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Forward-looking Statements
This presentation may contain certain statements that express the managements expectations, beliefs and assumptions about future events or results, Such statements are not historical facts, being based on currently available competitive, financial and economic data, and on current projections about the industries BM&FBovespa works in, The verbs anticipate, believe, estimate, expect, forecast, plan, predict, project, target and the like are intended to identify these forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from those projected in this presentation and do not guarantee any future BM&FBovespa performance, The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&FBOVESPA services; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitive industries BM&FBovespa operates in; (iii) changes in (a) domestic and foreign legislation and taxation and (b) government policies related to the financial and securities markets; (iv) increasing competition from new entrants to the Brazilian markets; (v) ability to keep up with rapid changes in technological environment, including the implementation of enhanced functionality demanded by BM&FBovespa customers; (vi) ability to maintain an ongoing process for introducing competitive new products and services, while maintaining the competitiveness of existing ones; (vii) ability to attract new customers in domestic and foreign jurisdictions; (viii) ability to expand the offer of BM&FBovespa products in foreign jurisdictions, All forward-looking statements in this presentation are based on information and data available on the date they were made, and BM&FBovespa undertakes no obligation to update them in light of new information or future development, This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities where such offer or sale would be unlawful prior to registration or qualification under the securities law, No offering shall be made except by means of a prospectus meeting the requirements of the Brazilian Securities and Commission (CVM) Instruction 400 of 2003, as amended,
2Q11 Highlights
Strengthening our strategic position amid challenging market conditions
BM&F ADTV of 2.7M contracts in 2Q11, 5.8% higher than 2Q10 HFTs volume increased 11% in BOVESPA Segment in comparison with 1Q11 (7.4% of overall value traded in 2Q11 and 8.6% in Jul11) 21 public offerings YTD, 11 IPOs and 10 follow-ons New buyback program allows the repurchase up to 30M shares until Dec11 Dividends: BRL235.3 million in 2Q11, 80% of GAAP Net income in 2Q11
Adjust.
OPEX.1:
Adjust. Net
Income.2:
STRATEGIC PROJECTS
New fee structure eliminates the cross subsidies, strengthens competitive position and aligns with international peers Derivatives module of new multi-asset platform to be online in 3Q11 Launch of the CloseOut Risk Evaluation (CORE), the linchpin on which the new BVMFs clearing and settlement risk management systems will be based Market maker for options on single stocks
1 2
excludes stock options plan, depreciation, allowance for doubtful accounts, and tax on dividends from CME Group. excludes deferred liability recognized in correlation with temporary differences from amortization of goodwill for tax purposes, the impact of the stock options plan and the investment in associate (CME Group) accounted for under the equity method of accounting, net of taxes. 3 excludes stock option plans costs . 3
Gross operating revenues BOVESPA Trd. / Sttmnt. BM&F Trd. / Sttmnt. Other operating revenues
521,324 240,574 191,148 89,602 Depository and custody 22,937 Vendors 16,301 Securities Lending 17,202 Trading access (Brokers) 12,078 Listing 11,617 Bank 5,096 Other 3,028 Brazilian Commodities Exchange 1,343
2Q11
528,996 259,309 184,139 85,548 22,270 16,819 12,345 13,431 10,754 3,931 4,942 1,056
2Q10
-1.5% -7.2% 3.8% 4.7% 3.0% -3.1% 39.3% -10.1% 8.0% 29.6% -38.7% 27.2%
Operating performance BOVESPA ADTV - in BRL millions Margin - in bps ADTV - in thds of contracts RPC - in BRL
Change % 2Q11 x 2Q10 6,207.1 6,682.6 -7.1% 5.862 6.131 -0.269 bp 2,670.2 2,523.4 1.127 1.145 5.8% -1.5%
4
BM&F
130%
110%
2.1
2.3
1.3
1.5
0.6
2,0
1,5 1,0
0,5
1.3
90% 70%
50%
4Q10
3Q10
2.2
2.1 1.7
2.3
1.5
1.5
0.4 0.1
0.6
0.2
BRL 5.9 bi
0.6
0.6
0,0
30%
2Q10
1Q10
2.3
2.0 1.8
1.9
2.1
1.7
0.2
0.2
BRL 6.7 bi
BRL 6.6 bi
1Q10
2Q10
ADTV in BRL bi
3Q10
4Q10
1Q11
2Q11
Turnover Velocity
Institutional Investors
Foreign Investors
Retail
Financial Insitutions
Assets under custody of retail investors remain steady as these investors wait out difficult market conditions, reduction in turnover velocity in the near-term
611
597
603
150
125
100
75 50
25
-
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
BM&F Segment
Derivatives volumes trading at high levels
Average Daily Traded Volume (ADTV)
ADTV in 2Q11 of 2.7 million contracts, up from 2.5 million in 2Q10, due mainly to interest rates in BRL and USD contracts
Average Revenue per Contract (RPC)
RPC fell to BRL1.13 from BRL1.14 year-over-year and rose over 1Q11 when it was BRL1.04. 2Q11 vs. 2Q10: change in the mix of contracts traded: i) growth in the participation of interest rate contracts in USD
(lower margins than the average); ii) lower participation of FX contracts (higher margins than the average)
BRL
1,30
Thousands of contracts
5.000
1,20
1,10 1,00 0,90 0,80 0,70 0,60 0,50 0,40
R$1.14
R$1.17 R$ 1.10
2,616
R$1.13
R$1.04
2,866 2,670
2,454
2,523
2,428
85 95 590 78 1,606
1,833
2,127
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
FX Rates
Others
Stock Indices
RPC
3.0%
2Q11
22,937
8.8% increase in average number of custody accounts, to 631 thousand from 580 thousand in 2Q10; accounts up slightly from 1Q11 13.6% increase in the portfolios under custody (excluding foreign investors and ADR positions)
2Q10
22,270
Securities lending
2Q11
17,202
39.3%
2Q10
12,345
42.0 % increase in the average value of the open positions over 2Q10
2Q11
-3.1%
Vendors
16,301
New Pricing Policy implemented in Aug10, reduced market data fees for Home Brokers, to attract more retail investors as market improves
BRL appreciation of 11% affected USD-denominated market data fees (about 30% of vendors revenues)
2Q10
16,819
Planned growth in headcount contributed to operating expenses of BRL166.8 million in 2Q11 OpEx down 11.6% from 1Q11 as expenses associated with first vesting of new stock options were concentrated in the 1Q11
53%
Adjusted OpEx up 15.5% over 2Q10, in line with companys growth strategy and guidance range (from BRL615M to BRL635M)
Adjusted OpEx slightly up (2.2%) from 1Q11 from personnel expenses - higher severance and overtime expenses
167.6 133.8 9.0 9.3 115.5 124.4 143.5 7.0 11.5 145.8 5.5 15.1
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
Depreciation
Stock option
Others
8
22.9% increase in average headcount (in IT and business development in line with growth strategy) over 2Q10 Down 9.5% over 1Q11 due to first quarter effect of new stock option expenses Adjust. Personnel up 7% on adjusted basis over 1Q11 due to non-recurring severance expenses and overtime expenses associated with development and implementation of planned strategic projects
24.5
10.1
54.7
57.4
66.2
80.9
72.9
78.0
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
Depreciation Expenses
22.3
Depreciation expenses dropped 12.3% over 2Q10 and 54.7% over 1Q11 Starting in 2Q11 the Company began to capitalize depreciation and amortization of certain equipment and software allocated to IT projects (related to equipment and software that have been used) The 2Q11 figure includes a R$6.8 million credit to depreciation and amortization related to the reversal of expenses that had been recognized as depreciation and amortization in 1Q11
9.3
11.5
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
Financial Highlights
Strong cash generation; continue to return cash to shareholders through buybacks and distributions
Cash and cash equivalents (BRL millions)
Financial income
238
BRL70.8 million in 2Q11: 6.3% lower than 2Q10 Financial revenues: BRL87.9 million, 13.2% higher than
2Q10 due to the increase of the average interest rate
2Q11
1.116 463
1.538
3,355
Investments (Capex)
Buyback program
4Q10
959 496
1.712
3,435
*Includes market participants cash collateral, earnings and rights on securities under custody and dividends and interest on capital pending payment ** Includes third-party deposits (BRL142 million in 4Q10 and BRL101million in 2Q11) and restricted funds (BRL11 million in 4Q10 and in 2Q11) from BM&F Settlement Bank,
10
Better reflects the company cost structure, eliminating cross subsidies; strengthens competitive position
Combination of four clearing houses builds synergies, reduces transaction costs and increases efficiency CORE will be the linchpin for clearing and settlement risk management systems Development over 2012; certification and migration in 2013
Derivatives module to be concluded in 3Q11 Increases capacity, reduces latency and adds functionalities Builds efficiency and synergies for markets participants Increases HFT participation
11
Strengthens competitive position Eliminates cross subsidies across trading and post-trading business lines Rebalancing the fees has neutral effect on investor costs and Company
revenues/margins
New fee structure for Bovespa Segment
basis point
Rebalancing
(76%)
(24%)
Total
(100%)
(100%)
(100%)
(100%)
Note: the lower fee is paid by local institutional and investment clubs and day trades transaction, in this case for all investors.
benchmark
12
Clearings Integration
Strengthens market position and reduces costs
The integration of risk management, collateral and clearings systems streamlines operations and builds efficiencies CORE architecture will benefit participants that concentrate their transactions within BVMF, strengthening our competitive position
OPERATIONAL EFFICIENCY
FINANCIAL DERIVATIVES AND COMMODITIES INTEGRATED SYSTEMS
CLEARING EFFICIENCY
NETTING POSITIONS FIXED INCOME
SPOT FX
13
IT Strategic Evolution
Building the State-of-the-Art IT infrastructure
New multi-asset trading platform: Derivatives module (3Q11) Processing capacity of 200 million messages/day (record of 6 million messages/day in BM&F segment) Latency: approximately 1 millisecond (moving down to microseconds in 2012) Other modules: equities (1H12) and fixed income (2012) TradingTechnology (TT) will offer trading screens to their clients
IT infrastructure development to support the new clearing house To support clearing and depository activities of the all four clearing houses Development to be concluded in 2012; certification and migration to be finished in 2013
14
Capture macro growth opportunities Despite the challenging short-term macro conditions, the Brazilian capital and derivatives markets offer good opportunities from which BVMF can benefit in the long term
Investments to build world-class IT platform Capital efficiency from the clearing integration First module of multi-asset platform online in 3Q11 Rebalance the fee structure
Establish diversified product mix to drive long-term revenue Partnership with CME delivers innovation New Products (market makers, cross listing and HFT) are gaining traction
Focus on OpEx Control; adjusted OpEx within budget Strategically return cash to maximize shareholder value High payout ratio ongoing, coupled with new buyback program
15
APPENDIX
16
467,639
(166,762) 300,877 22,091 70,815
475,631
(143,474) 332,157 75,536
-1.7%
16.2% -9.4% -6.3%
472,157
(188,714) 283,443 37,541 63,193
-1.0%
-11.6% 6.2% -41.2% 12.1%
393,783
294,171 313,216 67.0% 409,150 0.20895 323,342 69.1% (143,725)
407,693
305,646 343,681 72.3% 424,304 0.21131 350,692 73.7% (124,418)
-3.4%
-3.8% -8.9% -528 bps -3.6% -1.1% -7.8% -459 bps 15.5%
384,177
270,756 308,060 65.2% 384,216 0.19565 332,604 70.4% (140,628)
2.5%
8.6% 1.7% 173 bps 6.5% 6.8% -2.8% -130 bps 2.2%
17
294.2
124.7 10.1
(19.9)
409.2
Stock options
Deferred liability
Equity Accounting
In BRL thousands
Gaap net income* (+) Stock options program (+) Deferred tax liabilities (-) Equity accounting** Adjusted net income
*Attributable to BM&FBOVESPA shareholders
2Q11
294,171 10,127
2Q10
305,646 7,011
1Q11
270,756 24,544
Change 2Q11/1Q11
8.6%
124,706
19,853 409,150
111,647
424,304 -3.6%
124,134
35,218 384,216 6.5%
18
BRL thousands Total Expenses (-) Depreciation (-) Stock options plan (-) Tax related to equity accounting (-) Provision for doubtful account Adjusted Expenses
2Q11
166,762 10,101 10,127 2,238 572 143,725
2Q10
143,474 11,524 7,011 521 124,418
1Q11
188,714 22,294 24,544 2,323 (1,075) 140,628
Change 2Q11/1Q11
-11.6% -54.7% -58.7% -3.7% -153.2% 2.2%
19
Balance Sheet
(In BRL thousands)
ASSETS
06/30/2011 2,209,697 25,097 1,980,414 204,186 20,354,276 1,540,061 1,349,746 190,315 2,189,976 358,650
12/31/2010
Current assets Cash and cash equivalents Financial investments Others Non-current assets Long-term receivables Financial investments Others Investments
2,547,589 Current liabilities 104,017 Collateral for transactions 2,264,408 Others 179,164 Non-current liabilities 20,086,386 Financing
TOTAL ASSETS
22,563,973 22,633,975
22,563,973 22,633,975
1Q11
2Q11/2Q10 2Q11/1Q11 (%) (%) 6,734.9 -7.1% -7.9% 6,290.7 -5.0% -6.9% 444.2 -32.1% -21.5%
161.6 282.6 -10.1% -40.0% -24.9% -19.6%
1.3 6,207.1
3.0 6,682.6
0.5 6,735.4
-58.4% -7.1%
144.3% -7.8%
1Q11
2Q11/2Q10 2Q11/1Q11 (%) (%) 500,391 16.8% 0.6% 409,150 21.3% 3.2% 91,241 -1.8% -10.7%
1,433 89,809 -14.0% -1.6% -10.8% -10.7%
13 503,629
13 431,133
13 500,404
5.5% 16.8%
2.7% 0.6%
Total BOVESPA
5.862
6.131
6.017
21
RPC (BRL)
2Q11 Interest Rates in BRL FX Rates Stock Indices Interest Rates in USD Commodities Mini Contracts OTC Total 0.930 1.847 1.753 0.893 1.948 0.137 1.682 1.127 2Q10 0.905 1.838 1.515 1.163 2.106 0.129 1.772 1.145 1Q11 0.843 2.016 1.639 1.102 2.016 0.142 1.393 1.040 2Q11/2Q10 2Q11/1Q11 (%) (%) 2.7% 0.5% 15.7% -23.2% -7.5% 5.6% -5.1% -1.5% 10.3% -8.4% 7.0% -19.0% -3.4% -3.5% 20.7% 8.4%
22
251
42 93 38
3.6% 208
17 82
4.7% 251
10
95
50
45
101 2Q11
155
43 66
1Q11
74
2Q10 3Q10
77
4Q10
FX
Index
Mini-sized contracts
% in Overall Volume
6.1%
7.4% 898.6
120,0%
100,0%
800,0
700,0
814.5
4.3%
600,0
500,0
318.6
532.9
447.3
80,0%
60,0%
400,0
300,0
160.0
181.5
205.0 290.8
1Q11
184.1 267.2
2Q11
40,0%
20,0%
200,0
100,0
191.4
Nov-Dec/10
retail - day trading (BRL millions) fgn inv - day trading (BRL millions)
0,0%
23