for the year ended December 31, 2010 occurred only in January 2011 and it will have an impact on the year ending December 31, 2011 (see note in item 13.1 b (ii)).
Current Year Forecast for 2011 Board of directors Number of beneficiaries Regarding each option grant: - Date of grant - Number of options grants - Vesting dates n/a n/a n/a 01/03/2011 3,420,000 855,000 01/03/11 855,000 01/03/12 855,000 01/03/13 855,000 01/03/14 - Last exercise date Transfer restrictions period Strike price: price-weighted average for the following option groups: - Outstanding at start of year - Lost during the year - Exercised during the year - Expired during the year Fair value as of the option grant date Potential dilution for other shareholders after giving effect to exercise of options grants n/a n/a n/a n/a n/a n/a n/a n/a n/a 01/03/2018 n/a R$ 12.91 R$ 12.91 R$ 12.91 R$ 12.91 R$ 12.91 R$ 4.50 0.17% R$ 12.91 R$ 12.91 R$ 12.91 R$ 12.91 R$ 12.91 R$ 4.50 0.17% n/a Board of executive officers 6 Total 6
13.7 year.
Outstanding stock options held by directors and executive officers at the end of the most recent full
The tables below set forth information regarding the outstanding options of the executive officers recognized in the year ended December 31, 2010 considering the number of members of each body actually receiving variable remuneration. It should be noted that with regard to long-term compensation (stock option grants according to the option plan) as per the board of directors approval, option grants for the year ended December 31, 2010 occurred only in January 2011 and it will have an impact on the year ending December 31, 2011 (see note in item 13.1 b (ii)).
Year ended December 31, 2010 2010 Program Board of directors Number of beneficiaries Vesting options: Number of vesting options Vesting dates Last exercise date Transfer restrictions period Strike price in the year: weighted average n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Board of executive officers 6 Total 6
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Year ended December 31, 2010 2010 Program Board of directors Fair value as of end of year Vested options: Number of vested options Last exercise date Transfer restrictions period Strike price in the year: weighted average Option fair value as of end of year Fair value for all options as of end of year n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a Board of executive officers n/a Total n/a
Year ended December 31, 2010 2009 Program Board of directors Number of beneficiaries Vesting options: Number of vesting options Vesting dates Last exercise date Transfer restrictions period Strike price in the year: weighted average Fair value as of end of year Vested options: Number of vested options Last exercise date Transfer restrictions period Strike price in the year: weighted average Option fair value as of end of year Fair value for all options as of end of year n/a n/a n/a n/a n/a n/a 617,500 12/30/2016 n/a 6.60 2.93 2.93 n/a 6.60 2.93 2.93 617,500 n/a n/a n/a n/a n/a 955,000 477.500 12/30/2011 477.500 12/30/2012 12/30/2016 n/a 6.60 2.93 n/a 6.60 2.93 955,000 n/a Board of executive officers 6 Total 6
Due to the BM&F incorporation, the Company assumed 19,226,388 stock options from which 7,859,384 options were granted to the officers of the former corporation, entitling them to the acquisition of a similar number of Company shares at a set strike price of R$1.00 per share. On of December 31, 2010, there were 1,464,846 non-exercisable stock options and no exercisable options were available. Under the option plan, on December 19, 2008, the Company granted a lot of options at a strike price of R$5.174 per share, corresponding to the weighted average of the closing price at which the shares traded in the last 20 trading sessions preceding the grant date granted on vesting. A total of 1,540,000 staggered stock options had been granted to officers equally distributed in four vesting dates over a period of four years (2008 program). On December 31, 2010 there were 280,000 non-exercisable stock options and 70,000 exercisable options. 13.8 Options exercised and shares delivered to directors and executive officers as share-based compensation in the year to December 31, 2009 and December 31, 2010. The table below sets forth information regarding options exercised and shares delivered to executive officers as part of the Companys share-based compensation policy for the year to December 31, 2010 and December 31, 2009 considering the number of members from each body who actually exercised their options and received shares.
Year ended December 31, 2010 2010 Program Board of directors Board of executive officers Total
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Year ended December 31, 2010 2010 Program Board of directors Number of beneficiaries Exercised options: Number of shares from option exercise Strike price in the year: weighted average Difference between strike price and the market price of the shares Shares delivered: Number of shares from option exercise Strike price: weighted average Difference between strike price and the market price of the shares n/a n/a n/a n/a n/a n/a n/a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 n/a Board of executive officers 0 Total 0
Year ended December 31, 2009 2009 Program Board of directors Number of beneficiaries Exercised options: Number of shares from option exercise Strike price in the year: weighted average Difference between strike price and the market price of the shares Shares delivered: Number of shares from option exercise Strike price: weighted average Difference between strike price and the market price of the shares n/a n/a n/a n/a n/a n/a n/a 0 0 0 0 0 0 0 0 0 0 0 0 0 0 n/a Board of executive officers 0 Total 0
As set forth in paragraph 13.6 above, due to the incorporation of BM F SA, the Company assumed 19,226,388 stock options of which 7,859,384 were granted to the officers from the former corporation, entitling them to acquire an equal number of shares from the Company at the strike price of R$1.00 per share. On December 31, 2010, there were 1,464,846 outstanding stock options from the officers under the BM&F option plan, which had not yet been vested. Under the option plan, on December 19, 2008, the Company granted a lot of options at a strike price of R$5.174 per share, corresponding to the weighted average of the closing price at which the shares traded in the last 20 trading sessions preceding the grant date granted on vesting. A total of 1,540,000 staggered stock options had been granted to officers equally distributed in four vesting dates over a period of four years (2008 program). On December 31, 2010 there were 280,000 stock options granted in 2008 to the officers under the option plan which had not yet been vested. Under the option plan, on March 1st, 2009, the Company granted 2,490,000 stock options to officers at a set strike price of R$6.60 per share. After that, no new grants or changes to the vesting conditions occurred under the option plan. On December 31, 2010, there were 955,000 stock options granted to the officers which had not yet been vested. 13.9 Summary information required for a clear understanding of the data provided under paragraphs 13.6 to 13.8, such as an explanation of the method for pricing the shares and options.
a.
pricing model;
Because of the factors described in items (b) and (c) of this paragraph 13.9, in determining the options fair value we used Hulls binomial pricing model. This model presents advantages equivalent to such as the Black-Scholes model, used in valuations of European options, and is therefore relatively easy to build allowing exercise at any point in time until expiration and payment of dividend associated with the respective option.
b. data and assumptions used taken into account in the pricing model, including price-weighted average, strike price, expected volatility, option lifespan, expected dividends and risk-free interest rate;
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The main assumptions used in pricing the options were: the options were valued according to market conditions as at the grant dates under each grant program; the risk-free interest rate was estimated by using interest-based futures contracts assuming a count convention spanning the duration of the option; the prices for the shares were adjusted to account for dividend payments; the expected volatility used for pricing was defined pursuant to item (d) of this paragraph 13.9; and the assumed expiration date of the options was the last exercise date under the option. Other classic assumptions for option pricing models were used, such as removing the possibility of arbitrage and constant volatility over time. The key assumptions are thus the following:
Data and Assumptions Date of grant Share price (R$) Strike price (R$) Expected volatility (year) Option lifespan (last vesting) Expected dividends Risk-free interest rate (per year of 252 business days) 2010 Program 01/03/2011 13.40 12.91 25.00% 7 years 80% 11.78%
c. method used and assumptions adopted to incorporate expected effects of early exercise;
In determining the fair value of the options we took into account the following aspects: the stock option model we adopt allows for early exercise after a certain future date (the vesting date) between the grant date and the last exercise date; the underlying shares pay dividends between the grant date and the last exercise date. Therefore, through to the vesting date, the options mimic European-style options (early exercise not permitted) whereas after vested the options may be exercised earlier than anticipated under certain circumstances, mimicking American-style options. Similar options are known as Bermuda or Mid-Atlantic options, and by construal their price must lie between the price of a European option and the price of an American option of like characteristics. For the payment of dividends, two effects on the option price should be taken into consideration: (i) a typical drop in the market price for the shares after they start trading exdividend; and (ii) the influence these payments have on an early-exercise decision.
d. form of determining expected volatility;

The shares underlying the options under the programs were not outstanding for options listed on the date of the fair price calculation, and therefore it was not possible to define their implied volatilities through market prices. As a result, the Company estimated an average options volatility between the volatility calculated by means of broadly accepted model (EWMA) and the implied volatility by an independent data provider.
e. any other option feature included in measuring the option fair value fair value.
All major characteristics of the options are described and covered in the preceding paragraphs. 13.10 Private pension plans granted to directors and executive officers.
Board of directors Number of members Name of plan Number of officers eligible for retirement Conditions for early retirement Updated amount of contributions accrued in private pension plan up to end of previous year, net of direct contributions by the officers Total accrued contributions over previous year, net of direct contributions by the officers n/a n/a n/a n/a Board of executive officers 6 Mercaprev 1 n/a 3,893,443.51 0 0 3,893,443.51 Total 0
n/a
438,110.56
438,110.56
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Board of directors n/a Is early redemption possible and on what conditions
Board of executive officers Yes, only the employees portion
Total -
13.11
Average remuneration paid to directors, executive officers and fiscal council members.
In 2010, the stock options for the year 2010 as per the board of directors approval (see item 13.1 b (ii)) occurred on January 3, 2011, and it will have an impact on the year ending December 31, 2011. In the case of the board of directors, two members left the Company, one in April and one in June, and a new member was hired in June at a lower salary. We therefore considered the four members of the board with effective exercise of their functions over a twelve month period. To inform the highest remuneration, we considered all salaries paid in the year ended December 31, 2010, whereas the board member with the highest remuneration performed his functions over a full year. One member of the board of directors received no remuneration in the year 2010. The average amount of remuneration received by an individual board member during 2010 was R$383,573.49.
Year ended December 31, 2010 Board of directors Number of members Amount of highest individual remuneration (in R$) Amount of lowest individual remuneration (in R$) Average individual remuneration (in R$) 11.00 1,403,705.84 204,000.00 348,703.17 Board of executive officers 6.00 4,208,247.98 1,769,140.17 2,480,091.13 Fiscal Council n/a n/a n/a n/a
* As discussed in paragraph 13.1 of the Reference Form, while the fiscal council is not active, its responsibilities are adequately covered by the audit committee whose scope of responsibilities under article 47 of the Bylaws goes beyond those the Brazilian Corporate Law prescribes for the fiscal council. The Companys audit committee consists of five independent members, four of them being outside members, and one an independent member, all of whom serve for two-year terms. For the composition of the amounts listed in the table below, we considered compensation paid to four outside committee members in 2010. The highest remuneration paid in 2010 amounted to R$241,352.46 and the lowest was R$190,194.02. The average remuneration paid in 2010 was R$203,735.27. Due to changes in board composition as of April 2009, the information on lowest remuneration takes into account just the five members actually in office throughout the 12-month period, whereas the information on highest remuneration takes into account the aggregate amount recognized in the income statement. This notwithstanding the board member earning the highest remuneration was in office for just the period from May to December 2009. In the case of the board of executive officers, it should be noted two members left the Company in February and one in May, whereas a new officer joined our Company in July. The information on lowest remuneration takes into account the five members actually in office throughout the 12-month period, whereas information on the highest remuneration takes into account the aggregate amount recognized in the income statement for the year to December 31, 2009. The executive officer that earns the highest remuneration was in office for the full year. Two members of the board of directors received no remuneration in 2009. The average remuneration of the nine members who did receive remuneration in 2009 was R$415,061.48. It should be noted that that the composition of 2009 remuneration includes the amount related to long-term compensation (stock option grants) calculated based on the fair value of options as described in paragraphs 13.4, 13.6, 13.7, 13.8 and 13.9.
Year ended December 31, 2009 Board of directors Board of executive officers Fiscal Council
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Number of members Amount of highest individual remuneration (in R$) Amount of lowest individual remuneration (in R$) Average individual remuneration (in R$)
10.92 936,091.88 204,000.00 339,042.89
6.00 5,453,734.08 2,326,769.28 2,971,009.46
n/a n/a n/a n/a
13.12 Discussion on contractual arrangements, insurance policies and other documents used in structuring compensation schemes or indemnity mechanisms covering removal from office or retirement of directors and officers; including information on related financial effects impacting the Company. We do not adopt any specific policy for the compensation and/or indemnification of officers in the event of termination or retirement, except for benefits granted under the relevant private pension plans in effect in the event of retirement, as described in paragraph 13.10. It should be noted that the D&O insurance, which covers civil liability of directors and officers, held by the Company is not extensive and is not related to the termination or retirement, whereas its purpose is to ensure financial protection and peace of mind for all and management members, who can thus focus on day-to-day management decisions without too much concern, which is a competitive advantage in retaining qualified talent. 13.13 Information on percentage of total compensation paid to each of the board of directors, board of executive officers and fiscal council, which is attributable to members qualifying as parties related to the direct or indirect controlling shareholders, as defined under applicable accounting principles. The Company has no controlling shareholder, and therefore there is no compensation recognized in the income statement regarding directors or officers deemed to be parties related to direct or indirect controlling shareholders. 13.14 Information (segregated by body) on amounts recognized in the income statement as remuneration paid to members of each of the board of directors, board of executive officers and fiscal council for any reason other than their responsibilities as members of these bodies, such as, for example, fees and commissions for consulting or advisory services. There is no amount recognized in the income statement as remuneration paid to directors or officers for reasons other than their responsibilities as members of the board of directors or the board of executive officers. 13.15 Information (segregated by body) on amounts recognized in the income statements of subsidiaries, companies under common control and direct or indirect controlling shareholders, as remuneration paid to members of each of the board of directors, board of executive officers and fiscal council, including information specifying on what account these amounts were paid. The Company has no controlling shareholder, and therefore there are no companies under common control. There are no amounts recognized in the income statements of subsidiaries, as remuneration paid to directors or officers of the Company. 13.16 Other information deemed relevant by the registrant. There is no further information regarding the officers compensation which has not been set forth in the items of paragraph 13. 14. Human resources a. number of employees (grouped by type of activities performed and by geographic location)
14.1. Description of the human resources structure The number of personnel we employ has grown in 2010 largely as a result of enhanced market demand. Most our new hirings occurred in the technology and operational business areas, driven by the number and importance of our ongoing projects.
Year ended December 31, 2010 Geographic location Activity Senior executives Executives Managers Other heads of department Specialists Operations personnel Interns Specialists Interns Specialists Specialists TOTAL Number of employees 6 30 85 144 988 126 77 2 1 1 2 1,462 Total by geographic location
So Paulo
1,456
Rio de Janeiro Porto Alegre Mato Grosso
3 1 2
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Year ended December 31, 2009 Geographic location Activity Senior executives Executives Managers Other heads of department Specialists Operating personnel Interns Specialists Operating personnel Interns Specialists Operating personnel Managers Operating personnel Operating personnel TOTAL Number of employees 6 26 70 108 712 139 56 1 4 1 1 3 1 3 5 1,136 Total by geographic location
So Paulo
1,117
Rio de Janeiro Porto Alegre Cear Paran
6 4 4 5
Year ended December 31, 2008 Geographic location Activity Senior executives Executives Managers Other heads of department Specialists Operating personnel Interns Other heads of department Specialists Operating personnel Specialists Operating personnel Managers Specialists Operating personnel Managers Specialists Operating personnel TOTAL Number of employees 8 29 74 118 728 184 75 2 3 6 1 2 1 1 4 1 1 5 1,243 Total by geographic location
So Paulo
1,216
Rio de Janeiro Porto Alegre Cear Paran
11 3 6
b.
number of outsourced personnel (grouping them by type of activities performed and by geographic location) Year ended December 31, 2010 Activity Outsourced personnel (*) Specialists 175 Year ended December 31, 2009 Activity Outsourced personnel (*) Specialists 227 Year ended December 31, 2008 Activity Outsourced personnel (*) Specialists 319 Total by geographic location 175
Geographic location So Paulo
Total by geographic location 227
( )
Total by geographic location 319
* IT outsourced personnel
The number of outsourced personnel in 2010, including outsourced IT personnel, decreased 14.7% from May 2008 (after the BM&F and Bovespa Holding merger), when the number of outsourced IT personnel (not including interns) was 1,828. c. employee turnover rate;
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Pushed by our strategic plan and new projects, we opened 431 new job positions in 2010, most in the technology and operational areas, whereas having cut 58 positions in other departments. The turnover rate at the end of 2010 was 10.39%. Employee turnover in 2009 was 17.42%. We should stress this turnover rate was impacted by the actual cut of 93 jobs over the months of March and April 2009, which resulted from our having captured synergy opportunities arising from the process that integrated the activities of the former two independent exchanges, BM&F and BOVESPA. Given that the integration process started in May 2008, and extended over a certain number of months we cannot provide any accurate turnover rate for that year. d. registrants exposure to labor liabilities and contingent liabilities.
For information on our exposure to labor liabilities and contingent liabilities, see subsection 4.3 of this Form. 14.2. Discussion on any material changes relative to the data provided under item 14.1 of this Form.
As of the date of this form, there have been no material changes related to the data and information provided under subsection 14.1 above. 14.3. a. Description of the employee compensation policy salary and variable compensation policy;
Our aim is to have a competitive compensation policy vis--vis the marketplace, one that will give us the ability to attract and retain talent, and keep a capable team of skilled and dedicated people, capable to help us attain our short-, medium- and longterm goals and strategic objectives. Given that our integrated business model is inextricably tied to our objectives of promoting, developing and expanding the domestic capital markets, which per se imply longer and sustainable cycles, it is crucial for us to have the ability to retain talent, such that our compensation policy must include mechanisms to encourage our people to stay with us for the long haul. Under our policy our employees are granted annual salary adjustments based on the adjustment rate established under the relevant collective bargaining agreement, as of a certain base date. Moreover, we may grant additional salary adjustments based on merit, or due to promotion or as recognition for outstanding performance, which in any of these cases are voluntary salary adjustments with correlate mainly with the results of periodic evaluations of individual performance. In addition, the variable remuneration portion of the compensation package is established and paid every six months pursuant to our Profit Sharing Program and according to the rules set under Law No. 10,101 dated December 19, 2000. This profit sharing program defines potential multiples based on monthly salary, which are ultimately determined as a function of certain global performance indicators set for the Company, coupled with factors as job seniority and evaluations of individual performance. b. policy on employee benefits Our benefit package includes dental and health care plans, executive health check-up plan, life insurance, meal vouchers and in-house meals, private pension plan, child care and transportation vouchers. Additionally, we adopt a quality of life program which periodically implements actions oriented towards enhancing our employees wellness and quality of life, promoting healthy lifestyles and cultural activities and offering them good entertainment. c. characteristics of any share-based compensation plan for non-management employees While our stock option plan targets mainly our upper management employees, it also includes middle-management employees amongst the eligible employees. Stock options are granted from time to time as a function of certain global performance indicators set for the Company, coupled with factors as job rank and evaluations of individual performance. The characteristics of the share-based compensation plan to which our middle management employees are eligible are the same as those of the stock option plan for upper management members, and are discussed under subsection 13.4 of this Form. 14.4. Discussion on relations with workers unions
The workers union that represents most of our employees is the Union of Employees of Independent Commercial Agents and Consulting, Expertise, Information, Research and Accounting Firms of the State of So Paulo ( Sindicato dos Empregados de
Agentes Autnomos do Comrcio e em Empresas de Assessoramento, Percias, Informaes e Pesquisas e de Empresas de Servios Contbeis no Estado de So Paulo).
Our relationship with the union is characterized by analytical reviews and discussions of mutual proposals, with the aim of reaching consensus on how to best improve work conditions for our employees. These discussions typically involve the negotiations for the annual renewal of the collective bargaining agreement, and address issues as salary adjustments, benefits, work hours, lunch and rest breaks, and so forth. We have had productive relations with the unions thus far. In addition, in 2009 we entered into a collective bargaining agreement with the union which specifically sets rules on how our employees can bank time while they are working to cover periods when they are not. An hour bank was agreed along with the
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terms and conditions of our profit sharing program. 15. Controlling ownership 15.1. Controlling shareholder or group of shareholders No shareholder or group of shareholder sharing similar interests holds a direct or indirect controlling interest in our issued and outstanding shares. In addition, no shareholders agreement has been filed at our registered office which seeks to control the election of directors and/or regulate the exercise of voting rights by any shareholders. 15.2. Groups of shareholders sharing similar interests which in the aggregate hold ownership interest representing five percent or more of the shares of stock (other than those listed under 15.1 above).
Shareholder Common shares % of shares outstanding Last changed Brazilian or foreign shareholder Shareholders or voting agreements Ties with controlling shareholder
Funds managed by BlackRock, Inc. Funds managed by OppenheimerFunds, Inc. CMEG BRASIL I PARTICIPACOES LTDA. Other Treasury shares Total
104,767,426 103,004,451 101,078,580 1,620,930,218 50,219,325 1,980,000,000
5.29 5.20 5.10 81.87 2.54 100.00
9/7/2010 5/17/2011 12/13/2011 -
Foreign Foreign Brazilian -
No No No No -
No No No No -
15.3.
Ownership structure as at the date of the most recent shareholders meeting.

Ownership structure as at the annual and extraordinary shareholders meetings held on April 18, 2011
By type of shareholders
Number of individual shareholders Number of corporate shareholders Number of institutional investors Free float
Number of shares
76,908 2,068 1,823
(95.85%)
1,959,262,007
15.4.
Ownership structure chart
No shareholder or group of shareholder sharing similar interests holds a direct or indirect controlling interest in our shares. Ownership in our shares is widely dispersed. In addition, no shareholders or voting agreement has been filed at our registered office which seeks to control the election of directors and/or regulate the exercise of voting rights by any shareholders. 15.5. Shareholders agreements No shareholders or voting agreements of any kind have been registered with our Company. 15.6. Material changes in ownership interest held by participants in the controlling group and by the registrants directors and officers No shareholder or group of shareholders sharing similar interests holds a direct or indirect controlling interest in our shares. In addition, no shareholders or voting agreement has been filed at our registered office whether or not for the purpose of controlling the election of directors and/or regulating the exercise of voting rights by any shareholders. As of December 31, 2010, our directors and officers held combined ownership interest in 0.168% of our outstanding shares, or an aggregate of 3,433,299 common shares. As of December 31, 2009, their combined ownership interest was 0.108% of the outstanding shares of stock (or 2,212,684 shares), which was down from a total of 0.383% of the shares (or 7,834,824 shares) as of December 31, 2008. 15.7. Other material information
There is no additional material information to be provided at this time under this section. 16. Related party transactions 16.1. Rules, policies and practices the registrant adopts in connection with related party transactions, such as defined in applicable accounting standards. Our policy on related party transactions and other circumstances involving or potentially involving conflicts of interest (Policy on Related Parties) was approved by our board of directors on March 17, 2009. This policy sets rules aimed to ensure that
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decisions are taken on the basis only of the best interests of BM&FBOVESPA and subsidiaries, in particular decisions that involve related parties or other situations potentially involving conflicts of interest. Our policy applies to all our directors, officers and employees, and those of our subsidiaries. Based on Accounting Standard No. 5, or CPC-5, issued by the Brazilian Accounting Standards Board (Comit de Pronunciamentos Contbeis), or CPC, and endorsed by the CVM pursuant to CVM Resolution 560/08, our Policy on Conflicts of Interest and Related Party Transactions defines a related party as a person having relations with our company in any of the following ways: (a) Where said person directly or indirectly, through one or more intermediaries, (i) is a controlling shareholder or a subsidiary or company under common control (including a controlling shareholder or subsidiary), (ii) holds an interest in us permitting it to exercise significant influence over our company; or (iii) exercises joint control over our company; (b) Where said person is an affiliate of ours; (c) Where said person is a joint company (joint venture) in which we are an investor; (d) Where said person is a director or key management member of the Company, key management member being defined as a person vested with authority to, and responsibility for planning, directing and overseeing the Companys activities either directly or indirectly (including any director or executive officer of said person). Under our policy, key management member is further defined to include any member of our board of directors, our board of executive officers, our audit officer, our human resources officer, corporate risk officer and the chief operational officer, in addition to the chief operational officer of the BM&F settlement bank; (e) Where said person is a close family member of any of the persons listed in items (a) and (d) above, close family member being defined as family members that would be expected to influence, or be influenced by such close family member in his or her business dealings with us, and may include (i) said persons spouse, or common law spouse, and children; (ii) the children of the spouse or common law spouse; and (iii) said persons dependants or the dependants of said persons spouse. (f) Where said person is a subsidiary or company under common control, or is a company significantly under the influence of, or is a company in which the power to significantly affect or influence the decision-making process lies directly or indirectly with any of the persons listed in items (d) or (e); or (g) Where such person is a pension fund operating for the benefit of company employees or of any entity that is a related party of ours. Under our policy on related parties, on identifying a matter or proposal involving or potentially involving a related party transaction or other instance of conflict of interest, directors and officers are required promptly to make the conflict of interest known to us. In addition, they are required to abstain from taking part in discussions concerning any such matter or proposal, and from voting on any such matter or proposal. In the event a director or executive officer could potentially ascertain a personal gain from any particular decision were to silence about a conflict of interest, any peer having knowledge of the fact may disclose the conflict of interest. In this event, a directors or officers silence will be deemed a breach of our policy and the matter will be submitted to our nomination and corporate governance committee for evaluation and a recommendation to the board of directors as to possible corrective actions. Our policy and the rules it conveys are in line with the requirements of Brazilian Corporate Law, particularly inasmuch as it prescribes that directors and officers have a duty of loyalty towards the company. Except for the requirements set forth in our policy on conflicts of interest and related party transactions, we do not adopt other rules, regulation or procedures in connection with related party transactions. 16.2.
Related Party
Related party transactions

Partys relation to Co. Subsidiary TXN date Subject matter 2010 Monthly Exchange fees on ownership mbrshp. Costs refund exp. w/ IT services Exchange fees on ownership mbrshp. Bank acct. deposits (475) Amount (In R$) 2009 (475) 2008 (475) Transaction Acct. Payable Acct. Receivable Acct. Payables Cash equivalents Outstanding balance (in R$ thousands) 2010 (2,315) 2009 (1,839) 2008 (1,361) N/A N/A Related Party Crtb. Security & Insurances
BVRJ Rio de Janeiro Exchange BBM Brazilian Commodities Exchange BM&F Settlement
Monthly Subsidiary Monthly Whollyowned Not applicable
115 (1,319) -
295 (669) -
2,184 (150) -
5 (337) 17
88 (157) 9
(70) 2,760
N/A N/A N/A
N/A N/A N/A
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Bank
subsidiary
Monthly Not applicable Not applicable
Use of our facilities & IT infrastructure
5,402 -
5,898 -
3,325 -
Acct. Receivable Acct. Payable Foreign exchange Acct Receivable
527 153
543 3,549
457 (831) -
N/A N/A N/A
N/A N/A N/A
Fgn. exchange ctr. to close Cost recovery ctr. for refund of costs re use of our manpower & infrastructure Pass-through of broker contributions (based on trading volume) Refund of Co. donations
BSM Market Surveillance Investor Compensation Mechanism
Subsidiary
Monthly
2,570
2,419
1,483
452
1,257
N/A
N/A
Monthly
Funds to transfer Acct. Receivable Acct. Payable Donations Cost recovery Acct. Receivable Acct. Payable
(2,907)
N/A
N/A
Not applicable Bovespa Institute for Social & Environmental Responsibility Not applicable Not applicable Not applicable We sponsor the association Not applicable Not applicable
(9,250) 441 -
1 6,947 -
1,501 (9) 441 6,901 (9)
4,295 -
N/A N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A N/A
Subsidiary
Donations related to demutualization General cost recovery Cash transfers to Co.
BM&F Association
Abbreviations at http://www.itc.nrcs.usda.gov/scdm/docs/OD-Abbreviations.pdf
As discussed under subsection 16.1(d) above, our policy formally acknowledges key management personnel as our related parties. Given that the compensation we pay to our key management personnel has already been discussed at length under section 13 of this Form, the above table does not include information on compensation, providing data only on our transactions with other related parties, as identified based on the criteria set forth in subsection 16.1 above. 16.3. For each related party transaction or set of transactions discussed under 16.2 above, which has been agreed in the last year, the information should cover: a) identification of actions taken to tackle conflicts of interest Our transactions with other parties, in particular transactions with related parties, are typically subject to approval either by our board of directors or board of executive officers, as pertaining to each of their spheres of authority and provided in our bylaws. Where any director or officer may have a conflict of interest regarding any proposed transaction, this director or officer must abstain from discussing the matter, and from attending and voting in any meeting held to deliberate about the subject. For additional information on conflicts of interest affecting any member of our board of directors, please see subsection 12.4(c) of this Form. We adopt no additional formal mechanisms to identify conflicts of interests. b) evidence that the related party transactions have been entered on an arms length basis (mutually beneficial or adequately compensated transactions) Below there is more information about transactions with related parties carried out last year, according to the table in item 16.2:
BVRJ Rio de Janeiro Exchange. Payments made by BM&FBOVESPA is given pursuant to the BVRJs bylaws, which states that it
is the duty of the member (such as BM&FBOVESPA case) punctually pays the contributions due. At a meeting held on December 13, 2004, the Board of BVRJ established the minimum monthly contribution amount due for each property title at R$ 400.00. Additionally, in a meeting held on January 28, 2011, the Board of BVRJ determined the extinction of the stipulated minimum monthly contribution to BM&FBOVESPA, because of financial self-sufficiency of BVRJ.
BBM Brazilian Commodities Exchange. Payments made to BBM by BM&FBOVESPA is given pursuant the bylaws of that entity,
which states that it is the duty of the member (such as BM&FBOVESPA case) pay punctually the contributions due as a result of the property title. The Ordinary General Assembly established at a meeting held on December 18, 2003, the value of the minimum monthly contribution of R$ 500.00 per property title. For members considered inactive, the Board of Directors of BBM has determined the payment of double the minimum monthly contribution. The BM&FBOVESPA has received from BBM, as reimbursement of costs, the amount expent in expert technical assistance, systems development and maintenance of equipment (data processing).
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BM&F Settlement Bank. The amounts owed by the BM&F Settlement Bank to BM&FBOVESPA are relative to the resources used
by the bank for execution of their activities, in accordance with the contract between the parties. The payment of such amounts are done based on a descriptive document prepared by BM&FBOVESPA and approved by the BM&F Settlement Bank in accordance with the conditions of contract.
BSM Market Surveillance. BM&FBOVESPA transfers the costs related to the hiring of its resources and infrastructure by BSM to
perform its activities. Such costs are calculated monthly in accordance with methodology defined in the contract signed between the parties and also include activities related to the Invertor Compensation Mechanism Fund, since such mechanism is operated by BSM. 17. Capital stock 17.1. Capital stock
Issued and outstanding Capital stock Authorized share capital
Our capital stock is represented by shares of common stock only.

Type of shares Number of shares
(in R$ thousands)
(in R$ thousands)
(in R$ thousands)
Payment term
Last changed
Common shares
1,980,000,000
2,540,239,563.88
2,540,239,563.88
Authorized share capital Amount
2,540,239,563.88
Not applicable
December 13, 2011.
Number
(in R$ thousands)
Authorization date
Our board is authorized to increase the capital stock by up to two billion and five hundred million (2,500,000,000) shares of common stock
Within the authorized limit, our board has powers to decide on any issuance of shares and on the issue price per share.
May 8, 2008
As of the date of this Form no convertible securities have been issued by us. 17.2.
Date of decision
Share issuances and increase in capital stock

Issuance approved by Issue date Total issuance
Total issue
(number of shares)
Issue price
(in R$)
Form of payment
Criterion determining the total issuance
Private issuance or public offering
As a ratio of capital stock
(%)
August 19, 2008
Board of directors
August 19, 2008
3,216,300.00
3,216,300
1.00
Issue price paid in cash on or before December 31, 2008.
Shares issued within the authorized limit set in our Bylaws. Under article 8 of the Bylaws, our board has powers to decide on the issuance (within the authorized limit), the issue price, and the form and conditions of payment.
Private issuance shares subscribed by holders of vested stock options under our stock option plan.
0.16%
Under article 8 of the Bylaws, our board of directors is authorized to share issuances up to the limit of two billion and fiv e hundred million shares of common stock without need to amend our Bylaws. In so deciding, the board must resolve on the total issuance, the issue price per share and the form and conditions for shareholders to pay in the new shares. At a meeting held on August 19, 2008, our board approved the issuance of 3,216,300 additional comm on shares for fulfillment of vested stock options under the stock option plan which we absorbed upon the merger with BM&F (the former independent commodities and futures exchange), which was approved at a shareholders meeting held on September 20, 2007. This stock option plan was later incorporated into our own stock option plan, which was approved at the extraordinary shareholders meeting of May 8, 2008. As of August 19, 2008, the additional shares were fully subscribed by the relevant holders of veste d stock options and paid up in Brazilian currency on or before December 31, 2008. This share issuance was well within the authorized limit of our share capital. As a result, as of August 19, 2008, our capital stock which previously amounted to R$2,537,023, 263.88 increased to R$2,540,239,563.88 represented by 2,044,014,295 shares of common stock. At a shareholders meeting held on May 8, 2009, the shareholders approved the new wording of article 5 of the Bylaws,
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which reflects the current capital stock, as approved at the board meeting of August 19, 2008. 17.3. 17.4. 17.5. Share splits, reverse splits and bonus shares Reductions in capital stock Other relevant information As of the date of this Form, there have been no share splits or reverse splits and no bonus shares have been distributed. As of the date of this Form, there has been no reduction of our capital stock. At a Board meeting held on Dezembro 13, 2011, it was approved the cancellation of 64,014,295 treasury shares held by the Company after repurchases carried out within the scope of the Share Buyback Program. As a result, our capital stock amounted to R$ 2.540.239.563,88 is now represented by 1,980,000,000 shares of common stock. For additional information on our share buyback program, see section 19, under the heading Share buyback programs and treasury stock. 18. Securities information 18.1. Rights and prerogatives of each type and class of shares:
a.
Rights to dividends
Under Brazilian Corporate Law and our Bylaws, our shareholders are entitled to any dividend or other distributions, based on their proportionate holdings in shares of stock issued by us. Under article 54 of our bylaws, we are required to pay to shareholders every year mandatory dividends at a rate of 25% of adjusted net income for the year. Our calculation of net income for the year, and the amount available for distribution, includes adjustments made pursuant to Brazilian Corporate Law for allocations to the legal reserve and certain other reserves, such as a contingency reserve, as well as for reversal of previous allocations where appropriate.
b.
Voting rights
Each of our common shares grants its holder right to one vote at decisions of annual and extraordinary shareholders meetings. Under the Novo Mercado listing regulation, all our shares of capital stock are required to be voting shares, such that we are not permitted to issue non-voting shares or shares with restricted voting rights or participation certificates. However, there are certain voting limitations, which are set forth in subsection 18.2 of this form.
c.
Convertibility into other types or classes of shares
Our shares of stock are not convertible into other types or classes of shares. In addition, under our bylaws we are permitted to issue debentures convertible into common shares and subscription warrants. However as of the date of this reference form we had not issued any of these securities.
d.
Reimbursement rights
Withdrawal rights
Under certain circumstances, shareholders that dissent from a decision taken at a shareholders meeting are entitled to exercise withdrawal rights, in which case we must reimburse them for the value of their shares, as determined pursuant to Brazilian Corporate Law. In our case, pursuant to applicable regulations, shareholders will not be entitled to exercise withdrawal rights upon a decision to (a) approve a consolidation transaction or (b) approve a merger transaction where we are not the surviving entity or (c) approve our participation in a corporate group acquire ownership interest in to the extent our shares (1) are liquid shares, meaning they are included in the stock exchange general stock index or a stock index compiled by any other exchange, as defined by the Brazilian Securities Commission, and (2) consist of widely held stock (defined as the controlling shareholders individually or as a group holding less than 50% of the issued and outstanding shares of capital stock).
Redemption
Under Brazilian Corporate Law, our shares may be redeemed upon a decision taken at a shareholders meeting approved by holders of shares representing at least 50% of our capital stock.
Liquidation
Pursuant to Brazilian Corporate Law, in the event of our liquidation in a winding up process, our shareholders are entitled to reimbursement of capital in proportion to their holdings in our shares, provided all our other liabilities must have been previously settled.
e.
Tag along rights (tender offers triggered by acquisition of control)
Under the Novo Mercado listing regulation, a disposition of our control agreed pursuant to one or a series of successive transactions requires a precedent or dissolving condition being established, whereby the prospective buyer undertakes to conduct a tender offer to purchase all outstanding shares. Under Brazilian Corporate Law and the Novo Mercado listing
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regulation, the bid price and the payment conditions must be the same as offered for the controlling shares, and the offer should take place within the legally prescribed deadline. In addition, a tender offer is required also in the following instances: Where a transaction is entered for assignment of a sale of subscription or other rights exercisable for shares, or of securities convertible or exchangeable for shares of our capital stock, which upon being exercised or converted or exchanged for shares issued by us would imply a disposition of control; Where one or more transactions for a sale of beneficial ownership in as many shares issued by us as would imply a disposition of control (indirect transfer of control); and Where a shareholder acquires as many additional shares in one or more private transactions as are sufficient to acquire control. In this event, the bid price and payment conditions in the tender offer must be the same as paid under the private purchase transactions and, in addition, shareholders that may have traded shares to the acquirer of control in the preceding six-month period will be entitled to compensation established as the difference between the price per share paid for control and selling price on the stock exchange, as adjusted for inflation in the period. Under Brazilian Corporate Law and the Novo Mercado listing regulation, in a tender offer triggered by a disposition of control all shareholders may adhere to sell the shares at 100% the selling price paid for the controlling shares. Additionally, because of our fairly dispersed share ownership structure, our bylaws require a tender offer to be carried out by any shareholder or group of shareholders seeking to acquire a 30% interest in our shares, or other rights in our shares as beneficial owners (including by means of usufruct or a trust) in any way granting voting rights over 30% or more of the outstanding shares. For additional information see subsection 18.2(c) below.
f. g.
Transfer restrictions (lock up) Conditions to amend rights assigned to the shares
There are no transfer restrictions related to our shares. Under Brazilian Corporate Law, neither the bylaws nor the decisions of a shareholders meeting of any corporation may restrict the rights of shareholders regarding any of the following: Rights to a proportionate participation in profit distributions; Right to a proportionate participation in the distribution of assets outstanding in a winding up process (after all corporate liabilities are settled); Preemptive rights to subscribe for shares, convertible debenture or subscription warrants, except in certain circumstances permitted by Brazilian Corporate Law.; Right to review and judge the company financials and the management of business operations in the manner prescribed under Brazilian Corporate Law; and Right to withdraw under certain legally prescribed circumstances.
h. i.
Other material features Foreign issuers
There are no other material features. Not applicable. 18.2. Description of bylaws provisions limiting the voting rights of holders of material ownership interest, and bylaws provisions requiring holders of material interest to conduct tender offers.
- Voting cap
While under article 7 of our Bylaws each share entitles the holder to one vote in decisions of shareholders meetings, the same provisions sets forth a voting cap to the effect that no shareholder or group of shareholders sharing similar interests is entitled to vote shares representing individual or aggregate interest in excess of 7% of our issued and outstanding shares. As a result, if a shareholders or voting agreement regulating the exercise of voting rights were to be filed at our registered office, the contracting shareholders would be deemed to constitute a group of shareholders sharing similar interests, and would be subject to the voting cap discussed above. In addition, as a result of such voting cap, under paragraph 3 of article 7 of our Bylaws, no shareholders or voting agreement (whether or not filed at our registered office for effectiveness towards our company and other shareholders) will be permitted to predefine and establish a consistent majority by forming voting blocs representing aggregate voting interest in excess of 7% of our issued and outstanding shares, such as discussed above. The chairman of a shareholders meeting is responsible for enforcing the voting caps established under our Bylaws, and must inform shareholders of the number of eligible individual votes the shareholders and groups of shareholders will be permitted to
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cast at any particular meeting. For enforcement of these rules, votes cast in excess of the voting cap will not be computed for purposes of determining whether a quorum to resolve has been met.
- Tender offer requirements

Below is a discussion of certain tender offer requirements included in our Bylaws. Where a tender offer is conducted at any time to purchase our outstanding shares, and our board of directors finds the offer meets the interests of the community of shareholders and of the economic segments in which our subsidiaries operate, and votes to recommend the offer be accepted, then our board (and only our board) may also vote to call a shareholders meeting to decide on whether our Bylaws should be amended to eliminate any voting limitations, however under the condition that the bidder should acquire at least two-thirds of the outstanding shares (thus, not including treasury stock) for the amendments to the Bylaws to take effect.
(a) Disposition of control
Under our Bylaws and the Novo Mercado listing regulation, a disposition of control agreed pursuant to one or a series of successive transactions requires a precedent or dissolving condition being established, whereby the prospective buyer undertakes to conduct a tender offer to purchase all outstanding shares. Under Brazilian Corporate Law and the Novo Mercado listing regulation, the bid price and the payment conditions must be the same as initially offered for control, to ensure equalitarian treatment is extended to all shareholders. In addition, a tender offer is required also (1) where a transaction is entered for assignment of a sale of subscription or other rights exercisable for shares, or of securities convertible or exchangeable for shares of our capital stock, which upon being exercised or converted or exchanged for shares issued by us would imply a disposition of control, and (2) in the event of a disposition of control over our controlling shareholder (if any). Moreover, under our Bylaws and the Novo Mercado listing regulation, where a shareholder acquires as many additional shares in one or more private transactions as are sufficient to acquire control, this acquiring shareholder must then conduct a tender offer to purchase all outstanding shares. In this event, the bidder will also be required to reimburse any holders selling shares in stock market transactions (regardless of buying counterparties) carried out in the same trading sessions at which the acquirer of control was trading to buy shares in the market over the six-month period preceding the date of acquisition of Control, which reimbursement shall compensate these sellers for the difference between the selling market price per share and the tender offer bid price, as adjusted for inflation through to the reimbursement date. BM&FBOVESPA, as central counterparty clearing to these transactions shall be responsible, pursuant to applicable regulations, for allocating the aggregate of the reimbursement amount amongst the relevant stock market sellers in proportion to the daily net settlement balances of such transactions, as registered in its records. Additionally, both our Bylaws and the listing regulation prohibit the actual transfer of shares between sellers and buyer of control, requiring us not to recognize any share transfer unless and until the acquirer of control (whether one or a group of persons sharing similar interests) executes the instrument of adherence to the Novo Mercado listing regulation. Another requirement calls for the acquirer to take action within six months after the acquisition to restore the free float to minimum 25% of the outstanding shares, as the case may be. Moreover, in a tender offer conducted as part of a going private process, the bidder or bidders (including us, if we conduct the tender offer) to set the bid price at a minimum equivalent to the fair value per share, as determined by a specialist firm in the form prescribed in 63 of our Bylaws. A tender offer requirement applies also where the shareholders take action at a shareholders meeting approving (1) a delisting from the Novo Mercado for our shares to trade on another market or listing segment, or (2) implementing a corporate restructuring process from which we do not emerge as the surviving company and the actually surviving entity fails to list the shares to trade on the Novo Mercado within one hundred and twenty (120) days after the date of the meeting approving such action. In any such event the tender offer will be required to be carried out at a minimum bid price equivalent to the economic value (fair value) per share, as determined by a specialist firm according to the provisions of paragraphs 1 through 3 of article 63 of our Bylaws, whereas giving regard to other applicable legal and regulatory rules.
(b) Acquisition of control where control is widespread
Where share ownership is widely dispersed, if shareholders convening in a Shareholders Meeting approve action consisting of (1) a going private process (entailing cancellation of our registration as a public company), we will be required to take action regarding a tender offer for all outstanding shares, except that the preference order requires we first purchase the shares of accepting holders that voted against going private and only then those of accepting holders in favor of the action; or (2) a delisting from the Novo Mercado listing segment for the shares to trade on another market or listing segment, or if the shareholders take action to implement a corporate restructuring process where the unlisted surviving company fails to list the shares to trade on the Novo Mercado within one hundred and twenty (120) days after the date of the meeting approving such action, then such action shall be contingent on a tender offer being conducted for all outstanding shares, under similar terms and bid price conditions as discussed in the preceding paragraph (a). In addition, at the same meeting, the shareholders will
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be required to name one or more attendee shareholders in attendance to fulfill the requirement and carry out the tender offer. The shareholder(s) thus named will be required to commit expressly to the tender offer. Moreover, where the shareholders meeting approves a corporate restructuring process but fails to appoint the shareholder(s) responsible for conducting a tender offer if the unlisted surviving company fails to arrange for timely listing on the Novo Mercado segment, and such failure does take place, then the obligation to conduct a tender offer shall lie with all the shareholders that voted for the corporate restructuring process.
(c) Protection of free float
Where share ownership is widely dispersed and we incur a breach of the Novo Mercado listing regulation due to a action taken by shareholders at a shareholders meeting, our management will be required to call a shareholders meeting to remedy the breach or, in the alternative, to vote on delisting our Company from the Novo Mercado. If the shareholders vote for our delisting, they will also be asked to name the party or parties that will be responsible for conducting the required tender offer. Moreover, where share ownership is widely dispersed, if we incur a breach of the Novo Mercado listing regulation due to action taken by our management, i.e., an act or fact of Management, our directors and officers will be required to call a shareholders meeting to for the shareholders to resolve on action required to be taken to remedy the breach or otherwise decide for a delisting from the Novo Mercado, and in the latter case also name the party or parties that will commit to conducting the required tender offer. If any two or more of these events were to occur more or less concomitantly at any time ownership in our shares continues to be fairly dispersed, the regulation allows for a single tender offer to be conducted as long as the objectives of the relevant tender offer requirements can be achieved, the single-offer alternative does not harm the interests of shareholders and the CVM consents to this course of action, if and when required. In any event, the potential bidders in any such tender offer (whether required under our bylaws, the law, the CVM regulations or the Novo Mercado listing regulation) may agree that just one of them or a third party acting for them or, as the case may be, ourselves will carry out the offer, provided each party required to conduct a tender offer will be held liable for ensuring the bid is implemented and complies with applicable law and regulations.
(d) Protection of free float
Any shareholder or group of shareholders sharing similar interests (acquirer) that aims to purchase additional shares issued by us or acquire rights in the shares (including as beneficial owners, through usufruct or a trust) granting them a 15% voting interest in the outstanding shares of common stock, must first seek consent from the CVM, while giving regard to applicable legislation, regulatory rules, the stock exchange regulations and our bylaws. Any shareholder or group of shareholders sharing similar interests (acquirer) that (1) accumulates direct or indirect ownership interest in 30% or more of our issued and outstanding shares, or in any way (2) purchases (i.e., acquire at cost) rights in the shares (including as beneficial owners, through usufruct or a trust) granting a 30% voting interest in the outstanding shares of common stock, must first seek consent from the CVM, and within a 30-day period after obtaining consent, is required to initiate or apply to register a tender offer to purchase all other issued and outstanding shares, whereas giving regard to applicable law and regulatory rules in the jurisdictions where our shares are listed to trade at the time, and to the stock exchange regulations and our bylaws. The bid price per share in a tender offer triggered by accumulation of material interest (such as discussed in the preceding paragraph) must at least equal the highest market price per share the acquiring shareholder or group of shareholders paid for shares in the market within the six-month period preceding the date on which the 30% threshold was hit, as adjusted to account for corporate actions, such as distributions of dividends or interest on shareholders equity, stock splits, reverse splits and bonus shares, but not for actions related to corporate restructuring processes (article 70 of our bylaws). This tender offer requirement will not apply where a person acquires aggregate ownership interest in excess of 30% of the issued and outstanding shares by virtue of any of the following events: (i) a subscription of shares implemented in a single issuance authorized in a shareholders meeting, where the issue price is determined on the basis of a fair value valuation conducted by a specialist firm pursuant to article 63 of our bylaws; or, (ii) acquisition in a tender offer. However, if the acquirer fails to meet the requirements and obligations set forth in our bylaws, including as to applicable deadlines concerning (1) the start or registration of a tender offer, or (2) submitting applications to the CVM or meeting their demands, our board of directors will call a shareholders meeting to decide on suspending the rights of such acquirer, at which the shareholder or group of shareholders in question will be impeded from voting and must abstain (per article 120 of Brazilian Corporate Law). 18.3. Exceptions to, or events of suspension of economic and policy (voting) rights under the Bylaws.
Our Bylaws contemplate certain restrictions affecting economic and policy rights, as follows:
Events excluding or restricting preemptive rights

Under article 11 of our Bylaws (article 172 of Brazilian Corporate Law), if we decide to conduct an offering for sale of new
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shares or convertible debentures or warrants, or an exchange offer, we may for purposes of the offer and upon a decision of our board exclude the preemptive rights of shareholders, or limit the period for exercise of these rights. Similar exceptions may also occur under special tax legislation related to certain incentivized equity interests .
Members of the board of directors

Under article 22, paragraph 4, of our Bylaws, any person that holds a position in a competitor of ours, or the competitor subsidiaries, or that has a conflict of interest with us or any of our subsidiaries is ineligible to our board, unless the shareholders convening in a meeting decide otherwise (per article 147, paragraph 3, of Brazilian Corporate Law). Under Brazilian Corporate Law and paragraph 5 of article 26 of our Bylaws, a conflicted director will be barred from access t o information, and from taking part in board deliberations and decisions on any matter regarding which he or she has a conflicting interest with us or any of our subsidiaries, and must abstain from interfering in any way on any matter in which he or she has a conflicting interest.
Voting restrictions
Our Bylaws contemplate the voting cap discussed above under subsection 18.2. Additionally, article 19 of our Bylaws requires shareholders and shareholder proxies to abstain from voting on any matter in which their interest conflicts with ours. Under article 115 of Brazilian Corporate Law, a shareholder acting upon a conflict of interest whether to approve or disapprove any particular motion is deemed to incur abuse of voting rights. Moreover, under article 18 of our Bylaws, shareholders convening in a general meeting may suspend the rights, including voting rights, of any shareholder or group of shareholders that acts in violation of statutory or regulatory provisions or our Bylaws. 18.4. Information on trading value and stock quotes (highs and lows) in the three most recent full years.
Market price per common share Lowest price
(in R$)
Highest price
(in R$)
Average price
(in R$)
Average daily trading value

(in R$)
Financial value traded

(in R$)
2008 Third quarter (*) Fourth quarter 2009 First quarter Second quarter Third quarter Fourth quarter 2010 First quarter Second quarter Third quarter Fourth quarter
( )
6.77 3.90 5.70 6.91 10.45 11.05 11.05 9.81 10.95 12.50
13.38 9.27 7.90 12.78 13.55 14.11 13.94 12.76 15.00 15.70
10.05 5.84 6.62 10.16 11.94 12.34 12.11 11.74 12.98 13.67
138,159.59 132,264.18 111,485.35 194,471.38 156,717.79 181,050.08 163,108.70 177,097.20 159,399.99 167,850.43
5,940,862,448.00 8,200,379,312.00 6,800,606,391.00 11,862,753,941.00 10,029,938,722.00 10,863,004,671.00 9,786,521,890.00 10,980,026,639.00 10,201,599,549.00 10,238,876,045.00
* data start from August 20, 2008, when our shares began to trade on the stock exchange under ticker symbol BVMF3
18.5. 18.6. 18.7.
Other securities issued Brazilian markets where securities of the issuer have been listed to trade Cross-border markets where securities of the issuer have been listed to trade
We have issued no securities other than shares, as discussed elsewhere in this Form. BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros. No securities issued by us have been listed to trade on cross-border markets. 18.8. Securities offerings previously implemented by the issuer or other parties, including controlling shareholders, subsidiaries and affiliates, for sale of securities of the issuer. There have been no securities offerings previously implemented for sale of shares issued by us. 18.9. 18.10. Previous takeover bids and tender offers for shares of another company. Other relevant information There have been no previous takeover bids or other tender offers for shares of another company.
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We have issued global senior notes in a cross-border offering, whose principal features are set forth in the table below. The global notes have no legal nature of securities.
Identification of the Notes Issue date Maturity date Number of notes Principal (US$) Transfer restrictions Convertibility Redemption Events of redemption; redemption price calculation method
Senior unsecured notes July 16, 2010 July 16, 2020 Notes in minimum denominations of US$100,000 and integral multiples of US$1,000 US$612 million No No Yes, an optional redemption with make-whole amount. The Notes are redeemable, at our option, in whole or in part, at any time and from time to time, upon giving not less than 30 nor more than 60 days notice to the holders, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed, and (ii) the sum of the present values of the remaining scheduled payments on such notes discounted to the redemption date (excluding interest accrued to the redemption date), on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months), at a rate equal to the sum of the applicable U.S. treasury rate plus 40 basis points. The notes are unsecured, denominated in U.S. dollars and have been issued by us abroad. Interest calculated at the rate of 5.500% per annum will be payable semi annually on each January 16 and July 16 (the first Interest Payment Date was January 16, 2011) until full repayment has been made.
Key features of the notes
Trustee, Registrar, Transfer Agent and Paying Agent (the Trustee):

Deutsche Bank Trust Company Americas
19. Buyback programs and treasury stock 19.1. Implemented share buyback programs
a. dates of any decision to implement a buyback program

The board approved our first share buyback program (2008 Program) on September 24, 2008. While as legally permitted the program contemplated repurchasing up to 71,266,281 shares over a 365-day period starting from the approval date, it was terminated on May 12, 2009. Then, with the objective of creating shareholder value through efficient management of our capital structure, a second share buyback program (2010 Program) was approved at a board meeting held on August 12, 2010. The program contemplated repurchasing up to 31 million shares over a period ending December 31, 2010. However, on December 16, 2010, the board increased to 60 million the number of common shares in the buyback program, which was extended through June 30, 2011. A new buyback program (2011 Program) was approved at a board meeting held on June 16, 2011, with the objective of creating shareholder value through efficient management of our capital structure. The program contemplates repurchasing up to 30 million shares, spanning from July 1st to December 31, 2011. The board approved the extention of the 2011 Program on December 13, 2011. The maximum amount was increased to 60 million shares, spanning from December 31, 2011 to June 30, 2012.
b. detail the following regarding each program:

i. number of shares approved for repurchase, by type and class of shares The three share buyback programs discussed above contemplated repurchasing up to 71,266,281; 60,000,000 and 60,000,000 shares of common stock, respectively. ii. repurchase as a percentage of the total issued and outstanding shares, by type and class of shares As a percentage, repurchases under these three buyback programs represented approximately 3.5%, 3.03% and 3.12% of the free float at the time, respectively. iii. repurchase period We began repurchasing shares within the scope of the 2008 Program on September 29, 2008 and extended these repurchases through February 6, 2009. At a meeting held on May 12, 2009, after we had repurchased 45,686,000 shares of common stock, our board terminated the 2008 Program.
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In 2010 Program, we repurchased the totality of 60 million shares foreseen in the program, for aggregate R$768.3 million or average repurchase price of R$12.81 per share. The 2011 Program period will be from July 1st throughJune 30,2012. iv. reserves and earnings available to be allocated to the program
Year ended December 31, 2010 Year ended December 31, 2009 Year ended December 31, 2008
Allocations to Share Buyback Program
(in R$ thousands)
(in R$ thousands)
(in R$ thousands)
Capital reserves Profit reserves Total allocations
16,662,480 847,658 17,510,138
16,492,260 403,191 16,895,451
16,606,853 302,928 16,909,781
v.
other key program features
The share buyback program approved on September 24, 2008, authorized the repurchase of shares for subsequent cancellation with the aim of maximizing value generation for shareholders through efficient management of our capital structure. As of December 16, 2008, our board the earlier decision was amended to authorize us either to cancel the shares at a later date or to keep them as treasury stock for subsequent reissue within the scope of our stock option plan. The shares of common stock we repurchase under our 2010 and 2011 Programs will be kept as treasury stock and may either be cancelled or reissued by us for fulfillment of options exercised within the scope of our stock options plan. Other than discussed herein, there are no other key features related to our buyback program. vi. number of shares ultimately repurchased, by type and class of shares By February 6, 2009, we had repurchased a total of 45,686,000 shares within the scope of the 2008 Program. Additionally, within the scope of the 2010 Program, by June 30, 2011, we had repurchased 60,000,000 shares of common stock. vii. weighted average repurchase price, by type and class of shares Repurchases within the scope of the 2008 Program were implemented at average R$5.85 per share, whereas repurchases under the 2010 Program totaled average R$12.81 per share. The table below sets forth data on share buyback and average repurchase price under our first two programs.
2008 Program Average price per share Number of shares (in R$) 757,800 5,183,400 9,456,300 18,793,975 34,191,200 9,288,300 2,206,500 45,686,000 2010 Program 7.92 7.52 4.76 5.44 5.62 6.46 6.79 5.85 Total amount (in R$) 6,001,650.00 38,983,565.10 45,004,740.00 102,207,863.11 192,197,818.21 60,031,758.37 14,992,125.06 267,221,701.64
Periods
September 2008 October 2008 November 2008 December 2008 Total for 2008 January 2009 February 2009 Sum total
Periods
August 2010 September 2010 October 2010 November 2010 Total for 1st phase December 2010 January 2011 February 2011 March 2011 April 2011 May 2011 June 2011 Total for extended phase
Number of shares 5,650,000 8,280,000 12,447,900 2,872,100 29,250,000 2,700,000 16,570,000 1,800,000 250,000 2,500,000 4,150,000 2,780,000 30,750,000
Average price per share (in R$) 12.83 13.89 14.02 13.22 13.67 12.80 12.33 11.41 11.24 11.69 11.24 10.89 11.98
Total amount (in R$) 72,466,569.00 115,044,628.00 174,497,469.00 37,966,234.00 399,974,900.00 34,556,255.00 204,307,384.00 20,536,843.00 2,809,176.00 29,224,397.00 46,631,717.00 30,266,460.00 368,332,232.00
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Sum total for 2 nd Program
60,000,000 2011 Program
12.81
768,307,132.00
Periods
July 2011 August 2011 September 2011 Ouctober 2011 November 2011 December 2011* Sum Total
*On December 21 , 2011.
Number of shares
6,500,000 19,000,000 1,771,900 240,500 1,252,500 787,600 29,552,500
Average price per share (in R$)

9.90 8.92 9.31 8.72 9.52 10.00 9.21
Total amount (in R$)

64,378,535 169,531,039 16,496,138 2,097,641 11,923,993 7,875,425 272,302,771
viii. actually repurchased shares as a percentage of the total shares approved for repurchase Share repurchases within the scope of each of our first and second buyback programs were implemented giving regard to the restrictions set forth under CVM Instruction 358. The total number of shares repurchased within the scope of the 2008 Program represented 64.1% of the total number originally authorized, whereas those that we repurchased under the 2010 Program represented 100.0% of the total authorized repurchases. 19.2. Treasury stock information
Type of shares of stock Number of treasury stock at start of year Weighted Aggregate average value at repurchase start of year price per share Total repurchases in the year Aggregate repurchases in the year Number of treasury shares reissued Total amount reissued Number of cancelled shares Total treasury stock at year-end Total value at year-end
Year
(R$ thousands)
(in R$)
(R$ thousands)
(R$ thousands)
(R$ thousands)
2008 2009 2010
common common common
0 33,024,204 39,247,983
0 185,880 230,102
5.628 6.527 13.600
34,191,204 11,494,800 31,950,000
192,198 75,024 434,531
1,167,000 5,271,021 7,104,881
6,318 30,802 50,730
33,024,204 39,247,983 63,093,102
185,880 230,102 613,903
19.3.
Treasury stock at year-end

Total value of treasury stock Number of treasury stock Weighted average repurchase price per share Repurchase date As a percentage of issued and outstanding shares of common stock
(in R$)
(in R$)
6,001,650.00 38,983,565.10 45,004,740.00 102,207,863.11 60,031,758.37 14,992,125.06 72,466,569.00 115,044,628.00 174,497,469.00 37,966,234.00 34,556,255.00
757,800 5,183,400 9,456,300 18,793,700 9,288,300 2,206,500 5,650,000 8,280,000 12,447,900 2,872,100 2,700,000
7.92 7.52 4.76 5.44 6.46 6.79 12.83 13.89 14.02 13.22 12.80
September 2008 September 2008 November 2008 December 2008 January 2009 February 2009 August 2010 September 2010 October 2010 November 2010 December 2010
0.04% 0.26% 0.47% 0.93% 0.46% 0.11% 0.29% 0.42% 0.63% 0.15% 0.14%
19.4.
Other material information
There is no additional material information to be provided at this time under this secti on. 20. Securities trading policy
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20.1. Policy setting guidelines and standards for direct or indirect controlling shareholders, directors, officers, fiscal council members and members of technical or advisory standing committees established under the Bylaws concerning trading in securities of the issuer The securities trading guidelines and standards that apply to our directors, officers, fiscal council members (if the council is active) and members of technical or advisory standing committees established under the Bylaws (and would also apply to controlling shareholders if any were to emerge) are stated in our Material Disclosures and Securities Trading Policy Manual, which we call simply Policy Manual. In addition, the securities trading rules that apply to all of our directors, officers, employees, interns and service providers, as well as our subsidiaries, are stated in our Code of Conduct. a) Date of adoption Our Policy Manual was approved at a meeting of our board of directors held on March 8, 2008. Our Code of Conduct, as effective and amended, was approved at a meeting of our board of directors held on March 17, 2009. Amendments to this Code have been introduced after approved at a board meeting held on February 23, 2010. b) Persons bound by the policy As stated in the Policy Manual, our securities trading policy applies to, and is binding on directors, officers, consultants and other insiders. It would also be binding on controlling shareholders, if any were to emerge in the future. In addition, as reflected in our Code of Conduct, persons bound to comply with our securities trading policy encompass all our directors, officers and other insiders, including insider employees, consultants and service providers, as well as those of our subsidiaries, all of whom we call Collaborators. Moreover, the Code applies also to persons connected with any Collaborator, defined as close family members to the first degree (parents, children, siblings), spouses or common law spouses, dependents so declared in a collaborators income tax returns, and any legal entity in which a Collaborator holds powers to decisively influence the decision-making process. The definition of connected persons includes also investment funds in which a Collaborator holds powers to influence investment decisions, even if they are made by a fund manager or administrator. Accordingly, the securities trading policy standards does not apply to investment funds where the actual management of funds and assets is deferred to professional managers, such that a Collaborator would hold no power to influence investment decisions. A Collaborator may thus freely invest in these funds. c) Key policy features
Policy Manual
The policy sets guidelines and standards that subject persons to close or blackout periods during which trading is restricted. These trading restrictions are triggered, among other things: before the public disclosure of any material act or fact with respect to us, our business, our subsidiaries and affiliates, and their businesses; whenever there is in the course any process to implement a merger transaction (including a merger per se, share merger, full or partial spin-off or consolidation transaction, or transformation of corporate type, and any type of corporate restructuring process; applicable only to our directors and officers (and direct or indirect controlling shareholders, if any were to emerge), whenever there is in course a procedure for purchase or sale of our shares by us or our subsidiaries or affiliates, or an option or mandate has been granted for the same purpose. Persons that are no longer members of our management, having left the Company before a disclosure of material developments, are banned from trading in our securities, including derivatives based on our securities, provided the restriction extends to the earlier of (i) expiration of a six-month period after the date on which such persons quit their positions or (ii) the date of disclosure to the public of such material information as was known to them while in office, unless resuming trading in our securities would adversely influence the developments being disclosed, to our detriment of that of our shareholders.
Code of Conduct
Under our policy, and with certain exceptions, collaborators and connected persons are banned from trading in any way, directly or through other persons, on either the derivatives or the equities markets we operate (i.e., on markets comprising our BM&F segment or Bovespa segment).
Exceptions to the trading restrictions Policy Manual

The trading restrictions discussed above will not apply to subject persons making long-term investments (for at least 12 months) in our securities, as long as any such investment fulfills at least one of the following characteristics: a subscription or purchase of shares resulting from options exercised within the scope of our stock options plan, as approved and amended from time to time by action taken at a shareholders meeting; a purchase of shares issued by us using the proceeds of variable compensation paid by way of profit sharing; or
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investments made pursuant an individual investment program. An acceptable individual investment program is one establishing a plan for investments and divestments to be made according to some kind of schedule and programmed use and source of funds, where investments are long-term and extend for at least 12 months. In addition, the program is required to contain provisions preventing insider trading and must be structured so investment or divestment decisions cannot be taken after the investing subject person has become privy to any particular privileged information, meaning an investor under any such individual investment program must not influence any investment or divestment decisions.
Code of Conduct
Collaborators and connected persons are permitted trading activities consisting of the following (1) investments in shares or units of index funds (ETFs) listed on Bovespa segment markets, in which they hold no powers to influence the fund administration or asset management, provided buying and selling fund shares or units must span a 90-day period; (2) investments in shares of open-end, non-exclusive, diversified portfolio funds, in which they hold no powers to influence the fund administration or portfolio management; and (3) investments in securities listed to trade on Bovespa markets, pursuant to an individual investment program previously approved by us. Individual investment program An acceptable individual investment program for this purpose is one establishing a plan for investments and divestments to be made according to some kind of schedule. Investment clubs Collaborators and connected persons are not permitted join or invest in investment clubs. d) provisions governing blackout or close periods, and description of processes adopted to ensure compliance. Our Collaborators are categorically banned from trading in any way, shape or form, in stocks or other securities issued by us during the fortnight preceding the quarterly earnings release (known locally as ITR, or quarterly financial information) and the release of our full-year financial statements (or DFP). They may also be banned from trading in other instances, which our investor relations officer may define in his discretion. Our investor relations officer is responsible for circulating internal communication notices for the purpose of indicating the initial and final terms of any such blackout period.
Policy Manual
Our directors, officers, fiscal council members (if the council is active) and members of technical or advisory standing committees established under the bylaws are required to notify us of their holdings in our shares and those of connected persons, and of any changes to these holdings (1) on the first business day after they take office, and (2) no later than after five days of any buying or selling transaction.
Code of Conduct
Our audit office continually monitors trading activities by our Collaborators. If there are indications of a breach, formal clarification is sought; the case is investigated, analyzed and referred to the code of conduct committee for a decision. If the committee finds that a breach of conduct has in fact occurred, the collaborator in question will be subject to disciplinary action, which may result in termination for cause and other legally prescribed penalties, in addition to other appropriate action. 20.2. Other material information
Under article 10 of our bylaws, every shareholder or group of shareholders sharing similar interests is required to give notice to us disclosing any purchases of shares which added to previously held shares result in aggregate ownership interest in excess of 5% of our issued and outstanding shares of common stock, following which any additional purchase of share lots representing an interest in 2.5% (or multiples thereof) of our shares must also be disclosed. Any such disclosure must include information on the identities of buyer(s) and seller(s), the purpose of the acquisition, the number of shares and percentage interest acquired and other information required under article 12 of CVM Instruction 358/02. Given that ownership in BM&FBOVESPA shares is widespread and control is dispersed at this time, the provisions included in our Policy Manual specifically with regard to trading activities by controlling shareholders would only serve the purpose if any were to emerge in the future. 21. Disclosure policy 21.1. Guidelines, regulations and internal processes adopted by the registrant to ensure information requiring disclosure is collected, processed and reported in a timely and accurate fashion. Except as discussed herein based on guidelines, rules and processes stated in our disclosure policy, there are no additional guidelines, regulations or internal processes concerning disclosure of information by us. 21.2. Policy on disclosure of material developments adopted by the registrant. All our directors and officers, as well as our insiders as employees, consultants and providers with access to privileged
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information, and the controlling shareholders (if any were to emerge in the future) are required to comply with the guidelines and standard established by our material disclosures policy. Any information on material developments related to us necessarily flows to our investor relations officer, who is responsible for ensuring proper disclosure in accordance with our policy and article 3 of CVM Instruction 358/02. The responsibilities of the investor relations officer include ensuring material developments taking place in the course of business or in any way related to us and our subsidiaries are timely and accurately disclosed, using plain language which is easily understood by the market. In addition, our investor relations officer is responsible for ensuring material disclosures are promptly, widely and concomitantly disseminated in any markets in which our shares are listed to trade Under our disclosure policy, in the event of atypical volatility in the quotations or market price of our shares, or in volumes traded in our shares, our investor relations officer is responsible for investigating the matter, including by inquiring persons bound to comply with our policy, in order to determine whether there are indications of insider trading. Our policy requires that we disclose information on material developments as soon as practicable, preferably prior to the start of business or after the close of business on the stock exchange, provided that if our shares trade on more than one market in different time zones, the start and end of business in the Brazilian market prefer. The guidelines on manner and timing for the investor relations officer to disclose information on material developments are the following: i. ii. Material facts occurring in the course of business or in connection with our business operations are to be disclosed promptly after occurring; Material disclosures are to be made concomitantly to relevant markets in Brazil and elsewhere through any number of information channels, including press releases and professional association bulletin boards, and to investors, analysts and selected audiences; The investor relations officer is required to assess the suitability of requesting that trading on our shares be halted in any market they may trade for disclosure and dissemination of a particular material fact, if it is imperative for a particular disclosure to occur during business hours; The investor relations officer is charged with ensuring prompt and widespread dissemination of information on material developments to all relevant markets and stock exchanges where our shares may trade at the time; and The investor relations officer is charged with providing on request of the relevant regulatory entities additional clarification related to any particular disclosure of material development.
iii.
iv. v.
Material disclosures are made to the CVM and the relevant stock exchanges as soon as practicable and concomitantly in all relevant markets pursuant to a written document providing details on the material development being disclosed and, where possible or available, the amounts involved and other pertinent clarification. The dissemination of material disclosures is made through press releases published in the wide-circulation newspapers we customarily use to publish corporate acts and notices to the market. Pursuant to our disclosure policy, insiders are required to keep the information strictly confidential until such time as it is properly disclosed to the market. In addition, any person with access to privileged information (an insider) is required to refrain from acting on such knowledge in any way, directly or indirectly for his own or a third partys benefit, which includes any type of insider trading. These persons are also required to ensure persons working under him or her and persons of trust also refrain from acting on any information to which they have access due to their position, and are held jointly liable for any insider trading or unauthorized disclosure by the latter. Under our disclosure policy and pursuant to the main provision of article 6 of CVM Instruction 358/02, our board may decide to halt prompt disclosure in exceptional instances where disclosing privileged information on a particular material development could jeopardize our legitimate interests. Moreover, in any such exceptional event, the CVM, acting on its own initiative, or on request of our board or management or a shareholder, may analyze the matter further and confirm or disallow the decision to halt the material disclosure on grounds that it could jeopardize our legitimate interests. Moreover, any person bound by our policy on material disclosures and securities trading is required to sign an instrument of adherence to the policy. 21.3. Directors and/or officers responsible for implementing, enforcing, assessing and monitoring compliance with the disclosure policy. Under our disclosure policy, the investor relations officer is responsible for implementing, enforcing, assessing and monitoring compliance with the policy. 21.4. Other material information
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Under article 10 of our bylaws, every shareholder or group of shareholders sharing similar interests are required to give notice to us disclosing any purchases of shares which added to previously held shares result in aggregate ownership interest in excess of 5% of our issued and outstanding shares of common stock, following which any additional purchase of share lots representing an interest in 2.5% (or multiples thereof) of our shares must also be disclosed. Any such disclosure must include information on the identities of buyer(s) and seller(s), the purpose of the acquisition, the number of shares and percentage interest acquired and other information required under article 12 of CVM Instruction 358/02. 22. Extraordinary transactions 22.1. Acquisition or disposition of material assets transacted outside the normal course of business. In July 2010, following completion of a US$612 million bond offering whereby we sold global senior notes abroad, we used the offering proceeds to purchase an additional 3.2% interest in CME shares, which added to our 1.78% existing interest to total aggregate 5% ownership interest in the CME Group, which made us the largest CME shareholder and matched our reciprocal holdings. As long as we maintain our reciprocal holdings arrangement, each of BM&FBOVESPA and the CME Group will designate a representative to seat on the board of the other, thereby contributing to strengthen our mutual global preferred strategic partnership. As result of our acquisition of additional shares in the CME, beginning from July 2010, we now account for this investment under the equity method of accounting and recognize gains and losses from this investment in associate through profit or loss (in the statement of income). Our financial statements as of and for the year ended December 31, 2010, did include our equitymethod investment in CME shares and our share of the CME profits have been properly recognized in our statement of income. 22.2. 22.3. 22.4. Significant changes in the way business is conducted. Material contracts and agreements not directly related to the business activities. Other material information There have been no significant changes in the way we do business. There have been no material contracts or agreement not directly related to our business activities. There is no additional material information to be provided at this time under this section.
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2011 Reference Form BM&FBOVESPA S.A.

- Bolsa de Valores, Mercadorias e Futuros (BVMF)

BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros

The Brazilian Securities, Commodities and Futures Exchange

Reference Form 2011

Version 16,0 Last updated May 21, 2012.

Auditors replacement Replacement justification Auditors reasons

1,261 258 360 1,909

Other information the registrant may deem material to report.

2009 (in R$ thousands)

2009 (in R$ thousands)

19,419,048 22,633,975 1,889,757 1,592,515 1,144,486

19,342,893 20,837,839 1,502,544 1,186,574 882,069

9.807990 0.572058 0.568172

9.648453 0.439983 0.436195

Years ended December 31, 2010, 2009 and 2008

Rules on dividend distributions

Dividend distribution frequency

Restrictions on dividend distributions

Summary of distributions of net income and retained earnings.

(in R$ thousands, unless otherwise indicated)

3.3% 127,433 ASM April 28, 2009 Total gross distribution

0.020320 0.072995 0.069969 0.069307 0.030317

20,539 149,203 143,019 139,376 60,625 512,762

0.055931 0.070653 0.016727 0.074888 0.009976 0.123602

112,000 141,500 33,500 150,000 20,000 248,000 705,000

0.014951 0.025406 0.057996 0.022422 0.098957 0.119101 0.016156 0.206723

30,000 60,000 137,000 45,000 198,600 235,875 32,000 406,086 1,144,561

Year ended December 31,

Amount (in R$ thousands)

Type of debt ratio

Index description and reason for use

Debt to Equity Ratio

- Method: D/E = (total current + non-current liabilities) / shareholders equity.

Debt ratio or Total Debt-to-Total Assets

EBITDA-to-Interest Coverage Ratio

Year ended December 31, 2010

(data from our consolidated financial statements) in R$ thousands

1,798,723 1,010,059 732,074 56,590 1,798,723

Global Senior Unsecured Notes

Objectives of our Management Information System

We depend on the level of market activity, which is beyond our control.

Any damage to our reputation may have an adverse effect on us.

We are highly dependent on the level of trading by foreign investors.

Company BVRJ BBM TOTAL

5,765,609.73 541,074.31 249,048.93 6,555,733.00

37,875,098.46 2,039,162.97 39,914,260.83

Company BVRJ TOTAL

1,355,127.12.., 3,618.58 1,358,745.70

4,423,610.45., 168,521.06 4,592,131.51

(II) Tax Cases

Amounts, assets or rights at risk

Purpose and principal related facts

Prospects for a defeat Impact in case of a defeat Provisioned amount

(III) Civil law cases

Purpose and principal related facts4

Prospects for a defeat

Impact in case of a defeat Provisioned amount

lower federal court of the judiciary subsection of So Paulo (SP)

Amounts, assets or rights at risk

Purpose and principal related facts

Prospects for a defeat Impact in case of a defeat Provisioned amount

III.2 BM&FBOVESPA III.2.1)