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BM&FBOVESPA
Analyst DaySo Paulo, SP
August 23, 2013
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This presentation may contain certain statements that express the managements expectations, beliefs and
assumptions about future events or results. Such statements are not historical fact, being based on currentlyavailable competitive, financial and economic data, and on current projections about the industriesBM&FBOVESPA works in.The verbs anticipate, believe, estimate, expect, forecast, plan, predict, project, target and other
similar verbs are intended to identify these forward-looking statements, which involve risks and uncertainties thatcould cause actual results to differ materially from those projected in this presentation and do not guarantee anyfuture BM&FBOVESPA performance.
The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&FBOVESPAservices; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitiveindustries in which BM&FBOVESPA operates; (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 newentrants to the Brazilian markets; (v) ability to keep up with rapid changes in technological environment, includingthe implementation of enhanced functionality demanded by BM&FBOVESPA customers; (vi) ability to maintain anongoing process for introducing competitive new products and services, while maintaining the competitiveness ofexisting ones; (vii) ability to attract new customers in domestic and foreign jurisdictions; (viii) ability to expand the
offer of BM&FBOVESPA products in foreign jurisdictions.All forward-looking statements in this presentation are based on information and data available as of the datethey were made, and BM&FBOVESPA undertakes no obligation to update them in light of new information orfuture development.This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shallthere be any sale of securities where such offer or sale would be unlawful prior to registration or qualificationunder the securities law. No offering shall be made except by means of a prospectus meeting the requirements ofthe Brazilian Securities Commission CVM Instruction 400 of 2003, as amended.
Forward Looking Statements
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REVENUE GROWTH ANDDIVERSIFICATION Build on growth opportunities in the Brazilian capital
market
Foster greater sophistication among participants andinvestors
Promote volume growth and revenue diversification
Strategic Drivers
OPERATING EXCELLENCE Strengthen the business model with investments in
technology for trading and post-trade platforms that bringsefficiency to BM&FBOVESPA and market participants
Continuously improve processes and services, focusing on riskmanagement
Assure market integrity
FOCUS ON THE CUSTOMER
Deepen the relationship with clients (investors, brokersand issuers), by delivering high quality services andproducts, ensuring that this relationship isBM&FBOVESPAs greatest differential
Expand the range and quality of services and productsoffered
INSTITUTIONAL STRENGTHENING
Develop initiatives that contribute to the safety, reliability andstrengthening of the market, inducing and fostering its growth
Maintain high standards of self-regulation
SHAREHOLDERRETURN
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OPERATING EXCELLENCE
Strategic DriversProduct and Investor Relations Department
REVENUE GROWTH ANDDIVERSIFICATION
FOCUS ON THE CUSTOMER INSTITUTIONAL
STRENGTHENING
SHAREHOLDERRETURN
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Product Departments RoleStrategy and form of performance
LINK
EXTERNAL
ENVIRONMENT
RegulatorMarket
Committee / Relationship
THE ROLE OF THE PRODUCTS AREA
Identify market demands and trends
Link internal (IT, Operations and
Financial) with external (regulatorsand partners) efforts to prioritizeinitiatives
Manage fee and incentive policies
Adapt the range of products todifferent types of customers and
segments, including retail investors
INTERNAL
ENVIRONMENT
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Product and Market DevelopmentTrack record of success
*Updated until June 28, 2013.
OPERATIONAL DATA
CAGR: +55% CAGR: +38%
CAGR: +249%
CAGR: +458%CAGR: +197%
CAGR: +36%
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Listed
ETFs - Exchange Traded Funds: International
Fixed income
Equities
FIIs
Market Maker: Cash equities
Options
Commodities
Futures
Ibovespa (methodology review)
SMEs - Small and MediumEnterprises (BOVESPA Mais)
Incentive programs (retail
investors)
Selic Derivatives: Selic futures - OC1
FX spread - DCO
FX swap - SCS
Options on single stocks New fee policy for HFTs/day
traders
Ethanol Futures Contracts
BDR (exchange market)
Securities Lending (BTC)
Product and Market DevelopmentListed products
CONTINUOUS DEVELOPMENT OF LISTED PRODUCTS
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Product and Market DevelopmentOTC products and fixed income iBalco
Derivatives Fixed Income
Regis
tration NDFs deployed in Jul/13
Flexible options on single stocks
COE (Structured Notes) Swaps
LCAs (Agribusiness Credit Bill): improvements
LCIs (Real Estate Credit Bill) and CDBs (timedeposits): adaptation of the platform
pending regulatory approval Changes to listing rules and procedures for
corporate bonds and financial bills (LF)
Trading
-
Trading platform for government andcorporate bonds
Changes to the fee policy
CONTINUOUS DEVELOPMENT OF iBALCO PROJECT
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Projects Prioritized by Product AreaPriority Developments
Products / Market Current Stage
iBalco
OTC Derivatives
NDF Jul/13; prioritizing deployments and strategy implementation(Options, COE and Swaps)
Corporate Bonds and F (LF) Revision of prices and rules
Registration of LCIs and CDBs Platform under development (pending: Central Bank approval)
COE - Structured Notes
Discussions with regulators: Central Bank, Securities and Exchange
Commission (CVM) and Federal Revenue of Brazil (RFB) and
platforms adjustments
BTC (Securities lending) Operational improvement and trading screens Market Consultation about the model
Tax treatment Discussions with RFB
Promote the product internationally Roadshows in Europe and USA
Market Maker
Expansion of Market Maker Program
Conversations with participants; treatmentof market data
(challenges); market maker protection; automated options exercise;
and systems development (control and fee)
ETFs Fixed Income Discussions with market, CVM and RFB
International Index Discussions with market and CVM
FIIs Discussions with market, CVM and RFB
BEI Brazil Easy Investing Book orders in foreign currency - foreign retail
investors
Development completed; awaiting operationalization of the
agreement CVM RFB
Incentive Programs Retail investors Incentive program for brokers who attract retail investors
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Projects Prioritized by the Product AreaOngoing discussions with the Government
Initiatives for SMEs
Creation of a Working Committee for Small Offerings composed of public-private entities (BM&FBOVESPA, CVM,Brazilian Development Bank - BNDES, Brazilian Innovation Agency - FINEP of the Science and Technology Ministryand Brazilian Agency for Industrial Development - ABDI of the Trade and Industry Ministry)
Proposals to facilitate funding through issuance of shares (incentives for SMEs, investors and intermediaries)
Presentation of the project to the Ministry of Finance, CVM Board and BNDES
Securities Lending (BTC) Discussions with RFB about tax treatment: exemption for dividends received and regulatory arbitration
IOF (Tax on Financial Operations) on American Depositary Receipt (ADRs) issuance
Discussion with RFB for IOF exemption on ADRs creation
ETFs Discussions with CVM regarding international indices, fixed income and real estate funds (FIIs)
Discussions with RFB related to tax treatment of fixed income and FII ETFs
Tax on equity investments for individuals
Proposal for simplification of the tax treatment
MAIN DISCUSSIONS
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OPERATING EXCELLENCE
Strategic DriversTechnology and Information Security Department
REVENUE GROWTH ANDDIVERSIFICATION
FOCUS ON THE CUSTOMER INSTITUTIONAL
STRENGTHENING
SHAREHOLDERRETURN
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PUMA Trading SystemHigh-performance trading platform
Derivatives Module: Oct/11
Equities Module: Apr/13
ADAPTATION TO BRAZILIAN RULES AND PRACTICES ADVANTAGES AND CHARACTERISTICS
Performance/Capacity
Lower latency and high capacity (scalable) Attraction of new clients
Multi-asset and multi-market
Synergies for participants and investors
Leverage BM&FBOVESPAs capacity to offer products(new/complementary)
Features
Adapted to the characteristics of the Brazilianmarket and the needs of participants/clients
Process and controls automation
Availability/controls
Auction rule and price variation limits (dynamic andstatic)
Stability and availability
Development of market data by offering (and not price),since GLOBEX is only market by price
Inclusion of auction rules (CVM Intruction 168) in thematching engine
Validation of pre-trade limits at the final client (LiNe)
Development of a module to calculate options marketbands
Implementation of different types of bands that mitigate
the risks posed by possible order entry errors(automated or not)
Intraday limits
Static limit or circuit breakers
Rejection band
Short-term volatility band
Auction bands (price and quantity)
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PUMA Trading SystemHigh-performance trading platform
Participant
Co-location Infrastructure of PUMA Trading System
Gateway+
LiNe
MatchingEngines
~300 s~500 s~200 s
~1000 s
MACRO VIEW: PERFORMANCE OF CO-LOCATION
Network Infra
Networks built for thedevelopment and deployment
of PUMA platform
Gateway + LiNe
Pre-trade risk control (LiNe)represents about 60% ofGateway + LiNe latency
Matching Engines
Meet all auction rules andbands/fluctuation limits set outin regulations (100% of orders)
Network
The network infrastructure is required to allow connection between the participants and the Exchange.
The Gateway routes the orders sent by the participants to the Matching Engines.
The Matching Engine is responsible for the meeting of orders and market data generation.
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~1000 s
PUMA Trading SystemHigh-performance trading platform
Upgrade of the network and servers infrastructure
The maintenance of network and servers infrastructure, scheduled for 2015, should reduce RTT -Round-trip time (measured in microseconds - s ) by roughly 25%, based on conservative estimates
This investment is part of the maintenance Capex of the Company
Participant
Co-location
Gateway+
LiNe
MatchingEngines
Network
~750 s
MACRO VIEW: PERFORMANCE OF CO-LOCATION
Infrastructure of PUMA Trading System
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Pre-trade Risk Control (LiNe)Ensuring market integrity in a high frequency world
LiNe
T
radingPlatform
Post-trade
Platform
ClearingMember
2008: LiNe was implemented for pre-trade risk analysis forDMA3 and DMA4 (co-location)
Mar/13: LiNe mandatory for any customer classified as highfrequency - HFT (in all DMAs)
Under discussion:mandatory for 100% of accesses
The pre-trade risksystems complement thepost-trade risk systems
=SAFER FOR
CLEARINGHOUSES ANDTHE MARKET
Brokers
Final clients
Establish
limits for
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PUMA Trading SystemHigh-performance trading platform
SCALABILITY TRADING PLATFORM
Widely monitored environment - 24h
Process for monitoring the platform start
IT viewpoint
Business viewpoint
Mitigation of risk of infrastructure failure by the adoption of a High Availabilitymodel
AVAILABILITY
20 Market data channels
200 Gateways
12 Engines
. . .
Installed Capacity of PUMA TradingSystem Platform
ScalablePlatform
99.999%Availability
Platform tested in timesof high volatility and
historic peaks ofmessages per
minute/second
Easily scalable capacitywith the acquisition of"standard hardware
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New data centerInfrastructure IT Developments
BM&FBOVESPAClients
Jan/13 Apr/13 Jun/13
EFFICIENCY, SCALE AND EXPANSION OF SERVICES
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Market FragmentationEvolution of the discussion
New trading platform PUMA Trading System
Integration of the clearinghouses increased operational and capital efficiency for final clients andparticipants
Elimination of cross subsidies between trading and post-trade
EVENTS RELATED TO THE FRAGMENTATION OF THE CASH EQUITIES MARKET
HOW BM&FBOVESPA IS PREPARING FOR POSSIBLE FRAGMENTATION
2011 2012 2013
BATSAnnouncement
Feb/11
Direct EdgeAnnouncement
Nov/11
Hiring of Oxeraby CVM
Nov/11
Event about Oxerastudy results
Jun/12
ATSAnnouncement
Nov/12
Public hearing on costsand risks of fragmentation
Jul/13
Application for licenseexchange ATS
Jun/13
f h i i k i il
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Structure of the Equities Market in BrazilRoles and responsibilities
Trading Platform(TP)
CentralCounterparty
(CCP)
Central SecuritiesDepository
(CSD)
SecuritiesSettlement System
(SSS)
Receives and processes the flow of buy/sell orders entered by the participants,including trading desks and local and global DMAs. It closes deals based on orders that
are prioritized by price and chronological order, promoting efficient price formation. Itsends trading information to the post-trade systems and publishes trading data(orders and trades) in real time for the entire market.
CCP: acts as a buyer for every seller and as a seller for every buyer, taking on the riskand guaranteeing the settlement of transactions. For this reason it has collateral andsafeguard structures (risk management)
Clearing: calculation of the participants net obligations/rights resulting frommultilateral clearing (less need for liquidity, number of transactions, operational risksand costs)
Executes the transfer of securities and financial resources between buyers and sellers,extinguishing the rights and obligations arising from clearing. In the settlement oftransactions involving securities, transfer occurs through accounts opened with adepository, and settlement of the corresponding financial resources occurs in a
reserves transfer system (STR - Sistema de Transferncia de Reservas)
Responsible for the safeguarding, update and coordination of corporate actions(payments of proceeds, bonuses etc.). For this it takes on the status of trustee of thesecurities deposited in its environment
1 Simplified view that does not cover all of the characteristics of the services and activities described.
M k F i
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Market FragmentationEvolution of the discussion
US MODEL
NYSE NASDAQ BATSDIRECT
EDGE
DARK
POOLSBROKERS
CCP
SSS
CSD
OTCEXCHANGE
DEPOSITORY AND TRUSTCLEARING CORPORATION - DTCC
M k F i
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Market FragmentationEvolution of the discussion
TP
BVMF
CCP
BVMF
SSSBVMF
CSD
BVMF
NEW
TP
TP
BVMF
CCP
BVMF
SSS
BVMF
CSD
BVMF
NEW
TP
NEW
CCP
TP
BVMF
CCP
BVMF
SSS
BVMF
CSD
BVMF
NEW
TP
NEW
CCP
NEW
SSS
TP
BVMF
CCP
BVMF
SSS
BVMF
CSD
BVMF
NEW
TP
NEW
CCP
NEW
SSS
NEW
CSD
SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4
M k t F t ti
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Market FragmentationEvolution of the discussion
TP
BVMF
CCP
BVMF
SSSBVMF
CSD
BVMF
NEW
TP
SCENARIO 1 Main drivers of fragmentation:
Price
Performance and technological innovation
Price arbitrage between platforms interest of HFTs
Strategy and Main Competitive Differentials
Elimination of subsidies between trading and post-trade (0.5bp, 6% of revenue)
Elimination of technology gaps: PUMA state-of-the-art technology, RTT sub-
millisecond
Synergies resulting from a multiproduct platform (cash, options, futures, BTC etc.)
Established distribution network (trading desk screens, DMA, home broker, co-
location, vendors)
Costs of fragmentation
Adaptations of the screens, DMA, home broker, co-location, vendors
Network links and connectivity
Consolidation of market data and adaptation of market data systems
Implementation of best execution rules
Implementation of smart order routing systems
Possible adaptations in the self-regulation model
M k t F t ti
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Market FragmentationEvolution of the discussion
SCENARIO 2Main drivers of fragmentation:
Price
Performance and technological innovation
Price arbitrage between platforms interest of HFTs
Strategy and Main Competitive Differentials
All of the barriers foreseen in scenario 1 remain
New integrated CCP of BM&FBOVESPA efficiency in settlement, efficiency in the allocation of collateral,
operational efficiency and credit quality of BM&FBOVESPA as central counterparty
Challenges for the new CCP
Risk calculation system
Clearing fund (R$300 million), equity at Central Bank (R$47 million), cash position (R$2 billion)
Trade capture, trade give-up, trade allocation (ICVM 505), position management, mark-to-market,
calculation of net multilateral balances until the final beneficiary level.
Collateral system (pricing, haircuts, integration with BVMF, CETIP, SELIC, DTCC, EUROCLEAR, banks that
issue letters of credit)
Credit analysis process/system
Securities lending system (BTC) to handle settlement failures
Corporate actions adjustment and treatment system Back-office system of brokerage houses and clearing members (SINACOR)
Secondary data center for disaster recovery
Challenges for sell side and buy side
Greater difficulty for price arbitrage between platforms due to the absence of netting
Absence of netting between purchases and sales in the same security executed on different platforms
(doubled margin, need to deliver cash and the security in arbitrage)
Two settlement and risk management processes encumbering the sell side and the buy side
TP
BVMF
CCP
BVMF
SSS
BVMF
CSD
BVMF
NEW
TP
NEW
CCP
M k t F t ti
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Market FragmentationEvolution of the discussion
SCENARIO 3 Main drivers of fragmentation:
Price
Performance and technological innovation
Price arbitrage between platforms interest of the HFTs
Strategy and Main Competitive Differentials
All of the barriers foreseen in scenarios 1 and 2 remain
Challenges for the new SSS
Integration with the Reserves Transfer System (STR) of Central Bank and with
settlement banks (development of messaging system)
Integration with the CSD for instruction of the transfer of securities between
accounts
TP
BVMF
CCP
BVMF
SSS
BVMF
CSD
BVMF
NEW
TP
NEW
CCP
NEW
SSS
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P t t d I t ti IPN*
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Governmentbonds
Corporate fixedincome
Interbank spotforeign exchange
Futures, options,forwards
Securities lending
OTCderivatives
Other productsand assets
Equities, ETFs,BDRs
Organization of the post-trade environment by
process instead of
product type
Rationalization and
standardization of rules,
procedures, requirements
and documentation Establishment of a single
settlement window for all
markets
Development of an
integrated risk model and
single pool of collateral
Complete modernization
and simplification of thetechnological
infrastructure
Rules and Manuals
Structure of market participants
Participants and customer registration
Allocation and transfer
Position control
Clearing and settlement
Risk management
Pool of collateral
Post-trade Integration - IPN*Streamlining processes and operational efficiency
Reorganization of the post-trading environment will result in greateroperational efficiency for brokers back-offices
*The implementation of IPN/CORE depends on authorization by the regulators
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Post trade Integration IPN
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Post-trade Integration - IPNBM&FBOVESPA proposal for IPN certification
Strategic Drivers
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OPERATING EXCELLENCE
Strategic DriversFinancial and Corporate Department
REVENUE GROWTH ANDDIVERSIFICATION
FOCUS ON THE CUSTOMER INSTITUTIONAL
STRENGTHENING
SHAREHOLDERRETURN
Main Goals of the Financial Area
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Additional revenue in current mainproducts/markets
Additional revenue diversificationin the medium term
Validation of pricing policies
Budget managementProcess governance
Efficient control tools
Feasibility analysis andprioritization of capital investment
Payout
Buyback program execution
Maintain balance sheet with highliquidity and financial flexibility
Revenues
Expenses
and CapEx
Return toshareholdersand Financial
Soundness
Main Goals of the Financial AreaMaximize shareholder return and maintain a robust balance sheet
Diversified Revenue
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192 206 209 240
344 369433
47988 65
7454
86 86
342381
331 320
10694
1,041 1,0471,164
1,249
1H10 1H11 1H12 1H13
Cash Equities (Trade)
Cash Equities (Post-Trade)
Equities Derivatives
(Trade and post-trade)
Financial and Commodities Derivatives
(Trade and post-trade)
Other
Products and markets developed in recent
years to leverage revenue diversificationBTC Tesouro DiretoOptions with Market Maker FIIsLCAs Non-Sponsored BDRsETFs
Diversified RevenueRevenue diversification as a strength of our business model
Highly diversified revenuebase
Elimination of cross-subsidies between trading
and post-trade
DIVERSIFIED REVENUE
REVENUE OF HIGH GROWTH PRODUCTSDELIVERING ON INCREASING DIVERSIFICATION
R$ millions
1 Includes depository revenue for investors who have only FIIs.
34.651.6
77.294.6
39.1
69.8 73.6
3.3%
4.9%
6.6%
7.5%
3.7%
6.5%6.5%
2010 2011 2012 2013
Revenue 1 half. (R$ million) Revenue 2 half. (R$ million)
Share in total revenue 1 (%) Share in total revenue 2 half. (%)
Control Expenses and CapEx
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Continued focus on cost control
Expense Control
Budgetmanagement:
changes to
culture
Governance:authority for
decisionmaking andbudget and
projectscommittees
Efficientcontrol tools:
ERP
Decrease in adjusted expenses in real termsGrew 7.6% versus inflation of 23.1% in the period
Efficiency in hiring services and prioritization of activities
Control Expenses and CapExContinuous search for efficiency
R$ millIon
ADJUSTED EXPENSES DECREASED IN REAL TERMS
CapEx ADJUSTED EXPENSES
1 Adjusted for depreciation, stock option plan, taxes related to dividends received from CME Group, provisions and others. Inflation accumulated in the period (IPCA - Jan/10 to Jun/13). Source: IBGE.
*Include expenses with maintenance in general, taxes adjusted by dividends from CME Group, board and committee members compensation and others (excluding provisions).
R$ millIonR$ millIon
239.0 257.1
40.7 2.9(3.3) (3.6) (9.3) (9.3)
1H10 Adj.
Exp.
Adj.
Personnel
Data proc. Third Party Commun. Marketing Others* 1H13 Adj.
Exp.
Financial Soundness
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Financial SoundnessHigh liquidity and low indebtedness
Sound financial position - an important factor for the Company, given itsrole as CCP, guaranteeing the settlement of trades executed by global
and Brazilian investors
Standard & Poor sBBB+ (counterparty credit rating)
A-2 (issuer)
Moody sA3 (global scale issuer)A3 (Brazilian local currency issuer)
Baa1 (global notes)
R$ million Dec/10 Dec/11 Dec/12 Jun/13
Available funds 1,677 1,582 1,964 1,967
Indebtedness 1,043 1,172 1,279 1,388
R$ million
CASH POSITIONSOUND FINANCIAL POSITION
*Includes collateral pledged by participants in the form of cash, receivables and rights in securities under custody, as well as payouts still undisbursed.
**Includes third party collateral and restricted funds at BM&FBOVESPA Settlement Bank (Banco BM&FBOVESPA).
993
1,551
1,191
1,139
496
380
346
351
269
270
350
475
1,677
1,582
1,964
1,967
3,435
3,782
3,851
3,932
4Q10
4Q11
4Q12
2Q13
Market participants cash collateral and others*
Restricted funds
Subsidiaries**
Available funds
Return of Capital to Shareholders
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Return of Capital to ShareholdersCommitment to maximizing return
Payout(% of GAAP earnings)
2009: 80%2010: 100%2011: 87%
2012: 100%
BuybackRoughly 8% of
free floatrepurchased ina 5 year period
(2H08-1H13)
+
CASHFLOW GENERATION AFTER INVESTMENTS AND INTEREST PAYMENTS (2009-1H13)
(Accumulated between Jan/09 and Jun/13 in R$ million)
Data of BM&FBOVESPA (not consolidated): excludes variation in financial transactions and collateral pledged by participants, proceeds raised and investment related to the acquisitionof CME Group shares in 2010. Dividend yield is the result of the sum of earnings per share for the year, divided by the average share price during the same year.
ROIC: Return On Invested Capital.
DIVIDEND YIELD
Change - GAAP EPS : +26.5%Change - Adjusted EPS : +36.8%
8.9%
ROIC
8.4%9.4%8.3%
EARNINGS PER SHARE (EPS) AND ROIC
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REVENUE GROWTH ANDDIVERSIFICATION
Build on growth opportunities in the Brazilian capitalmarket
Foster greater sophistication among participants andinvestors
Promote volume growth and revenue diversification
Strategic Drivers
OPERATING EXCELLENCE Strengthen the business model with investments in
technology for trading and post-trade platforms that bringsefficiency to BM&FBOVESPA and market participants
Continuously improve processes and services, focusing on riskmanagement
Assure market integrity
FOCUS ON THE CUSTOMER Deepen the relationship with clients (investors, brokers
and issuers), by delivering high quality services andproducts, ensuring that this relationship isBM&FBOVESPAs greatest differential
Expand the range and quality of services and productsoffered
INSTITUTIONAL STRENGTHENING
Develop initiatives that contribute to the safety, reliability andstrengthening of the market, inducing and fostering its growth
Maintain high standards of self-regulation
SHAREHOLDERRETURN
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www.bmfbovespa.com.br
Investor Relations Department+55 11 2565-4729 / 4418 / 4834 / 4207 / [email protected]