2013 Reference Form - Version 10

The Brazilian Securities, Commodities and Futures Exchange
BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros
Reference Form 2013
Version 10 April 30, 2014.

Free translation of the original filed in Portuguese
2013 Reference Form BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros (BVMF3)
TABLE OF CONTENTS
1. 2. 3. 4. 5. 6. 7. 8. 9.
PERSONS RESPONSIBLE FOR THE REFERENCE FORM ........................................ 3
INDEPENDENT AUDITORS ................................................................................... 3 SELECTED FINANCIAL AND OPERATING INFORMATION .................................... 3 RISK FACTORS ..................................................................................................... 7 MARKET RISKS ................................................................................................... 25 COMPANY HISTORY ........................................................................................... 34 BUSINESS ........................................................................................................... 37 ECONOMIC GROUP............................................................................................. 58 MATERIAL ASSETS ............................................................................................. 60
10. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................................................................................... 68 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. PROJECTIONS .................................................................................................... 89 SHAREHOLDERS MEETING; MANAGEMENT ...................................................... 90 MANAGEMENT COMPENSATION ......................................................................106 HUMAN RESOURCES ........................................................................................127 CONTROLLING OWNERSHIP ............................................................................129 RELATED PARTY TRANSACTIONS ....................................................................130 CAPITAL STOCK................................................................................................133 SECURITIES INFORMATION ............................................................................133 BUYBACK PROGRAMS; TREASURY STOCK .......................................................137 SECURITIES TRADING POLICY ........................................................................138 DISCLOSURE POLICY .......................................................................................140 EXTRAORDINARY TRANSACTIONS ..................................................................141
1. PERSONS RESPONSIBLE FOR THE REFERENCE FORM

1.1. Statements and identification of the persons responsible for this form. Officer responsible for the information provided in this Form: Edemir Pinto Title: Chief Executive Officer Officer responsible for the information provided in this Form : Eduardo Refinetti Guardia Title: Investor Relations Officer
The above identified executive officers hereby represent to:

(a) have reviewed this Reference Form; (b) find the information contained herein meets the requirements of Brazilian Securities Commission (CVM) Ruling No. 480, in particular those that are set forth under articles 14 through 19 thereof; and (c) find the totality of the information provided herein is truthful, accurate and complete, and fairly presents the financial condition and results of operations of our Company, including as to risks inherent in our business and our issued and outstanding securities.
2. INDEPENDENT AUDITORS
2.1 and 2.2. Information regarding the independent auditors
Years ended December 31, 2012, 2011 and 2010
CVM Code : 287-9 / Audit Firm Name : PricewaterhouseCoopers Auditores Independentes / Taxpayer ID (CNPJ) 61.562.112/0001-20 Service period : From March 4, 2010 through December 31, 2012 Lead auditor : Luiz Antonio Fossa (Taxpayer ID (CPF): 052.348.068-71) / Started : April 15, 2011 / Ended : December 31, 2012 Office address : Avenida Francisco Matarazzo 1400, 9 th 10 th and 13 th -17 th floors, Downtown, So Paulo, SP, Brazil
Postal Code (CEP) 05001-100 Phone number +55 11 3674-2000 Fax number +55 11 3674-2030 Email address : antonio.fossa@br.pwc.com Description of agreed services : auditing of annual financial statements; review of quarterly financial reports; other audit-related services. Total compensation for independent audit services : total compensation in 2012 auditing services: R$1,562 thousand / audit-related services: zero Replacement justification : independent audit firm Ernst&Young Terco Auditores Independentes has been hired to provide audit services starting from January 2013. This is in line with the audit firm rotation requirement prescribed under article 31 of CVM Rul ing 308/99. Reasons of the auditors in case of disagreement with the reasons of the issuer to replace the auditors : Not applicable Year ending December 31, 2013
CVM Code : 471-5 / Audit Firm Name : Ernst & Young Terco Auditores Independentes S.S. / Taxpayer ID (CNPJ) 61.366.936/0001-25 Service period : Started February 21, 2013 Lead auditor : Flvio Serpejante Peppe (Taxpayer ID (CPF): 125.090.248-76) / Started : February 21, 2013 Office address : Avenida Presidente Juscelino Kubitschek 1,830, Tower II, 5 th floor, district of Itaim Bibi, So Paulo, SP, Brazil
Postal Code (CEP) 04543-900 Phone number +55 11 2573-3213 Fax number +55 11 2573-4901 Email address : flavio.s.peppe@br.ey.com Description of agreed services : auditing of annual financial statements; review of quarterly financial reports; other audit -related services. Total compensation for independent audit services : Services just started Replacement justification : Not applicable Reasons of the auditors in case of disagreement with the reasons of the issuer to replace the auditors : Not applicable
2.3. Other material information On March 4, 2013, we released a Notice to the Market announcing the hiring of the independent audit firm of Ernst & Young Terco Auditores Independentes S.S. as our independent auditors, in lieu of PricewaterhouseCoopers Auditores Independentes. Ernst & Young started providing services to us from year 2013. This move aimed to fulfill the provision under article 31 of CVM Ruling 308/99, as amended, which requires a rotation of the independent auditors. While we understand that under the abovementioned provision we would be permitted to adopt a 10-year rotation policy, our Company has elected to implement a 5-year rotation policy, as we believe this is in line with the better recommended practices.
3. SELECTED FINANCIAL AND OPERATING INFORMATION

3.1. Consolidated financial statements
2012 (in R$ thousands) 2011 (in R$ thousands) 19,257,491 23,589,922 1,904,684 1,588,210 1,048,529 2010 (in R$ thousands)
Shareholders equity Total assets . Net revenues Gross income Net income
19,413,882 24,147,114 2,064,750 1,659,791 1,074,256
19,419,048 22,633,975 1,898,742 1,592,515 1,144,486
(in number of shares) (in number of shares) (in number of shares)
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..
1,931,572,495
(in Brazilian reais) 10.050817
1,927,991,988
(in Brazilian reais) 9.988366
1,979,921,193
(in Brazilian reais)
9.807990 0.572058 0.568172

2009
0.556512 0.555066
2010
0.537789 0.536588
3.2.
Non-GAAP financial measures
Our operating income for 2012 amounted to R$1,301,670 thousand, a 19.6% year-on-year rise from R$1,088,020 thousand in the prior year. Likewise, the operating margin (EBITDA divided by net income) rose to 63.0% from 57.1% one year ago.
2012 Net revenues Expenses Operating income
(in R$ thousands) 2,064,750 -763,080 1,301,670
2011
(in R$ thousands) 1,904,684 -816,664 1,088,020
Variation
(%) 8.4% -6.6% 19.6% 592 bps
Operating Margin
63.0%
57.1%
Operating income and margin information is developed by us as a measure of our operating performance, which is why we consider it important to provide this information herein. Management believes operating income and margin information gives a deeper understanding of our operating performance and allows for better comparability with other companies which operate in the same industry as ours. 3.3. Subsequent events. Our consolidated financial statements as of and for the year ended December 31, 2012, were approved at a board of directors meeting held on February 19, 2013, and subsequently approved by our shareholders at the annual general meeting of March 27, 2012. At a meeting held on February 19, 2013, our board of directors declared additional dividends out of net income for the year ended December 31, 2012, in the amount of R$388,703 thousand, which action our shareholders confirmed at the annual meeting held on March 15, 2013. 3.4. Dividend and cash distributions policy Topic
Rules on earnings retention

From net income for the year, as determined after the deductions set forth in article 55 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 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) ( 1 ) that we allocate to the bylaws reserve less than the portion required under the bylaws (item (b) above); and/or ( 2 ) 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 article 54 of the b ylaws, the shareholders meeting may decide to retain that portion of net income for the year which is forecast in a capital expenditure budget approved pursuant to Article 196 of Brazilian Corporate Law. We were not required to make any net income allocations to the legal reserve based on earnings ascertained for the years ended December 31, 2011, 2010 and 2009, because at each of these dates the amount of our legal reserve plus our capital reserves exceeded 30% of our capital stock amount, thereby dispensing with the otherwise required allocation.
Amount of profit retentions
No earnings have been retained, nor allocations to the bylaws reserve made out of net income for the years ended December 31, 2012 and 2010. Earnings retained based on allocations to our bylaws reserves out of net income for the year ended December 31, 2011, amounted to R$135,726 thousand. Allocations to bylaws reserves are typically designed to fund our future investments and the safeguard schemes we established in connection with our role as central counterparty clearing house.
Topic
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, consistent with Brazilian Corporate Law, this mandatory distribution may be suspended in any particular year in which our board of directors reports to our a nnual shareholders meeting that the distribution would be inadvisable given our financial condition. In the years ended December 31, 2010, 2011 and 2012, we distributed 100%, 87% and 100% of our yearly GAAP net income, respectively. 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 may deem fit, which in any event may be computed as part of the mandatory dividends we are required to distribute. In the three most recent years, we adopted the policy of declaring dividends and/or interest on shareholders equity following the end of each quarter, and have on occasion declared payouts at even shorter periods. Under Brazilian Corporate Law we are permitted to suspend the distribution of the mandatory dividend contemplated in item (i) of paragraph 1 of article 55 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 account of a suspension (paragraph 5 of article 5 5 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, mandated by law or special regulation applicable to the issuer, or otherwise required under agreements, arbitration awards or decisions issued by a court of law or administrative court
3.5.
Summary of distributions of net income and retained earnings.

2011 2010
1,047,999 912,273 87.0%
See the table below See the table below
2009
1,144,561 1,144,561 100.0%
(in R$ thousands, unless otherwise indicated)
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 Date of retention approval
1,074,290 1,074,290 100.0%

5.5% -
5.4% 135,726 ASM - March 27, 2012
5.9% -
Cash Distributions 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 Interest on shareholders equity
Type of shares common stock common stock common stock common stock common stock common stock common stock common stock
Distribution payment dates March 11, 2010 April 13, 2010 May 27, 2010 September 10, 2010 September 10, 2010 November 25, 2010 January 19, 2011 May 16, 2011
Gross distribution per share

(in R$)
(in R$ thousands)
Total gross distribution
0.014951 0.029890 0.068231 0.022422 0.098957 0.119101 0.016156 0.207025 0.576733
30,000 60,000 137,000 45,000 198,600 235,875 32,000 406,086 1,144,561 50,000
common stock
March 10, 2011
0.025461
Gross distribution per share
(in R$)
Cash Distributions Interest on shareholders equity Dividends Dividends Dividends Dividends Total for 2011 Dividends Dividends Dividends Interest on shareholders equity Dividends Total for 2012
Type of shares common stock common stock common stock common stock common stock
Distribution payment dates July 5, 2011 July 5, 2011 October 3, 2011 January 31, 2012 April 30, 2012
(in R$ thousands)
Total gross distribution
0.051128 0.034054 0.121740 0.121139 0.117420 0.470942
100,000 66,605 235,336 233,605 226,727 912,273 224,341 240,065 131,181 90,000 388,703 1,074,290
common stock common stock common stock common stock common stock
July 31, 2012 October 31, 2012 December 17, 2012 December 17, 2012 April 30, 2013
0.116161 0.124359 0.067921 0.046599 0. 201237 0.556277
For additional information, see the discussion on dividend and other distributions policy in the above subsection 3.4. 3.6. 3.7. Dividends declared out of retained earnings or other profit reserves. Indebtedness level. In the three most recent years we have not declared dividends out of retained earnings or other profit reserves. 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 - Method: D/E = (total current liabilities + non-current liabilities) / shareholders equity.
2012
4,733,232
Debt to Equity Ratio
24.4%
3.8.
Debt obligations by type and time to maturity

Type of Debt(*) Short-term
Maturing within 1 year Maturing within 1-3 years
Year ended December 31, 2012 (data from our consolidated financial statements)
Long-term
Maturing within 3-5 years Maturing after 5 years
(in R$ thousands)
(in R$ thousands)
Current liabilities Collateral for transactions Earnings and rights on securities under custody Suppliers Salaries and payroll 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 Post-employment healthcare benefits Total Indebtedness (current + noncurrent liabilities)
__________________________________________________________________________
Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured Unsecured
1,666,609 1,134,235 43,975 60,562 74,492 28,358 2,564 36,882 1,845 277,696 0 0 0 0 1,660,609
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 3,072,623 1,242,239 1,739,644 63,207 27,533 3,072,623
( )
* We classify the types of debt (based on type of guarantee or absence thereof) as secured by collateral, by floating assets or unsecured.
The line items collateral for transactions and earnings and rights on securities under custody recorded under current liabilities are intrinsic to our business model as an exchange. These collaterals and guarantees are not operated in any particular or actually defined term. Likewise, movements in the line item deferred income tax and social contribution, under noncurrent liabilities, are not subject to any predefined timelines. Collateral for transactions. Collateral pledged to our clearinghouses as margin for transactions are tied to the transactions they secure up to the amounts thereof, and would not be affected in the event of bankruptcy or judicial reorganization by operation of articles 6 and 7 of Law No. 10,214/01, and articles 193 and 194 of Law No. 11,101/05. 6
Tax liabilities (provision for taxes and contributions payable; income tax and social contribution) and labor liabilities (salaries and payroll charges). These correspond to debt that takes priority over other debt in the manner prescribed under article
83 of the Bankruptcy and Judicial Recovery Law (Law No. 11,101/05). Other liabilities recorded under both current and noncurrent liabilities line items in our financial statements as of and for the year ended December 31, 2012, consist of unsecured debt obligations. Additional reportable information.
3.9.
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, the actual cost correlates with a rate of 5.64% per annum. As translated into Brazilian reais and including accrued interest of R$36,882 thousand, the balance of our debt under the global notes as of December 31, 2012, was R$1,279,121 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, 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. 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). 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. We conduct retrospective and prospective tests to assess the hedge effectiveness. On testing backward-looking effectiveness, we adopt the ratio analysis method, also called dollar offset method, as applied on a cumulative and spot-rate basis1. 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, 2012, there was no realizable ineffectiveness. Moreover, at that year-end date, the fair value of our debt under the notes, as determined based on market data, was R$1,418,205 thousand (Source: Bloomberg).
Supplemental Information for Subsection 3.7

Such as stated in subsection 3.7, our debt ratios and the additional data provided above indicate our company enjoys fairly conservative financial leverage ratios. For additional information on the particular characteristics of our indebtedness, see subsection 10.1(f) below.
4. RISK FACTORS
4.1. Discussion of risk factors a. Risks relating to the Company
In performing our role as central counterparty clearing house we are exposed to substantial third-party credit risks.
Each of our clearinghouses acts 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
1
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 investmen t in a foreign operation over the relevant period.
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 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, the level of leverage in the market, uncertainties related to local and global macro-economic environment, interruptions on liquidity flow of domestic and global markets systemic credit events on domestic and global markets, drastic political changes in Brazil and in the main economies worldwide and 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 rely 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.
Bovespa segment. We derive a significant portion of our overall revenues from fees charged 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-based 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. 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. We have no direct control over any of these factors, 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 8
attractive venue for the trading of these securities and derivatives when compared with other exchanges and trading platforms. These factors, in turn, are influenced primarily by the macroeconomic conditions in Brazil and across the world, in terms of: growth levels, liquidity and political stability, the regulatory environment for securities and derivatives, and the level of activity, and volatility and performance across global markets. Additionally, we may be more significantly affected by global and capital market crises than other financial services institutions because these factors directly impact average daily value and volumes traded on these markets.
BM&F segment. Economic downturns, global financial crises or sudden changes in economic or market conditions, credit
crunches, market instability, market volatility, 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 the capital markets. Moreover, against this backdrop, financial institutions may be unable or unwilling to renew, extend, or grant new lines of credit under economically favorable conditions, or even unable or unwilling to honor existing commitments, all of which could materially and adversely affect our revenues, profitability, results of operations and financial condition. Substantial decreases in the volume of trading in derivative contracts, particularly in exchange and interest rate futures contracts, which account for a significant portion of our revenues for the segment, and other factors may adversely impact our revenues and profitability, thereby negatively affecting our business, results of operations and financial condition.
As our cost structure consists mainly of fixed costs, if our revenues decrease and we are unable to reduce costs our profitability could be materially adversely affected.
Our cost structure, which consists mainly of fixed costs, including IT maintenance costs and expenses with IT personnel, is based on historical and expected levels of demand for products and services offered to participants in the markets we operate. If the demand for our products and services were to decline sharply at any given time, driving a plunge in revenues, we may be unable to adjust our cost structure promptly to make up for the loss in revenues, which could adversely affect our results of operations and our business. Moreover, we may incur substantial expenses in developing and marketing new products and services whose sales could ultimately miss the target, and we would be unable to derive equally significant selling revenues. Should this occur, our results of operations could be adversely affected.
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 consent or to prevent them 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 every intellectual property rights secured by third parties, which may create litigation risks concerning ownership rights of these products, services and technologies. We cannot give assurances that we would successfully pursue violations of our intellectual property rights through legal proceedings in order to enforce them, or successfully defend ourselves against third-party allegations of violation.
We rely on the members of our management team, whom we may be unable to retain or replace with persons of similar experience and qualifications.
A significant portion of our future success depends on the skills and efforts of our management team. 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 harm 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 th e 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 opportunities for acquisitions, investments and other strategic alliances. We may not be successful in identifying opportunities or in integrating the acquired businesses.
We intend to continue to explore and pursue acquisitions and other strategic opportunities to strengthen our business and grow our company, particularly opportunities 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. We can give no assurances that our efforts will be successful. We may not realize the anticipated growth and other benefits from strategic growth initiatives we have made or come to make in the future, and we may have to incur significant expenses to address the additional operating and control requirements engendered by our growth strategy, which could adversely impact our financial condition and results of operations. Furthermore, some of our partnership agreements could restrict our ability to seek strategic alliances with other important market players, preventing us from taking advantage of business opportunities presented by these alliances. 9
b. Risks relating to direct or indirect controlling shareholder or controlling group
We have no 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 our 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 could entail 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 . d. Risks relating to our subsidiaries and affiliates Risk factors related to our subsidiaries and affiliates are the same as those related to us, as discussed herein above. e. Risks relating to our suppliers
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 brokerage and broker-dealer firms licensed to operate as market participants, and issuers of securities listed 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 2012, the top ten stocks most actively traded on our stock exchange (Bovespa segment) accounted for 42.95% 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 increase significantly, our combined revenues and results of operations could be adversely affected. 10
Volumes from foreign investors.

We are highly dependent on the volumes traded by foreign investors. In 2012 foreign investors accounted for 40.4% of the total value traded on markets comprising the Bovespa segment and 25.4% of the overall volume traded on derivatives markets comprising the BM&F segment. The Brazilian government may implement changes in taxation which could increase the tax burden of end-customers or affect the flow of foreign investments to Brazilian markets, including investors that deal on our exchanges, which could adversely affect our results of operations and financial condition. For instance, in September 20, 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 hot money inflows from zero to 2.0%. Then, because the actual impact of the tax (IOF) would have diverted 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 on October 7, 2010, the Central Bank required 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 any actual inflow, which is thus 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, 2010, 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. On September 15, 2011, barely one year on, the Brazilian government announced it was broadening its financial transactions tax (the IOF tax) on currency derivatives to charge increases in short dollar exposures at a 1% rate. And in December 1st, 2011, in a welcome policy switch, the Brazilian government removed the 2% IOF tax charged on hot money inflows for investments in equity securities and equity-based derivatives first adopted in September 2009. Such measures had a negative impact on our 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 both foreign and local exchange market operators, as well as operators of execution venues and organized over-the-counter markets, as there are no regulatory barriers preventing cross-border operators from entering the Brazilian exchange market. We compete with existing and new market participants in various aspects, including with respect to fee rates, quality and speed of trading, 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. The entry of new competitors into our markets could 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. In recent years, the exchange landscape in major international markets encouraged the creation of new, alternative trading facilities which adopt differing structures and business models that could be replicated in our market in the future. The entry of well-capitalized competitors coming from other markets, such as the U.S. and European markets, could attempt to expand their operations and enter other markets, such as the Brazilian markets. If we are not successful in promptly adapting to structural changes in our markets, to technological and financial innovation and other competitive factors, we could be unable to maintain or increase trading volume, and the volume of our clearing and settlement services, which could materially and adversely affect our business, revenues, financial condition and results of operations.
Our average rates per contract, or RPC, (BM&F segment) and trading fees margins (Bovespa segment) are subject to significant fluctuations due to a number of factors, such that you should not rely on average RPC or fee margins for any particular period as an indication of our future average RPC or trading fee margin.
The average rate per contract in our BM&F segment, which impacts our results of operations, is subject to fluctuations related to shifts in the mix of products traded, and to trading venue and the mix of customers, and their impact of our pricing structure. For example, we earn lower fee rates on trades in short-term Brazilian-interest rate futures contracts, whereas granting progressive discounts to high frequency traders based on trading volume bands. Additionally, where the Brazilian real appreciates against the U.S. dollar, we earn lower revenues in reais from trading in contracts for which our fee rates are denominated in U.S. dollars (such as FX futures). Changes to any of these factors are difficult to predict but they do impact our average RPC for the period. As a result, you should not rely on our historical average RPC as an indication of future average RPC. 11
The margin in our Bovespa segment, which impacts our results of operations, is subject to fluctuations due to changes in the mix of investor categories more actively trading, and in the share of overall ADTV for which they account in any given period. For example, we earn lower margins on day trading and on the volumes traded by local institutional investors (funds and investment clubs). Additionally, as compared with cash market trades, we charge higher fees for trades carried out on forward and options markets. Moreover, the revenues we derive from stock market trading fluctuate in tandem with the fluctuations in the market prices for stocks, as we charge fees as a percentage on value traded, such that a bear market will ultimately affect our revenues from trading fees. And we grant progressive discounts to high frequency traders based on trading value bands, which influences our trading fees margin. While changes to any of factors are difficult to predict they do impact our average margin on value traded for the period. Because of this fluctuation, you may not be able to rely on the average transaction margin for any particular period as an indication of our future average margins. 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, acting through the Central Bank, 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 noncompliance. In recent years, a number of regulatory changes impacted our operations, including CVM Ruling 461/2007 governing the organization, operation and dissolution of stock, futures and commodity exchanges and OTC markets. Moreover, the activities of our clearinghouses and those of our subsidiary, BM&FBOVESPA Settlement Bank are also subject to the regulatory authority of the Central Bank and the CVM. Additionally, the Central Bank may adopt rules or procedures regarding the clearing and settlement of securities, and also require additional collateral for transactions executed 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 (2008-2009), stricter rules on financial institutions have been under consideration by regulators across the world. If such rules are implemented abroad or recommended by the Bank for International Settlements (BIS), the Central Bank and the CMN may also implement part of these stricter rules and recommendations in Brazil, which may impact our exchange business, clearinghouse and central securities depository business, or the business of our subsidiary, BM&FBOVESPA Settlement Bank. The Central Bank and the CVM have broad administrative powers to fine, suspend or interrupt our activities. In the event of actual or alleged noncompliance 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. Regulatory changes may have an adverse effect on us and on the current and future users of our services. For instance, the regulators may implement changes which reduce the attractiveness of a listing on our markets or the use of our services, or encourage issuers whose shares trade on our trading platforms to migrate to alternative market centers offering more flexible trading or corporate governance requirements. The loss of a substantial number of customer issuers or a reduction in the volume of trading on our exchanges and OTC markets may have an adverse effect on us. Any investigation or proceeding, regardless of outcome, may result in substantial costs, and could also adversely affect our reputation, thus adversely affecting our results of operations.
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 stock exchange (Bovespa segment) may generate conflicts of interest between our self-regulatory function and our interests as a for-profit company. As a securities market operator, we are responsible for establishing listing and disclosure standards to be followed by issuers both upon a listing and thereafter. Market perception that we would lower these standards so as to benefit us or to secure additional listings would harm our image and reputation. i. Risks relating to other countries in which the Company operates. Our subsidiaries BM&F (USA) Inc. and BM&FBOVESPA (UK) Ltd. operate primarily as our cross-border representative offices and are not direct sources of revenues, such that there are no material risks associated with our cross-border operations. 4.2. 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 busin ess 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 for continuing pursuit of improvement s 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 expanding our market data activities, fo r more nimble, accurate and cost effective retrieval and transmission of market data to vendors, market participants, 12
investment research analysts, advisory services and, ultimately, the investment decisions of customer investors; (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 settlement of transactions carried out o n 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 controlling 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. Moreover, we have been investing in developing and implementing a new multi-asset trading platform and a new integrated multi-asset, multi-market clearing and risk management system, both of which should give us the ability to offer market participants technologically innovative , high-performing and efficient trading, clearing and risk management systems and services; strengthen our competitive position and better prepare us to face the risk of new competitors potentially entering the local exchange industry. 4.3 Arbitration proceedings; legal and administrative proceedings not protected by absolute privilege. The Company and its subsidiaries are parties to administrative and court cases relative to matters of tax, labor and civil la w. 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 that differ from those contemplated under CVM Resolution 594/09, the tables below include 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 form.
(I) Tax Cases
I.1 BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros (BM&FBOVESPA) I.1.1)

Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets, rights at risk 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 BM&F S.A. (merged with BM&FBOVESPA on May 8, 2008) Defendant: Brazilian Government R$20,789,085.06, as updated through to December 2012. This is a declaratory action seeking a court decree recognizing the absence of taxation relationship permitting the government to charge the Additional Social Security Contribution 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 ca lculation basis just the aggregate of payments made to independent service providers. - 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 A dditional 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. Prospects for a defeat Impact in case of a defeat Provisioned amount Remote Because the amounts being litigated have been 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$20,789,085.06 (the value at risk has been provisioned despite the assessment of remote prospects for a defeat because central issue being litigated is a legal obligation of the Company.
Purpose and principal related facts
I.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
13
Amounts, assets, rights at risk R$844,718 thousand. The tax authority drew up a tax delinquency notice seeking to collect corporate income tax (IRPJ) and social contribution on net income (CSLL), on alleged grounds that in 2008 and 2009 BM&FBOVESPA supposedly failed to pay levies for such taxes on the amortization of goodwill from the merger of the shares of Bovespa Holding S.A., approved at the shareholders meeting held on May 08, 2008. We received notice of tax assessment on November 29, 2010, and on December 28, 2010, filed opposition challenging the assessment. - On October 21, 2011, the lower court decision (Regional Tax Adjudication Division) was partially favorable to the Company in that it cutback the tax assessment amount arguing the tax authority calculated the tax basis relative to 2008 using erroneous criteria. We have appealed this decision, which is now pending judgment by the Appellate Tax Adjudication Board. 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.
Prospects for a defeat Impact in case of a defeat Provisioned amount
I.1.3)
Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets, rights at risk Administrative Case No. 16327.720648/2012-03 8 th Panel of the So Paulo Regional Tax Adjudication Division Brazilian Federal Revenue Service Lower administrative court May 22, 2012 Claimant: Brazilian Federal Revenue Service Respondent: BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros R$153,935 thousand. The tax authority seeks to collect withholding income tax (IRRF) supposedly due in connection with the 2008 merger with Bovespa Holding S.A. (a share merger) . The Federal Revenue alleges our company should have retained and remitted withholding income tax due on capital gain the Bovespa Holding shareholders supposedly earned from the merger. We received notice of tax assessment on May 22, 2012, and on June 21, 2012, filed opposition challenging the assessment. - The case is now pending judgment by the So Paulo Regional Tax Adjudication Division. Possible A final judgment of liability would entail obligation to pay the principal deemed delinquent. No amount has been provisioned.
I.1.4)
Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets, rights at risk Administrative Case No. 16327.721.146/2012-91 8 th Panel of the So Paulo Regional Tax Adjudication Division Brazilian Federal Revenue Service Lower administrative court October 30, 2012. Claimant: Brazilian Federal Revenue Service Respondent: BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros R$109,676 thousand (IRPJ and CSLL) plus R$8,121 thousand (noncompliance fine, IRRF). The tax authority seeks to collect corporate income tax (IRPJ) and social contribution on net income (CSLL), after disallowing certain tax deductions (expenses with fees and commissions charged by participants in the 2007 secondary initial public offering of shares of Bovespa Holding) we took into account in determining the tax basis for each of these taxes. In addition, the Federal Revenue alleges we have failed to retain and remit withholding income tax (IRRF) due on part of the fees and commissions charged by the offering participants. We received notice of tax assessment on October 30, 2012, and on November 29, 2012, filed opposition challenging the assessments. - The case is now pending judgment by the So Paulo Regional Tax Adjudication Division. Possible, for the assessment of IRPJ and CSLL (R$109,676 thousand); remote for the R$8,121 thousand fine for noncompliance with ancillary tax obligation (IRRF). A final judgment of liability would entail obligation to pay the principal deemed delinquent. No amount has been provisioned.
I.1.5)
Court of origin Filing date Litigating parties Administrative Cases Nos. 16327.721.267/2012-33 and 16327.721.268/2012-88 8 th Panel of the So Paulo Regional Tax Adjudication Division Brazilian Federal Revenue Service Lower administrative court November 7, 2012. Claimant: Brazilian Federal Revenue Service
Stage (degree of jurisdiction)
14
Respondent: BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros Amounts, assets, rights at risk R$81,118 thousand (social security contributions), plus R$43,202 thousand (noncompliance fine, IRRF). The tax authority seeks to collect corporate social security contributions supposedly due on stock options originally granted under the BM&F Stock Options Plan of the old independent exchange (exercisable in 2007 and 2008). Our Company supposedly absorbed this tax liability on merging with BM&F in 2007. In addition, the Federal Revenue alleges we have failed to retain and remit withholding income tax (IRRF) levied on the value attributable to these stock options. We received notice of tax assessment on November 7, 2012, and on December 7, 2012, filed opposition challenging the tax assessment. - The case is now pending judgment by the So Paulo Regional Tax Adjudication Division. Possible, for the assessment of as to social security contributions (R$81,118 thousand); remote for the R$43,202 thousand fine for noncompliance with ancillary tax obligation (IRRF) . A final judgment of liability would entail obligation to pay the principal deemed delinquent. No amount has been provisioned.
I.1.6)
Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets, rights at risk Administrative Case No. 16327.721.519/2012-24 8 th Panel of the So Paulo Regional Tax Adjudication Division Brazilian Federal Revenue Service Lower administrative court December 19, 2012. Claimant: Brazilian Federal Revenue Service Respondent: BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros R$110,675 thousand. The tax authority seeks to collect differences in corporate income tax (IRPJ) and social contribution on net income (CSLL) for 2008, which allegedly were due as a result of the non-deductibility of interest on shareholders equity we declared and credited to shareholders in 2008. We received notice of tax assessment on December 19, 2012, and on January 18, 2013, filed opposition challenging the tax assessment. - The case is now pending judgment by the So Paulo Regional Tax Adjudication Division. Possible. A final judgment of liability would entail obligation to pay the principal deemed delinquent. No amount has been provisioned.
(II) Civil law cases

II.1 BM&FBOVESPA and BVRJ II.1.1)
Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets, rights at risk Case No. 2007.001167284-8 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 st ock 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 addres sed to the Superior Court of Justice and the Supreme Federal Court. The Superior Court of Justice recently issued a certiorari order, accepting the special appeal for review. A decision by the Superior Court of Justice is now pending. Remote 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.
II.1.2) 15
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 pl aintiffs 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 sha reholders 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 p ending. 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.
Amounts, assets, rights at risk
II.2 BM&FBOVESPA II.2.1)

Case No. 0172946-23.2010.8.26.0100 (lower court case No. 583.00.2010.172946-2) Court of origin Stage (degree of jurisdiction) Filing date Litigating parties 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 held by plaintiftt in BM&F (then a mutualized non-profit exchange, which later went public and merged with BM&FBOVESPA). The value of a membership certificate as of December 2012 has been estimated at R$79,299,544.03, plus R$32,589.220.00 in payouts by BM&F through to the merger in November 2007 (historical nominal amount) plus payouts paid through to the date when shares of BM&FBOVESPA are delivered to plaintiff, as claimed. 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 default on membership fees due and payable) of Spreads membership certificates previously held in BM&F, the old futures exchange. 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 (a) compensation for losses allegedly incurred with the cancellation of membership certificates, which according to the trustees estimate should be arbitrated at the equivalent of the proceeds from a hypothetical sale of 1,629,461 shares of BM&F S.A. in its 2007 IPO at the offering price per share of R$20.00, as adjusted for inflation and accruing interest in arrears to the payment date; (b) in addition to indemnity for unearned dividends and interest on shareholders equity declared by BM&FBOVESPA since the 2007 merger of BM&F, which the trustee alleges to be attributable to the shares of BM&FBOVESPA the estate would hold were it not for the cancelled membership cert ificates. The trustee also claims payment for fees of counsel arbitrated at 10% of the value on the action. We received service of process on January 18, 2011, and filed the answer shortly thereafter. On August 5, 2011, the lower court decision found for the plaintiff to recognize 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 los ses from the cancellation of membership certificates in BM&F (arbitrated at R$32,589,220.00, i.e., the proceeds from a hypothetical sale of 1,629,461 shares BM&F S.A. in its 2007 IPO, as adjusted for inflation and accruing interest in arrears of 1% per month to the payment date), and the claim for indemnity for unearned dividends and interest on shareholders equity declared by BM&FBOVESPA (arbitrated at R$2,311,592.14, to be paid as adjusted for inflation and accruing 1% interest in
16
arrears), 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, which the So Paulo Court of Appeals received with both suspensive and remanding effects. Judgment by the Court of Appeals is still 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 BM&F membership certificates), in addition to compensation for losses supposedly arising from the impossibility to sell BM&F shares in its 2007 IPO (as of November 2007 estimated at R$32,589,220.00), plus indemnity for unearned dividends and interest on shareholders equity BM&FBOVESPA declared over time since absorbing BM&F (as of November 2007 estimated at R$2,311,592.14), as adjusted for inflation and accruing interest in arrears of 1% per month. No amount has been provisioned.
Impact in case of a defeat
Provisioned amount
II.2.2)
Court of origin Filing date Litigating parties Amounts, assets, rights at risk Case No. 0204334-17.2005.8.26.0100 (lower court case No. 583.00.2005.204334-9) 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 action seeks the annulment of a decision of the board of directors of BM&F (then a mutualized exchange), which excluded the plaintiff from membership and cancelled his membership certificates due to default on fees owed the exchange. He also seeks a valuation of his interest in common membership certificates according to the rules provided in the bylaws of the old exchange (including adjustment 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 credits (if any) against BM&F. Both parties filed motions to clarify. The motion filed by co-defendants BM&FBOVESPA and BM&F Association was partially granted, whereas the plaintiffs was rejected. The plaintiff then filed both special appeal and extraordinary appeal. A second motion to clarify filed by BM&FBOVESPA and BM&F Association was been rejected. However, due to clerical error and other reasons, we filed another motion, which the lower court judge accepted to correct the clerical error. In order to have the motion reviewed by the higher court, we then filed regulatory appeal, which is now pending a decision. Possible Payment of plaintiff's credits resulting from his exclusion from membership in BM&F (then a mutual entity), which as of March 2012 we estimated at R$1,647,885.81. No amount has been provisioned.
II.2.3)
Court of origin Filing date Case No. 0206075-19.2010.8.26.0100 (lower court case No. 583.00.2010.206075-4) 14 th lower civil court of the judicial district of So Paulo (SP) First degree of jurisdiction November 23, 2010 Plaintiff: Esboriol Participaes e Empreendimentos Ltda. and Fernando Alexandre Esboriol Defendant: BM&FBOVESPA (as successor to BM&F)*, BM&F As sociation and BM&FBOVESPAs CEO, Mr. Edemir Pinto. ( ) * BM&F was originally a mutualized non-profit exchange, which later went public and merged with BM&FBOVESPA. An adjusted amount equivalent to the proceeds of a hypothetical sale of shares in the 2007 IPO of BM&F, assuming the courts recognize the plaintiffs hold ownership rights in such shares (as arising from a conversion of the membership certificates special trader category they once held in the predecessor mutualized entity). The plaintiffs in this action seek to annul certain board decisions and transactions (including, in particular, a sale of membership certificates carried out within the scope of a buyback program and a spin-off of the assets and liabilities of BM&F and related plan of exchange of certificates for shares) 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 not for allegedly having given defective consent to certain demutualization transactions. Process was served on all defendants; the answers were filed, and so was the plaintiffs rebuttal. The parties are now set to be given notice by the court to
Litigating parties
17
designate the evidence they plan to use. Prospects for a defeat Impact in case of a defeat Provisioned amount 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.
II.2.4)
Court of origin Filing date Case No. 0117867-25.2011.8.26.0100 (lower court case No. 583.00.2011.117867-5) 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 exchange, which later went public and merged with BM&FBOVESPA. An adjusted amount equivalent to the proceeds of a hypothetical sale of shares in the 2007 IPO of BM&F, assuming the courts recognize the plaintiffs hold ownership rights in such shares (as arising from a conversion of the membership certificate commodity broker category plaintiff 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 carried out within the scope of a buyback program and a spin-off of the assets and liabilities of BM&F and related plan of exchange of certificates for shares) implemented in the course of the demutualization process, on grounds of alleged defective consent. The plaintiff intends to regain ownership rights in membership certificates in order to have them replaced 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 offering price per share in the 2007 IPO, and 65% valued at the current market price for BM&FBOVESPA stocks, allowing for certain adjustments). The answer and plaintiffs rebuttal were filed; the lower court decided the case finding the claim invalid. The plaintiff filed motion to clarify, which was rejected. Plaintiff appealed and the case is now pending judgment by the So Paulo Court of Appeals (Appeal No. 0117867-25.2011.8.26.0100). 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
II.2.5)
Administrative Misconduct Suits 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) Filing date 22 nd lower civil court of the Federal District judiciary section First degree of jurisdiction These cases started between April 20 and June 25, 1999 Plaintiffs: The Federal Public Prosecution Office, Plaintiff in the administrative misconduct suits; 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 trades in futures contracts between the Central Bank and the two defendant banks (Marka and FonteCindam). The administrative misconduct suits 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 contracts agreed between the Central Bank and the two co-defendant 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, which later went public and merged with BM&FBOVESPA) and its officers at the time appear as co-defendants allegedly for 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 ta ken 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
Litigating parties
18
devaluation. The court granted requests for an expert examination to be carried out. In addition, given the identity of purposes found in these actions, the expert opinion has been accepted as valid for all of the cases. On March 15, 2012, the actions were adjudged, and the claims held valid. Most defendants were held jointly and secondarily liable for redressing the Brazilian Treasury, including BM&FBOVESPA (as a successor to BM&F). The value at issue may rise to R$7,005 million. According to one of the decisions, part of this amount (up to R$5,431 million) may be offset against gains the Central Bank made by avoiding to use its U.S. dollar reserves. These amounts are 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, some of the defendants were also charged with administrative 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 misc onduct 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, as well as payment of 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. After these decisions were publicized, we filed motion for clarification of judgment, which the court rejected. We next filed appeals which are currently pending a decision by the Regional Federal Court (an appellate court). Prospects for a defeat Remote Compensation for losses incurred by the Treasury, which pursuant to the lower court decisions would rise to R$7,005 million. According to one of the decisions issued thus far, a proportionate part of the award for refund may be offset against gains (up to R$5,431 million) the Central Bank made by avoiding to use 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 has been imposed (which as of January 1999 amounted to R$1,418 million, and will require adjusting for inflation and accrue 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.
Provisioned amount
II.2.6) Case No. 0612656-34.2000.8.26.0100 (lower court case No. 000.00.612656-1

Court of origin Stage (degree of jurisdiction) Filing date Litigating parties Amounts, assets, 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, which was the case of the plaintiff. This is an annulment action brought against BM&F (then a mutualized entity, which later went public and merged with BM&FBOVESPA) seeking to quash a board decision dated December 22, 1999, which authorized the company to charge trading fees (emolumentos de prego) from holders of rights to operate as Commodity Brokers and Clearing Members, including holders that are undergoing extrajudicial liquidation, court-administered reorganization or bankruptcy proceedings (which are not permitted to operate). After the answer, reply and rebuttal, the lower court decision 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 , and followed by plaintiffs special and extraordinary appeals, which were also rejected. Plaintiff then filed interlocutory appeal seeking to reverse the rejection. The interlocutory appeal filed in the record of the special appeal was rejected, whereas the interlocutory appeal filed in the record of the extraordinary appeal is still pending a decision. Remote In the event of defeat, beyond the annulment of the fees charged and collected, the decision would establish a negative precedent which would adversely affect the collection of fees from market participants that file for extrajudicial liquidation, court-administered reorganization or bankruptcy. No amount has been provisioned.
4.4 Arbitration proceedings; legal and administrative proceedings not protected by absolute privilege, where the Company or a subsidiary litigates with against any of a current or former director, officer or controlling shareholder or investor. 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 litigates against any of a current or former director or officer or controlling shareholder or investor in our own securities or those of a subsidiary.
19
4.5
Material legal proceedings protected by absolute privilege.
Other than as disclosed and discussed above, as of the date of this Reference Form there are no material proceedings protected by absolute privilege to which either the Company or any of its subsidiaries is party. 4.6 Material arbitration, legal and administrative proceedings not protected by absolute privilege, whose outcome (taken collectively) could materially affect the Company or a subsidiary.
(I) Labor Cases
As of December 31, 2012, our Company and subsidiaries were parties to 265 labor claims, which classify into two main groups: I Claims by former employees. These refer to 111 labor cases (41.88% of the total) involving claims for salary differences (in large part related to overtime, salary equalization and health hazard allowance, among other things). In this group, 45 claims (contingent liabilities of R$8,916,148.20) have been assessed as a probable defeat, whereas 54 claims (contingent liabilities of R$28,535,060.57) have been assessed as a possible defeat. A total of 12 cases have been assessed as entailing remote prospects for a defeat.
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 Brazilian Commodities Exchange TOTAL
38 6 1 45
8,175,731.54 491,207.32 249,209.34 8,916,148.20
54 54
28,535,060.57 0 0 28,535,060.57
II Third-party claims (other than former employees). These refer to 155 claims (58.12% of the total) filed by former employees of outsourced providers and brokerage firms seeking to have our Company or a subsidiary held jointly or secondarily liable for severance and other payments on grounds that Precedent 331 of the Superior Labor Court (TST) is applicable. These claims substantially classify into three groups, as follows: a. This group comprises 49 claims, where 45 have been brought against a number of brokerage firms and us by former pit traders that used to work on the exchange floor. In addition, the Capital Market Workers Union ( Sindicato dos Trabalhadores em Mercados de Capitais) brought four other claims against brokerage firms, banks, insurance companies and us on behalf of unionized workers, arguing our former trading floor posed an environmental health hazard for traders and other workers, who thus should have been compensated in the form of additional health hazard allowance payments. The decisions thus far issued by the courts upheld our arguments to overrule the plaintiffs allegation s, setting aside the notion that we hold secondary liability in the litigated issues, because (i) the plaintiffs actual employers are the brokerage firms and institutions for which they worked, and the allegation of indirect employment is groundless, including as to cases where health hazard allowance payments are claimed; and (ii) the exchange floor has long been shut down, objective expert evidence can no longer be obtained and the courts have refused to consider evidence possibly given in older cases. Thus, based on evaluations by counsel, Management classifies the prospects for a defeat in these cases as remote, except for one case (contingent liability of R$40,998.16) where the employer brokerage firm and us have been found jointly liable for the amounts claimed, such that we classify this case as a possible defeat. b. 82 lawsuits have been brought by former employees of outsourced providers of cleaning and security services that claim differences in severance payments received from their former employers. As a result, we are susceptible to being found secondarily liable in 37 claims, which were assessed as a probable defeat (contingent liabilities of R$1,758,059.27). In 26 other claims (contingent liabilities of R$2,263,370.51), the prospects for a defeat have been assessed as possible. The remaining 19 claims have been assess entailing remote prospects for a defeat.
Party Number of claims assessed as a probable defeat Contingent liabilities under claims assessed as a probable defeat (in R$) Number of claims assessed as a possible defeat Contingent liabilities under claims assessed as a possible defeat(in R$)
Company BVRJ TOTAL
37 0 37
1,758,059.27 0 1,758,059.27
25 1 26
2,226,615.78 36,754.73 2,263,370.51
c. 23 claims have been brought by former employees of outsourced providers of IT services . The prospects for a defeat in four of these claims (contingent liabilities of R$1,335,047.49) have been assessed as probable, whereas the prospects in 14 other claims (contingent liabilities of R$11,089,016.45) have been assessed as possible. The remaining five cases were assessed as entailing remote prospects for a defeat.
Party Number of claims assessed as a probable defeat Contingent liabilities under claims assessed as a probable defeat (in R$) Number of claims assessed as a possible defeat Contingent liabilities under claims assessed as a possible defeat(in R$)
Company TOTAL
4 4
1,335,047.49 1,335,047.49
14 14
11,089,016.45 11,089,016.45
20
We provision contingent liabilities (based on value on action ascribed by claimants) where the prospects for defeat in a claim are classified as probable. For this reason, we understand these labor claims entail no material risk to our business.
(II) Tax Cases
There are no arbitration or administrative or court proceedings consisting of repetitive 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

(a) Ordinary Action Case Record No. 0125497-40.2008.8.26.0100 (former case 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. 9095570-75.2009.8.26.0000 - Plaintiff: Carlos Rodrigues Jnior; (b) Ordinary Action Case Record No. 583.00.2008.125496-6 16 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 012549655.2008.8.26.0100 Plaintiff: Paulo Roberto Ferreira de Sena; (c) Ordinary Action Case Record No. 0125498-25.2008.8.26.0100 (former case No. 583.00.2008.125498-1) 24 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 9204350-79.2009.8.26.0000 Plaintiff: Jurandir Pinheiro de Castro; (d) 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 Civil Appeal no. 9138494-71.2009.8.26.0000 - Plaintiff: Walter Silva Junior; (e) Ordinary Action Case Record No. 0136416-88.2008.8.26.0100 (former case No. 583.00.2008.136416-9) 2 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0136416-88.2008.26.0100 Plaintiff: Egemp Gesto Patrimonial Ltda.; (f) Ordinary Action Case Record No. 583.00.2008.129505-7 9 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 9000043-91.2008.8.26.0100 Plaintiff: Reginaldo Goncales da Silva; (g) Ordinary Action Case Record No. 0130365-61.2008.8.26.0100 (former case No. 583.00.2008.130365-7) 8 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal no. 0130365-61.2008.8.26.0100 Plaintiff: Solidez Corretora de Cmbio, Ttulos e Valores Mobilirios Ltda; (h) Ordinary Action Case Record No. 0125495-70.2008.8.26.0100 (former case No. 583.00.2008.125495-3) 9 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Appeal no. 0125495-70.2008.8.26.0100 in the Court of Appeals of So Paulo Plaintiff: Roberto Magalhes Duprat; (i) Ordinary Action Case Record No. 0129506-45.2008.8.26.0100 (former case No. 583.00.2008.129506-0) 40 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Jair do Nascimento; (j) Ordinary Action Case Record No. 0130362-09.2008.8.26.0100 (former case No.583.00.2008.130362-9) 9 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Special Appeal No. 1.328.897/SP Plaintiff: Aureum Corretora; (k) Ordinary Action Case Record No. 0101785-84.2009.8.26.0100 (former case No. 583.00.2009.101785-7) 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 Plaintiff: Banex Distribuidora de Ttulos e Valores Mobilirios; (l) Ordinary Action Case Record No. 0243345-48.2008.8.26.0100 (former case No. 583.00.2008.243345-0) 1 st Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Carmine Enrique Filho; (m) 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 Civil Appeal no. 0197829-68.2009.8.26.0100 Plaintiff: Future Premium; (n) 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 Oleaginosas e Derivados; (o) Ordinary Action Case Record No. 0197372-36.2009.8.26.0100 (former case No. 583.00.2009.197372-7) 9 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0197372-36.2009.8.26.0100 Plaintiff: Mario Cesar Nassif da Fonseca; (p) Ordinary Action Case Record No. 0243341-11.2008.8.26.0100 (former case No. 583.00.2008.243341-9) 37 th Lower Civil Court of the Central Courthouse, currently at the appellate stage Civil Appeal No. 0243341-11.2008.8.26.0100 Plaintiff: Renato Enrique; (q) Ordinary Action Case Record No. 0212131-39.2008.8.26.0100 (former case No. 583.00.2008.212131-1) 10 th Lower Civil Court of the Central Courthouse, currently at the appellate stage Civil Appeal No. 0212131-39.2008.8.26.0100 Plaintiff: Shan Ban Chun; (r) Ordinary Action Case Record No. 0184184-39.2010.8.26.0010 (former case No. 583.00.2010.184184-2) 15 th Lower Civil Court of the Central Courthouse Plaintiff: Flavio Barreto Moreira; (t) Ordinary Action Case Record No. 0184065-78.2010.8.26.0100 (former case No. 583.00.2010.184065-3) 39 th Lower Civil Court of the Central Courthouse, currently at the appellate
Plaintiffs; original or appellate courts; case numbers
21
stage Civil Appeal No. 0184065-78.2010.8.26.0100 Plaintiff: Jos Carlos Citti de Paula; (u) Ordinary Action Case Record No. 0184083-02.2010.8.26.0100 (former case No. 583.00.2010.184083-5) 8 th Lower Civil Court of the Central Courthouse, currently at the appellate stage Appeal no. 0184083-02.2010.8.26.0100 Plaintiff: Ricardo Lombardi de Barros; (v) Ordinary Action Case Record No. 0104331-78.2010.8.26.0100 (former case No. 583.00.2010.104331-4) 1 st Lower Civil Court of the Central Courthouse, currently at the appellate stage Civil Appeal No. 0104331-78.2010.8.26.0100 Plaintiff: Luiz Carlos Ferreira; (w) Ordinary Action Case Record No. 0184070-03.2010.8.26.0100 (former case No. 583.00.2010.184070-3) 29 th Lower Civil Court of the Central Courthouse Plaintiff: Alexandre de Freitas Nuzzi; (x) Ordinary Action Case Record No. 0184078-77.2010.8.26.0100 (former case No. 583.00.2010.184078-5) 6 th Lower Civil Court of the Central Courthouse Plaintiff: Rogrio Sandes Cardoso; (y) Ordinary Action Case Record No. 0183812-90.2010.8.26.0100 (former case No. 583.00.2010.183812-8) 31 st Lower Civil Court of the Central Courthouse, currently at the appellate stage Civil Appeal No. 0183812-90.2010.8.26.0100 Plaintiff: Target Consultoria Financeira; (z) Ordinary Action Case Record No. 0184197-38.2010.8.26.0100 (former case No. 583.00.2010.184197-7) 5 th Lower Civil Court of the Central Courthouse, currently at the appellate stage Civil Appeal No. 0184197-38.2010.8.26.0100 Plaintiff: Vagner Blantes; (aa) Ordinary Action Case Record No. 0183536-59.2010.8.26.0100 (former case No. 583.00.2010.183536-2) 31 st Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0183536-59.2010.8.26.0100 Plaintiff: Edson Cerreti; (aa) Ordinary Action Case Record No. 0182475-66.2010.8.26.0100 (former case No. 583.00.2010.182475-4) 36 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0182475-66.2010.8.26.0100 Plaintiff: Treviso Corretora de Cmbio Ltda; (ab) Ordinary Action Case Record No. 0197368-96.2009.8.26.0100 (former case No. 583.00.2009.197368-0) 34 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Ernesto Matalon; (ac) Ordinary Action Case Record No. 0244812-62.2008.8.26.0100 (former case No. 583.00.2008.244812-9) 37 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0244812-62.2008.8.26.0100 Plaintiff: Antonio Carlos Rago Cano; (ad) Ordinary Action Case Record No. 583.00.2008.151231-9 19 th Lower Civil Court of the Central Courthouse, 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 Carlos Eduardo Chamma Lutfalla Et Al.; (ae) 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 Civil 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; (af) 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 Civil 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, Marisa Lojas, and Dcio Goldfarb; (ag) Ordinary Action Case Record No. 0019539-14.2010.4.03.6100 2 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Plaintiff: Esboriol Participaes e Empreendimentos Ltda.; (ah) Ordinary Action - Case Record No. 583.00.2007.264023-3 2nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal no. 0264023-21.2007.8.26.0100, in the Court of Appeals of So Paulo Plaintiff: Ernesto Rahmani and Ike Rahmani. BM&FBOVESPA and BM&F Association, each as a successor to BM&F Mercantile and Futures Exchange (a mutualized non-profit exchange) Plaintiffs intend to regain ownership rights in common membership certificates previously held in the old futures exchange, BM&F (then a mutualized exchange, which later went public and merged with BM&FBOVESPA), in order to have them replaced with an equivalent number of shares of BM&FBOVESPA. The financial value at risk in these cases would have to be determined in proceedings for calculation of the award and enforcement of judgment. 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 exchange for shares of the demutualized corporation emerging from the spin-off, which they claim failed to take into account earnings retained since 1994. The plaintiffs applied for interim relief in the form of an injunction annulling the m eeting or, in the alternative, as a secondary plea, the plaintiffs seek an order annul ling the members decision that approved the valuation of membership certificates, coupled with an order for the Defendants to refund losses supposedly incurred for lack of adjustments to the value of their membership certificates. In the answer, the defendants sustained, as preliminary arguments, lack of interest in the action (a justiciable controversy) and legal impossibility of the claim, while on the merits claiming for the invalidity of the actions (due to lack of legal basis) in addition to appropriate arguments related to the peculiarities of each case. Except for the suits filed by Flavio Barreto Moreira item (r), Rogrio Sandes Cardoso item (w), Ernesto
Plaintiffs; original and appellate courts; case numbers
Defendant
22
Matalon item (ab), Esboriol e Ernesto - item (ag) e Ernesto and Ike Rahmani item (ah), a decision has been entered by the relevant lower court judge in all other cases. There have been decisions on the merits finding for invalidity of the claim, and some decisions dismissed the action without prejudice. The decisions entered in the records of the suits filed by Jair do Nascimento item (i), Granleo Comrcio item (n) and Alexandre de Freitas Nuzzi item (v) may still be appealed. In all other cases, the plaintiffs appealed the lower court decision. The appellate court judgements upheld the lower court decisions, thus rejecting the appeals of plaintiffs Paulo Roberto Ferreira de Sena item (b), Walter Silva Junior item (d), Aureum Corretora item (j), Renato Enrique item (p), Jos Carlos Citti de Paula item (s), Ricardo Lombardi de Barros item (t), Luiz Carlos Ferreira item (u), Treviso Corretora de Cmbio Ltda item (aa), Carlos Eduardo Chamma Luftalla Et Al. item (ad), Cludio Coppola Di Todaro item (ae) and Rivale Representaes, Marisa Lojas, and Dcio Goldfarb item (af). Brokerage firm Aureum Corretora (item (j)) appealed the higher court judgment with a Special Appeal now pending a decision by the Superior Court of Justice (Special Appeal No. 1.328.897/SP). Further appeals to higher courts, and motions for clarification of the appellate judgments, may still be filed in the other cases. 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, which approved the proposed demutualization and subsequent spin-off of BM&F, then a mutualized entity. The Plaintiffs also object to the valuation of their membership certificates and the plan of exchange for shares of the demutualized corporation. Remote Given the time elapsed since these actions were filed, and the general context within which these cases have been evolved, we understand the worst-case scenario would be one where the Company could be required 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 the pre-demutualization state of affairs. However, it is very difficult to make a reasonable estimate of the indemnity amount 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 fo r calculation of the award , as otherwise it seems impossible to assign value to the Plaintiffs supposed losses. No amount has been provisioned.
Provisioned amount
(III.2) Repetitive Cases II

(a) Ordinary Action Case Record No. 055287-69.2008.8.26.0100 (former case No.583.00.2008.155287-5) 32 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 924647329.2008.8.26.0000 Plaintiff: Lawrence Pih; (b) Ordinary Action Case Record No. 055286-84.2008.8.26.0100 (former case No. 583.00.2008.155286-2) 37 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0155286-84.2008.8.26.0100 Plaintiff: Andr Arantes; (c) Ordinary Action Case Record No. 0119296-95.2009.8.26.0100 (former case 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 Plaintiff: Chao En Ming; (d) Ordinary Action Case Record No. 0113283-80.2009.8.26.0100 (former case No. 583.00.2009.113283-6) 13 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0113283-80.2009.8.26.0100 Plaintiff: Claudio Monteiro da Costa; (e) Ordinary Action Case Record No. 0113286-35.2009.8.26.0100 (former case No. 583.00.2009.113286) 23 rd Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Fernando Alexandre Esboriol; (f) Ordinary Action Case Record No. 0113284-65.2009.8.26.0100 (former case No. 583.00.2009.113284-9) 2 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0113284-65.2009.8.26.0100 Plaintiff: Henrique S. Filho; (g) Ordinary Action Case Record No. 0113285-50.2009.8.26.0100 (former case 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 Plaintiff: Seeiche Abe. (h) Ordinary Action Case Record No. 0184100-38.2010.8.26.0100 (former case No. 583.00.2010.184100-2) 18 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184100-38.2010.8.26.0100 Plaintiff: Carlos Eduardo Miranda Teixeira; (i) Ordinary Action Case Record No. 0184181-84.2010.8.26.0100 (former case No. 583.00.2010.184181-4) 25 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184181-84.2010.8.26.0100 Plaintiff: Celso Rodrigues; (j) Ordinary Action Case Record No. 0184093-46.2010.8.26.0100 (former case No. 583.00.2010.184093-9) 12 th Lower Civil Court of the Central Courthouse of So Paulo Civil Appeal No. 0184093-46.2010.8.26.0100 Plaintiff: Correta Corretora; (k) Ordinary Action Case Record No. 0184183-54.2010.8.26.0100 (former case No. 583.00.2010.184183-0) 38 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Edilson Morais Alencar; (l) Ordinary Action Case Record No. 0184182-69.2010.8.26.0100 (former case No. 583.00.2010.184182-7) 10 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage (Civil Appeal pending registration with the Court of Appeals) Plaintiff: Fabio Causso Feola; (m) Ordinary Action Case Record No. 0184076-10.2010.8.26.0100 (former case No. 583.00.2010.184076-0) 27 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184076-10.2010.8.26.0100 Plaintiff: Izael Camillo dos Anjos;
23
(n) Ordinary Action Case Record No. 0184060-56.2010.8.26.0100 (former case No. 583.00.2010.184060-0) 27 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal no. 0184060-56.2010.8.26.0100 Plaintiff: Marcos Bianco Bastos; (o) Ordinary Action Case Record No. 0184085-69.2010.8.26.0100 (former case No. 583.00.2010.184085-0) 36 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184085-69.2010.8.26.0100 Plaintiff: Roberto Allan de Moraes Barros; (p) Ordinary Action Case Record No. 0184092-61.2010.8.26.0100 (former case No. 583.00.2010.184092-6) 42 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184092-61.2010.8.26.0100 Plaintiff: Ronaldo Caire; (q) Ordinary Action Case Record No. 0132917-28.2010.8.26.0100 (former case No. 583.00.2010.132917-9) 7 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0132917-28.2010.8.26.0100 Plaintiff: Srgio Prado Frigo; (r) Ordinary Action Case Record No. 0184067-48.2010.8.26.0100 (former case No. 583.00.2010.184067-9) 28 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184067-48.2010.8.26.0000 Plaintiff: Henrique Bispo Pimentel; (s) Ordinary Action Case Record No. 0184068-33.2010.8.26.0100 (former case No. 583.00.2010.184068-1) 36 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184068-33.2010.8.26.0100 Plaintiff: Paulo Srgio Albanezi; (t) Ordinary Action Case Record No. 0184196-53.2010.8.26.0100 (former case No. 583.00.2010.184196-1) 11 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Pedro Augusto Spnola; (u) Ordinary Action Case Record No. 0184091-76.2010.8.26.0100 (former case No. 583.00.2010.184091-3) 4 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184091-76.2010.8.26.0100 Plaintiff: Ulisses Sandes Cardoso; (v) Ordinary Action Case Record No. 0175422-97.2011.8.26.0100 (former case No. 583.00.2011.175422-6) 39 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: BVL Corretora. (w) Ordinary Action Case Record No. 0116425-24.2011.8.26.0100 (former case No. 583.00.2011.116425-1) 30 h Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Roberto Cordeiro Simes; (x) Ordinary Action Case Record No. 0126956-72.2011.8.26.0100 (former case No. 583.00.2011.126956-4) 10 th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage (Civil Appeal pending registration with the Court of Appeals) Plaintiff: Robson Rodrigo de Souza; (y) Ordinary Action Case Record No. 0019453-43.2010.4.03.6100 12 th Lower Civil Court of the Central Courthouse of So Paulo Plaintiff: Carlos Eduardo Rodrigues. Defendant BM&FBOVESPA, as successor to BM&F Mercantile and Futures Exchange (originally, a mutualized entity), and BM&F Association Plaintiffs intend to regain ownership rights in common membership certificates previously held in the old So Paulo Commodities Exchange (Bolsa de Mercadorias de So Paulo), or BMSP and a similar interest in membership certificates of the old futures exchange, BM&F (then a mutualized exchange, which later went public and merged with BM&FBOVESPA), in order to have them replaced with an equivalent number of shares of BM&FBOVESPA. The financial value at risk in these cases would have to be determined in proceedings for calculation of the award and enforcement of judgment. These are actions brought against BM&FBOVESPA and the BM&F Association, each as a successor to former BM&F Mercantile and Futures Exchange, whereby the plaintiffs seek recognition of the ineffectiveness of the provisions of a certain Partial Spin -Off Protocol and Justification agreed in September 2007 between the mutual association named BM&F and the corporation named BM&F S.A. The Plaintiffs sustain that the document contemplated the termination of membership certificates in the mutual association named BM&F before the consolidation with BMSP had been completed, such that this was in conflict with the provisions of a 1991 Memorandum of Understanding between BMSP and the mutual association named BM&F , which rendered the spin-off agreement void. Lower court decisions have been issued in all of these cases, either to hold the claim invalid or dismiss the action without prejudice, except for the lawsuits of plaintiffs Roberto Cordeiro Simes item (x) and Carlos Eduardo Rodrigues item (y). The decisions entered in the records of the suits filed by Edilson Morais Alencar item (k), BVL Corretora item (v), and Fernando Alexandre Esboriol item (e), may still be appealed. All other plaintiffs appealed the lower court decisions. Appellate judgments upholding the lower court decisions have been entered in the records of of the cases brought by plaintiffs Henrique S. Filho item (f), Celso Rodrigues item (i), Correta Corretora item (j), Izael Camillo dos Anjos item (m), Ronaldo Caire item (p) and Henrique Bispo Pimentel item (r). The legal term opened for any of them now decide whether to accept the decisions, file motion to clarify or appeal to the higher courts. Supposed ineffectiveness of the provisions of the Partial Spin -Off Protocol and Justification agreed in September 2007 between the mutualized entity named BM&F and the corporation named BM&F S.A. The Plaintiffs argue that the ineffectiveness stems from the document having addressed the termination of the BM&F membership certificates before the completion of the consolidation of BM&F with BMSP, which they allege to be inconsistent with the terms of a 1991 Memorandum of Intent entered into by BM&F and BMSP , thereby giving rise to ineffectiveness which should now be recognized. 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
24
(III.3) Repetitive Cases III

(a) Ordinary Action Case Record No. 0184098-68.2010.8.26.0100 (former case No. 583.00.2010.184098-2) 7th Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184098-68.2010.8.26.0100 Plaintiff: Henrique Bispo Pimentel; (b) Ordinary Action Case Record No. 0184069-18.2010.8.26.0100 (former case No.583.00.2010.184069-4) 1 st Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage (Civil Appeal pending registration with the Court of Appeals) Plaintiff: Marcos Bianco Bastos; (c) Ordinary Action Case Record No. 0184096-98.2010.8.26.0100 (former case No.583.00.2010.184096-7) 2 nd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184096-98.2010.8.26.0100 Plaintiff: Seeiche Abe. (d) Ordinary Action Case Record No. 0184097-83.2010.8.26.0100 (former case No.583.00.2010.184097-1) 3rd Lower Civil Court of the Central Courthouse of So Paulo, currently at the appellate stage Civil Appeal No. 0184097-83.2010.8.26.0100 Plaintiff: Srgio Carnelosso. BM&FBOVESPA and Association BM&F (as successors to BM&F, originally a mutualized entity). The hypothetical present market value attributable to membership certificates the so-called special agricultural commodities traders previously held in the old futures exchange, BM&F (then a mutualized exchange, which later went public and merged with BM&FBOVESPA), or, in the alternative, 10% of the hypothetical present market value attributable to membership certificates issued to so-called special traders (execution brokers /proprietary traders with access to both the futures market and OTC market). The financial value at risk in these cases would have to be determined in proceedings for calculation of the award and enforcement of judgment. These are actions against BM&FBOVESPA and Association BM&F which object to, and challenge, the cancellation of BM&F membership certifica tes 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 alt ernative, 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, insufficiency 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 membership certificates (carrying market access rights under the category special agricultural commodities trader ) in the course of the demutualization implemented in preparation of certain merger transactions and a going-public process. In any event, after the demutualization, it was no longer necessary to hold a certificate in order for any broker or trader to be granted market access rights. Remote Award for damages requiring payment of indemnity in the hypothetical present market value attributable to special agricultural commodities trader membership certificates or, in the alternative, 10% of the hypothetical present market value attributable to membership certificates issued to so-called special traders . No amount has been provisioned.
Defendant
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 Rules applying in the home country jurisdiction and in the foreign jurisdiction where securities of the issuer are held under custody. BM&FBOVESPA is a corporation duly organized and regularly existing under the laws of Brazil. Our shares 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 the exposure to principal market risks
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 25
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 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, whether advanced economies or emerging market countries, could adversely affect the Brazilian economy, our business and the market price of our shares.
The market prices of securities of Brazilian issuers is affected to varying degrees by the volume of capital flows, the economic landscape and market conditions in other economies. Heightened risk aversion in our markets and sudden shifts in the expectations for growth in major economies and financial 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, if the Brazilian real appreciates against the U.S. dollar and other foreign currencies, this could lead to a deterioration of Brazilian current accounts denominated in foreign currency and slow exports. 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. In addition, a relatively steep appreciation of the Brazilian currency could drive the government to act to push the exchange rate down or curb hot money inflows by creating new levies or increasing tax rates, or intervening in the market or adopting controls that could adversely affect our operating performance and negatively affect the market price of our shares. There have been from time to time significant fluctuations in the Brazilian real exchange rate to the U.S. dollar and o ther currencies. Over 2008 the local currency depreciated 31.9% against the U.S. dollar due primarily to the global financial crisis. In 2009 and 2010 it appreciated 25.5% and 4.3% on a year-over-year basis, but depreciated 12.6% and 8.9% in 2011 and 2012, respectively. We can give no assurances that the Brazilian real will depreciate or appreciate against the U.S. dollar in the future. As of December 30, 2012, the PTAX selling rate compiled and released by the Central Bank was R$2.0435/US$1.00. 2005
Year-end appreciation (depreciation) of the Brazilian real to the U.S. dollar
2006 8.7%
2007 17.2%
2008 (31.9%)
2009 25.5%
2010 4.3%
2011 (12.6%)
2012 (8.9%)
11.8%
Moreover, in 2012, approximately 13.0% of our overall revenues from trading fees (both segments) were denominated in U.S. dollars, derived primarily from trading in interest rate futures, in FX futures and options on FX futures, most notably contracts whose underlying is the exchange rate for the Brazilian real to 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.
26
Fluctuations in interest rates may negatively affect our business and results of operations.
Since 2001 the Central Bank has frequently adjusted the target of the basic interest rate, or Selic 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 Central Bank (from a yearly rate of 26.5% set in February 2003 to 16% per year between April and September 2004). Then, in May 2005, as a measure to curb inflationary pressures, the Central Bank raised the target to 19.75% per year. Over the next two years, the favorable macroeconomic landscape and low, stable inflation rates controlled through targeting drove the Central Bank to resume the gradual cuts in interest rates, which as of September 2007 had declined to 11.25% per year. However, between April and June 2008, inflationary pressures and market expectations of a spike in inflation rates spurred 0.5% monthly jumps in the basic interest rate, which by June 2008 had climbed to 12.25% by year. The 2008 global financial crisis prompted measures to curb the economic slowdown and expand credit availability, as well as another round of cuts in the benchmark 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% p.a., then to 10.25% in June 2010 and 10.75% p.a. in July 2010, in an effort to curb the inflationary trend. In 2011, also with the aim of curbing inflationary pressures, the Central Bank again raised the benchmark interest rate to 11.25%, a move followed by incrementally increasing rates, and a monetary policy switch in August 2011 driven mainly by a deflationary spiral in the international markets and the governments effort to spur local economic growth, with the benchmark rate closing 2011 at 11.00% per annum. The rate cuts continued over the following months and, as of October 2012, the benchmark rate had been slashed to 7.25% per annum, a historic record low sustained through December 2012. High inflation and interest rates, as well as sudden shifts in the governments monetary 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 the domestic capital markets, in particular our equities and derivatives markets, thereby 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 corporate 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 with access to 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 single 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 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 oth er financial assets, such that in the event of default we may have to resort to certain establis hed safeguard mechanisms, or in extreme situations we may have to resort to our own net assets. 27
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.
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 investment positions in bank deposit certificates (CDBs, which track the interbank lending rate), and in government bonds, repo transactions, and units of open-ended funds benchmarked to the interbank lending 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 to be an immaterial 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 CDI rate over a 3-month probable scenario.
At December 31, 2012 Risk factor Impact on interest income (3 month probable scenario) -50% scenario -25% scenario Probable scenario 25% scenario 50% scenario
Financial investments (in R$ thousands) Assumed annualized rate (%)

( ) (
Selic rate (*) CDI rate (**) Selic rate (*) CDI rate (**)
28,452 3.47%
42,410 5.20%
56,197 6.93%
69,817 8.67%
83,276 10.40%
by the number of business days in the month) of the overnight interbank lending rates. CDIs are overnight interbank lending certificates.
* Selic rate is the benchmark rate compiled and released by the Central Bank; **) CDI rate refers to Brazils overnight interbank lending rate (known as DI-Over) compiled by CETIP as the daily average annualized rate (calculated
Exposure to fixed-rate risk

Given that part of our financial investments earns fixed rates, our net exposure is associated with the fixed interest rate intrinsic to 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.
Exposure to 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 negative 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, 2012, our net exposure to exchange rate risk amounted to negative R$26,455 thousand (versus negative R$4,938 thousand as of December 31, 2011, and positive R$1,820 thousand as of December 31, 2010. However, given the net amounts at risk, we consider the potential impact of these risks materializing to be immaterial.
Exposure to risk associated with positions in inflation indices 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 cas es 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 (as discussed under subsection 5.1), 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. 28
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, 2011, there was no realizable ineffectiveness.
3)
Risks related to our financial investments
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. 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 represen ts a set of resources and mechanisms we may use to hedge potential loss arising from failed delivery or se ttlement 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 t he 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 2020. The purpose of this bond issuance was to finance our purchase of additional shares in the CME Group , thereby increasing our aggregate holdings 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$612 million (a hedging instrument in a hedge of net investment in a foreign operation, per Note 7 to our financial statements as of and for December 31, 2010). For additional information, see subsection 5.2(a) above.
3)
While for a relatively moderate portion of our financial investments (as set forth in subsection 5.2(c) below) we do seek hedge protection through investing in exclusive investment funds, which is explained by the very low risk profile associated the large portion which we do not hedge, we have nonetheless decided not to adopt hedge accounting. c. hedging tools used for protection
1)
Pursuant to our strategy which prefers solid mechanisms to mitigate exposure to potential materialization of risk intrinsic in our role as central counterparty to ensure multilateral clearing and settlement transactions, we have developed specific risk management systems and safeguard mechanisms for each of the clearing facilities we operate. These systems and safeguard structures are described in detail in the operating regulations and procedure manuals adopted by each of these facilities. In addition, these systems and structures have been tested and approved by the Brazilian National Monetary Council (CMN) and the Central Bank pursuant to CMN Resolution No. 2,882/01 and Central Bank Circular Directive No. 3,057/01. Data on key components of these safeguard structures are set forth below.
Derivatives Clearinghouse
Collaterals pledged by participants of the derivatives clearinghouse (futures contracts and other derivatives). The table below sets forth data on the positions in different types of collaterals pledged to our derivatives clearinghouse.
Pledged collaterals Brazil government bonds Bank letters of guarantee Stocks Bank Deposit Certificates (CDBs) Gold Cash collateral BM&F FoF (FIC Banco BM&F) Total
At December 31,2012
(in R$ thousands)
At December 31,2011
(in R$ thousands)
At December 31,2010
(in R$ thousands)
85,901,802 2,696,602 3,532,128 933,447 67,677 741,243 179,521 94,052,420
95,413,934 3,090,051 3,242,459 1,448,298 80,619 707,212 212,935 104,195,508
76,979,261 3,538,492 4,934,328 1,150,998 105,958 652,290 173,340 87,534,667
At the derivatives clearinghouse, the intermediaries to transactions (brokerage firms and clearing participants) are co-liable for the transactions and for fulfilling margin calls. 29
Special Clearing Participant Fund (Fundo de desempenho operacional) Derivatives Clearinghouse . This special
clearing participant fund (year-end positions amounting to R$1,099,786 thousand in 2012 versus R$1,138,007 thousand in 2011, and R$1,162,122 thousand in 2010) 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 partici pants are required to make to the fund vary in correlation with the type of settlement rights ( direitos de liquidao , or DL) granted under the access permit held by each 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 brokers are required to make to the fund amounts to R$6,000 thousand for holders of permits granting full trading rights, and R$4,000 thousand 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 amounts 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$1,000 thousand;
Contributed assets At December 31,2012 (in R$ thousands) At December 31,2011 (in R$ thousands) At December 31,2010 (in R$ thousands)
Brazil government bonds Bank letters of guarantee Bank Deposit Certificates (CDBs) Stocks Cash collateral Total contributions Minimum membership contributions (from clearing agents and trading participants) Surplus contributions
919,462 150,800 4,946 11,074 13,504 1,099,786 (874,000) 225,786
913,100 204,152 8,055 12,700 1,138,007 (952,700) 185,307
921,678 172,210 52,801 15,358 75 1,162,122 (989,200) 172,922
Agribusiness Operating Fund ( Fundo de operaes do mercado agropecurio ) Derivatives Clearinghouse . This fund
(R$50,000 thousand as of December 31, 2012, 2011 and 2010, respectively) was set up as a safeguard mechanism for the settlement of transactions in agricultural commodities;
Clearing participants special fund (Fundo especial dos membros de compensao) Derivatives Clearinghouse. This
special clearing fund (R$40,000 thousand as of December 31, 2012, 2011 and 2010, respectively) 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$386,803 thousand as of December 31, 2012 versus R$380,993 thousand and R$408,509 thousand as of December 31, 2011 and 2010, 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 p ay R$500 thousand by designated holders of trading rights for whose activities the clearing participant undertakes certain responsibilities.
Brazil government bonds Bank letters of guarantee Bank Deposit Certificates (CDBs) Stocks Cash collateral Total contributions Minimum membership contributions (from clearing agents and trading participants) Surplus contributions
342,942 36,684 3,177 4,000 386,803 (270,500) 116,303
339,180 38,763 3,050 380,993 (293,000) 87,993
354,256 35,012 14,700 4,541 408,509 (313,000) 95,509
As required under article 5 of Law No. 10,214 dated March 27, 2001, coupled with 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, 20 12 our derivatives clearinghouse had segregated net assets worth R$42,245 thousand R$38,906 thousand (versus R$34,807 thousand and R$31,678 thousand at year-end in 2010 and 2009, respectively).
30
Equities Clearinghouse
Collaterals pledged by participants of the equities clearinghouse (stocks, equity securities and corporate debt securities);
At December 31,2012
(in R$ thousands)
Collaterals
At December 31,2011
(in R$ thousands)
At December 31,2010
(in R$ thousands)
Brazil government bonds Stocks Foreign government bonds and ADRs ( 1) Bank Deposit Certificates (CDBs) Bank letters of guarantee Cash collateral Gold BB-CBLC Financial Investment Fund (FIF BB-CBLC) Other Total
_________________________________________
32,749,964 40,975,737 2,596,140 522,080 312,288 369,910 11,464 182,241 77,719,824
34,422,215 31,417,638 2,134,513 621,817 245,616 762,111 5,930 314 159,968 69,770,122
22,749,941 25,809,847 736,905 580,066 448,054 235,806 4,955 6,092 130,873 50,702,537
( 1)
U.S. Treasury Bonds, German Government Bonds and American Depositary Receipts (ADRs)
At the equities clearinghouse, the intermediation agents to a transaction (brokerage firms and clearing participants) are coliable for these transactions and for meeting margin calls. Settlement Fund (Fundo de liquidao) - Equities Clearinghouse. As of December 31, 2012, the settlement fund had contributed assets worth R$421,786 thousand (versus R$384,326 thousand and R$485,409 thousand at year-end in 2011 and 2010, respectively) as a result of contributions from clearing and settlement agents for assurance of completion of clearing and settlement transactions;
At December 31,2012 (in R$ thousands) At December 31,2011 (in R$ thousands) At December 31,2010 (in R$ thousands)
Contributed assets
Brazil government bonds Cash collateral Total contributions
416,212 5,574 421,786
384,326 384,326
485,409 485,409
As required under article 5 of Law No. 10,214 dated March 27, 2001, coupled with 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, 2012 our equities clearinghouse has segregated net assets worth R$45,138 thousand (versus R$41,564 thousand and R$37,210 thousand in 2011 and 2010, respectively). Collaterals pledged by FX market participants;
Collaterals At December 31,2012 (in R$ thousands) At December 31,2011 (in R$ thousands) At December 31,2010 (in R$ thousands)
FX Clearinghouse
Brazil government bonds Cash collateral Total contributions
3,662,691 4 3,662,695
3,416,862 31,697 3,448,559
3,855,147 66,520 3,921,667
Participation fund (Fundo de participao) FX Clearinghouse. The participation fund (year-end positions amounting to
R$214,675 thousand (versus R$181,260 thousand and R$162,235 thousand at year-end in 2011 and 2010, 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;
Brazil government bonds
214,675
181,260
162,235
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, 2012, 2011 and 2010 the fund held contributed assets worth R$50,000 thousand; As required under article 5 of Law No. 10,214 dated March 27, 2001, coupled with 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, 2012 our FX clearinghouse had segregated net assets worth R$42,295 thousand (versus R$38,956 thousand and R$34,848 thousand at year-end in 2011 and 2010, respectively).
31
Bonds Clearinghouse
Collateral pledged by participants in the bonds market;
Collaterals At December 31,2012
(in R$ thousands)
At December 31,2011
(in R$ thousands)
At December 31,2010
(in R$ thousands)
Brazil government bonds
1,046,977
1,142,266
928,786
Operating Fund Bonds 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, 2012, 2011 and 2010 the fund held contributed assets worth R$40,000 thousand; As required under article 5 of Law No. 10,214 dated March 27, 2001, coupled with 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, 2012 our bonds clearinghouse had segregated net assets worth R$29,747 thousand (versus R$27,395 thousand and R$24,536 thousand at year-end in 2011 and 2010, 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$612 million, and correlates with the nominal amount of our July 2010 bond issuance whose proceeds funded said portion of our investment in CME shares, we have designated the latter a hedging instrument in a hedge of net investment in a foreign operation (per Note 7 to our financial statements as of and for December 31, 2010) that portion of the principal under the global notes which correlates with changes in exchange rates. Accordingly, we have adopted net investment hedge accounting pursuant to accounting standard CPC-38 (Financial Instruments: Recognition and Measurement). For additional information on the hedge accounting, see subsection 5.2(a) above.
3)
We trade in derivative financial instruments consisting of Brazilian-interest rate futures contracts locally known as DI1 contracts, which we designate at inception and recognize as financial assets measured at fair value through profit and loss, fair value being determined based on current market prices. These financial instruments are part of a consolidated portfolio of exclusive funds, which we established with the aim of covering our exposure to fixed-rate risks by acquiring a similar position in floating rate DI1 futures contracts. We trade in DI1 futures contracts whose maturity dates are the same as attributable to the fixed-rate positions we are hedging. While we trade in such derivative financial instruments as a hedging alternative, management elected not to adopt hedge accounting for the recognition of such instruments. Our net gain from transactions in derivatives designed to hedge fixed-rate positions correlates with our short position in interest rate futures contracts (i.e., DI1 futures contracts which, as measured at market price, totaled R$ 394 thousand at December 31, 2011 versus R$686 thousand at December 31, 2010) and has been presented under the net interest income line item , whereas positive and negative mark-to-market adjustments have been presented under the other receivables and other liabilities line items, respectively . d. guidelines adopted in managing these risks
1)
Risks related to our role as Central Counterparty Clearing House (CCP)
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. 32
2013 Reference Form BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros (BVMF3) 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) Financial element Risk Factor 2012 Percentages at December 31, 2011 2010
Floating interest rate Fixed interest rate Exchange rate (USD) Gold Inflation rate
A fall in CDI rates A rise in fixed rate Currency appreciation A fall in market price A fall in inflation rate
95.40% 3.59% 0.68% 0.32% 0.01% 100.00%
99.29% 0.07% 0.38% 0.26% 0.00% 100.00%
99.35% 0.35% 0.05% 0.25% 0.00% 100,00%
e. in case the issuer transacts in financial instruments other than to hedge risks, identify the purposes of said transactions; 1) Our role as Central Counterparty Clearing House (CCP) 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)
Not applicable, as we make no use of derivatives or adopt hedging strategies relative to our equity investment in the CME Group. 3) Risks related to our financial investments 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) Our role as Central Counterparty Clearing House (CCP)
The risk management policies adopted at our clearing facilities are established by our market risk committee in line with the guidelines and framework set by our board of directors, as advised by the board risk committee, and our board of executive officers. In May 12, 2009 we established the Risk Committee as a board advisory body whose primary responsibilities include monitoring 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. For the composition of this committee, see the information under section 12.7 of this Form. Under our bylaws, the market risk committee includes officers of BM&FBOVESPA. For the composition of this committee, see the information under section 12.7 of this Form. The responsibilities of the market risk committee include (i) evaluating the macroeconomic landscape and the effects thereof from a risk exposure perspective, and their impact on markets we operate; (ii) defining standards and criteria for the models we use in determining margin requirements; (iii) setting standards and criteria for the valuation methods we use in valuating collateral pledged to our clearing facilities; (iv) defining the types of acceptable collaterals, the collateral valuation methods, seizure limitations and risk-based haircuts regarding transactions carried out on our trading or OTC transaction registration systems, and transactions registered in our clearing and settlement systems; (v) analyzing the degree of leveraging extrapolated from our systems; (vi) proposing standards, caps and criteria for the management of exposures to credit risk attributable to market participants; and (vii) performing other market risk-related research and analysis. Our risk management officer reports to the Chief Operations Officer (who is responsible also for the operations of our clearing facilities and central securities depository). He 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 further for continually monitoring policy suitability vis--vis current market conditions.
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) Risks related to our financial investments 33
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) Our role as Central Counterparty Clearing House (CCP) 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 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) above. 3) Risks related to our financial investments 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 1) Our role as Central Counterparty Clearing House (CCP)
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. We have tested the hedge effectiveness, having determined that there was no realizable ineffectiveness. 3) Risks related to our financial investments There have been no changes in our exposure to market risks associated with our financial investments. 5.4. Additional reportable information. Except as discussed above in subsections 5.1, 5.2 and 5.3 above, there is no additional reportable information concerning market risks.
6. COMPANY HISTORY
6.1 / 6.2 / 6.4 Incorporation; duration; CVM registration date.
Incorporation; incorporation date. December 14, 2007, is the incorporation date of a corporation formed under the name T.U.T.S.P.E. Empreendimentos e Participaes S.A., a vehicle for the inception of BM&FBOVESPA. In its current configuration,
BM&FBOVESPA S.A, the Brazilian Securities, Commodities and Futures Exchange, resulted from the integration of the businesses of the Brazilian Mercantile & Futures ExchangeBM&F S.A. and BOVESPA Holding S.A. (operator of the So Paulo Stock Exchange), as approved at their respective Extraordinary General Meetings of Shareholders of May 8, 2008. Corporate type. A corporation (under Brazilian Corporate Law, a companhia), meaning a joint-stock, limited-liability public company. Country of incorporation . Brazil Duration . Our Company has been established for an indefinite period of time. CVM registration date. 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 registration as a public company, the CVM issued SMI Directive Release No. 018/09 dated June 18, 2009, confirming our registration as a market operator. 6.3. Brief History BM&FBOVESPA is the company that emerged from certain merger transactions in the course of the integration process that combined two formerly independent exchanges, i.e., the futures and commodities exchange formerly known as BM&F Mercantile and Futures Exchange (Bolsa de Mercadorias & Futuros - BM&F S.A) and the So Paulo Stock Exchange operated by BOVESPA Holding S.A. The corporate restructuring process which 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.
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 to 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 34
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. 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, based in Rio de Janeiro. In addition, it introduced the foreign exchange clearing house in the aftermath of the Brazilian governments initiative to remodel the Brazilian Payment System. Then, in 2004 it introduced a clearing house for debt securities, including government bonds, and organized the BM&FBOVESPA Settlement Bank, widening the scope of the strategic position BM&F now occupied in the Brazilian capital markets. Until 2007 BM&F had been operating as a non-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. In September 2007, General Atlantic LLC and BM&F agreed an acquisition agreement whereby General Atlantic purchased a 10% interest in BM&F shares. One month later, in October, BM&F and the CME Group agreed a partnership involving a crossinvestment arrangement and the interconnection of their telecommunications 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. In addition, the scope of the partnership with CME has been widened in February 2010, as discussed below under BM&FBOVESPA History. 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). And since August 20, 2008, as the integration with BOVESPA completed, BMEF3 shares were converted and replaced with BM&FBOVESPA shares at a 1:1 ratio. BM&FBOVESPA shares trade under ticker symbol BVMF3.
BOVESPA Segment history

BOVESPAs inception dates back to 1890 when Bolsa Livre was created. Beginning in the 1960s, BOVESPA became a mutualized non-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 (Bolsa de Valores de So Paulo) was adopted. The Bovespa Index (Ibovespa) launched in 1968 as an indicator of average market behavior. The integrity of the historical series has been maintained since its inception, with no changes in methodology. 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 the 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 by the mid-1990s was replaced with an advanced system developed by then Paris Bourse (currently NYSE Euronext). In addition, the Brazilian Clearing and Depository Corporation (CBLC) was organized to operate as both a clearing house for equities and central securities depository, with banking institutions participating as clearing members. 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 across the country. Moreover, in the same year BOVESPA launched three special listing segments which adopt additional and more stringent corporate governance requirements than prescribed by law. These special listing segments are known as Novo Mercado and Corporate Governance Levels 1 and 2. Then, in 2001 BOVESPA launched BOVESPA FIX, an electronic platform for the trading of fixed-income securities, and in 2002 it started operating an OTC market for equities (an organized over-the-counter market, per applicable regulations), which grew to concentrate all local trading in OTC equities and equity-based securities. Then, in September 2005, BOVESPA closed its trading floor to become a fully-integrated electronic market. On August 28, 2007, with the regulators approval of the demutualization of BOVESPA, the membership equity and market access rights were detached in preparation of a corporate restructuring process, which combined the businesses of BOVESPA and CBLC under a holding company named BOVESPA Holding. The initial public offering of BOVESPA Holding launched in October 2007 and the shares first traded on the Novo Mercado segment under ticker symbol BOVH3. Later, in May 2008, the merger and integration with BM&F (futures and commodities exchange) was approved, and on August 20, 2008, the shares of Bovespa Holding were converted into shares of BM&FBOVESPA (the company surviving the merger) at a ratio of 1:1.42485643 common shares plus 0.1 preferred share. These preferred shares were subsequently redeemed at a price of R$17.15340847 per share. BM&FBOVESPA shares trade under ticker symbol BVMF3.
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 S.A. On April 8, 2008, the shareholders changed the corporate name to Nova Bolsa S.A., meaning the New Exchange. 35
On May 8, 2008, the integration process that combined the businesses of BM&F and BOVESPA Holding was approved. A corporate restructuring process ensued, which included a merger of BM&F assets and liabilities into Nova Bolsa S.A.; a merger of the shares of BOVESPA Holding into Nova Bolsa S.A., and adoption of the corporate name BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros (Securities, Commodities and Futures Exchange). This integration process gave rise to one of the largest exchanges across the world by market capitalization, the second exchange in the Americas and the leading exchange in Latin America. BM&FBOVESPA adopts a fully integrated business model, encompassing the entire chain of trading, clearing and settlement, risk management, CCP and CSD, through integrated, fullyelectronic systems, based on straight-through processing. As a result, BM&FBOVESPA offers a fully-integrated, automated venue for the trading of stocks and other equity-based securities, private debt securities and government bonds, ETFs, equitybased derivatives, financial and commodity derivatives and other financial instruments, which trade on cash, futures, options and forward markets. BM&FBOVESPA also offers listing services for issuers and ETFs, engages in market data and information services, index production, system and software development and technology enhancements In addition, BM&FBOVESPA operates a central securities depository (CSD) and complete custody system, as well as four clearing houses (equities, derivatives, bonds and forex), a securities lending facility and safeguard mechanisms to ensure market participants and investors are provided with a modern and efficient structure for their dealings. In its present configuration, BM&FBOVESPA provides 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, leveraging techniques, portfolio diversification and so forth, thus significantly contributing to the growth of the Brazilian economy. In February 2010 we agreed the Term Sheet of a global preferred strategic partnership with the CME Group for the two exchanges (1) 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) to combine efforts for joint development of a multiasset class electronic trading platform; and for us (3) to acquire additional shares in CME and increase to 5.1% our ownership interest in CME shares, and (4) to designate a representative to sit on the CME Board. On June 22, 2010, we executed definitive agreements with the CME Group (for a 15-year renewable term), and in July 2010, following the completion of a US$612 million bond offering, we used the offering proceeds to purchase additional CME shares, thereby raising from 1.8% to 5.1% our aggregate ownership interest in shares of the CME Group, which reportedly made us the largest CME shareholder. As result, beginning from July 2010, we now account for this investment under the equity method of accounting (a 5.1% interest in CMEs shareholders equity), and recognize gains and losses from our investment through profit or loss (in the statement of income). Moreover, in 2011, we invested in our technology infrastructure to lay the foundation of our future multi-asset class, multimarket, integrated trading and clearing systems, and invested also in a future state-of-the-art OTC platform for derivatives and fixed-income securities. Over 2012 we implemented important stages of our program to improve and refresh our technology infrastructure, including (i) in cooperation with the CME Group, completion of development and testing of the equities module of our new multi-asset class, multi-market trading system, i.e., the PUMA Trading System; (ii) announcement of the Post-Trade Integration Program (Programa de Integrao da Ps-Negociao, or IPN), designed to integrate our four clearing houses into a single, multi-asset, multi-market clearing facility which will rely in CORE , or CloseOut Risk Evaluation, to provide us with a new, cutting edge risk management framework, the lynchpin of a solid clearing and risk management system architecture for our integrated clearing facility; (iii) construction of our new Data Center. Completion of these projects will give market participants a high capacity, high-performing, technology infrastructure and give us the ability to provide highly efficient, integrated clearing, settlement and risk management services. For information on our product offerings, see section 7 of this Form. 6.5. Principal merger and acquisition transactions involving the Company, subsidiaries and affiliates As discussed elsewhere herein and 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. Nova Bolsa S.A. was the corporate name our Company adopted upon being incorporated, prior to the corporate restructuring process that combined the businesses of BM&F and BOVESPA Holding. Set forth below is a summary of the principal shareholder approved merger transactions related to us and our subsidiaries: The BM&F and Nova Bolsa S.A. Extraordinary Shareholders Meetings of May 8, 2008, approved the merger of BM&F assets and liabilities into Nova Bolsa S.A.; The Nova Bolsa S.A. Extraordinary Shareholders Meeting held on May 8, 2008, also approved the absorption through merger of all shares of BOVESPA Holding then issued and outstanding. At the same meeting, action was taken to change the companys name to BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros.
It should be noted that the share merger per se did not imply termination of Bovespa Holding, which remained as an ongoing concern and our wholly-owned subsidiary until November 2008. Bovespa Holding owned and controlled Bolsa de Valores de So Paulo S.A. (or BVSP, the 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 36
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, the two mergee companies were terminated.
Ultimately, as a result of these corporate transactions, the companies Bolsa de Mercadorias & Futuros - BM&F S.A (Brazilian Mercantile & Futures Exchange), Bovespa Holding S.A., Bolsa de Valores de So Paulo S.A. BVSP (the Sao Paulo Stock Exchange) and Companhia Brasileira de Liquidao e Custdia (the Brazilian Clearing and Depository Corporation), or CBLC, ceased to exist after having merged with BM&FBOVESPA. 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. As a result, we increased to 5.1% our total ownership interest in CME shares. The cross-holdings structure discussed in subsection 6.3 above (under the heading BM&F Segment history) has been maintained. 6.6. Petitions for bankruptcy or (judicial or extrajudicial) recovery proceedings No application has been filed by us or any other party seeking a bankruptcy order against us or our judicial or extrajudicial recovery. 6.7. Additional reportable information There is no additional reportable information concerning any of the matters discussed under this section.
7. BUSINESS
7.1. Overview of the business of the Company and 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, and clearing and settlement of trades in, stocks and other equity securities, corporate fixed-income securities and government bonds, exchangetraded derivatives based on equities, stock indices, interest rates, exchange rates and currencies, commodities 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 software (such as Sinacor, a brokers integrated back office management system with capacity to process several middle and back-office activities for brokerage firms and other financial institutions). Moreover, consistent with the requirements of CVM Ruling 461/07, our company, acting through BM&FBovespa Market Surveillance (BM&FBovespa Superviso de Mercados), or BSM, a non-profit mutual entity and self-regulatory organization in which we hold a material membership interest, performs activities as a self-regulatory entity in charge of overseeing the activities of issuers (including ours) and market participants, and all trading, clearing and settlement transactions performed within the realm of the capital markets we operate. The BSM membership comprises the BM&FBOVESPA Settlement Bank and us.
BM&FBOVESPA Settlement Bank (Banco BM&FBOVESPA 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&FBOVESPA 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&FBOVESPA 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&FBOVESPA 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. Acting as our cross-border representatives at these bases, it establishes professional relationships with other exchanges 37
and market regulators and, giving due regard to local regulatory constraints, prospecting customers for BM&FBOVESPA markets, in particular investors and intermediaries.
BM&FBOVESPA (UK) Ltd.

BM&FBOVESPA (UK) Ltd. is a wholly-owned subsidiary based in London, which operates as our representative office for the European and the Middle Eastern regions, establishing professional relationships with other exchanges and market regulators and, giving due regard to local regulatory constraints, prospecting customers for our markets, in particular investors and intermediaries.
Brazilian Commodities Exchange (Bolsa Brasileira de Mercadorias)

The Brazilian Commodities Exchange is a mutualized entity in which BM&FBOVESPA holds a majority membership interest. Its corporate purposes include establishing, developing, providing adequate trading or auction systems, and operating free and open and competitive markets, including spot or actual, and forward and options markets, for the trading of actual commodities, agricultural or otherwise, or of commodities and agribusiness services, and agribusiness securities traded on primary or secondary markets.
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. For additional information, see subsection 7.9 of this Form. 7.2. Business segment information
a.
Products and services offerings
1) BM&F Segment
The BM&F segment comprises operations, products and services to support and manage the principal stages of the trade and post-trade cycles for dealings in financial and commodity derivatives, government bonds and spot currency contracts. These services include: (i) electronic trading systems for electronic and web-based trading; (ii) clearing and settlement systems integrated into a solid and sophisticated risk management system, which will give us the ability to provide highly efficient clearing and settlement services; and (iii) custody systems for agribusiness securities, gold certificates and other financial assets and securities.
Financial and commodity derivatives

Our product offerings for trading in financial and commodity derivatives include futures contracts based on the local interest rate, i.e., Brazilian-interest rate futures (also known as Real-denominated interest rate contracts), or contracts based on the local interest rate denominated in U.S. dollar, i.e., US dollar-denominated futures, as well as Fx futures, stock index futures, commodity futures offered as full-sized and in certain cases mini-sized contracts, in addition to multiple OTC derivatives.
Clearing houses for the BM&F segment

We provide transaction registration, risk management, clearing and settlement services within the realm of our BM&F segment through three clearing facilities, which we call Derivatives Clearinghouse, FX Clearinghouse and Securities Clearinghouse. They operate fully integrated systems to ensure the integrity and efficiency of market operations. Transactions are settled through multilateral netting, with each clearing house acting as central counterparty (CCP). Additionally, their role as central counterparty clearing house gives them the ability to settle trades through multilateral netting, which mitigates exposure to credit risks market participants incur when dealing on our markets. Moreover, in order to control and mitigate credit risks, as well as to set margin requirements and margin calls, we adopt risk assessment and management systems, procedures and methodologies, based on which we calculate exposures inherent to each transaction for some contracts almost in real time, but often in real time, immediately before bids and asks are matched. Our Derivatives Clearinghouse manages risks and settles exchange-traded futures and options contracts, as well as OTCtraded 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. Our Securities Clearinghouse is responsible for the registration, clearing, settlement and risk management of transactions in Brazilian government bonds, notes and other debt securities. Fees we charge at our Derivatives Clearinghouse differ based on type of contract and time to expiration or maturity. In addition, on setting fee rates for the different contracts and durations we also take into account the implied volatility, the existing market conditions and the fees charged in competing markets, among other things. Typically, we charge higher fees for contracts implying greater volatility, as they are riskier contracts than the average. The most actively traded financial and commodity derivatives contracts are Brazilian-interest rate contracts, for which we charge fee rates that vary in correlation with contract duration; FX contracts, whose fees primary variable is the actual Brazilian real to US dollar exchange rate; and derivatives based on stock indices, for which we typically charge fixed fee rates set at fixed rates but whose average that but whose average , vary based on type of transaction and investor category. The BM&FBOVESPA Settlement Bank performs an important supplementary role for the operation of our three clearinghouses and risk management systems. Through the BM&FBOVESPA 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 38
collateral and/or liquidate government securities pledged as collateral. In addition, the BM&FBOVESPA 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.
Registration and custody systems for agribusiness securities, gold certificates and other securities and financial assets
In addition to trading, settlement and risk management systems, our clearinghouses and the BM&FBOVESPA 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.
Registration system for agribusiness securities, or RTA (Sistema de Registro de Ttulos do Agronegcio). Our Agribusiness Securities Registration and Custody System (Sistema de Registro de Custdia de Ttulos do Agronegcio),
or SRCA, gives market participants the ability to register 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 for custody-only trading, and the ability to monitor dealings in such securities. Agribusiness securities thus registered in our SRCA system trade on the Brazilian Commodities Exchange. Certain of these securities may also be pledged as collateral for transactions registered in the Derivatives Clearinghouse systems.
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 commodities 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&FBOVESPA 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

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.
Spot forex market

The most actively traded spot currency contract traded on this market are what we call spot U.S. dollar contracts (dlar pronto), which are traded for physical delivery on T+0, T+1 or T+2. Our trading fees for spot U.S. dollar contracts are calculated and allocated on a daily basis by applying differing fee rates to value-traded bands. We currently adopt three value-traded bands to determine our fees, such that, for any given customer, the higher the value traded, the lower fees we charge. These fees are payable to us in Brazilian currency. Our FX clearinghouse provides transaction registration, clearing and settlement, and risk management services for interbank trades in spot currency contracts. On providing these services, we act as central counterparty to ensure clearing and settlement on a payment-versus-payment basis, or PVP, which eliminates risk of default.
Bonds market
Our securities clearinghouse is responsible for the registration, clearing, settlement and risk management of transactions in Brazilian government bonds, notes and other debt securities, including buy and sell transactions for cash or forward settlement, repo and lending transactions, which we clear and settle on a delivery-versus-payment basis, or DVP, thus averting risk of default. We charge registration fees to register transactions in bonds and clearing fees for clearing and settlement services. Moreover, as transactions registered in our clearinghouse have a relatively short settlement cycle, we do not charge permanence fee. Transactions in government bonds which are eligible for registration, clearing and settlement at our Bonds Clearinghouse include (i) cash or forward buy and sell transactions in Brazilian government bonds, notes and other debt securities (which pay fixed or floating interest rates, or track an inflation index or the Brazilian real to U.S. dollar exchange rate) and (ii) repurchase (repo) and securities lending transactions related to government bonds.
Primary sources of revenues

We derived revenues primarily from fees we charge for the use of our trading, registration, clearing and settlement systems and permanence. For our customers these fees represent the cost of trading in our systems. We typically calculate and charge in Brazilian currency for payment through the settlement processes implemented at our clearing houses , the exceptions being trading fees charged on transactions in agricultural commodity derivatives, 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). We classify these fees according to nature, as follows:
Exchange or trading fees. We charge fees for trades executed on our trading platforms, including at position closeouts
or transfers. Exchange fees are calculated for each group of contracts with similar characteristics and purposes or relative to products based on the same type of underlying asset.
Clearing fees. We charge fees to provide clearing and settlement of transactions in listed derivatives, including position
closeouts upon maturity. These fees cover our costs to provide clearing and settlement and are charged upon a cashsettled or physical delivery clearing.
Registration fees. We charge fees for the registration of transactions at the derivatives, forex and bonds clearinghouses.
This fee, which consists of a compound charge relative to the registration and closeout of a position upon maturity, breaks down into a fixed component (a unit worth R$0.1166181, not applicable in the case of exempt contracts) and a 39
variable component, which we calculate pursuant to a progressive discount method based on trading volume bands (such as specified in Circular Letter 006/2009-DP) and according to specific fee schedules per group of contracts;
Permanence fees. These are fees we charge to monitor custody account positions and issue reports and statements.
These fees cover the operating costs of maintaining inactive accounts for positions in derivatives contracts. We calculate permanence fee based on a customers number of contracts outstanding at the end of business on a daily basis.
Average daily trading volume;2 Rates per contract Years ended December 31, 2012 and 2011
The average daily volume traded (ADTV) in financial and commodity derivatives markets (BM&F segment) climbed 7.3% year over year hitting, yet again, an all-time high of 2.9 million trades. Additionally, the average rate per contract climbed 7.7% year-over-year, boosting the segment revenue from trading fees. Brazilian-interest rate contracts make up the most actively traded contract group in the segment, having accounted for the larger share (66.4%) of the overall trading volume and a 7.2% year-over-year climb from the prior year. This performance is explained by a combination of factors, prime among which the increase in domestic credit availability (particularly fixed-rate lending); the greater portion of fix interest-bearing government debt relative to total public debt; and volatility triggered by differing market expectations about the direction of the benchmark rate, particularly in the period from March to May of the earlier year. The average daily volume traded in forex contracts kept a virtually flat line from the prior year. This lack of movement is attributable mainly to year-on toned down volatility and the IOF tax charged on increases in short dollar exposures. Moreover, the average daily volume traded in stock-index derivatives climbed 16.1% year-over-year to daily average of 143.1 thousand contracts, primarily due to more active trading by local institutional investors, which accounted for a 42.3% year-overyear rise in average daily volume (40.1% of the overall volume versus 32.5% one year earlier), underlining the greater sophistication of this investor category. The average RPC for the segment picked up 7.7% year-on-year across derivatives markets due mainly to (i) a 9.3% year-on rise in average RPC for Brazilian-interest rate contracts (R$1.004 versus R$0.918 earlier), which is attributable to greater concentration of dealings in longer maturity contracts (5th maturity date or longer), the rates for which are higher than the average for other contract groups; and (ii) a 16.4% year-on surge in average RPC charged for trades in forex contracts, coupled with a 7.9% jump in average RPC for U.S. dollar-denominated interest rate contracts, in either case explained by 17.6% average year-on-year appreciation of the Brazilian real to U.S. dollar exchange rate3, as our rates for these contracts are denominated in U.S. dollars.
Years ended December 31, 2011 and 2010
The 2011 average daily trading volume (ADTV) climbed 7.8% year-on-year hitting 2.7 million trades in futures contracts and other derivatives, the highest on record for the derivatives markets (BM&F Segment). The most actively traded group of contracts in the segment are Brazilian-interest rate contracts (or Real-denominated interest rate contracts), whose volumes climbed 6.7% year-on-year. This volume growth is explained primarily by two equally important factors: structural growth and market perceptions and expectations. The structural growth factor correlates with economic growth in Brazil and the demand it engenders for hedging instruments. Heightened exposure to fixed-rate risk incurred transactions entered in the private lending market or the government bonds market increases the demand from lenders and bond holders for hedging instruments capable of eliminating or mitigating risk that interest rates or a fixed rates implied volatility will change. According to data compi led by the Central Bank, at December 31, 2011, the overall volume of fixed-rate lending had climbed 20.1% year-over-year, to R$747.2 billion from R$622.4 billion one year ago, whereas the portion of national debt paying a fixed rate had grown 12.2% to R$682.6 billion from R$608.4 billion the year before. Market uncertainty about the direction and pace of the changes in benchmark rate is a second factor explaining the heightened volume of trading in Brazilian-interest rate contracts (typically, when expectations converge volumes tend towards stability). The governments trade -offs between objectives and shifts in monetary policy translate into volatility triggered by market uncertainty and differing expectations about the direction of the benchmark rate. Early in the year Brazils government adopted a restrictive monetary policy and over the six -month period to July 2011 the Central Bank raised the benchmark rate by 175 bps (or 1.75%). In August, in response to a deteriorating global economic outlook and slowdown in Brazil, the Central Bank caught the market unawares with a turnabout move that started a rate cut cycle, which as the year closed had slashed the benchmark rate by 50 bps (0.5%). Additionally, In July 2011, in an attempt at stemming hot money inflows to curb the currency appreciation, the government broadened its financial transactions tax (IOF tax) to charge increases in short dollar exposures at 1%. This new levy was introduced by Provisional Measure No. 539 dated July 26, 2011, and further regulation conveyed by Decree No. 7,536. The operating and financial data available as the year came to a close showed this move had a rather negative impact on the volume traded in FX derivatives. A comparison of similarly volatile periods both before (May 2010) and after (October 2011) the
2
Average daily trading volume (ADTV) within the BM&F segment is a measure of average amount of individual derivatives contracts traded in a given day, such that, unless the context clearly indicates otherwise, references herein to volume, average volume and average daily volume should be taken with a similar meaning (average number of derivatives traded daily).
3
Year-over-year exchange rate variation is calculated as the average fluctuation of the PTAX exchange rate as at the end of December 2010 through end-November 2012, as these rates provide the basis on which to calculate average RPC for the months of January 2011 through December 2012, respectively. The PTAX rate is compiled and released at the close of business on a daily basis by the Central Bank. 40
governments moves suggest this new tax prompted a 20% tumble in average daily trading volume, to 544.1 thousand contracts from 670.2 thousand contracts earlier. Moreover, at December 31, 2011, the average RPC had dropped 2.5% year-on-year across derivatives markets due mainly to (i) year-over-year changes in the mix of derivatives contracts more actively traded, where volumes traded in U.S. dollardenominated interest rate contracts and mini-sized contracts (the rates for which are lower than the average for other contract groups) built up to account for 5.4% and 4.2% of the overall volume for 2011 versus 3.6% and 3.0%, for 2010, respectively, whereas volumes traded in forex contracts fell to account for 18.3% of overall volume for the year versus 21.6% previously; and (ii) year-on falls of 17.6% and 1.8% in average RPC charged for trades in U.S. dollar-denominated interest rate contracts and forex contracts, respectively, are explained by a 5.8% year-over-year average appreciation of the Brazilian real to the U.S. dollar, since our rates for these contracts are denominated in U.S. dollars.
Selected operating data for BM&F segment Brazilian-interest rate derivative 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 underlying in the most actively traded contract in this group is the interbank lending 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 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 they add variety to the hedging strategies they develop. The average rate per contract (RPC) in this group varies in correlation with expiration date.
Currency and forex contracts. Currency derivative contracts encompass mainly futures contracts based on the Brazilian real
to U.S. dollar exchange rate (the most actively traded) and exchange rates for Brazilian real to Euro, to Australian dollar, to Canadian dollar, to Yen, 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 for these contracts is denominated in U.S. dollars, such that fluctuations in the currency rate influence our average rate per contract. The most actively traded currency derivatives are Brazilian real to U.S. dollar rate futures (BRL/USD contracts), which are not 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 dealing in these contracts include bank treasurers, fund managers and non-resident investors, in addition to trading companies and other firms that engage in import-export operations. Transactions in forex contracts are designed mainly to hedge receivables and debt obligations denominated in a foreign currency (primarily U.S. dollars) or to take advantage of 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 contracts (options on dlar pronto ) are highly liquid contracts which are frequently used as part of currency hedging strategies designed by our customers. As with other currency and spot forex contracts, our average rate per contract for these derivatives is denominated in U.S. dollars.
Index-based derivative contracts.
This contract group encompasses futures contracts based on the Bovespa Index, or Ibovespa, and the Brazil-50 Index, or IBrX-50, in addition to options on Bovespa index futures. The top traded contract in this group is Bovespa Index (or Ibovespa) futures. These contracts are widely regarded as an efficient, liquid alternative for investors seeking to hedge long positions in single stocks, in particular in bear market periods, or bet on a bullish trend or implement strategies by combining trades on cash, futures and options markets. While for these contracts we charge exchange fees at a fixed rate, the average rate per contract varies in correlation with the average daily volume, which is significantly influenced by the order flow from high frequency traders, as they enjoy progressive discounts based on intraday volume traded. Increases in the volume of open positions in index-based derivatives can directly and positively impact stock market volumes, which is more readily noticeable from significant increases in cash market trading volume during contract maturity periods. Additionally, in August 2009 the Commodity Futures Trading Commission, or CFTC, the U.S. regulator for the futures and options markets granted approval for us to offer and sell in the United States full-sized and mini-sized futures contracts and option contracts based on the Bovespa Index (or Ibovespa). And in 2012 we implemented a cross listing arrangement agreed with the CME Group for mutual introduction of exchange-traded derivatives. As a result, CMEs cash-settled e-mini S&P-500 futures contracts (cash-settled to the special opening quotation (SOQ) of the Standard and Poor's 500 Stock Price Index, or S&P 500 Index) and e-mini soybean futures started trading on our Exchange, whereas futures on U.S. dollar-denominated Ibovespa started trading on the Chicago Mercantile Exchange. Moreover, pursuant to a similar cross listing arrangement agreed with certain BRICS market operators, we also implemented cross listings of futures on benchmark stock indices denominated in the local currencies of Russias Moscow Interbank Currency Exchange (MICEX), the National Stock Exchange of India (NSE), BSE India (formerly, the Bombay Stock Exchange), the Hong Kong Exchange (HKEx, initially representing China), and South Africas Johannesburg Stock Exchange (JSE).
US dollar-denominated interest rate contracts. This group encompasses futures contracts based on the local interest rate
denominated in U.S. dollars, or based on Brazils Global Bonds or on U.S. Treasury Notes. Futures based on the U.S. dollardenominated local interest rate consist of futures on the spread between the local interbank lending 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 positi on 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 in 41
correlation with expiration dates and the actual Brazilian real to U.S. dollar exchange rate.
Commodity derivatives.
Commodity derivatives include futures contracts based on Arabica coffee, livestock, soybean, denatured fuel ethanol, corn and gold, in addition to options on these futures. The average rate per commodity derivative contract (RPC) varies in correlation with trading volume combination 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.
Mini-sized contracts. Mini-sized contracts are smaller-sized versions of the equivalent full-sized derivative contracts. Most minisized 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.
OTC derivatives. Listed OTC derivatives include interest rate swaps (for both fixed and floating 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 swaps, in addition to flexible barrier options on the spot U.S. dollar rate or the Bovespa Index, or the local interest rate, where the customer sets expiration date, size, strike price, exercise style, and a trigger and knock-in or knock-out barrier). The tables below set forth selected operating data for the segment (average daily trading volume and average rate per contract).
BM&F segment Average Daily Trading Volume ADTV
Year ended December 31, Realdenominated interest rate Currency and forex contracts Equity index derivatives USDdenominated interest rate
(In number of contracts)

Mini-sized contracts OTC derivative s Overall ADTV
)
Commodity derivatives
2009 2010 2011 2012

YOY VAR YOY VAR YOY VAR
843,480 1,683,623 1,797,215 1,925,725

2010/2009 2011/2010 2012/2011
447,093 540,623 495,537 493,883
80,015 89,406 123,273 143,088
78,298 89,714 145,222 149,843
10,236 12,898 13,235 11,218
52,637 75,605 114,432 165,746
9,273 12,866 11,726 9,173
1,521,032 2,504,736 2,700,639 2,898,676
99.6% 6.7% 7.2%

Realdenominated interest rate
20.9% -8.3% -0.3%

Currency and forex contracts
11.7% 37.9% 16.1%
14.6% 61.9% 3.2%

USDdenominated interest rate
26.0% 2.6% -15.2%

(In Brazilian reais)
Commodity derivatives
43.6% 51.4% 44.8%
38.7% -8.9% -21.8%

OTC derivative s
64.7% 7.8% 7.3%
Average rate per contract RPC

Year ended December 31, Equity index derivatives
Mini-sized contracts
Overall Average RPC
2009 2010 2011 2012

2010/2009 2011/2010 YOY VAR 2012/2011
YOY VAR YOY VAR
0.979 0.889 0.918 1.004
2.161 1.928 1.894 2.205
1.619 1.564 1.614 1.524
1.357 1.142 0.941 1.015
2.307 2.168 2.029 2.239
0.176 0.128 0.130 0.116
1.655 1.610 1.635 1.769
1.365 1.134 1.106 1.191
-9.1% 3.3% 9.3%
-10.8% -1.8% 16.4%
-3.4% 3.2% -5.6%
-15.8% -17.6% 7.9%
-6.0% -6.4% 10.4%
-26.9% 1.4% -10.8%
-2.7% 1.6% 8.2%
-16.9% -2.5% 7.7%
The table below sets forth comparative data on the share of overall trading volume attributable to each investor category over the last four years. As a percentage of the overall volume for the segment, institutional and foreign investors contributed the larger shares of the volume, while the share contributed by financial institutions in the overall volume has been falling year over year since 2009.
BM&F segment Share of overall volume by investor category
Year ended December 31,
(as a percentage)
Corporate investors Central Bank
Institutional buyers
Foreign investors
Retail investors
Financial institutions
2009 2010 2011 2012
24.3% 29.6% 32.5% 34.0%
20.0% 22.4% 23.0% 25.4%
7.6% 3.9% 4.5% 4.5%
45.5% 42.4% 38.1% 34.5%
2.5% 1.7% 1.8% 1.6%
0.1% 0.0% 0.0% 0.1%
DMA (Direct Market Access) High frequency trading (HFT)

The electronification of access to trading platforms has continued to grow consistently over the last few years. The volumes traded via direct market-access channels, which in 2009 accounted for 9.7% of the overall volume for BM&F segment, increased to 16.2% in 2010, 23.1% in 2011 and 27.1% in 2012. Moreover, DMA provided through co-location arrangements is widely regarded as highly efficient performance-wise. It is also the best performing DMA model in terms of volume growth. The better example of this transformation is high frequency trading. High frequency dealings on BM&F markets began in 2009, a year in which executions from the HFT order flow accounted for 2.2% of the overall volume traded that year, while having climbed to 4.8% in 2010, 6.0% in 2011 and 6.6% in 2012.
2) Bovespa segment
The Bovespa segment comprises operations, products and services to support and manage the trading and post-trade cycles for dealings carried out on the equities markets and over-the-counter markets. We offer market participants several tools and mechanisms for the trading of variable income securities (including single stocks, exchange-traded funds (ETFs), Brazilian depositary receipts (BDRs), equity-based derivatives (including stock warrants, locally known as subscription 42
warrants), and index-based derivatives, in addition to corporate debt securities and shares of real estate investment funds (or FIIs, similar to U.S. real estate investment trusts, or REITs) and other CVM -authorized securities (such as units of collective investment schemes), all of which are traded, cleared and settled in our fully-integrated electronic systems, resulting in a fully automated process covering the entire chain of trading.
Post-trade services. We are the only central counterparty (CCP) clearing house for transactions in equities, equity securities,
equity and index derivatives and corporate bonds carried out on markets we operate, a provider of risk management services, and operator of safeguard mechanisms we adopt to handle payment default and failed delivery. We act as central counterparty for all clearing agents, absorbing the risks of counterparties in-between a trade transaction and its clearing and settlement, carrying out multilateral activities to ensure the financial settlement and cle aring of securities. In addition, in certain cases we provide gross settlement services without acting as CCP, so participants may set date and time for settlement. We also provide registration, clearing and settlement services for public offerings of securities authorized for trading on the non-organized OTC market. The primary revenue components we derive from our operations within the realm of our Bovespa segment are exchange or trading fees and fees for clearing and settlement, which we charge at varying rates depending on the type of transaction and investor category. Our Bovespa segment comprises the stock market, and cash, forward, options and futures markets for equity securities and equity-based derivatives, as well as a fixed-income market for corporate debt securities. 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 threebusiness-day 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 trade execution and the settlement date (while other indices or rates may be used, indexation is frequently agreed based on 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 physical delivery of the underlying stocks, whereas exercising an index option implies paying or receiving cash for the difference between strike price and closing price for the underlying index at exercise or expiration. In any event the strike price under a stock option or index option may be indexed to an 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.
Average Daily Trading Volume;4 Margins Years ended December 31, 2012 and 2011
The average daily volume traded (ADTV) on the equities and equity derivatives markets (including cash, options and forward markets) jumped 11.7% year-over-year, a new all-time high for the segment. An analysis of average daily trading volume for the last five years (2008-2012) shows compound annual growth rate (CAGR) of 7.0%. Cash market performance was the primary driver of a year-over-year surge in average daily trading volume, explained mainly by increase in turnover velocity 5, which climbed to 69.8% from 64.2% year-on-year, since the average capitalization of the stock market rose by slight 2.2% from the prior year. However, this growth has been partially counterbalanced by a 2.2% year-on margin fall, to 5.676 bps from 5.793 bps one year ago, which means average revenue of R$5.676 per R$10 thousand in volume traded, which is in line with volume growth coming from high frequency trading and intraday trading, for which we charge lower than average trading fees. Foreign investors led the climb in turnover velocity and accounted for the larger portion of the overall volume, prod ded,
4
ADTV for markets comprising the Bovespa segment is a measure of average daily financial value traded on these markets, such that, unless the context clearly indicates otherwise, references herein to volume, average volume and average daily volume for t he Bovespa segment should be taken with the meaning of average daily financial value traded. 5 Turnover velocity for the year is defined as the ratio of annualized turnover (value) of stocks traded on the cash market over a twelve-month period to average market capitalization for the same period.
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among other things, by the shift in policy which in December 2011 led the Government to remove the 2% IOF tax on hot money inflows for investments in equity securities and equity-based derivatives. Introduced half a year earlier to curb the currency appreciation, the levy had put off foreign investors, who showed subdued impetus to pursue profits in cash equities over the second half of 2011. This tax removal impacted trading volumes for 2012. The average daily volume traded on the options market in 2012 went up by 1.4% year-over-year. The performance highlights were options on singles stocks of ten issuers and options on Ibovespa, all of which are part of our ongoing options market making program. The average daily volume traded in these options soared 44.8% year-over-year to R$74.6 million from R$51.5 million earlier. However, this climb was counterbalanced by sliding volumes traded in option s on Petrobras and Vale stocks, which traditionally have been top-traded options, and combined accounted for a 10.3% year-over-year fall in average daily volume traded in options.
Years ended December 31, 2011 and 2010

The average daily trading volume (ADTV) of R$6.5 billion for 2011 picked up just a thread (1.1%) from the earlier year, yet enough to surpass the 2010 record high. While partially offset by a fall in volume traded on forward and options markets, this virtually unchanged performance ultimately pushed a 1.3% year-on climb in average capitalization of the stock market and a slight increase in turnover velocity (to 64.2% from 63.8%), which drove the 1.1% rise in value traded in cash equities. This increase in turnover velocity was more palpable in the second half of the year, at a time when the market capitalization of the stocks listed on our exchange had lost ground. In the options market the average daily volume traded plunged 10.3% from the prior year due primarily to significant concentration of trading in options on Petrobras and Vale stocks even as the value traded in these stocks plunged 18.8% on a year-over-year basis. Options on Petrobras and Vale stocks accounted for 79.5% of the overall average value traded on the options market in 2011. Moreover, retail traders, who typically account for the larger share of the overall volume, showed lukewarm disposition to trading in equity options. As a result, retail investors accounted for just 54. 1% of the overall value traded on the options market in 2011. The forward market saw a similar trend, with average daily v olume traded retreating 19.9% year-on-year as retail traders and institutional buyers showed measured enthusiasm for forwards.
Bovespa segment - Selected operating data. Volume in terms of average financial value traded (ADTV) . The evolution of average daily volume traded (ADTV) has shown
consistent growth over the last few years. In 2012, ADTV hit R$7,250.7 million, again an all-time record high from R$6,491.6 million in 2011, R$6,488.6 million in 2010, and R$5.286.8 million in 2009.
Bovespa segment Average Daily Trading Volume ADTV
Years ended December 31, 2009 2010 2011 2012 YOY VAR 2010/2009 YOY VAR 2011/2010 YOY VAR 2012/2011
Cash market Forward market Options market
(In R$ millions)
Fixed-income market Overall ADTV
4,943.7 6,031.6 6,096.3 6,861.3
96.5 147.4 118.0 103.4
245.0 307.9 276.3 280.1
1.6 1.8 1.1 6.0
5,286.8 6,488.6 6,491.6 7,250.7
22.0% 1.1% 12.5%
52.7% -19.9% -12.4%
25.7% -10.3% 1.4%
12.5% -40.4% 455.1%
22.7% 0.0% 11.7%
Two product offerings have caught the attention of investors, particularly retail investors keen to turn a profit from cash market dealings, one such product being exchange-traded funds, or ETFs, which are part of a product development program we have been implementing over the last few years. The average daily volume traded in ETFs soared 138.1% year -on-year to account for 1.7% of the overall cash market volume (versus 0.8% in 2011), after having surged 70.7% in 2011 and 53.2% in 2010. The other highlight, exchange-traded real estate funds (FIIs), includes 93 new listings in 2012 versus 66 listings in 2011 and 48 in 2010, with the average daily volume traded having surged to R$14.6 million in 2012, from R$3.7 million and R$1.5 million in 2011 and 2010, respectively.
Volume in terms of average daily number of trades. The 2012 average daily number of trades (actual volume) jumped
37.6% year-on-year, as compared to 31.7% in 2011 and 29.6% in 2010. These jumps are explained primarily by consistent increases in high frequency trading volumes, which despite being highly quantitative use fairly small-orders, thus driving down the average ticket size per trade. High frequency traders accounted for 9.4% of the average daily value traded in 2012, versus 8.5% in 2011 and 4.3% in 2010. In any event, we should note that following recent investments in technology infrastructure and IT resources, our trading and clearing systems now offer substantially higher throughput capacity than the current volume of business, and are ready to support the future growth of our markets, as results begin to show.
Bovespa segment Average daily number of trades (actual volume)

2009 2010 2011 2012
YOY VAR YOY VAR YOY VAR
Cash market
Forward market
Options market
Fixed-income market
Overall Volume
270.6 349.8 476.5 653.0
1.3 1.6 1.1 1.0
60.4 79.3 89.6 126.4
0.007 0.012 0.013 0.011
332.3 430.6 567.2 780.4
2010/2009 2011/2010 2012/2011
29.2% 36.2% 37.1%
18.4% -26.7% -15.5%
31.3% 13.0% 41.1%
77.1% 9.9% -14.0%
29.6% 31.7% 37.6%
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Equity market capitalization. The year-end equity market capitalization (i.e., a measure of the total market value of the stock
market, or total market capitalization of all listed issuers) hit R$2,524.3 billion in 2012, as compared to R$2,294.4 billion in 2011, R$2,569.4 billion in 2010 and R$2,334.7 billion in 2009. Additionally, as an annual average, the equity market capitalization hit R$2,417.0 billion in 2012, as compared to R$2,365.6 billion in 2011, R$2,334.9 billion in 2010 and R$1,826.9 billion in 2009, whereas the average turnover velocity was 69.8%, 64.2%, 63.8% and 66.6% in the years from 2012 to 2009, respectively.
Bovespa segment Equity market capitalization Turnover velocity (as a percentage)
(In R$ millions) Turnover velocity

2009 2010 2011 2012
YEAR-ON-YEAR VARIATION YEAR-ON-YEAR VARIATION
Year-end Market Capitalization
Average market capitalization
2,334.7 2,569.4 2,294.4 2,524.3
1,826.9 2,334.9 2,365.6 2,417.0
66.6% 63.8% 64.2% 69.8%
2010/2009 2011/2010 YEAR-ON-YEAR VARIATION 2012/2011
10.1% -10.7% 10.0%
27.8% 1.3% 2.2%
-276 bps 36 bps 567 bps
Share of the volume by investor category. Moreover, foreign investors accounted for 40.4% of the overall value traded on
equities markets for 2012, 34.7% in 2011 versus 29.6% and 34.2% for 2010 and 2009, respectively. Institutional investors were the second more active investor category and accounted for 32.1% in 2012, 33.4% of the overall value traded for the segment in 2011 versus 33.3% and 25.7% in 2010 and 2009, respectively, followed by retail investors, which accounted for 17.9% in 2012, 21.5% of the overall value traded in 2011 versus 26.4% and 30.5% in 2010 and 2009, respectively.
Year ended December 31, 2009 2010 2011 2012 Retail Investors Bovespa Segment Share of overall volume (value) traded by investor category Institutional Financial Corporate Foreign Investors Investors Institutions Investors Other
30,5% 26,4% 21,5% 17,9%
25,7% 33,3% 33,4% 32,1%
34,2% 29,6% 34,7% 40,4%
7,4% 8,4% 8,6% 8,1%
2,2% 2,3% 1,7% 1,5%
0,1% 0,1% 0,1% 0,0%
Other services Securities lending.

Our equities clearinghouse operates a securities lending facility known as BTC, which permits investors to lend securities traded on our exchange against collateral posted by borrowers that engage in short-selling or arbitrage transactions, thus adding liquidity to these securities. We act as central counterparty to ensure settlement of all lending transactions. In doing so, we adopt strict lending and risk management standards to ensure the market operates in an orderly fashion. The expansion of securities lending transactions has performed a significant role in increasing stock market liquidity in the last few years. As a facilitating agent for securities lending and borrowing, our securities lending facility ensures more efficient clearing and settlement processes, as in the event of failed delivery the BTC will promptly intervene and compulsorily procure so-called automatic loans to ensure that particular transaction is properly cleared and settled. Borrowers are charged fees on each lending transaction registered in our system. For regular transactions initiated by a borrower the fees are charged at a rate of 0.25% per annum over the financial value of the open interest position, calculated on a pro rata basis (except that the fee sum observes a floor of R$10,00 per transaction), and for automatic loans initiated as a safeguard against failed delivery, fees are charged at a rate of 0.50% per annum over the financial value of the open interest position (no floor amount applies). 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, 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). With the aim of pushing volume growth in the securities lending market, in May 2009 our securities lending facility introduced a rebate payable to local securities lenders out of the revenues derived by our securities lending facility. The average financial value of open interest positions as the year closed in 2012 hit R$31.9 billion, versus R$30.2 billion, R$20.5 billion, and R$12.7 billion in the earlier years of 2011, 2010 and 2009, respectively.
Securities listings
This is the portion of the business that consists of listing securities for trading on our markets. Our revenues from listing fees correlate primarily with annuities charged from issuers as a rate of their capital stock amount, the minimum annuity amount currently set at R$35.0 thousand and a cap set at R$850.0 thousand. In addition, we currently charge a R$7.7 thousand listing annuity from investment funds, incentivized companies and issuers of units representing cinematic investment certificates (certificados de investimento audiovisual) and certificates of additional potential construction area called Certificados de Potencial Adicional de Construo, or CEPACs. Our stock market comprises the traditional listing segment for stocks and three special listing segments (Novo Mercado, Corporate Governance Level 2 (Nvel 2) and Level 1 (Nvel 1) segments), which require issuers to adopt progressively more stringent additional corporate governance standards not prescribed by law. These requirements typically focus on achieving more transparent corporate management practices, including through heightened disclosure and reporting standards, better balancing the rights of shareholders by ensuring minority holders are extended fair treatment, and promoting widespread share ownership. Moreover, we have established Bovespa Mais as a special listing segment of the organized OTC market 45
designed for mid-cap issuers keen on pursuing gradual access to the stock market (through, say, lower volume equity offerings or offerings designed for a limited number of investors). The corporate governance standards, reporting and disclosure requirements as well as corporate rules applicable in these segments are set forth in the listing regulation for each segment and accessible in our website. The table below sets forth data on total listing per segments in the period from 2009 to 2012.
Total listings
2012 Years ended December 31, 2011 466 2010 471 2009 434
(1)
Stock market listings

Traditional segment Special listing segments
452
Novo Mercado (NM) Level 2 (N2) Level 1 (N1)

Sponsored BDRs
262 178 127 18 33 12

139
274 182 125 19 38 10

121
295 167 112 18 37 9

70
265 159 105 19 35 10

77
Organized OTC market listings
Bovespa Mais (MA)

Funds and other listings (stock and OTC markets)
Total
(1)
3
171 762
2
148 735
1
143 684
1
131 642
Include securities issued by securitization firms, as well as bond issuers and issuers of real estate receivables certificates (CRIs) whose shares are not listed to trade on the stock exchange and, thus, are not taken into account in our calculation of equity market capitalization.
Equity offering market. We also derive revenues from charging a R$51.0 thousand fee for analysis and registration of listing
applications in connection with initial public offerings, follow-on and seasoned equity offerings. In 2012 we registered 12 equity offerings, three of them being initial public offerings and nine follow-on offerings, all of which combined amassed gross proceeds on the order of R$13.2 billion. Additionally, a total of 22 equity offerings completed in 2011 (11 IPOs of debutant issuers, and 11 follow-on offerings raised R$18.0 billion in aggregate gross proceeds, in a substantial dive from previous years. In 2010, with the market rebounding from the global financial crisis, there were 22 offerings (11 IPOs and 11 follow-on and seasoned offerings) which combined amassed record high gross proceeds of R$74.4 billion, surpassing the R$70.1 billion famously grossed in 2007. If we were to include the oil reserves assignment the Brazilian government and Petrobras agreed in connection with the seasoned offering conducted in August 2010 by Brazils oil and gas giant Petrobras, the overall gross offering proceeds would have risen to R$149.2 billion. This compares with 24 offerings in 2009, six being IPOs and the remainder 18 being follow-on or seasoned offerings which combined raised gross proceeds of R$46.0 billion.
Bovespa segment Equity offerings 2012
Years ended December 31,

2011 2010 2009
Number of equity offerings Combined gross offering proceeds

(1)
Initial public offerings Follow-on; seasoned offerings

Total
3 9
12
11 11
22
11 11
22
6 18
24
Initial public offerings Follow-on; seasoned offerings

Total
3.9 9.3
13.2
7.2 10.8
18.0
11.2 63.2
74.4(1)
23.8 22.2
46.0
Includes the oil reserves assignment the Brazilian government and Petrobras agreed in connection with the seasoned offering conducted in August 2010 by Brazils oil and gas giant Petrobras.
Central Securities Depository (CSD); custody and back-office services

We operate the only domestic central securities depository, or CSD, existing in Brazil, through which we provide depository and safe custody services to customers which deal on our equities and fixed-income securities markets. We also provide fungible custody services pursuant to which we hold fiduciary title to securities under custody. We perform daily reconciliation of custody positions and the underlying securities, which are identified by an ISIN code (International Securities Identification Number) under a segregated account structure which identifies the ultimate beneficial owner. Our customers for custody and back-office services are securities issuers and investors in equities and fixed-income securities. These services include custody accounts identified by investor, account and position statements which we furnish by mail or online through the Internet; treatment of corporate actions, including money transfers and payment receipts, recording of exercise of conversion, exchange and other rights on, in or under securities, and account operations processed in real time. In addition, we facilitate interactions and communication among issuers, trustees and customer investors. The number of active custody accounts at the central securities depository at the close of 2012 totaled 613.9 thousand (587.2 accounts registered for retail investors), versus 611.2 thousand accounts (583.2 thousand registered for retail investors) in 2011, 640.2 thousand accounts (610.9 thousand for retail investor deposits) in 2010, and 575.7 thousand custody accounts (552.4 thousand for retail investor deposits) in 2009. We derive revenues from depositary and custodial services in the form a fixed monthly fee charged to the intermediary firm relative to the number of accounts or open interest positions they service ((R$3.00 per inactive custody account or open interest position; R$6.90 per active account or open interest position in equities; and R$20.00 per annum (prorate on a monthly basis) relative to each active custody account or open interest position in fixed-income securities. In addition, since May 2009, we also charge an additional fee rate for open interest positions in excess of R$300 thousand. Moreover, our central securities depository provides deposit and safe custody services for retail investors dealing on our 46
Treasury Direct (Tesouro Direto) platform, which we operate for the trading of government bonds through the Internet pursuant to a cooperation arrangement agreed with the Brazilian Treasury. The financial value of government bonds, notes and other debt securities held under custody at our central securities depository as the year closed in 2012 totaled R$9.0 billion, up from R$6.1 billion in 2011 and R$3.9 billion in 2010, whereas the number of retail investors holding custody accounts was 84.3 thousand at end-2012, versus 64.4 thousand and 42.3 thousand in the earlier years of 2011 and 2010, respectively.
Market access permits

Under applicable legislation and regulations, trading activities on regulated organized markets, including ours, as well as clearing and settlement an custodial activities are typically performed through intermediation agents, in particular brokerage firms. In our overarching structure, which comprises both trade and post-trade (clearing, settlement, custody) structures for each of the BM&F and the Bovespa segments, intermediation agents holding permits for access to our exchange and organized OTC markets, and to our clearing, settlement and depositary (custody) systems are called market participants. The requirements and processes applicable to intermediation agents applying for rights of access to our trading markets and clearing and settlement facilities have been regulated and released by means of Circular Letter No. 078/2008-DP (a directive release). Fee requirements Applicants for permits granting access rights to either BM&F or Bovespa segment markets are required to commit to the following fee requirements: Licensing fee: this is a one-off charge collected in connection with the permit application processing; Trading access fee: this is a one-off charge collected upon issuance of a permit granting trading rights; Post-trading access fee: this is a one-off charge collected upon issuance of a clearing and custody permit; and, Annual fees: this fee is intended to cover brokerage auditing costs. It is charged at 5% over the base fee for trading or post-trade access, as applicable. 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-DP (a directive release). In addition, our service provision policy was disseminated through Circular Letters 031/2010-DP and 016/2011-DP, which, among other things, set forth our fee schedules for the following: (i). MegaBolsa workstations (MegaBolsa being a trading system); (ii). Gateways for transmission of orders; (iii). Additional contingency SLC servers for use at trading desks and brokerage branches; and (iv). 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. The table below set forth data on number of intermediary investment services firms (including broker and broker-dealers) holding permits for access to our markets in the periods indicated. You should note that intermediary firms may apply for permits to operate in more than one market or segment.
Licensed intermediary investment services firms
2012 Years ended December 31, 2011 2010 2009
Equities markets (1) Derivatives markets (2) Forex markets Bonds market
(1) (2)
88 74 27 58
87 68 38 61
85 67 38 61
81 62 66 80
Include markets for stocks and other equity securities, as well as equity-based instruments and derivatives, in addition to corporate debt securities. Include the markets for financial and commodity derivatives.
Market Data and Information Services

We distribute to local and international authorized vendors across the world quote and trade-related information generated in our stock market, options and forwards and futures markets for equity-based securities and derivatives, and in our fixed-income market, and financial and commodity derivatives futures and options markets, as well as information on our stock indices, in addition to news reports on market developments. We currently authorize market data 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 transmitted directly by us or retransmitted by other intermediating vendors. Brokerage firms may obtain market data through direct market data feeds provided by us or a vendor or a HomeBroker provider.
b. Revenues derived by operating segments, including as a percentage of total net revenues.
See subsection 10.1(h) below for information on revenues derived by our operating segments, including as a percentage of total net revenues.
c. Income (loss) ascertained by operating segment, including as a percentage of total net income (loss).
We do not calculate income or loss per operating segment.
47
7.3.
Information on products and services comprising each operating segment

a.
Production process characteristics
Organized markets
Brazilian capital markets regulation classifies organized markets as exchange markets and organized over-the-counter markets. Under applicable regulation, an exchange is a displayed marketplace where centralized and multilateral systems allow order entry, competitive matching and execution of buy and sell orders for trades in securities (with assistance from licensed intermediary investment firms, which may also engage in proprietary trading) or, alternatively and subject to certain requirements, a displayed market which provides order entry, crossing and execution systems and a licensed third market maker which acts as counterparty to the trade and is required to post firm bids and offers in the system. In turn, an organized OTC market provides centralized and multilateral systems for trading (entry, matching and execution of buy and sell orders) in securities or, in the alternative, a platform for registration of previously agreed transactions (with a market maker acting as counterparty to the trade); adopts price formation standards; permits a trader to deal directly, with no assistance from an intermediary firm; permits delayed display of quote and trade-related information. Other features distinguishing an exchange from an OTC market are trading volume and type of target investing public. Brazilian capital markets law grants regulatory and oversight powers and authority to the Brazilian Securities Commission, or CVM, the market regulator, which in turn may delegate some of its authority to self-regulatory organizations. CVM Ruling No. 461 dated October 23, 2007, provides the regulatory framework governing regulated securities markets and the formation, organization and operation or extinction of stock exchanges, commodity exchanges, futures exchanges and organized over-thecounter markets. Other regulators for the domestic capital markets and the Brazilian payment system are the Brazilian National Monetary Council (or CMN, acting through the Central Bank) and the Central Bank.
Exchange and organized over-the-counter markets

Exchange markets typically provide centralized and multilateral systems for trading (entry, matching and execution of buy and sell orders) in securities, with assistance from an intermediary firm. Organized OTC markets either operate similarly to an exchange or provide a platform for registration of previously agreed transactions, whether or not with assistance from an intermediary firm. We operate exchange markets for the trading of financial and commodity derivatives, spot currency contracts, and government bonds, all of which comprise our BM&F segment. Additionally, we operate a stock market and exchange markets for the trading options on singles stocks and other equity-based derivatives, as well as corporate debt securities, all of which comprise our Bovespa segment. Both segments operate pursuant to a fully automated, vertically integrated business model. Our service offerings encompass the entire life cycle of trading, from order entry to matching, to execution, risk management, and clearing and settlement (where we act as CCP to ensure multilateral settlement). In addition, through our central securities depository, we provide safe custody for financial assets and back-office services to intermediary firms and investors. A particular trait of exchange markets is that securities and derivatives traded on these markets consist of standardized securities and derivatives contracts, which facilitates trade processing and price discovery. This is because centralized and multilateral trading systems that adopt price formation standards require asset types of similar characteristics which are fungible things (i.e., mutually replaceable for things of the same kind and volume). As such, they trade freely regardless of holder. In the organized OTC market for financial and commodity derivatives fungibility is not a prerequisite, such that trading and price formation standards and practices differ from those that are adopted in an exchange market. OTC derivatives traded on BM&F segment markets are typically non-standard, tailor-made contracts, or else standardized (as to size, underlying asset, duration, settlement conditions, etc) registerable contracts for trading directly between two counterparties, whose value is derived from the value of the underlying asset, and which unlike certain exchange -traded equities and fixed-income securities, are typically not fungible. OTC equity securities and equity-based derivatives traded on Bovespa segment markets include low liquidity stocks of mid- to small-cap issuers or issuers that adopt a strategy of gradual access to the stock market, in addition to corporate debt securities, fund shares and units of funds of funds and other securities. We have been implementing substantial investments in modernizing our technology infrastructure so as to offer the markets we operate high performing and efficient systems, as well as trade and post-trade services. We discuss our recent technology developments elsewhere in this Form. In November 2011, within the context of our project for a new, streamlined, state-of-art OTC platform for fixed-income and other OTC derivatives, we announced a partnership with Calypso Technology, Inc., a global application software provider of an integrated suite of trading and risk applications to financial and capital market institutions. The Calypso system will give us a new operating model for registration and treatment of OTC transactions, risk calculation and collateral management, while offering nimble, flexible and cost efficient features and capabilities, which will give us the ability to better meet regulatory requirements and market demand. The new OTC platform is set to implement late in 2013, with the module for registration of transactions in unsecured cash-settled currency forwards.
Technology Evolution - trading systems

For a great many years trading on stock and futures exchanges were performed on the open outcry trading floor, 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 on Bovespa and BM&F markets. 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 and platforms where matching engines replaced hand-signaling in matching orders for execution. This transformation deeply changed the pace of business, as 48
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. The electronic trading system of Bovespa, then an independent exchange, first launched in 1990 offering a CATS trading platform (acronym for Computer-Assisted Trading System), which in 1997 was replaced with the MegaBolsa system, first developed by then Bourse de Paris (currently NYSE Euronext) and further developed updated by us over the years. At BM&F, then also an independent exchange, the electronic trading system for derivatives first launched in 2000 as the GTS platform (acronym for Global Trading System), the first version of which had again been developed by then Bourse de Paris . Following the two exchanges integration process, that system was replaced early in 2008 with a new proprietary system developed and implemented by us, which we continued to GTS platform. After the trading floor shut down in June 2009, all trading in financial and commodity derivatives was now is processed through the electronic trading platform. In September 2005, BOVESPA closed its trading floor to become a fully-integrated electronic market. We believe that having the ability to offer electronic trading at 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 and continuing investments in technology. For this reason, in 2010 we agreed a partnership and technology cooperation with the CME Group for joint development and implementation of a multi-asset class electronic trading platform with throughput capacity below one millisecond, which we planned and designed to replace both the MegaBolsa system (Bovespa segment) and the GTS platform (BM&F segment). We named it PUMA Trading System. The system module for the trading of financial and commodity derivatives contracts and spot currency contracts (BM&F segment) launched in the second half of 2011, whereas the modules for the trading of stocks and other equity securities, equity-based derivatives (Bovespa segment) implemented quite recently, in the first half of 2013. Technology developments implemented in recent years first brought the round-trip time, or RTT, down to 10 milliseconds at year-end in 2010 from 450 milliseconds at end of 2007, whereas throughput capacity increased tenfold. With the implementation of the second module of our PUMA Trading System, the round-trip time went down to one millisecond latency, with capacity to support our future growth. The table below sets forth data on the evolution of RTT and throughput capacity over the years through to December 31, 2012.
2007 Years ended December 31, 2008 2009 2010 2011 2012
BM&F segment
Round-trip time Daily throughput capacity
(PUMA Trading System Average daily volume from 2011) Peaks
(in milliseconds) (in thousands of trades) (in thousands of trades) (in thousands of trades) (in milliseconds) (in thousands of trades) (in thousands of trades) (in thousands of trades)
70 55 23 42 450 390 153 343
25 200 29 49 300 770 245 414
20 200 39 76 20 1,500 332 591
10-15 400 66 152 10-15 3,000 431 800
~1 400 66 195 10-15 3,000 567 1,092
~1 400 99 195 10-15 3,000 781 1,500
Bovespa segment
(MegaBolsa system)
Round-trip time Daily throughput capacity Average daily volume Peaks
Beyond offering lower latency and higher throughput capacity, improvements implemented in recent years also included investments in direct market 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 (Direct Market Access) 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 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). 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. Below is a brief description of each of the four DMA channels we have implemented: 49
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 current providers for the order routing process, including order routing to the CME Globex system; Type 3 DMA via Direct Connection - gives users the ability to hire a direct link to the Exchange and forego usage of broker trading screens and other specific interface tools; and Type 4 DMA via Co-location Arrangements - we host customer servers in our data center and provide automated order execution and transaction registration capabilities.
BM&F segment.
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, followed by implementation of all other connections for DMA via Provider (Type 2) in January 2009, DMA via Co-location (Type 4) in June 2009 and DMA via Direct Connection (Type 3) in October 2009.
Bovespa segment. The traditional DMA connection (Type 1) has been available since 1999, when the HomeBroker platform
launched, whereas the other channels for direct market access, i.e., DMA via Provider (Type 2), DMA via Direct Connection (Type 3) and DMA via Co-location (Type 4), have been implemented in September 2010.
Technology Evolution post-trade systems

In the course of the exchange integration process whereby BM&F and Bovespa merged with 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 in the domestic capital markets: (i) equities clearinghouse (for single stocks, equity securities and equity-based derivatives, as well as corporate debt securities), (ii) derivatives clearinghouse (for financial and commodity derivatives), (ii) FX clearinghouse; and (iii) bonds clearinghouse. Our clearing facilities operate pursuant to Law No. 10,214 dated March 27, 2001, which authorizes multilateral clearing and settlement, regulates the role of the central counterparty (as performed by systemically material clearing facilities, such as ours), and permits the seizure 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 segments, data on these trades are automatically fed into the system 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 clear and settle physical delivery contracts (entailing delivery of the relevant securities or contract underlying and, as the case may be, the transaction registration) and cash-settled contracts (entailing movement of monetary resources). 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 trades in exchange-traded derivatives, FX derivatives, government bonds and stocks, but is voluntary for the clearing and settlement of trades in OTC derivatives and corporate debt securities. Our clearing houses typically act as central counterparty (CCP) for the derivatives markets (including futures, forward, options and swap markets), the spot U.S. dollar market, the government bonds markets (cash, forward, repo and securities lending markets), and for the equities markets (cash, forward options, futures and securities lending markets) and the fixed-income markets (cash and securities lending markets for corporate debt securities). 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 make up 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 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 we 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, 2012, 2011 and 2010, collaterals posted by market participants totaled aggregates of R$176,481.9 million, R$178,556.5 million and R$143,087.7 million, respectively. 50
We are now in the process of implementing the project to combine our four clearing houses into a single, fully-integrated, central clearing house. In the last quarter of 2011, we announced a partnership with Cinnober, a Sweden-based global provider of advanced financial technology, which will include a perpetual license for use of TRADExpress RealTime Clearing, their high performing, multi-asset, clearing and real-time risk management system. The RealTime Clearing system (RTC) will be the backbone our future multi-asset, multi-market, integrated clearing facility for its technologically innovative, high performing capabilities, capacity, stability and security features. And in the second quarter of 2011 we announced the development of CORE, or CloseOut Risk Evaluation, our new central counterparty multi-asset, multi-market risk management framework, and lynchpin of a solid risk management system architecture with performance to match the RTC system. In addition, in November 2012, we presented to the market our Integrated Post-Trading Facility Program (Programa de Integrao da Ps-Negociao - IPN), which will combine and consolidate the activities of our four clearing houses into a single, fully-integrated facility which will provide clearing and settlement, central depository and other ancillary services for transactions in equities, equity securities and other equity-based derivatives, corporate debt securities, financial and commodity derivatives, forex and government bonds. This integrated clearing facility is set to combine Cinnobers RealTime Clearing system (multi asset, multi-market clearing and real-time risk management system) with CORE, or CloseOut Risk Evaluation (central counterparty multi-asset, multi-market risk management framework, the basis for our risk management system architecture will be based). This integrated facility is set offer highly efficient clearing and settlement services for multiple assets across markets, and optimized use of cash and collateral allocation through cross margining. It should also greatly enhance our competitive position. Under the program schedule, the new technology infrastructure for financial and commodity derivatives is set to launch early in 2014, and the infrastructure for variable income assets will follow.
b.
Features of the distribution process
Distribution channels
Licensed investment services firms (including commodity and securities brokerage firms) are market participants with direct access to our trading systems, entitled to engage in proprietary trading and p erform investment intermediation on behalf of their customers. 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. Access permit categories 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. Access permits may grant full or restricted rights for participants to trade and intermediate trading on our markets, depending on the terms of the permit application. Our board of directors reviews and evaluates applications for access permits pursuant to applicable regulations and article 30, item f of our bylaws.
Operational Qualification Program, or PQO (Programa de Qualificao Profissional)

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, certification 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 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 51
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 certification seal, brokerage firms are required to operate pursuant to certain standards and practices based on which qualification is recognized. Investment services firms licensed to operate as market participants are required to observe and practice certain general standards (minimum qualification requirements), in addition to special standards applicable to each qualification category, which a brokerage firm must meet and practice. A certification seal is granted only upon issuance of an opinion by our PQO Qualification Committee (composed of some of our executives and officers) advising that the applicable requirements are fulfilled and recommending the qualification seal. The heightened standards by which brokerage firms operate in our markets underpin the development of Brazilian capital markets. For this reason, in 2010 we extended our qualification and certification program to the participants of the Bovespa segment as well. Starting from 2011 the qualification and certification programs for participants of each of BM&F and Bovespa segment markets are now a responsibility of our subsidiary BM&FBOVESPA Market Surveillance, or BSM, which acts in the capacity of self-regulatory and market surveillance organization.
c.
Market characteristics in relevant operating segments. i. Market share per segment.
Because we operate the only domestic exchange and OTC markets for listed equities and derivatives, as December 31, 2012, 2011 and 2010 our share of these markets was 100%. According to data compiled by the Futures Industry Association and released in the FIA Magazine, in the years 2010, 2011 and 2012 we were operating the sixth largest derivatives exchange across the world in terms of number of contracts trade. This measure takes into account financial and commodity contracts traded on futures and options markets comprising our BM&F segment and equity-based derivatives and options on single stocks and stock indices traded on derivatives markets comprising our Bovespa segment. In the case of trades in OTC derivatives, our market share is approximately 20%. As for stock trading, in 2012 we held market shares of 63.0% of the overall financial value traded in stocks of Brazilian issuers, versus 58.3% and 55.4% in the earlier years of 2011 and 2010, respectively, whereas the remainder correlates with trading on U.S. exchange markets, such as the New York Stock Exchange, or NYSE, in the form of depositary receipts. We should also mention that while between 2004 and 2011 our stock market registered 141 new listings from initial public offerings, NYSE registered five offerings of shares of Brazilian issuers. . Moreover, according to data compiled by the World Federation of Exchanges (WFE), in 2012 our stock market (Bovespa segment) ranked 6th worldwide in terms of gross process raised in share offerings, 13th in terms of average daily trading volume (financial value) and 14th in terms of equity market capitalization. And according also to WFE data, as measured in terms of volume traded, equity market capitalization and volume of equity offerings, we are the by far leading Latin American exchange. ii. Competitive market conditions
Brazilian Exchange 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, as an exchange for the trading of financial, commodity and equity-based 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, 2012, 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 relative to registration of OTC transactions in derivatives, government bonds and corporate debt securities, in addition to having competition for certain of the services our subsidiary BM&FBOVESPA Settlement Bank provides. iii. 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. 52
iv. 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, as in the case of the MegaBolsa trading system, since the maintenance fees for this system closely correlate with throughput. Our main suppliers and service providers include the following: IT (software and hardware): Services: Specialist providers: Telecom providers: Web hosting providers: HP; EMC Computer; Hitachi Data System; IBM; Compusoftware; AtosEURONEXT (NYSE); Software AG and Oracle; 7COMm; IBM; Multirede; Hitachi Data Systems, Diveo, CPM Braxis and Microsoft; 7COMm; GPTI; 3CON Consultoria and Stefanini; Algar-CTBC; Embratel Primesys; RTM; TIM Intelig; Diveo; Tivit.
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; background on relationships with licensing authorities.
Industry Regulation
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 the Brazilian National Monetary Council (Conselho Monetrio Nacional), or CMN; and (ii) Law No. 6,385/76, 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.
Regulators
The Brazilian National Monetary Council, 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.
Brazilian National Monetary Council (CMN)

The CMN members are 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.
Brazilian Securities Commission (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; (iii) oversee the activities of publicly held companies, and the stock, commodities and futures markets, as well as the members of the securities distribution system; (iv) release information or set guidelines for clarification or guidance to market participants; (v) 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 53
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 provision of fungible and non-fungible custodial services for securities and bonds. Under article 18 of the Brazilian Securities Market Law (Law No. 6,385/76, as amended), the operation and management of organized securities markets by us are subject to consent and oversight by the CVM. In addition, the CVM issued Ruling 461/07, which regulates the formation, organization, operation and extinction of exchange markets (whether for stocks, commodities or derivatives) and organized over-the-counter 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 Ruling 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 Market Surveillance (BSM) is 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 maintains close relationships with the regulators, in particular the Central Bank and the CVM. It is also responsible for keeping the CVM abreast of market developments and provide the market regulator with periodic reports of its market surveillance activities. Moreover, pursuant to CVM Ruling 89/88, which provides on granting of licenses for provision of securities boo kkeeping and custodial services, and CVM Ruling 115/90, which regulates the 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 (our equities clearinghouse, which formerly operated as an independent company 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. Under Law No. 10,214/01, activities involving clearing and settlement services, which we provide through our four clearing facilities (the derivatives, FX and bonds clearinghouses for BM&F segment and the Bovespa segment clearinghouse for equities and corporate debt securities) 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 a nd 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 bonds 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 entails no 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, we are 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), contemplating all of the Scope 1, 2 and 3 emissions provided under the GHG Protocol Corporate Standard. Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 54
emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions. Moreover, since 2010 our reports are now externally assured. We were also the first emerging-market exchange to sign up to the Principles of Responsible Investment (PRI), an United Nations-backed initiative and a set of aspirational and voluntary guidelines for investment entities wishing to address environmental, social, and corporate governance (ESG) issues. The Principles provide a voluntary framework by which investors can incorporate ESG issues into their decision-making and ownership practices and so better align their objectives with those of society at large. As a signatory member, we also disseminate the Principles encouraging other investors to adhere. And we are a member of the advisory committee of the Carbon Disclosure Project. Moreover, such as announced at the 2012 Rio+20 Conference, acting within the scope of the Sustainable Stock Exchanges Initiative, or SSE, have committed to advance long-term, sustainable investment in our markets by promoting improved environmental, social and corporate governance disclosures, performance and reporting by issuers and market participants. The SSE is an initiative supported by the U.N. Global Compact (PRI), the United Nations Conference on Trade and Development (UNCTAD), the United Nations Environment Program (UNEP) Finance Initiative, and the U.N. Global Compact. c. Dependence on patents, trademarks, licenses, concession grants, franchise arrangements or other royalty-related contracts, which are material for the course of business.
Given the nature of our business, intellectual property assets can be critical to our operations, in particular IT-related assets which in some cases may have been licensed from third parties. The information below provides an overview of these assets, which are discussed in further detail under subsections 9.1(b) and 9.2 of this Reference Form.
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 Propriedade Industrial), or INPI, the local patent and trademark office (see the information 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, Novo Mercado BM&FBOVESPA, PUMA Trading System BM&FBOVESPA, and BM&FBOVESPA The New Exchange, which are either currently registered or are the subject of trademark applications previously filed with the INPI, classifying as trademarks or services marks in the several categories of services and products we and our subsidiaries offer. 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, 2012, we had 86 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. Following completion of the integration process which combined BM&F and Bovespa into BM&FBOVESPA, we are now in the process of reviewing our portfolio of brands, marks and logos. Moreover, as of December 31, 2012, we had four patent applications pending at the INPI in Brazil, one patent application pending in the United States and one PCT application. These applications are related to our GTS trading system, the Brazil Easy Investment project and our CORE project (or CloseOut Risk Evaluation), our new central counterparty, multi-asset, multimarket risk management framework. Pursuant to a strategic decision taken by our chief IT and technology officer, the patent applications previously filed in Argentina in connection with the GTS trading system have been withdrawn.
2)
Domain names
As of December 31, 2012, BM&FBOVESPA and its subsidiaries owned 157 domain names registered on behalf of the Company in Brazil and 16 domain names registered elsewhere, other than in Brazil, 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.
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 from local and foreign customers
a.
Revenues attributable to customers based in the issuers home country, including as a percentage of total net revenues
We estimate domestic investors accounted for about 70.0% of the overall volume traded on our markets in the year ended December 31, 2012
b.
Revenues attributable to foreign customers on a per-country basis, including as a percentage of total net revenues
Investors based in the United States, United Kingdom, Uruguay and Ireland accounted for 13.9%, 11.1%, 4.8% and 2.6%, respectively, of the overall volume traded in 2012 on markets comprising our Bovespa segment, which means these investors accounted for estimated 6.8%, 5.5%, 2.4% and 1.3%, respectively, of the overall volume-related net revenues (from exchange fees and clearing fees) for the segment, which in turn accounted for 49.0% of our total net revenue for 2012. Within our BM&F segment, investors based in the United States and United Kingdom accounted for 14.6% and 6.8%, respectively, of the overall 55
volume traded in 2012, which means these investors accounted for estimated 6.0% and 2.8%, respectively, of the overall volume-related net revenues (from exchange fees and clearing fees) for the segment, which in turn accounted for 41.1% of our total net revenue for 2012.
c.
Total revenues attributable to customers based elsewhere other than in Brazil, including as a percentage of total net revenues
We estimate foreign investors accounted for about 30.0% of the overall volume traded on our markets in the year ended December 31, 2012. 7.7. How the laws and regulations of foreign jurisdictions influence the business We are subject to the regulatory authority of the U.S. Commodity Futures Trading Commission, or CFTC, which is the independent agency of the United States Government that regulates futures and options markets. 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, provided certain CFTC requirements were met, no civil or criminal action would be taken against BM&FBOVESPA for providing direct access to trading systems in U.S. derivatives markets, or any against market participants (meaning local brokerage firms or clearing agents for BM&F segment markets) and authorized U.S. persons for accessing electronic trading systems in U.S. derivatives markets through BM&FBOVESPA. The relevant CFTC requirements include, among other things, reporting requirements concerning volumes and types of contracts traded, new contract offerings, changes to our organizational structure 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 Bovespa Index. Under applicable U.S. law, a foreign exchange offering derivatives based on a stock index must meet certain contract-related requirements and index composition and compilation criteria. One such criterion requires the underlying stock index to be a broad-based index (as opposed to a narrow-based security index, as defined).
On August 26, 2009, the CFTC authorized us to offer and sell to U.S. persons the following futures contracts and strategies: Bovespa Index Futures (or 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 Futures Rollover (IR1). On the 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. A response to this latter application to the CFTC is currently pending. 7.8. Material long-term relationships not discussed elsewhere in this form. Starting from 2008 we have been publishing annual sustainability reports which provide information about economic, environmental, social and governance performance. In 2009 we adopted the guidelines of the Global Reporting Initiative (GRI) on sustainability reporting. A sustainability report is an organizational report that gives information about economic, environmental, social and governance performance, and enables companies and organizations to report sustainability information in a way that is similar to financial reporting, including by providing comparable data, with agreed disclosures and metrics. We were the second exchange worldwide and the first in the Americas to adopt the GRI Guidelines on sustainability reporting. And since 2010, we have been publishing a comprehensive annual report giving financial and non-financial, socially and environmentally responsible investing information, which is also encouragement for investors and analysts to incorporate environmental, social and corporate governance (ESG) issues into their investment decision-making and ownership practices, and thus better align their objectives with those of society at large. Our 2011 Annual Report was prepared pursuant to a GRI Application Level C declaration, which the Global Reporting Initiative has checked issuing the relevant GRI Application Level Check Statement. You may access our Annual Reports in our websites at (i) our institutional page, www.bmfbovespa.com.br, in the drop down menu select BM&FBOVESPA, About BM&FBOVESPA, Annual Report ; or (ii) at our investor relations page, www.bmfbovespa.com.br/ri, select Financials , Annual Reports. Our commitment to sustainability is underpinned by the realization that our Company has the key mission of inducing, promoting and practicing socially and environmentally responsible principles and investments designed to promote sustainable development. Amidst other actions geared towards realizing these aspirations and ensuring these values are built into our approach to business, we launched our Novo Valor (New Value) program in May 2010, which aims at promoting corporate sustainability as a business approach that creates long-term shareholder and stakeholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments, by formulating strategies to build a company that fosters longevity through transparency, sustainable strategies and multi-dimensional initiatives that disseminate these values across capital markets and society at large. Our Novo Valor initiatives and programs include:
Corporate Sustainability Index, or ISE (ndice de Sustentabilidade Empresarial). Created in 2005, this index measures
return on a theoretical portfolio composed of shares of companies highly committed to sound practices in social and environmental responsibility, corporate sustainability and higher corporate governance standards. The ISE is a benchmark for the domestic capital markets and a driver of socially and environmentally responsible investing; 56
Carbon Efficient Index, or ICO2 (ndice Carbono Eficiente). Launched in December 2010, the Carbon Efficient Index, or ICO2, was developed in cooperation with the Brazilian Social and Economic Development Bank (Banco Nacional de Desenvolvimento Econmico e Social) , or BNDES, to measure the carbon footprint performance of 50
large-cap listed companies. 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 index theoretical portfolio will be weighed also by the issuers inventory of carbon emissions associated with its activities, i.e., their carbon footprint, calculated as MTeCO 2/Gross Revenues. With this index we aim to encourage public companies to adhere to GHG emissions inventory reporting, and 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;
In Good Company, a Corporate Sustainability Program (Em Boa Companhia - Sustentabilidade nas Empresas). This
program was announced in 2011 as a discussion forum for deeper understanding of the impact of sustainability and social investing initiatives on management and day-to-day corporate activities. A highlight of the program, in April 2011, we launched a publication designed as a first -steps guide to socially and environmentally responsible investments entitled Novo Valor Corporate Sustainability: How to begin; who to involve; what to prioritize (Novo Valor Sustentabilidade nas Empresas, Como Comear, Quem Envolver e o que Priorizar).
Greenhouse Gas Emissions Inventory Report . We issued in 2010 our first GHG Emissions Inventory Report (for
2009), which was followed in 2011 by a Scope 3 report for the 2010 GHG emissions inventory, which has been externally assured.
Report of Explain Initiative.
In June 2012, at the Rio+20 United Nations Conference on Sustainable Development, we announced the results of our initiative on sustainability reporting by issuers, which we implemented in January 2012 on a report-or-explain basis in a partnership with the Global Reporting Initiative, an international non-profit organization that promotes economic, environmental and social sustainability. The sustainability report is to be discussed under subsection 7.8 of the Reference Form. An October 2012 update showed a total of 253 listed issuers (50 more than in June, a 12.64% climb) had now committed to release a sustainability report or explain why not.
SSE Initiative. In addition, also at the Rio+20 Conference, BM&FBOVESPA, Nasdaq OMX, the Johannesburg Stock
Exchange, the Istanbul Stock Exchange and the Egyptian Exchange announced a commitment to advance long-term, sustainable investment in our domestic markets by promoting enhanced environmental, social and corporate governance disclosures, performance and reporting by issuers and market participants. The announcement followed a report by the Sustainable Stock Exchanges Initiative, or SSE, named 2012 Sustainable Stock Exchanges: A Report on Progress, supported by the U.N. Global Compact (PRI), the United Nations Conference on Trade and Development (UNCTAD), and the U.N. Global Compact.
BM&FBOVESPA Institute
As part of our corporate citizenship and social investment initiatives, in 2007 we organized the Institute (Instituto BM&FBOVESPA) as a civil society organization (CSO), which under Brazilian law takes the form of a public interest nongovernmental organization locally known as OSCIP (organizao da sociedade civil de interesse pblico), for the purpose of integrating and coordinating our social investment projects. The three principal initiatives the Institute operates are:
Sports and Cultural Space (Espao Esportivo e Cultural) located in Paraispolis, a 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 (Biblioteca Norberto Bobbio) with a catalog comprising over 2,800 titles. Our Sports and Cultural Space offers year-round sports classes to about 800 youngsters and teenagers, including basketball, tennis, soccer, volleyball and track and field athletics;
BVSA The Environmental 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 socially and environmentally responsible projects (including education and community advancement projects) in search of sponsors and financing. In 2012 the program amassed R$473 thousand to finance 15 project;
Philanthropy Contributions to 20 nonprofit and anchor institutions active in different sectors of the community totaled
R$438 thousand in 2012.
In addition to the above, the BM&FBOVESPA Institute sponsors and operates the BM&FBOVESPA Job Training Association and the BM&FBOVESPA Athletic Club (see below). For additional information, see the website at www.institutobmfbovespa.org.br.
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 education actions aimed to modify present conditions and ensure 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 2011, with the aim of sharing the social investing expertise we amassed over the years through the Associations work, we systematized and published this knowledge in the Association website, where it is available for anyone hoping to replicate our working model. In 2013 we will be celebrating the 17th anniversary of our association with a track record of 75% employability rate. The association trains and qualifies on average 500 young adults at a time from facilities located both in So Paulo and Rio de Janeiro. 57
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 as part of our efforts 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, permits us to sponsor a number of athletes that otherwise might not have the opportunity, and has a highly positive impact on lower income communities. In addition to tackling social inclusion, our Athletic Club sponsors a number of outstanding track and field athletes (around 70 presently) who compete or have potential to compete at an international level. Such is the case of Marlson Gomes dos Santos, two-time winner of the New York City Marathon and three-time winner of the So Silvestre Marathon, as well as world No.1 pole vaulter and Diamond League winner Fabiana Murer. In 2012, the Club won the Brazilian Track and Field Trophy for the eleventh consecutive time. In 2011, we organized and are sponsoring a junior track & field team composed of young people from underprivileged backgrounds aged 6 to 18. The initiative gives us the ability to nurture skills such as discipline, hard work, good attitude and time management, contributing to the formation of healthy, well-rounded people. On celebrating its 10th anniversary, in 2012 the Club unveiled its new Sports Training Center located nearby So Paulo in the city of So Caetano. Product of a cooperation arrangement with the So Caetano City Hall, the training center has been built on a 31,000 square meter city-owned tract of land pursuant to smart construction principles as sustainable building techniques, environmentally conscious products and energy conservation. It is an indoor sports complex, with both indoor and outdoor track and field facilities, which offers fitness, strength and conditioning areas, medical and rehabilitation facilities, and other athlete services.
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 training and qualification courses, and specialization and postgraduate programs (including an MBA program with focus on Capital Markets and Derivatives), which are open to persons from the public at large, and to brokers, traders and other market professionals, including regulatory agencies personnel. As the primary center in Latin America for dissemination of specialized knowledge on securities and derivatives markets we have taught over 40,000 students in the last 20 years. And in the second half of 2010 we expanded activities and the Institute gained status as our Business School. 7.9. Additional reportable information. On April 9, 2012, the Government of the State of Rio Janeiro issued a public interest decree anticipating a prospective expropriation of the real properties on which the premises of the Rio de Janeiro Stock Exchange sit, at Praa XV de Novembro 20, city and state of Rio de Janeiro. The property owner, namely Bolsa de Valores do Rio de Janeiro , or BVRJ, is a subsidiary of BM&FBOVESPA S.A. Later, however, on June 4, 2012, citing loss of public interest, the Rio de Janeiro administration announced it was formally repealing the earlier decree. On June 6, 2012, we released a notice of material fact announcing the city administrations turnabout move.
8. ECONOMIC GROUP
8.1. Description of the economic group
a.
direct and indirect controlling shareholders
We have no direct or indirect controlling shareholder or controlling group of shareholders sharing similar interests. In addition, no shareholders, voting or other agreements have been filed in our registered office to regulate rights to elect our directors or the exercise of voting rights by shareholders.
b.
subsidiaries and affiliates
BM&FBOVESPA Settlement Bank (Banco BM&FBOVESPA de Servios de Liquidao e Custdia S.A.)

The BM&FBOVESPA Settlement Bank was first organized in 2004 as a wholly-owned subsidiary of the former Mercantile 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 risk 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 our representative office in Shanghai, China. It operates in these regions as a cross-border representative office, establishing professional relationships with other exchanges and market regulators and, giving due regard to local regulatory constraints, prospecting customers for our markets.
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BM&FBOVESPA (UK) Ltd. is a wholly-owned subsidiary based in London, which operates as our representative office for the European and the Middle Eastern regions, establishing professional relationships with other exchanges and market regulators and, giving due regard to local regulatory constraints, prospecting customers for our markets.
Brazilian Commodities Exchange (Bolsa Brasileira de Mercadorias)

The Brazilian Commodities Exchange is a mutualized not-for-profit entity in which BM&FBOVESPA holds a 51.39% majority membership interest consisting of 203 membership certificates. The corporate purpose of the Brazilian Commodities Exchange is to develop and offer regional venues for the trading (including cash and forward market 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 .
Rio de Janeiro Stock Exchange, or BVRJ (Bolsa de Valores do Rio de Janeiro)

BVRJ is an inactive stock exchange. Started in 2004, it rents out space in part of the building where its registered office is located. The Rio Exchange Convention Center leases space for seminars, congresses, conferences, professional training sessions, private meetings, and similar other events. On the premises and real property on which BVRJ is located, please see the information under subsection 7.9 of this Form. c. Equity holdings in companies belonging to the economic group
Subsidiaries and affiliates BM&FBOVESPA Settlement Bank Brazilian Commodities Exchange Rio de Janeiro Stock Exchange BM&F (USA) Inc. BM&FBOVESPA (UK) Ltd. Equity holding(%) 100.00% 51.39% 86.95% 100.00% 100.00%
d. e.
Interest held in our shares by companies belonging to the economic group. Companies under common control.
None of our subsidiaries and affiliates holds shares issued by us. 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 BM&FBOVESPA S.A.
The Brazilian Securities, Commodities and Futures Exchange
99.99% BM&FBOVESPA Market Surveillance (BSM)
51.39% Brazilian Commodities Exchange
100.0% BM&FBOVESPA Settlement Bank
86.95% Rio de Janeiro Stock Exchange (BVRJ)
100.0%
100.0%
BM&F (USA) Inc.
0.01%
99.99% BM&FBOVESPA Institute
BSM, or BM&F Market Surveillance (BM&FBOVESPA Superviso de Mercados) , is a not-for-profit association organized as a self-regulatory and market surveillance organization, which consistent with CVM Ruling 461/07, is responsible for regulatory and oversight activities relative to the markets we operate. BSM is unconsolidated in our financial statements. The BM&FBOVESPA Institute (Instituto BM&FBOVESPA) has been organized as a civil society organization (CSO), organized in 2007, which under Brazilian law takes the form of a public interest non-governmental organization locally known as OSCIP (organizao da sociedade civil de interesse pblico) , for the purpose of integrating and coordinating our social investment projects. The BM&FBOVESPA Institute is unconsolidated in our financial statements. 8.3. Restructuring processes; merger and acquisition transactions Other than as discussed in subsection 6.5 of this Form, there have been no corporate restructuring transactions, whether materially impacting our economic group or otherwise.
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8.4.
Additional reportable information.
There is no additional material information related to our economic group and this subsection.
9. MATERIAL ASSETS
9.1. Material and other noncurrent assets Not applicable, as we hold no noncurrent assets which are material for our business. a. Fixed assets
Property address City State Owned/Rented/Leased Type of property
Headquarters building High rise High rise Office space Office space High rise High rise
Praa Antonio Prado 48 Rua XV de Novembro 275 Rua Florncio de Abreu 195 Rua Lbero Badar 471, 4th floor Rua Lbero Badar 471, 1st, 2nd, 3rd, 5 th and 6th floors Av. Ceci 1,850 district of Tambor Rua Bento Branco de Andrade Filho district of Santo Amaro
So Paulo So Paulo So Paulo So Paulo So Paulo Barueri So Paulo
So So So So So So
Paulo Paulo Paulo Paulo Paulo Paulo
Owned property Owned property Owned property Owned property Rented property Rented property Rented property
So Paulo
b.
Asset description Territory covered Effective life Events potentially triggering loss of trademark rights Effects of loss of rights
Patents, trademarks, licenses, concessions, franchises, and technology transfer agreement

Subsection 9.2 of this Form sets forth a list of all our material registered trademarks and trademark applications in Brazil. Brazil. Pursuant to the Industrial Property Law ( Law No. 9,279/96, as amended), 10 years from the registration date. Other than legally prescribed events, we are not aware at this time of an y circumstance which could lead to loss of rights on any particular trademark or application. Moreover, we do not anticipate facing any event or circumstance which could result in loss of rights on any particular trademark or trademark application. No trademark or trademark application has been contested or challenged in any way, whether administratively or before the courts. A loss of rights under any registered trademark or trademark application could entail inability to prevent other parties from using the trademarks and, possibly, discontinuance of use, neither of which is anticipated by us to the information provided herein.
1) Material registered trademarks and trademark applications in Brazil
2) Material trademarks registered elsewhere other than in Brazil

Asset description Territory covered Subsection 9.2 of this Form sets forth a list of our material registered trademarks abroad. Territories of Argentina, Chile, Paraguay, Uruguay, Mexico, Canada, the United States of America, territory covered by the European Unions Office of Harmonization for the Internal Market (OHIM), Spain, Portugal, France, the United Kingdom, Switzerland, Hong Kong, Japan, South Korea, Singapore and Taiwan, as applicable, and as stated in the list provided in subsection 9.2 below. Pursuant to applicable legislation in the jurisdictions in which trademarks were registered or trademark applicat ions filed, the effectively life typically spans 10 years after the registration date. 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 or application. Moreover, we do not anticipate facing any event or circumstance which could result in loss of rights on any particular trademark or trademark application. No trademark or trademark application has been contested or challenged in any way, whether administratively or before the courts. A loss of rights under any registered trademark or trademark application could entail inability to prevent other parties from using the trademarks and, possibily, discontinuance of use, neither of which is anticipated by us by virtue of the information provided herein.
Effective life Events potentially triggering loss of trademark rights Effects of loss of rights
3) Patent applications in Brazil

Asset description Territory covered Effective life Events potentially triggering loss of trademark rights Effects of loss of rights Subsection 9.2 of this Form sets forth a list of our patents and patent applications in Brazil. Brazil. Pursuant to the Industrial Property Law ( Law No. 9,279/96, as amended), 20 years from the patent deposit date. However, you should note that as of the date of this Form, no patents had been issued to us. 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 patent application. Moreover, we do not anticipate facing any event or circumstance which could result in loss of rights on any particular patent applicat ion. No patent application has been contested or challenged in any way, whether administratively or before the courts. A loss of rights under any patent or patent application could entail inability to prevent other parties from using the patents and, possibily, discontinuance of use, neither of which is anticipated by us by virtue of the information provided herein.
4) Cross border patent applications and patent applications under the Patent Cooperation Treaty (or PCT applications)
Asset description Territory covered Effective life Subsection 9.2 of this Form sets forth a list of our patents and patent applications abroad. United States of America and countries which the applicant will select in due course from among signatory member countries. Pursuant to applicable legislation in the jurisdictions in which patent applications have been filed, 20 years from the patent deposit date. However, you should note that as of the date of this Form, no patents had been issued to us elsewhere other than Brazil.
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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 patent application. Moreover, we do not anticipate facing any event or circumstance which could result in loss of rights on any particular patent application. No patent application has been contested or challenged in any way, whether administratively or before the courts. A loss of rights under any patent or patent application could entail inability to prevent other parties from using the subject-matter of the patent application and, possibily, discontinuance of use, neither of which is anticipated by us by virtue of the information provided herein.
Events potentially triggering loss of trademark rights Effects of loss of rights
5) Technology transfer agreements

Asset description Territory covered Effective life Events potentially triggering loss of trademark rights Effects of loss of rights Subsection 9.2 of this Form sets forth a list of existing technology agreements. Brazil. As stated under subsection 9.2 under the heading Technology Agreements. To the best of our knowledge, there have been no events or circumstances prior to the date of this Form which would threaten or otherwise imply loss of our rights under any existing technology agreeme nt, which rights have not been challenged by any third party under judicial proceedings or otherwise. Given the information above, we do not anticipate losing any such contractual rights. However, we could resort to using alternative technology solutions if the relevant technology agreement were to terminate.
For supplemental information regarding trademarks, patents, applications and technology agreements, see the tables under subsection 9.2 of this Form, under the heading Additional Reportable Information Supplemental Information for
Subsection 9.1(b).
c.
Corporate name
Companies in which the issuer holds ownership interest

BM&FBOVESPA Settlement Bank Subsidiary (Banco BM&FBOVESPA de Servios de Liquidao e Custdia S.A) 00.997.185/0001-50 So Paulo, SP, Brazil Facilitates clearance and settlement of transactions carried out on BM&FBOVESPA markets; acts as an important risk mitigation vehicle 100.0% Not registered as a public company (closely-held) Facilitating the clearing and settlement process and the custody of financial assets for customer market participants with access to our clearing houses. R$55,143 thousand (December 31, 2012) Not applicable None, except for a positive equity-method adjustment to carrying value, in the amount of R$5,494 thousand. Not applicable R$0.00 Brazilian Commodities Exchange (Bolsa Brasileira de Mercadorias) Subsidiary 05.342.088/0001-43 So Paulo, SP, Brazil Facilitates trading of agricultural commodities, provides services to the public sector by operating the electronic auctions system and to the agribusiness sector by operating a market for agricultural commodities. 51.4% Not registered as a public company (closely-held) Developing and offering regional venues for the trading (including cash and forward market 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 R$8,079 thousand (December 31, 2012) Not applicable None, except for a negative equity-method adjustment to carrying value, in the amount of R$641.0 thousand. Not applicable R$0.00 BVRJ - Rio de Janeiro Stock Exchange (Bolsa de Valores do Rio de Janeiro) Subsidiary
Brazilian taxpayer ID (CNPJ) Based in (city state - country) Business Ownership interest CVM Registration (number) Investment decision basis (decisions to acquire and to hold the investment) Investment carrying value Investment market value as at year-end (per stock quote as at year-end) Appreciation or depreciation in the last three years (based on carrying value) Market value appreciation or depreciation in the last three years (per stock quote as at year-end) Total dividends received in the last three years Corporate name Brazilian taxpayer ID (CNPJ) Based in (city state - country) Business Ownership interest CVM Registration (number) Investment decision basis (decisions to acquire and to hold the investment) Investment carrying value Investment market value as at year-end (per stock quote as at year-end) Appreciation or depreciation in the last three years (based on carrying value) Market value appreciation or depreciation in the last three years (per stock quote as at year-end) Total dividends received in the last three years
(In R$ thousands)
Corporate name
61
Brazilian taxpayer ID (CNPJ) Based in (city state - country) Business Ownership interest CVM Registration (number)
33.660.648/0001-43 Rio de Janeiro, RJ, Brazil BVRJ is an inactive stock exchange. Since 2004 it rents out space in part of the building where its registered office is located. The Rio Exchange Convention Center leases space for seminars, congresses, conferences, professional training sessions, private meetings, and similar other events. See the information under subsection 7.9 of this Form. 86.9% Not registered as a public company (closely-held) In 2000, with the purpose of consolidating all Brazilian equity trading on a single exchange, the So Paulo Stock Exchange (Bovespa) led an integration program with the other eight Brazilian stock exchanges, whereby it became the only exchange operator for equities in Brazil. In 2002, BM&F acquired most of the membership certificates in the Rio de Janeiro Stock Exchange, which gave it control over the rights to operate Sisbex, the government bonds trading system previously operated by the Rio de Janeiro Stock Exchange (BVRJ). R$55,449 thousand (December 31, 2012) Not applicable None, except for a positive equity-method adjustment to carrying value, in the amount of R$ 3,390 thousand. Not applicable R$0.00 BM&F (USA) Inc. Subsidiary Not applicable New York, NY, U.S.A. Acts as our cross-border representative office, establishing professional relationships with other exchanges and market regulators and, giving due regard to local regulatory constraints, prospecting customers for our markets. It also tackles distribution of market data and other market information abroad; prospects for strategic alliances and opportunities with other exchanges. 100.0% Not registered as a public company (closely-held) Establishing professional relationships with other exchanges and market regulators, prospecting customers for our markets. R$937.0 thousand (December 31, 2012) Not applicable None, except for a negative equity-method adjustment to carrying value in the amount of R$200.0 thousand. Not applicable R$0.00 BM&FBOVESPA (UK) Ltd. Subsidiary Not applicable London, England Acts as our cross-border representative office, establishing professional relationships with other exchanges and market regulators and, giving due regard to local regulatory constraints, prospecting customers for our markets. It also tackles distribution of market data and other market information abroad; prospects for strategic alliances and opportunities with other exchanges. 100.0% Not registered as a public company (closely-held) Establishing professional relationships with other exchanges and market regulators, prospecting customers for our markets. R$1,079 thousand (December 31, 2012) Not applicable None, except for a negative equity-method adjustment to carrying value in the amount of R$61 thousand. Not applicable
Investment decision basis (decisions to acquire and to hold the investment)
Investment carrying value Investment market value as at year-end (per stock quote as at year-end) Appreciation or depreciation in the last three years (based on carrying value) Market value appreciation or depreciation in the last three years (per stock quote as at year-end) Total dividends received in the last three years Corporate name Brazilian taxpayer ID (CNPJ) Based in (city state - country)
Business
Ownership interest CVM Registration (number) Investment decision basis (decisions to acquire and to hold the investment) Investment carrying value Investment market value as at year-end (per stock quote as at year-end) Appreciation or depreciation in the last three years (based on carrying value) Market value appreciation or depreciation in the last three years (per stock quote as at year-end) Total dividends received in the last three years Corporate name Brazilian taxpayer ID (CNPJ) Based in (city state - country)
Business
Ownership interest CVM Registration (number) Investment decision basis (decisions to acquire and to hold the investment) Investment carrying value Investment market value as at year-end (per stock quote as at year-end) Appreciation or depreciation in the last three years (based on carrying value) Market value appreciation or depreciation in the last three years (per stock quote as at year-end)
62
Total dividends received in the last three years Corporate name Brazilian taxpayer ID (CNPJ) Based in (city state - country)
R$0.00 CME Group, Inc. Affiliate Not applicable Chicago, IL, U.S.A. The CME Group serves the risk management needs of customers around the world. As an international marketplace, it attracts buyers and sellers to its multi-asset electronic trading systems (CME Globex) and open-outcry system. CME listings include futures and options based on interest rates, equity indices, foreign exchange, energy, agricultural commodities, rare and precious metals, weather and real estate. 5.1% A public company registered with the U.S. Securities and Exchange Commission (SEC) Global preferred strategic partnership whereby the two exchanges collaborate in identifying strategic joint investment and commercial partnership opportunities in securities and derivatives markets, in addition to jointly developing and implementing a new multi-asset class electronic trading platform. R$2,893,632 thousand (December 31, 2012) R$1,757,944 thousand None December 31, 2012 R$205,922 thousand December 31, 2011 (R$268.329) thousand December 31, 2010 - R$ 69,617 thousand December 31, 2012 R$124,470 thousand December 31, 2011 R$ 32,907 thousand December 31, 2010 R$ 18,169 thousand
Business
Ownership interest CVM Registration (number) Investment decision basis (decisions to acquire and to hold the investment) Investment carrying value Investment market value as at year-end (per stock quote as at year-end) Appreciation or depreciation in the last three years (based on carrying value) Market value appreciation or depreciation in the last three years (per stock quote as at year-end) Total dividends received in the last three years
9.2. Additional reportable information
CME Group, Inc. 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 5.1% (from 1.8% 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).
BM&F (USA) Inc. and BM&FBOVESPA (UK) Ltd. Pursuant to corporate documents dated February 1, 2011, BM&FBOVESPA (UK)
Ltd., which was earlier a wholly-owned subsidiary of BM&F (USA) Inc., is now directly under our control as a wholly-owned subsidiary.
Supplemental Information for Subsection 9.1(b)
1) Material registered trademarks and trademark applications in Brazil

Trademark BM&F IBOVESPA BOVESPA Case Record No. 812290143 813834600 813878128 813878144 816169683 820693081 200010476 820833193 821874640 821877259 821877348 822059380 822744260 822472791 822472813 823194264 823411656 823411680 823411710 823454258 826745741 826745750 Status Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Applied for Registered Registered Class 36.50/60/70 NCL 36 NCL 36 NCL 36 NCL 36 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 NCL NCL NCL 36 36 36 16 Deposit date 11/7/1985 9/22/1987 10/29/1987 10/29/1987 7/4/1991 5/28/1998 5/29/1998 8/10/1998 12/15/1999 12/16/1999 12/16/1999 3/14/2000 5/22/2000 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 Registration date 10/27/1987 2/6/1990 2/6/1990 2/6/1990 7/12/1994 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 11/3/2010 2/21/2007 2/21/2007 2/21/2007 12/9/2008 9/11/2007
FUTURO IBOVESPA BOLSA DE MERCADORIAS & FUTUROS - BM&F 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
BM&F BRASIL
GTS - GLOBAL TRADING SYSTEM BM&F TRADING SYSTEM BM&F TRADING SYSTEM
63
BM&F TRADING SYSTEM BM&F TRADING SYSTEM BM&F TRADING SYSTEM MEGABOLSA MB 826745768 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 830863630 830863648 830863656 830863672 830863680 830863699 830876383 830876405 830876413 830876448 830876456 831093226 831093234 831093242 831093250 831093269 831093277 840042922 840042957 840043066 840043155 840043228 Registered Registered Registered Registered Registered Registered Applied for Applied for Applied for Registered Registered Registered Registered Registered Applied for Applied for Registered Registered Applied for Applied for Applied for 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 Applied for Applied for Applied for Applied for Applied for NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL 42 41 36 36 36 36 36 36 36 36 16 10/14/2004 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 1/28/2011 1/28/2011 1/28/2011 1/28/2011 1/28/2011 1/28/2011 2/28/2011 2/28/2011 2/28/2011 2/28/2011 2/28/2011 8/17/2011 8/17/2011 8/17/2011 8/17/2011 8/17/2011 8/17/2011 3/2/2012 3/2/2012 3/2/2012 3/2/2012 3/2/2012 8/2/2011 8/2/2011 9/11/2007 9/11/2007 9/11/2007 11/20/2007 12/26/2007 3/18/2008 7/27/2010 7/27/2010 7/27/2010 5/17/2011 3/5/2013 9/6/2011 9/6/2011 9/6/2011
BOVESPA MAIS BRASIL ISE NDICE DE SUSTENTABILIDADE EMPRESARIAL NVEL 1 BOVESPA BRASIL NVEL 2 BOVESPA BRASIL NOVO MERCADO 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
NCL 36 NCL 42 NCL 16 NCL 36 NCL 41 NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL NCL 41 36 41 36 41 36 36 36 41 36 42 36 41 36 35 36 41 42 36 41 42 16 32 38 36 35 09 42 36 36 42 09 42 36 41 35 16
BM&F BOVESPA A NOVA BOLSA BM&F BOVESPA A NOVA BOLSA

IBOVESPA IBOVESPA SINACOR iMERCADO BVMF BVMF BVMF
DESAFIO BM&FBOVESPA Educar BM&FBOVESPA ndice BM&FBOVESPA Financeiro - IFNC ndice BM&FBOVESPA Financeiro - IFNC
TJ3 BM&FBOVESPA A Nova Bolsa TJ3 BM&FBOVESPA A Nova Bolsa TJ3 BM&FBOVESPA A Nova Bolsa TJ6 BM&FBOVESPA A Nova Bolsa TJ6 BM&FBOVESPA A Nova Bolsa TJ6 BM&FBOVESPA A Nova Bolsa Novo Mercado BM&FBOVESPA Novo Mercado BM&FBOVESPA Novo Mercado BM&FBOVESPA Novo Mercado BM&FBOVESPA Novo Mercado BM&FBOVESPA PUMA Trading System BM&FBOVESPA PUMA Trading System BM&FBOVESPA PUMA Trading System BM&FBOVESPA BM&FBOVESPA The New Exchange BM&FBOVESPA The New Exchange BM&FBOVESPA The New Exchange BRICSMART BRICSMART BRICSMART BRICSMART BRICSMART CORE CloseOut Risk Evaluation (ESTRUTURA DE
2/1/2011 8/9/2011 5/15/2012 5/15/2012 5/15/2012 5/15/2012 8/21/2012 11/27/2012 11/27/2012
AVALIAO DE RISCO PARA CONTRAPARTES CENTRAIS) RISK
MANAGEMENT STRUCTURE FOR CENTRAL COUNTERPARITES CORE CloseOut Risk Evaluation (ESTRUTURA DE AVALIAO DE RISCO PARA CONTRAPARTES CENTRAIS) RISK MANAGEMENT STRUCTURE FOR CENTRAL COUNTERPARITES
840296568 840296584
Applied for Applied for
NCL 42 NCL 16
10/11/2012 10/11/2012
64
2) Material trademarks registered abroad

Country Argentina 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 Trademark IBRX Case record 2.039.057 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 2367095A 2367095B 34906 427536 83189 84268 352.300 347.426 348.234 Status 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 Registered Registered Registered Registered Registered Registered Registered Registered Registered Registered Class NLC 36 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 NLC 36 NLC 36 NLC 36 NLC 16/35/36 NLC 35 NLC 36 NLC 36 NLC 36 NLC 36 Deposit date 1/7/2004 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 BOVESPA BOLSA DE VALORES DE SO PAULO BOVESPA BOLSA DE VALORES DE SO PAULO INDICE BOVESPA
IBOVESPA
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 6/30/2004 6/30/2004 4/6/1995 3/29/1995 3/9/1995 3/9/1995 1/13/2004 11/17/1992 4/23/1993
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
BOVESPA BOLSA DE VALORES DE SO PAULO
3) Patent applications in Brazil

Application number PI 0801789-1 PI 0801983-5 PI 0801982-7 Deposit date 4/30/2008 5/29/2008 5/29/2008 Publication date 2/1/2011 2/9/2010 2/9/2010 Title Status
Sistema
(Exchange Trading System)
de
operacionalizao
de
transao
burstil
Patent application in effect Patent application in effect Patent application in effect
Processo e sistema de realizao de precificao (Pricing

System And Collection Processing)
Processo de realizao de uma operao burstil de direto e sistema de assistncia

(Straight-Through Trade Processing And Assistance System)
65
BR 11 2012 008205 1 A2
9/30/2010 (international application) 4/9/2012 (local application)
12/5/2012
Mtodo implantado por computador para facilitar a negociao de valores mobilirios, sistema para facilitar a negociao de valores mobilirios, meio de armazenamento legvel por computador implantado por hardware e meio de armazenamento
(Computer-implemented method for facilitating securities
Patent application in effect
trading; system for facilitating securities trading; machinereadable storage medium)
4) Patent applications abroad

Country United States PCT Application (countries to be designated in due course) Application No. US-13/462,091(Final application) US-61/481,473 (provisional application) PCT/BR2012/000127 Deposit date Final application on May 2, 2012. Provisional application on May 2, 2011 May 2, 2012 Status Patent application in effect Patent application in effect
5) Technology transfer agreements 5.1.) Technology Agreement CME BM&FBOVESPA

Technology recipient: Technology provider: Subject-matter: Our Company, BM&FBOVESPA the CME Group, Inc. (CME) Technology transfer agreement for development of a multi-asset class electronic trading system for the trading of individual equities and other equity securities; equity, financial and commodity derivatives; corporate 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. We estimate the agreement, which was executed in 2010, will be effective for twelve (12) years commencing from the execution date. Our Company, BM&FBOVESPA Cinnober Financial Technology AB (Cinnober) Software customization, maintenance and support agreements which contemplate knowledge transfer by means of technology supply and provision of technical and scientific assistance in connection with (1) development and customization of a new automated, integrated post-trade platform; (2) installation, implementation and testing of the automated platform; (3) provision of support and maintenance services for the installation, implementation, personnel training and operation stages. Software system customization agreement - Executed in 2011s, this agreement will be effective for the entire project lifecycle (estimated to last for 74 weeks commencing from the execution date); Software system support and maintenance agreement - The agreement was executed in 2011 to take effect from January 25, 2013. While we anticipate it will be effective for an indefinite period, the agreement will be in effect for at least 10 years after the execution date. Each of our material technology agreements typically has its own renewal method and timeline, as designed to meet market standards or our specific operating requirements. Mostly Brazilian territory, with possible effects on other countries due to the nature of our business.
Term of effectiveness:
5.2.) Technology Agreements Cinnober BM&FBOVESPA

Technology recipient: Technology provider: Subject-matter:
Term of effectiveness: Term of effectiveness:
6) Material technology agreements

Term of effectiveness: Territory covered:
6.1)
Overview
Currently, the technology contracts that are relevant for the development of our activities are as follows: (i) license and maintenance contracts for use of software applications for the trading engine of our electronic trading platforms (Megabolsa and GTS described below), and 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; (ii) 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 (iii) 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 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. 66
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 2011 we entered into a software customization agreement and a software system support and maintenance agreement with Cinnober Financial Technology AB, a Sweden-based global provider of advanced financial technology, which will include a perpetual license for use of TRADExpress RealTime Clearing, their cutting edge, nimble, high performing, multi-market clearing and real-time risk management system. The RealTime Clearing system (RTC) will be the backbone our future multiasset class, multi-market, integrated clearing facility. The agreements contemplate software customization, maintenance and support agreements which contemplate knowledge transfer by means of technology supply and provision of technical and scientific assistance in connection with (1) development and customization of a new automated, integrated post-trade platform; (2) installation, implementation and testing of the automated platform; (3) provision of support and maintenance services for the installation, implementation, personnel training and operation stages. Also in 2011 we entered into a technology licensing and master services agreement with Calypso Technology, Inc., a global application software provider of an integrated suite of trading and risk applications to financial and capital market institutions. The Calypso system will give us a new operating model for registration and treatment of OTC transactions, risk calculation and collateral management. 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, for the last several years the Global Trading System, or GTS, has been our electronic trading platform for exchange-traded financial and commodity derivatives, government bonds, the spot currency contracts and carbon credits. GL Trade developed the GTS system and provided also the trading screen software, GLWin Fix, also known as GTS Fix, which we provide for dealings on these markets (derivatives; bonds; spot currency; carbon), such that all derivatives contracts authorized to trade on our exchange were traded on the GTS trading system, except for the OTC contracts. Started from August 2011, we began the phased implementation of our new trading platform, the PUMA Trading System, whose derivatives module is now operational and will thus discontinue derivatives trading through the GTS system. We also have an electronic trading system called Sisbex, which we have adapted especially for the execution of transactions in government bonds, including buy and sell, repurchase agreements and securities 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 primary debt securities market in Argentina. In 2001, after acquiring the trading platform, we entered into a partnership with MAE and Bolsa Electronica de Valores del Uruguay S.A. (BEVSA) to further develop and enhance the software. As the software was originally developed for the debt securities market, it features characteristics of that market, such as trading in rates, quote requests and spread orders. 67
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. We use the SIOPEL system in our BM&F segment as a trading platform for government bonds.
6.2.4)
PUMA Trading System
When fully implemented and operational, our new multi-asset trading platform, a joint creation of the CME Group and BM&FBOVESPA, the PUMA Trading System will be one of the most advanced and efficient trading systems available anywhere across the world. Development started in 2010. The module for derivatives and spot currency contracts was implemented in 2011. In the first half of 2013 we implemented the module for equities, bonds other securities.
6.3)
Sinacor
In addition, we also developed and offer brokerage firms an integrated middle and back office management system known as SINACOR (Sistema Integrado de Administrao de Corretoras), which provides services with safety, efficiency and efficacy and can process various middle and back office activities for brokerage houses and other Intermediary Institutions.
10. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
10.1 Managements discussion and analysis. a. financial condition and net equity position
Year ended December 31, 2012 compared with year ended December 31, 2011.
BM&FBOVESPA delivered solid operating performance in 2012, which translated into growth and record high volumes traded in both our Bovespa segment (equities, equity-based derivatives and index-based derivatives) and BM&F segment (financial and commodity derivatives). Growth in the Bovespa segment was driven primarily by increase in turnover velocity 6, spurred mainly by the increase in average daily volume traded by foreign investors. The primary reasons for this are twofold: one, the fact that most of the high frequency trading volume originates cross border; two, a shift in monetary policy which in December 2011 led the Government to remove the 2% tax on financial transactions (IOF tax) levied on hot money inflows for investments in variable-income securities. In turn, growth in the BM&F segment was pushed mainly by increase in average daily volume traded in Brazilian-interest rate contracts, the most actively traded contract group. In addition, the average rate per contract (RPC) climbed both as a result of the increase in volumes traded in longer-maturity Brazilian-interest rate contracts and because the RPC for FX contracts was positively influenced by the depreciation of the Brazilian real against the U.S. dollar, since our rates for these contracts are denominated in U.S. dollars. A combination of factors explains the increase in trading volume and greater concentration on longer term interest rate contracts, prime among which are the structural change brought about by drastic cuts in real interest rate, coupled with increased credit availability and the greater portion of fix interest-bearing government debt relative to total public debt. Reflecting this operating performance, our consolidated gross revenues climbed 8.2% year-over-year, to R$2,289,023 thousand from R$2,115,983 thousand one year ago, driven by (i) a 7.2% rise in revenues from trading and clearing fees derived in the Bovespa segment; (ii) a 13.9% climb in revenues from trading and clearing fees earned in the BM&F segment; and (iii) a 0.5% drop in other operating revenues unrelated to trading volume. The consolidated total expenses fell 6.6% year-over-year, to R$763,080 thousand from R$816,664 thousand in the prior year. As adjusted to eliminate non-recurring expenses and expenses with no impact on cash flow, the adjusted expenses 7 decreased 3.6% to close the year quite near the lower endpoint of the opex budget revised interval. In August 2012, true to our commitment to controlling costs and expenses, we revised the adjusted opex guidance to an interval between R$560,000 R$580,000 thousand from R$580,000 R$590,000 thousand previously. Contrasting to operating performance, which the slash in real interest rates strengthened by spurring trading volumes in the BM&F segment, our interest revenues dwindled as a result of a plunge in interest earned on our cash availabilities and financial investments (the large part of which earn fixed-interest rates), coupled with a jump in interest expenses attributable to the appreciation of the U.S. dollar against the Brazilian real, as most our interest expenses are denominated in U.S. dollars. As a result, net interest income shrank 25.6% year-over-year to R$208,851 thousand from R$280,729 thousand one year earlier. Thus, the consolidated operating income climbed 19.6% from one year ago, while the consolidated net income available for shareholders rose 2.5%. Our performance in 2012 bolstered our strong financial position further.
Year ended December 31, 2011 compared with year ended December 31, 2010.
After two years of feeble and uneven recovery from the financial crisis, the global economic and financial landscape in 2011 unveiled persistent weaknesses in developed economies. Events as the Eurozone sovereign debt crisis and market mistrust that European policy makers would successfully implement necessary fiscal adjustment programs in countries as Italy, Spain and Portugal, but particularly in Greece; the downgrading of the U.S. credit rating; the problem of deteriorating output growth; and fears that Chinas deepening economic slowdown would ripple across the world economy, all made up for an uneasy economic landscape. Meanwhile, in the domestic front, the economy experienced contrasting half-year periods as Brazils government made
6
Turnover velocity for the year is defined as the ratio of annualized turnover (value) of stocks traded on the cash market ove r a twelve-month period to average market capitalization for the same period. 7 The operating expenses have been adjusted to eliminate expenses with depreciation, the stock options plan, certain provisions, and taxes related to dividends received from the CME Group, in addition to a transfer of restricted funds to the Investor Compensation Mechanism administered by BM&FBOVESPA Market Surveillance (BSM), such as discussed elsewhere herein.
68
sensitive trade-offs between objectives and implemented measures shifting policy directions. Over the first half of the year, signaling concern about existing inflationary pressures, the government repeatedly raised the benchmark interest rate (Selic), adopting macroprudential measures to curb credit growth and consumer demand, and to arrest the persistent currency appreciation, in the latter case by expanding the taxation of financial transactions (IOF) and increasing the rates of existing IOF levies, among other things. In the second half of the year, as the U.S. debt-ceiling crisis threatened global markets, and the Eurozone sovereign debt crisis deepened, putting the global economies, including Brazil, in further peril; and as expectations for domestic GDP growt h in 2011 and 2012 pointedly declined (see the chart below), while industrial production weakened, the Brazilian government responded with fresh urgency in ratcheting the benchmark rate, shifting policies to incentivize consumer spending on durables, cutting taxes and loosening credit restrictions in an effort to stave off economic slowdown. Some of the governments macroprudential measures had a direct impact on the domestic capital markets, including markets BM&FBOVESPA operates. Such was the case, for example, when in July 2011, seeking to stem hot money inflows to halt the currency appreciation, the government broadened its financial transactions tax (IOF tax) to charge increases in short dollar exposures at a 1% rate. Then, in December, a welcomed switch came when the government removed the 2% IOF tax charged on hot money inflows for investments in equity securities and equity-based derivatives. Against this backdrop, our 2011 consolidated revenues were virtually unchanged from the prior year after register ing a slight 0.2% year-on-year rise (to R$2,115,983 thousand versus R$2,111,539 thousand earlier) attributable primarily to (i) a 5.3% climb in revenues from fees earned on trading and clearing/settlement transactions within our BM& F segment (derivatives markets and related clearing facilities) (ii) a 15.0% jump in other revenues unrelated to trading volumes and (iii) an 8.1% decline in revenues from fees on trading or clearing and settlement transactions within our Bovespa segment ( equities markets and related clearing facilities), which dive substantially quashed the revenue increases in the other two line items. Total consolidated expenses rose 28.9% year-on-year, to R$816,664 thousand from R$633,504 thousand one year ago, with a caveat, however, as the figure for 2011 includes a one-off expense of R$92,342 thousand related to the transfer of restricted funds to BM&FBOVESPA Market Surveillance (BM&FBOVESPA Superviso de Mercado), or BSM, which had been reserved and designed as a guarantee fund for use within the scope of the investor compensation scheme operated by BSM (in the Contribution to MRP line item) . Therefore, after eliminating the passing of restricted funds to BSM, total expenses for 2011 were up to R$724,322 thousand, up 14.3% year-on-year, due mainly to increases in the personnel and depreciation expense line items, both of which were to be expected on account of our significant investments in technology (which include the internalization of IT personnel). The consolidated operating income fell 14.0% year-on-year, while the yearly consolidated net income available for shareholders sank 8.4%, which however did not adversely affect our financial position. b. Capital structure; likelihood of share redemption. The composition of our consolidated capital structure in the last three years was the following: (i) at December 31, 2012 80.4% equity and 19.6% liabilities, (ii) at December 31, 2011 - 81.6% equity and 18.4% liabilities, (iii) at December 31, 2010 85.8% equity and 14.2% liabilities.
Year ended December 31, 2012 Current and noncurrent liabilities Shareholders equity Total liabilities and shareholders equity 4,733,232 19,413,882 24,147,114 19.6% 80.4% 100.0% Year ended December 31, 2011 (in R$ thousands, except for percentages) 4,332,431 18.4% 19,257,491 81.6% 23,589,922 100.0% Year ended December 31, 2010 3,214,927 19,419,048 22,633,975 14.2% 85.8% 100.0%
Under total liabilities, part of our onerous liabilities relates mainly to debt issued abroad in connection with global senior notes issued in a cross-border bond offering completed on July 16, 2010 (see subsection 10.1(f)).
Year ended December 31, 2012 Total onerous liabilities Interest payable on debt issued abroad and loans Debt issued abroad and loans Shareholders equity Total onerous liabilities and shareholders equity 1,279,121 36,882 1,242,239 19,413,882 20,693,003 Year ended December 31, Year ended December 31, 2011 2010 (in R$ thousands, except for percentages) 6.2% 1,172,225 5.7% 1,043,213 5.1% 33,566 33,154 1,138,659 19,257,491 20,429,716 94.3% 100.0% 1,010,059 19,419,048 20,462,261 94.9% 100.0%
93.8% 100.0%
According to the information presented above, our Company has a conservative degree of leverage, taking into account both our total liabilities (current and noncurrent liabilities) and our onerous liabilities (debt and interest on debt). i. ii. events of redemption redemption price calculation method
Other than as legally prescribed, we are not contemplating any share redemption and do not anticipate any event occurring that would trigger redemption rights. c. Capacity to service the debt. Our Company has strong cash generation capacity, as evidenced by consolidated operating income of R$1,301,670 thousand in 2012, of R$1,088,020 thousand in 2011, and R$1,265,238 thousand in 2010, coupled with consolidated operating margin of 69
63.0%, 57.1% and 66.6%, and yearly net income for shareholders amounting to R$1,074,290 thousand, R$1,047,999 thousand, and R$1,144,561 thousand for the same three years, respectively. Additionally, our consolidated cash and cash equivalents coupled with short- and long-term financial investments reached R$3,850,639 thousand in 2012 (15.9% of total assets), R$3,782,411 thousand in 2011 (16.0% of total assets), and R$3,435,345 thousand in 2010 (15.2% of total assets). As a result, net interest income for the same three years hit R$208,851 thousand, R$280,729 thousand and R$289,039 thousand, respectively. Accordingly, our net indebtedness indicator (see subsection 10.1(f) below) at December 31, 2012, was a negative number (R$1,393,308 thousand, negative) which compares with equally negative figures for 2011 and 2010 (R$1,070,126 thousand and R$1,402,736 thousand, negative, respectively), in each case denoting our low degree of financial leverage and very strong capacity to service our debt. 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, safe investments, often by taking positions in Brazilian government bonds, notes and other debt securities whose yield and coupon rates typically track the base rate (interbank lending 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 support all of the former and most of the latter. In a particular case we have also accessed the capital markets (by issuing global senior notes in a 2010 bond offering) as an alternative to finance noncurrent assets. And certain finance leases we had entered into in prior years (per our 2010 financial statements) matured and terminated over the course of 2011. For additional information on the nature and characteristics of our 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 deficiencies, we would benefit from investment grade ratings8 (foreign and local currency) 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 (i) material loans and financing transactions
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 mature on July 16, 2020, and pay 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. Effective from July 16, 2010, we used the net offering proceeds to purchase additional interest in the shares of the CME Group, thereby increasing our ownership interest to 5.1% of the shares of common stock (from 1.8% earlier). As translated into Brazilian reais, the balance of our debt under the global notes as of December 31, 2012, was R$1,279,121 thousand (including accrued interest of R$36,882 thousand), as compared to R$1,172,225 thousand (accrued interest of R$33,566 thousand) at December 31, 2011, and R$1,043,213 thousand (accrued interest of R$33,154 thousand) at December 31, 2010. We have tested the hedge effectiveness retrospectively and prospectively, having determined that there was no realizable ineffectiveness at December 31, 2012. Moreover, at December 31, 2012, the fair value of our debt under the notes, as determined based on market data, was R$1,418,205 thousand (Source: Bloomberg). Starting from the notes issue date (July 16, 2010), 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 the year ended December 31, 2012). Accordingly, we have adopted net investment hedge accounting pursuant to accounting standard CPC-38 (IAS 39 -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.
Standard & Poors Issuer credit rating of BBB+ (foreign and local long-term); Outlook: Stable / Issuer credit rating of A2 (foreign and local short-term); and Moodys Issuer ratings of A3 on the global scale and Aaa.br on the Brazilian national scale / Notes rating of Baa1. The outlook is positive
70
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 for 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 at 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 so as to determine degree of sensitivity to changes in exchange rates. We have tested the hedge effectiveness retrospectively and prospectively, having determined that there was no realizable ineffectiveness at December 31, 2012. In addition to the funding transaction discussed above (bond offering), in previous years we agreed borrowing transactions in the form of computer equipment finance leases, the balance of which as of December 31, 2010, totaled R$2,975 thousand. These leases have since matured and were terminated in April 2011. The table below sets forth data related to our debt service coverage indicator.
Debt coverage indicator
Gross debt service Cash and cash equivalents, plus short- and long-term financial investments (*) Net debt service
( )
Years ended December 31, 2012 1,279,121 2,672,429 (1,393,308) 2011

(in R$ thousands)
2010 1,043,213 2,445,949 (1,402,736)
1,172,225 2,242,351 (1,070,126)
* In determining our debt coverage indicator, and in order to better evidence the actual ratio of cash available for debt servicing, we calculate
total cash and cash equivalents plus short- and long-term financial investments (current and noncurrent assets) after eliminating amounts recognized in the line items for collateral for transactions, as well as payouts and rights on securities under custody at our central depository under current liabilities.
(ii)
other long-term transactions with financial institutions
In the normal course of our business we transact on an arms length basis with some of the primary financial institutions operating in Brazil. These are transactions agreed pursuant to customary market practices. Other than as set forth herein, we have no long-term transactions agreed with financial institutions and our noncurrent liabilities record no other long-term liabilities. (iii) debt subordination In terms of subordination, the liabilities we recognize in the line items under current and noncurrent liabilities in our balance sheet statement rank as follows: Collateral for transactions pursuant to articles 6 and 7 of Law No. 10,214/01 (clearing and settlement within the scope of the Brazilian Payment System) and articles 193 and 194 of Law No. 11,101/05 (Bankruptcy and Reorganization Law), the financial assets pledged to our clearing houses as collateral for transactions rank senior to and have priority over any other guarantee up to the amount of the transactions these collaterals secure, and are not affected in any way in the event of bankruptcy or judicial reorganization proceedings. Tax and payroll liabilities pursuant to article 83 of Law No. 11,101/05 (Bankruptcy and Reorganization Law), government credits for tax liabilities and government or employee credits for social security and payroll liabilities (recognized in the line items personnel and related charges and income tax and contributions payable/recoverable) constitute preferred debt and, thus, have priority over other types of debt. Other payment obligations other obligations recognized under current and noncurrent liabilities in our balance sheet statement as of December 31, 2012, constitute unsecured debt. (iv) restrictions on indebtedness level and new financing, on dividend declaration, on assets sales, on new issues and transfer of control
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.
71
g. h.
Restrictions on use of the proceeds of financing previously undertaken. Significant changes to line items of the financial reports.
Not applicable. Other than the funding transaction discussed under 10.1(f) above, we have taken no other loan or financing. Our consolidated financial statements as of and for December 31, 2012, and the comparative financial statements as of and for December 31, 2011 and 2010, 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 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 with International Financial Reporting Standards, or IFRS, adopted by the International Accounting Standards Board, or IASB, were issued for compulsory adoption from January 1, 2010, and included, for comparability purposes, a requirement for presentation of financial statements revised and adjusted for retrospective application of international financial accounting standards. Moreover, started from 2011, the results of the financial intermediation operations (custody services and local representation for nonresident investors) of our subsidiary BM&FBOVESPA Settlement Bank were reclassified to the other revenues line item, with no impact on net income and shareholders equity. Before 2011 we recognized these results under the net interest income (expense) line item. Accordingly, for comparability purposes, our comparative consolidated financial statements at December 31, 2010, have been revised and adjusted for retrospective recognition of the amounts of R$8,985 thousand under the lien item other revenues . This account reclassification ultimately required adjustments to the line items gross revenues, other revenues, net revenue, and net interest income (expense) in our consolidated statements of income, and modified EBITDA for the years ended December 31, 2010.
Selected financial information.
The tables below set forth selected financial information extracted from our consolidated statements of income and balance sheet statement at December 31, 2012 and 2011, and retrospective consolidated statements of income and balance sheet statement at December 31, 2010, revised and adjusted as previously discussed in connection with the account reclassification. For better comparability and understanding of the effects of this account reclassification, the tables below set forth data related only to the main line items of the statements of income and balance sheet, and changes to these line items, as selected by management upon applying the materiality criteria discussed at the top of each table, as follows:
Selected financial information extracted from the consolidated balance sheet statements. This table presents only the line items that accounted for over 4.0% of total assets line items at December 31, 2012, and information related to one-off, extraordinary, non-recurring and other events which are likely to provide a clearer understanding of our balance sheet statements. Selected financial information extracted from the consolidated statements of income. This table presents only the
revenue line items that accounted for over 3.0% of net revenue for the year ended December 31, 2012; expense line items that accounted for over 3.0% of total expenses for the same year, in addition to line items for other results andinformation related to one-off, extraordinary or non-recurring events which are likely to provide a clearer understanding of our statements of income.
Selected Financial Information

(from the Consolidated Balance Sheet Statements)

2012
(In R$ thousands)
AV%
(%)
2011
(In R$ thousands)
AV%
(%)
2010
(In R$ thousands)
AV%
(%)
Variation
2012/2011
Variation
2011/2010
(%)
(%)
Assets Current assets Cash and cash equivalents Financial investments Noncurrent assets Long-term receivables Financial investments Investments Investment in associate Intangible assets Goodwill Total assets Liabilities and shareholders equity Current liabilities Collaterals for transactions
3,536,282 43,642 3,233,361 20, 610,832 808,868 573,636 2,928,820 2,893,632 16,512,151 16,064,309
14.6 0.2 13.4 85.4 3.3 2.4 12.1 12.0 68.4 66.5
2,401,134 64,648 2,128,705 21,188,788 1,767,411 1,589,058 2,710,086 2,673,386 16,354,127 16,064,309
10.2 0.3 9.0 89.8 7.5 6.7 11.5 11.3 69.3 68.1
2,547,589 104,017 2,264,408 20,086,386 1,216,812 1,066,920 2,286,537 2,248,325 16,215,903 16,064,309
11.3 0.5 10.0 88.7 5.4 4.7 10.1 9.9 71.6 71.0
+47.3 -32.5 51.9 -2.7 -54.2 -63.9 8.1 8.2 1.0 0.0 2.4 -14.0 -24.4
-5.7 -37.8 -6.0 5.5 45.2 48.9 18.5 18.9 0.9 0.0 4.2 36.3 57.2
24,147,114 100.0 1,660,609 1,134,235 6.9 4.7
23,589,922 100.0 1,929,946 1,501,022 8.2 6.4
22,633,975 100.0 1,416,204 954,605 6.3 4.2
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Noncurrent liabilities Debt issued abroad and loans Deferred income tax and social contribution Shareholders equity Capital and reserves attributable to shareholders Capital stock Capital Reserves Total liabilities and shareholders equity
3,072,623 1,242,239 1,739,644 19,413, 882
12.7 5.1 7.2 80.4
2,402,485 1,138,659 1,204,582 19,257,491
10.2 4.8 5.1 81.6
1,798,723 1,010,059 732,074 19,419,048
7.9 4.5 3.2 85.8
27.9 9.1 44.4 0.8
33.6 12.7 64.5 -0.8
2,540,239 16,037,369
10.5 66.4
2,540,239 16,033,895
10.8 68.0
2,540,239 16,662,480
11.2 73.6
0.0 0.0 2.4
0.0 -3.8 4.2
24,147,114 100.0
23,589,922 100.0
22,633,975 100.0
Selected Financial Information (from the Consolidated Statements of Income) Years ended December 31,
2012
(In R$ thousands)
AV%
(%)
2011
(In R$ thousands)
AV%
(%)
2010
(In R$ thousands)
AV%
(%)
Variation
2012/2011
Variation
2011/2010
(%)
(%)
Gross revenues Revenues from trading and/or clearing services BM&F segment Derivatives Revenues from trading and/or clearing servicesBovespa segment Transaction revenues - trading fees Transaction revenues clearing fees Other Other revenues Securities lending fees Depository, custodian, back-office services Market data sales (vendors) Deductions from revenues Net revenue Expenses Personnel and related expenses Data processing Depreciation and amortization Marketing and promotion Contribution to MRP Sundry Operating income
Operating margin
2,289,023 865,874 848,858 1,034,007 243,181 769,221 21,605 389,142 77, 063 102,763 67,668 (224,273) 2,064,750 (763,080) (353,880) (102,805) (93,742) (19,280) (64,567)
110.9 41.9 41.1 50.1 11.8 37.3 1.0 18.8 3.7 5.0 3.3 -10.9 100.0 -37.0 -17.1 -5.0 -4.5 -0.9 0.0 -3.1
2,115,983 111.1 760,245 744,018 964,702 540,391 396,023 28,288 391,036 74,030 91,353 65,049 (211,299) (816,664) (351,608) (104,422) (75,208) (38,609) (92,342) (47,478) 1,088,020 57.1% 219,461 280,729 357,720 (76,991) 1,588,210 (539,681) (49,422) (490,259) 1,048,529 1,047,999 39.9 39.1 50.6 28.4 20.8 1.5 20.5 3.9 4.8 3.4 -11.1 -42.9 -18.5 -5.5 -3.9 -2.0 -4.8 -2.5 57.1 11.5 14.7 18.8 -4.0 83.4 -28.3 -2.6 -25.7 55.1 55.0
2,111,539 722,065 701,545 1,049,300 737,074 254,904 57,322 340,174 49,443 88,263 67,629 (212,797) 1,898,742 (633,504) (290,107) (101,690) (54,818) (42,376) (41,748) 1,265,238 66.6% 38,238 289,039 329,084 (40,045) 1,592,515 (448,029) (5,408) (442,621) 1,144,486 1,144,561
111.2 38.0 36.9 55.3 38.8 13.4 3.0 17.9 2.6 4.6 3.6 -11.2 100.0 -33.4 -15.3 -5.4 -2.9 -2.2 0.0 -2.2 66.6% 2.0 15.2 17.3 -2.1 83.9 -23.6 -0.3 -23.3 60.3 60.3
8.2 13.9 14.1 7.2 -55.0 94.2 -23.6 -0.5 4.1 12.5 4.0 6.1 8.4 -6.6 0.6 -1.5 24.6 -50.1 36.0 19.6 -32.0 -25.6 -16.9 14.8 4.5 8.5 36.2 5.7 2.5 2.5
0.2 5.3 6.1 -8.1 -26.7 55.4 -50.7 15.0 49.7 3.5 -3.8 -0.7 0.3 28.9 21.2 2.7 37.2 -8.9 13.7 -14.0 473.9 -2.9 8.7 92.3 -0.3 20.5 813.9 10.8 -8.4 -8.4
1,904,684 100.0
1,301,670 63.0% 63.0% 149,270 208,851 297,217 (88,366) 1,659,791 (585,535) (67,314) (518,221) 1,074,256 1,074,290 7.2 10.1 14.4 -4.3 80.4 -28.4 -3.3 -25.1 52.0 52.0
Equity in results of investees Interest income, net Interest income Interest expenses Income (loss) before taxation on profit Income and social contribution taxes Current Deferred Net income (loss) for the year Net income available for BM&FBOVESPA shareholders
COMPARATIVE ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31, 2012 compared with year ended December 31, 2011. Gross revenues
Gross revenues for the year ended December 31, 2012, amounted to R$2,289,023 thousand, rising 8.2% year-over-year due primarily to revenue increases in both the Bovespa and BM&F segments.
Transaction revenues Trading and clearing fees BM&F segment
At R$865.874 thousand, this line item increased 13.9% year-over-year reflecting a 7.3% climb in overall trading volume for the segment and 7.7% jump in average rate per contract, as previously discussed herein.
Transaction revenues Trading and clearing fees Bovespa segment
At R$1,034,007 thousand, this line item jumped 7.2% year-over-year due mainly to an 11.7% rise in trading volume for the segment, which, however, was partially counterbalanced by a 2.2% margin drop (to 5.676 bps from 5.793 bps one year earlier) attributable to the higher volumes of high frequency and intraday trading, since we charge lower fees these types of 73
transactions. In addition, on a year-over-year basis, the 2012 revenues were toned down by fewer trading sessions than last year (246 trading sessions in 2012 versus 249 in 2011).
Trading Fees trading systems. This revenue line item declined 55.0% year-on-year, to R$243,181 thousand from R$540,391
thousand one year ago, driven by our pricing policy implemented in September 2011, which rebalanced the price structure in line with our cost structure, ultimately pulling down the average fee rate for trading, whereas pushing up the average fees for clearing and settlement transactions, such that the cost of trading for investors would not be impacted.
Clearing fees clearing and settlements systems. The revenue from fees our equities clearing house charges on clearing and
settlement transactions (Bovespa segment) went up 94.2% year-over-year, to R$769,221 thousand from R$396,023 thousand in 2011, due mainly to the price structure rebalancing previously discussed.
Other transaction revenues Bovespa segment. The revenue from fees charged on other transactions, unrelated to trading or
clearing services (Bovespa segment) went down 23.6% year-over-year, to R$21,605 thousand from R$28,288 thousand in the earlier year, due primarily to a plunge in the number of equity offerings.
Other revenues
Other operating revenues unrelated to trading and/or clearing of R$389,142 thousand went down slight 0.5% from the yearago primarily as a result of changes in revenue line items unrelated to trading and clearing activities, as follows:
Securities lending services. This revenue line hit R$77,063 thousand (3.4% of gross revenues), a 4.1% year-over-year upsurge
due mainly to a 5.9% year-on rise in financial value of the balance of open interest positions at year-end, which amounted to R$32.0 billion.
Depository, custody, back office services. The line for revenues derived from the operations of our central securities depository
hit R$102.763 thousand (4.5% of gross revenues) rising 12.5% year-over-year mainly due to a 2.6% climb in average financial value of assets under custody, not including custody of ADRs and custody services provided to foreign investors. In addition, the revenue from fees related to custody of Brazils government bonds traded in our Treasury Direct (Tesouro Direto) platform soared 30.1% year-on-year.
Market data sales (vendors). At R$67.668 thousand (3.0% of gross revenues) this revenue line item picked up 4.0% year-over-
year. While the number of customers for our market data shrank somewhat, this climb is attributable mainly to appreciation of the U.S. dollar versus the Brazilian real, as we derive 40.0% of this revenue line from fees denominated in U.S. dollars which we charge from foreign customers.
Deductions from revenue Net revenue
Deductions from revenue totaled R$224,273 thousand, a 6.1% upsurge in line with the increase in gross revenues. As a result of the changes in revenue line items discussed above, the net revenue shot up 8.4% year-over-year, to R$2,064,750 thousand from R$1,904,684 thousand one year ago.
Expenses
Expenses totaling R$763,080 thousand declined 6.6% year-over-year. However, the comparability of this line item has been hampered because of certain non-recurring expenses recorded in 2011 and 2012.
Personnel and related expenses. This expense line totaled R$353.880 thousand, up slight 0.6% year-over-year, and correlate
primarily with: (i) the provision for expenses with healthcare plans, which totaled R$27,553 thousand and was recognized in accordance with accounting standard CPC 33/IAS 19 (Employee Benefits). The provision correlates with the expense accrual related to vested rights of employees that contributed to a (post-retirement) healthcare plan in the period between 2002 and 20099. Pursuant to Law No. 9,656/98 and additional requirements set forth under Brazilian Healthcare Agency (ANS) Normative Resolution No. 279 dated November 2011, an employee that contributes to the corporate healthcare plan with any sum of money is entitled to continue on as beneficiary after the employment termination or retirement, as long as such employee bears the burden of paying for the plan costs. The potential liabilities thus reserved relate to the difference, over time, between the average cost of the corporate healthcare plan and the estimated average cost for inactive beneficiaries had they not stayed on as plan beneficiaries (indirect benefit); and (ii) expenses with the stock options plan, which at R$32,306 thousand (versus R$53,630 thousand in 2011) fell by 39.8% year-over-year; and (iii) a R$18.290 thousand year-on increase in capitalized expenses with personnel engaged in certain ongoing technology projects. The effects of inflation on the line item for personnel and related expenses have been balanced out by these factors (see the discussion under subsection 10.2(c) below).
Data processing. This line item totaled R$102,805 thousand, a 1.5% drop from the prior year. Depreciation and amortization. The expenses in this line item totaled R$93.742 thousand, up 24.6% year-over-year and in line
with the increase in investments implemented in previous years.
Marketing and promotion. This expense line hit R$19.280 thousand, plummeting 50.1% year-over-year due primarily to the
reprioritization of our marketing campaigns for the year and cuts in advertising expenses.
Sundry.
This expense line hit R$64,567 thousand, soaring 36.0% year-over-year due primarily to a R$15,000 thousand contribution to fund the operations of BSM (our market surveillance arm) over the course of 2013.
Operating income
At R$1,301,670 thousand, the operating income (revenues, net of expenses) was up 19.6% from R$1,088,020 thousand in the prior year.
Gain (loss) on equity-method investment (equity in the results of subsidiaries and investees)
Starting from May 2009, the employee healthcare plan is no longer a defined contribution plan, such that only part of our active employees will be entitled to all or some of benefit.
4
74
We account for our investment in shares of the CME Group under the equity method of accounting and recognize gains and losses through profit or loss in the statement of income. Our gain from this investment totaled R$149,270 thousand, 32.0% down from one year ago, in line with the yearly results of the CME Group. It is worth noting this line item includes recognition of R$60,196 thousand worth of tax benefit in the form of income tax to offset against income tax paid abroad.
Interest income, net
Net interest income of R$208,851 thousand plunged 25.6% year-over-year mainly due to a 16.9% year-on decrease in interest revenues, which totaled R$297,217 thousand. Additionally, the interest revenues were negatively impacted by an increase in interest expenses, which at R$88,366 thousand climbed 14.8% year-over-year. This increase in interest expenses is explained by the appreciation of the U.S. dollar against the Brazilian real, since we are required to make U.S. dollar-denominated coupon payments under the global senior notes issued in our July 2010 cross-border offering.
Income before taxation on profit
Income before taxation on profit rose by 4.5% year-over-year, to R$1,659,791 thousand from R$1,588,210 thousand one year ago.
Income tax and social contribution
Income tax and social contribution for the year totaled R$585,535 thousand. This line item comprises current income tax and social contribution amounting to R$67,314 thousand, including R$60,196 thousand which we offset against income tax paid abroad (such as discussed previously under gain (loss) on equity-method investment). Additionally, at R$518,221 thousand, the line item deferred income tax and social contribution comprises (i) recognition of R$539,075 thousand in deferred tax liabilities related to temporary differences attributable mainly to amortization of goodwill for tax purposes, with no impact on cash flow for the year; and (ii) recognition of R$20,854 thousand in deferred tax assets related mainly to temporary differences and reversal of deferred tax liabilities.
Net income for the year
Net income for the year rose 2.5% year-over-year to R$1,074,256 thousand at December 31, 2012, from R$1,048,529 thousand one year ago.
Net income available for BM&FBOVESPA shareholders
Net income available for BM&FBOVESPA shareholders likewise climbed 2.5% year-over-year to R$1,074,290 thousand from R$1,047,999 thousand the year before, primarily due to an increase in revenues earned on a higher trading volume base coupled with a reduction in expenses, which were partially counterbalanced by lower gain on the equity-method investment and a decline in net interest income.
Year ended December 31, 2011 compared with year ended December 31, 2010 Gross revenues
Gross revenues of R$2,115,983 thousand in 2011 were up by slight 0.2% from R$2,111,539 thousand one year ago. The 5.3% increase in revenues from fees earned in our BM&F segment transactions and 15.0% climb in other revenues were counterbalanced by an 8.1% drop in revenues from fees earned in our Bovespa segment.
Transaction revenues - Trading fees or clearing and settlement fees BM&F segment
Revenues from trading or clearing and settlement fees earned on transactions within the BM&F segment totaled R$ 760,245 thousand, up 5.3% from R$722.065 thousand one year ago, due mainly to a 6.1% year-on-year climb in revenues from trading fees charged on derivatives transactions (R$744,018 thousand versus R$701,545 thousand earlier) driven by a 7.8% rise in average daily trading volume. The latter, however, was partially quashed by a 2.5% stumble in average revenue per contract.
Transaction revenues - Trading fees or clearing and settlement fees Bovespa segment
Revenues from trading or clearing and settlement fees earned on transactions within the Bovespa segment amounting to R$964,702 thousand shrank 8.1% from R$1,049,300 thousand the year before, due to average trading volume virtually unchanged from the prior year, tough still enough to hit an all-time record, coupled with a fall in basis point margin. This margin tumble, in turn, is explained primarily by the larger share of overall volume attributable to high frequency and day trading, from which we derive fees at lower-than-average margins, and a stumble in average volumes traded in equity-based derivatives on options and forward markets, where we derive higher-than-average fees. Moreover, these falls were topped off with a collapse in revenues from fees earned on clearing and settlement of equity offerings due to slow market conditions.
Trading Fees trading systems
This revenue line item went down 26.7% year-on-year, to R$ R$540,391 thousand from R$737,074 thousand earlier, driven by our pricing policy implemented in September 2011, which rebalanced the price structure in line with our cost structure (see subsection 10.2(b) below), ultimately pulling down the average rate for trading, whereas pushing up the average fees for clearing and settlement transactions, such that the cost of trading for investors would not be impacted.
Transaction fees clearing and settlements systems
Revenues from fees earned by our equities clearing house on clearing and settlement transactions related to trades carried out on equities markets (Bovespa segment) surged 55.4% year-on-year, to R$ R$396,023 thousand from R$ R$254,904 thousand previously, which is explained by the same factors discussed above in connection with our new pricing policy.
Other revenues from trading or clearing and settlement fees
Revenues from fees earned on other transactions carried out within the Bovespa segment took a 50.7% year-on-year dive, to R$28,288 thousand from R$57,322 thousand in the earlier year, due mainly to a collapse in number (volume) of equity offerings, with the caveat, however, that in the comparative year to December 31, 2010, the same line item had ballooned on hefty revenue from settlement fees charged on the massive seasoned offering of Brazils oil and gas giant, Petrobras. 75
Other revenues
Other revenues unrelated to trading and/or clearing and settlement the Bovespa and BM&F segment markets climbed 15.0% year-on-year to R$391,036 thousand from R$340,174 thousand one year earlier. This increase is attributable mainly to the factors discussed below.
Securities lending services. Revenues from securities lending services amounting to R$74,030 thousand soared 49.7% from
R$49,443 thousand in the prior year due mainly to a 47.1% upsurge in the average financial value of open interest positions, which rose to R$30.2 billion from R$20.5 billion one year earlier. Depository, custody, back office services. This line item climbed 3.5% year-on-year, to R$91,353 thousand from R$88,263 thousand earlier. Revenues derived from the operations of our central securities depository rose 2.1% year-on-year primarily on account of a 2.3% rise in average number of custody accounts (624.7 thousand accounts in 2011 versus 610.8 thousand accounts one year ago) and a 0.7% year-on-year lift in average financial value of financial assets under custody (R$476.2 billion in 2011 versus R$472.6 billion in 2010), not including custody of ADRs and custody services provided to nonresident investors. In addition, the revenues from custody of government bonds traded on the Treasury Direct platform surged 8.1% year-on-year.
Market data sales (vendors). At R$65.049 thousand, this revenue line item dropped 3.8% year-over-year due mainly to an
August 2010 price schedule change which cut the fees charged to HomeBroker users, thus affecting revenues for year 2011.
Deductions from revenue
Deductions from revenue dropped 0.7% year-on-year to R$211,299 thousand from R$212,797 thousand one year ago, primarily as a result of a cut in service tax rate (which fell to 2.0% from 5.0% at end-July 2011). However, the changes in our pricing policy counterbalanced the effects of this tax cut on the revenues of our Bovespa and BM&F segments for the months of August and October, respectively.
Net revenue
As a result of the changes in revenue line items discussed above, net income amounted to R$1,904,684 thousand, up 0.3% from R$1,898,742 thousand in the prior year.
Expenses
Expenses totaled R$816,664 thousand surging 28.9% year-on-year from R$633.504 thousand earlier. The principal changes in expense line items are set forth below.
Personnel and related expenses. Personnel and related expenses of R$351,608 thousand jumped 21.2% year-on-year from
R$290,107 thousand one year ago. This movement is explained by factors as (i) the August 2011 salary increase required under the existing collective bargaining agreement, which represented a 7.0% increase in payroll; (ii) the effects of a 17.8% year-onyear climb in headcount over the course of 2011, to a total of 1,426 employees (most new hirings adding to the technology and business development staffs) versus 1,211 employees one year ago (including the 2010 internalization of 143 previously outsourced IT providers); and (iii) the increase in expenses recognized in connection with stock options plan, which soared 73.4% year-on-year, to R$53,630 thousand from R$30,921 thousand earlier, merely because differently from 2011 there were no option grants one year ago. Each of these factors accounted for about a third of the increase in expenses for 2011.
Data processing. Data processing expenses totaling R$104,422 thousand went up 2.7% from R$101,690 thousand in the prior
year. The internalization of technology personnel (discussed above) was a determinant factor in stifling further increases in time billed by outsourced providers, as we are in the process of executing capital-intensive projects to overhaul, modernize and strengthen our technology infrastructure and resources.
Depreciation and amortization. The expenses with depreciation and amortization went up 37.2% year-on-year, to R$75,208
thousand from R$54,818 thousand one year ago, primarily as a result of the upturn in capital expenditures over the course of 2010 in connection with our capital-intensive technology projects.
Marketing and promotion. Marketing and promotion expenses hit R$38,609 thousand from R$42,376 thousand one year ago, a
8.9% decline primarily due to a shift in policy which redirected the expenses with financial education initiatives and marketing campaigns to more affordable channels.
Contribution to MRP (Guarantee Fund transferred to BSM). This expense relates to an extraordinary, non-recurring transfer of
R$92,342 thousand in restricted funds passed to BSM. These restricted funds had been segregated from our assets and reserved as a guarantee fund within the scope of a regulatory investor compensation scheme (the MRP, or Investor Compensation Mechanism Fund) established in connection with certain types of investor claims, which is now operated by BSM. While we previously had control of this guarantee fund, we have, in line with our policy to strengthen and consolidate BSM as an autonomous and financially independent self-regulatory organization, enforcer and overseer of the markets, transferred the control and management of this investor compensation scheme, and passed the funds to BSM, thus unifying this type of resources under the oversight and enforcement authority of BSM. In doing so, we also passed on behalf of BSM any interest income earning on future financial investments of these funds.
Sundry. This expense line hit R$47,478 thousand, up 13.7% year-over-year. Operating income
At R$1,088,020 thousand, the operating income (revenues, net of expenses) was down 14.0% from R$1,265,238 thousand in the prior year.
Gain (loss) on equity-method investment (equity in the results of subsidiaries and investees)
Starting from the third quarter of 2010, when we increased to 5.1% 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. Our gain from the investment in CME Group totaled R$219,461 thousand, up 473.9% from R$38,238 thousand one year ago, due to (i) an incremental gain in the CME Group results from an extraordinary reversal of provision for 76
taxes; and (ii) because our investment in CME Group shares began to be accounted for as an equity-method investment only in the third quarter of 2010, whereas the 2011 figure accounts for a full-year recognition of our share in the results of the investee, thereby affecting the year-on-year comparability of this line item. It is worth noting this line item includes recognition of R$62,987.3 thousand worth of tax benefit in the form of income tax to offset against income tax paid abroad. Of this amount, R$44,936.4 thousand were offset against current income tax and social contribution payable, as discussed below in the income tax and social contribution line item, under income before taxation on profit in the statement of income.
Interest income, net
Net interest income of R$280,729 thousand shed 2.9% from R$289,039 thousand one year ago. Interest revenue climbed to R$357,720 thousand from R$329,084 thousand the year before influenced by an increase in average interest rate earned on financial investments and higher average cash invested in short- and long-term investments. However, the interest revenues were negatively impacted by an increase in interest expenses, which climbed to R$76,991 thousand from R$40,045 thousand one year ago due to coupon payments required to be made to global senior notes issued in our July 2010 cross-border offering.
Income before taxation on profit
Income before taxation on profit fell slightly, by 0.3% year-on-year, to R$1,588,210 thousand from R$1,592,515 thousand the year before, explained primarily by proportionally higher year-on expenses over a substantially unchanged revenue base, particularly the one-off effect of the passing of a Guarantee Fund (R$92,342 thousand) to BSM, coupled with the year-on increase in expenses with our stock options plan and the equity pickup on our equity-method investment, as previously discussed.
Income tax and social contribution
Income tax and social contribution for the year totaled R$539,681 thousand, up 20.5% from R$448,029 thousand in the prior year. This line item comprises current income tax and social contribution amounting to R$49,422 thousand, including R$44,936.4 thousand which we offset against income tax paid abroad (as discussed under the gain (loss) on equity -method investment line item), such that just the difference of R$4,485.6 thousand had an impact on cash flow generation. Additionally, the line item deferred income tax and social contribution amounted to R$490,259 thousand, and is comprised of (i) recognition of deferred tax liabilities of R$498,252 thousand related to temporary differences attributable mainly to amortization of goodwill for tax purposes, with no impact on cash flow for the year; and (ii) recognition of deferred tax assets amounting to R$7,993.0 thousand related to tax losses, negative tax base and tax credits related to other temporary provisions.
Net income for the year
Net income for the year declined 8.4% year-on-year to R$1,048,529 thousand at December 31, 2011 from R$1,144,486 thousand one year ago.
Net income available for BM&FBOVESPA shareholders
Net income attributable to BM&FBOVESPA shareholders of R$1,047,999 thousand was down 8.4% year-on-year from R$1,144,561 thousand the year before, primarily due to proportionally higher expenses having taken a larger share of a virtually unchanged revenue base, with a note concerning the one-off expense recognized in connection with the passing of restricted funds (Guarantee Fund) to BSM and the expenses with the stock options plan, both discussed previously herein. MAIN LINE ITEMS OF THE CONSOLIDATED BALANCE SHEET STATEMENTS
Year ended December 31, 2012 compared with year ended December 31, 2011. TOTAL ASSETS
At R$24.147.114 thousand, total assets climbed 2.4% from R$ 23,589,922 thousand one year ago.
Current assets
Current assets surged 47.3% year-over-year, to R$3,536,282 thousand (14.6% of total assets) from R$2,401,134 thousand the year before due mainly to an increase in investments maturing in the near term (less than 12 months), and the upcoming maturity of a number of government bonds in our investment portfolio.
Cash and cash equivalents; short-and long-term financial investments. These comprise line items registered under current
assets (cash and cash equivalents comprising cash on hand and demand deposits, in addition to short-term financial investments) as well as under noncurrent assets (long-term financial investments). Short- and long-term financial investments are liquid investments with prime banks, and in financial investment funds, government bonds and other highly liquid financial assets. At December 31, 2012, cash and cash equivalents plus short- and long-term financial investments totaled R$3,850,639 thousand, a 1.8% year-on-year rise from R$3,782,411 thousand one year ago.
Noncurrent assets
Noncurrent assets of R$20,610,832 thousand (85.4% of total assets) fell 2.7% year-on-year from R$21,188,788 thousand one year ago. Set forth below is a brief discussion of main changes to line items under noncurrent assets not previously discussed.
Investments. This line item increased 8.1% year-on-year to R$2,928,820 thousand from R$2,710,086 thousand previously. The
investments line consists primarily of investment in associate which we account for under the equity method of accounting, and relates to our ownership interest in shares of the CME Group, which at December 31, 2012, was recorded at R$2,893,632 thousand. The year-on-year rise first noted above is attributable mainly to devaluation of the Brazilian real against the U.S. dollar and our recognition of the gain on equity-method investment.
Intangible assets. This line rose by 1.0% year-over-year, to R$16,512,151 thousand from R$16,354,127 thousand previously.
Intangible assets consist of (i) goodwill, which at R$16,064,309 thousand kept a flat line in each year, and accounted for 66.5% and 68.1% of total assets at December 31, 2012 and 2011, respectively; and (ii) software and projects, which soared 54.5% 77
year-over-year to R$447,842 thousand from R$289,818 thousand one year ago due mainly to acquisition, implementation and development of new software applications and systems.
Current liabilities
Current liabilities decreased 14.0% year-over-year to R$1,660,609 thousand from R$1,929,946 thousand the year before. This change is attributable mainly to a 24.4% decrease in the collateral for transactions line item, as the year -end balance of cash collateral pledged as margin by market participants declined to R$1,134,235 from R$1,501,022 one year ago.
Noncurrent liabilities
Noncurrent liabilities of R$3,072,632 thousand went up 27.9% from R$2,402,485 thousand in the prior year. Set forth below is a brief description of the main changes to line items under noncurrent liabilities.
Debt issued abroad and loans.
Loans and financing amounting to R$1,242,239 thousand rose 9.1% from R$1,138,659 thousand one year earlier primarily on account of the devaluation of the Brazilian real (our functional currency) against the U.S. dollar, which is the transaction currency for our global senior notes issued abroad (in a July 2010 cross-border bond offering).
Deferred income tax and social contribution. Deferred income tax and social contribution liabilities amounted to R$1,739,644
thousand versus R$1,204,582 thousand one year ago, a 44.4% year-on-year surge resulting from recognition of the temporary difference between the tax base of goodwill and its balance sheet carrying value (while goodwill continues to be amortized for tax purposes, from January 1, 2009, it 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 of R$19,413,882 thousand was virtually unchanged with a scanty 0.8% year -on-year drop from R$19,257,491 thousand one year ago.
Year ended December 31, 2011 compared with year ended December 31, 2010. TOTAL ASSETS
At R$ 23,589,922 thousand, total assets climbed 4.2% from R$22,633,975 thousand one year ago.
Current assets
Current assets fell 5.7% year-on-year to R$2,401,134 thousand from R$2,547,589 thousand the year before.
Cash and cash equivalents; short-and long-term financial investments. These comprise line items registered under current
assets (cash and cash equivalents comprising cash on hand and demand deposits, in addition to short-term financial investments) as well as under noncurrent assets (long-term financial investments). At December 31, 2011, cash and cash equivalents plus short- and long-term financial investments totaled R$3,782,411 thousand, a 10.1% year-on-year rise from R$3,435,345 thousand one year ago.
Noncurrent assets
Noncurrent assets of R$21,118,778 thousand climbed 5.6% year-on-year from R$20,086,386 thousand one year ago. Set forth below is a brief discussion of the main changes to line items under noncurrent assets not previously discussed.
Investments. This line item increased 18.5% year-on-year to R$2,710,086 thousand from R$2,286,537 thousand previously.
The investments line consists primarily of investment in associate which we account for under the equity method of accounting, and relates to our 5.0% ownership interest in shares of the CME Group, which at December 31, 2011, was recorded at R$2,673,386 thousand. The year-on-year change first noted above is attributable primarily to devaluation of the Brazilian real against the U.S. dollar over the year and our recognition of the gain on equity-method investment.
Intangible assets. Intangible assets were up slightly, by 0.9% year-on-year, to R$16,354,127 thousand from 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 68.1% and 71.0% of total assets at December 31, 2011 and 2010, respectively; and (ii) software and projects, which soared 91.2% year-on-year to R$289,818 thousand from R$151,594 thousand earlier due mainly to acquisition, implementation and development of new software applications and systems.
Current liabilities
Current liabilities rose 36.3% year-on-year to R$1,929,946 thousand from R$1,416,204 thousand the year before. Set forth below is a brief description of the main changes to line items under current liabilities.
Collateral for transactions. Collateral for transactions at year-end amounting to R$1,501,022 thousand jumped 57.2% from
R$954,605 thousand one year ago. This change is due mainly to a year-on upsurge in cash collateral pledged as margin by participants.
Noncurrent liabilities
Noncurrent liabilities of R$2,402,485 thousand surged 33.6% from R$1,798,723 thousand in the prior year. Set forth below is a brief description of the main changes to line items under noncurrent liabilities.
Debt issued abroad and loans.
Loans and financing amounting to R$1,138,659 thousand rose 12.7% from R$1,010,059 thousand one year earlier, primarily on account of the devaluation of Brazilian reais (our functional currency) against the U.S. dollar, which is the transaction currency for our global senior notes issued abroad (in a cross-border bond offering completed on July 16, 2010).
Deferred income tax and social contribution. Deferred income tax and social contribution liabilities amounted to R$1,204,582
thousand versus R$732,074 thousand one year ago, a 64.5% year-on-year surge resulting from recognition of the temporary difference between the tax base of goodwill and its balance sheet carrying value (while goodwill continues to be amortized for tax purposes, from January 1, 2009, it is no longer amortized for accounting purposes, thus resulting in a goodwill tax base that 78
is lower than its carrying value).
Shareholders equity
Shareholders equity of R$19,257,491 thousand was virtually unchanged with a scanty 0.8% year -on-year drop from R$19,419,048 thousand earlier. 10.2. Managements discussion and analysis of results of operations a. Material revenue components
Year ended December 31, 2012 compared to year ended December 31, 2011.
Our consolidated gross revenues climbed 8.2% year-on-year R$2,289,023 thousand from R$2,115,983 thousand one year ago. Transaction revenues derived from both trading and clearing fees charged within our Bovespa segment climbed 7.2% year-on-year to R$1,034,007 thousand, reflecting a combination of 11.7% rise in average trading volume, which however was partially counterbalanced by fewer trading sessions than the year before (246 in 2012 versus 249 in 2011), and a 2.2% fall in average basis point margin (to 5.676 bps from 5.793 bps in the earlier year). This margin drop is in line with the larger share of overall volume attributable to high frequency and intraday trading from which we derive fees at lowerthan-average margins. Transaction revenues derived from both trading and clearing fees charged within our BM&F segment jumped 13.9% yearon-year, to R$865,874 thousand, due primarily to a 7.3% year-on-year upsurge in volumes traded and a 7.7% climb in average rate per contract (RPC). Revenues unrelated to trading or clearing activities totaling R$389,142 thousand in 2012 kept a virtually unchanged line from R$391,036 thousand one year ago.
Year ended December 31, 2011 compared to year ended December 31, 2010
Our consolidated gross operating revenues climbed by flimsy 0.2% year-on-year R$ R$2,115,983 thousand from R$2,111,539 thousand one year ago. Transaction revenues derived from trading or clearing and settlement fees charged within our Bovespa segment declined 8.1% year-on-year and amounted to R$964,702 thousand, reflecting a combination of virtually unchanged average trading volume and a fall in average basis point margin (to 5.79 bps from 6.19 one year ago). The relatively subdued financial value (volume) traded and this margin fall were due mainly to the larger share of overall volume attributable to high frequency and day trading (from which we derive fees at lower-than-average margins), coupled with a stumble in average volumes traded in equity-based derivatives on options and forward markets (where we earn higher-than-average fees). Another factor further reining in revenues was the slow equity offering market as prospective issuers responded to worsening market conditions by taking a wait-and-see attitude (with the caveat, however, that in the comparative year to December 31, 2010, the revenues from clearing and settlement fees earned on equity offerings had ballooned on account of the massive seasoned offering implemented by Petrobras. Transaction revenues derived from trading or clearing and settlement fees charged within our BM&F segment jumped 5.3% year-on-year, to R$760.245 thousand, due primarily to a 7.8% year-on-year upsurge in volumes traded, which however was not fully captured as revenue due to a 2.5% drop in average rate per contract (RPC). Revenues unrelated to trading or clearing and settlement activities surged 15.0% year-on-year to R$391.036 thousand in 2011. b. Factors that materially influence the results of operations
The volume of business in both our Bovespa and BM&F segments ballooned over the course of 2012 to hit new record highs. In the Bovespa segment, increased turnover velocity driven by a boost in volume traded by foreign investors spurred an 11.7% spike in overall trading volumes. The primary reasons for the foreign investing buildup are twofold: one, the fact that most of the high frequency trading volume originates cross border; two, a shift in monetary policy which in December 2011 led the Government to remove the 2% IOF tax levied on hot money inflows for investments in variable-income securities. In turn, a 7.3% volume jump in the BM&F segment was pushed mainly by the surge in average volumes traded in Brazilian-interest rate contracts. In addition, the average rate per contract (RPC) climbed 7.7% year-over-year both as a result of the swelling volumes traded in longer-maturity Brazilian-interest rate contracts and because the RPC for forex contracts was positively influenced by the depreciation of the Brazilian real against the U.S. dollar (since our rates for these contracts are denominated in U.S. dollars). A combination of factors explains the increase in trading volume and greater concentration on longer-term interest rate contracts, prime among which are the structural change brought about by drastic cuts in real interest rate, coupled with increased credit availability and the greater portion of fix interest bearing government debt relative to total public debt. Other factors which decisively influenced our 2012 results, as compared to 2011, include: a 25.6% decline in interest revenues (to R$208,851 thousand versus R$280,729 thousand one year ago) due primarily to a tumble in the interest rates earned on our financial investments, most of them fixed-rate investments; R$27,533 thousand reserved as provision for healthcare plan expenses; R$15,000 thousand contributed to BSM to fund the operations of our market surveillance arm over the course of 2013.
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After two years of feeble and uneven recovery from the financial crisis, the global economic and financial landscape in 2011 unveiled persistent weaknesses in developed economies. Events as the Eurozone sovereign debt crisis and market mistrust that European policy makers would successfully implement necessary fiscal adjustment programs in countries as Italy, Spain and Portugal, but particularly in Greece; the downgrading of the U.S. credit rating; the problem of deteriorating output growth; and fears that Chinas deepening economic slowdown would ripple across the world economy, all made up for an uneasy economic landscape. Meanwhile, in the domestic front, the economy experienced contrasting half-year periods as Brazils government made sensitive trade-offs between objectives and implemented measures shifting policy directions. Over the first half of the year, signaling concern about existing inflationary pressures, the government repeatedly raised the benchmark interest rate (Selic), adopting macroprudential measures to curb credit growth and consumer demand, and to arrest the persistent currency appreciation, in the latter case by expanding the taxation of financial transactions (IOF) and increasing the rates of existing IOF levies, among other things. In the second half of the year, as the U.S. debt-ceiling crisis threatened global markets, and the Eurozone sovereign debt crisis deepened, putting the global economies, including Brazil, in further peril; and as expectations for domestic GDP growth in 2011 and 2012 pointedly declined (see the chart below), while industrial production weakened, the Brazilian government responded with fresh urgency in ratcheting the benchmark rate, shifting policies to incentivize consumer spending on durables, cutting taxes and loosening credit restrictions in an effort to stave off economic slowdown. Some of the governments macroprudential measures had a direct impact on the domestic capital markets, including markets BM&FBOVESPA operates. Such was the case, for example, when in July 2011, seeking to stem hot money inflows to halt the currency appreciation the government broadened its financial transactions tax (IOF tax) to charge increases in short dollar exposures at a 1% rate. Then, in December, a welcomed switch came when the government removed the 2% IOF tax charged on hot money inflows for investments in equity securities and equity-based derivatives. Against this backdrop, the average trading volume for the stock market (Bovespa segment) was virtually unchanged from the earlier year, though still an all-time record, which is explained by a number of reasons but primarily and more so towards the latter half of the year by dwindling expectations that market forecasts could still be beaten. Additionally, the average basis point margin for markets comprising the Bovespa segment fell to 5.79 bps from 6.19 one year ago, pushed mainly by the larger share of overall volume attributable to high frequency and day trading, from which we derive fees at lower-than-average margins, coupled with a stumble in average volumes traded in equity-based derivatives on options and forward markets, where we earn higher-thanaverage fees. The combination of these factors resulted in an 8.1% year-on-year decline in our revenues for the segment. Moreover, the after-effects of the IOF tax removal implemented by end-2011 (relative to trading in equity securities and equitybased derivatives by nonresident investors) will only materialize in any measurable way over the first few months of 2012. In turn, the average daily volume traded in derivatives on markets comprising the BM&F segment rose 7.8% year-on-year in the wake of further growth in foreign trade and credit availability (particularly through fixed-rate loan facilities) and the windings of the monetary policy over the year, all conducive to heightened hedging activity. Moreover, the governments policy shifts and turnabout moves translated into heightened volatility and successive changes in the mix of derivatives contracts more actively traded, from which we derive fees at varying rates. Ultimately, this led to a 2.5% tumble in average rate per contract (RPC). Additionally, the introduction in July of an IOF tax levy on increases in short dollar exposures significantly depressed the volumes traded in forex contracts; so much so that a month-on-month comparison of periods of roughly similar volatility levels before and after the new tax (i.e., May 2010 and October 2011) point to a 20.0% plunge in average volume. The combination of these factors resulted in a 5.3% year-on-year rise in our revenues for the segment. Other factors that materially impacted our results of operations for 2011 as compared to 2010 include: The one-off passing of the Guarantee Fund (R$92,342 thousand) to BSM, which we recognized as an extraordinary expense and increased our total expenses for 2011 by R$92,342 thousand; The increase in expenses with the employee stock options plan, which soared 78.5% year-on-year, to R$55,191 thousand from R$30,921 thousand earlier, because differently from 2011 there were no option grants one year ago. c. 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: Trading and post-trade transactions within the Bovespa segment. In August 2011, as discussed elsewhere herein, we announced a comprehensive revision of our pricing policy for the segment to eliminate cross subsidies embedded in fee rates across our trading and post-trade business lines. While this policy revision affected the comparability of the 2012 and 2011 revenue lines as regards fees derived from trading activities and post-trade activities, the comparability of total revenues for these two years has not been hampered. Trading and post-trade transactions within the BM&F segment. The variation in exchange rates between the years 2011 and 2012 positively influenced the average RPC for forex contracts (+ 16.4%) and U.S. dollar-denominated interest rate contracts (+ 7.9%), as the fees we charge for both are denominated in U.S. dollars. Between 2011 and 2012 the average
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exchange rate for U.S. dollars appreciated 17.6% against the Brazilian real.
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Market data sales (vendors signal broadcast). This revenue line was positively influenced by the appreciation of the U.S. dollar against the Brazilian real, as about 40% of the revenues from market data sales originate from foreign customers from whom we charge fees denominated in U.S. dollars for payment abroad.
Changes in revenues attributable to changes in our pricing policies or to fluctuations in exchange rates include: Trading and post-trade transactions within the Bovespa segment. In August 2011 we announced the results of a comprehensive review of our pricing policy for the segment, which was designed to eliminate cross subsidies embedded in fee rates across our trading and post-trade business lines. In reviewing this policy, we were concerned to ensure it would have neutral effect relative to overall cost-by-trade for market participants and investors (per then existing pricing structure), while adequately rebalancing the fee structure to correct price distortions. As a result of this review and rebalancing effort, the aggregate of trading and settlement fees we now charge account for average 30% of the overall cost-by-trade within the Bovespa segment, which is in line with international pricing practices and has not adversely affected the overall cost-by-trade for investors. Trading and post-trade transactions within the BM&F segment. In October 2011, with similar objectives as discussed above, we announced the results of a similar comprehensive review of our pricing policy for the segment. Under the pricing structure changes, after our rebalancing effort, the aggregate of the fees we charge for trading and post-trade services now account for average 40% of the overall cost-by-trade for the segment. Listing fees. The discounts previously granted on listing annuities came to an end, as announced in 2009 when we implemented a change in policy for phased-out termination of annuity discounts. Market data sales. The change in pricing policies implemented in August 2010 slashed the fees we charge from traders doing business through our Home Broker platform and impacted our revenues from market data sales for the full year, thus affecting the year-over-year comparability. Participant access (order entry and other fees charged within Bovespa segment). Aimed at boosting trading volumes, we reviewed our pricing policies and revised the market access price schedule to cut fee rates for unexecuted orders in excess of the order-per-trade cap (implemented in March and December 2011). We also revised the price schedule for technology services we provide to brokerage firms, which included cuts in fees for use of the Sinacor system (our integrated system for brokers management of back, middle and front-office activities) and for connection to the BM&FBOVESPA Communications Network, or RCB (in March 2011). Depository, custody and back-office services (Treasury Direct platform). This is a program we established in cooperation with the Brazilian Treasury and a platform we operate through our central securities depository for retail investors to trade in government bonds through the Internet. In December 2010 we announced a program designed to expand the Treasury Direct (Tesouro Direto) investor base, encourage long-term household savings and increase the savings rate. For this purpose, the program included incentives to custodians (banks and brokerage firms) for government bonds and treasury bills traded on this platform, in the form of a 0.15% credit on the overall financial value (volume) of trades allocated by custodian. As a result of this successful strategy, the number of retail traders actively doing business through this platform soared 57.0% from the earlier year. We have since extended the program through 2012, with a 0.10% credit over total volume by custodian. We should note the above changes were designed to have no (and had no) significant impact on our consolidated results for 2011. d. Impact on financial condition and results of operations attributable to changes in inflation rates; in market prices for the principal raw materials and other supplies; in exchange and interest rates.
The level of interest rates impacts our financial results (net interest income) insofar as it influences the market remuneration rates we earn on our financial investments, which at December 31, 2012, totaled R$3,806,997 thousand. Thus, the year-onyear decline in average interest rate paid on our investments negatively affected our interest revenues, which in 2012 hit R$297,217 thousand versus R$357,720 thousand one year ago. In the case of changes in exchange rate, the impact of the depreciation of the local currency relative to U.S. dollars over 2012 was twofold: (i) our interest expenses increased, as most our onerous liabilities relate to the U.S.-dollar denominated debt under global senior notes issued in a cross-border bond offering completed on July 16, 2010 (see subsection 10.1(b) above); and (ii) the average fee rates we charge on trades in forex futures contracts and U.S. dollar-denominated interest rate contracts went up because these fees are denominated in U.S. dollars (see subsection 10.2(b) above). Additionally, the inflation rate influences our expenses, in particular expenses with personnel and related charges (see subsection 10.1(h) above.). Under our August 2012 collective bargaining agreement, the payroll and related charges climbed by 5.36% or 6.50%, depending on wage bracket. 10.3. Managements discussion and analysis of actual or expected material effects on the financial statements or results of operations from the factors set forth below. a. Creation or disposition of operating segment. No operating segment was created or sold in the year ended December 31, 2012. Accordingly, no such event has had or is
Year-over-year exchange rate variation is calculated as the average fluctuation of the PTAX exchange rate as at the end of December 2010 through endNovember 2012, as these rates provide the basis on which to calculate average RPC for the months of January 2011 through December 2012, respectively. The PTAX rate is compiled and released at the close of business on a daily basis by the Central Bank.
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expected to have any effects on our financial statements, financial condition or results of operations. b. Company organization; acquisition or disposition of ownership interest. No event entailing the organization of a company has occurred in the prior year, nor any acquisition or disposition of ownership interest carried out in the year ended December 31, 2012. c. One-off and extraordinary events or transactions. In the year ended December 31, 2012, there were no events or transactions characterized as one-off or extraordinary events or transactions related to us or our business which materially influenced, or are expected to materially influence our financial statements and results of operations. 10.4. Discussion and analysis of a. Significant changes in accounting practices There were no significant changes in our accounting practices in the years ended December 31, 2012, 2011 and 2010. Our consolidated financial statements as of and for the year ended December 31, 2010, were the initial consolidated financial statements prepared and presented under Brazils CPC and IFRS. The consolidated financial statements were prepared and 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) . b. c. Significant effects of changes in accounting practices Qualifications and emphasis of matter paragraphs included in the independent auditors report There were no significant changes in our accounting practices in the years ended December 31, 2012, 2011 and 2010. The independent auditors report on our financial statements as of and for the years ended December 31, 2012, 2011 and 2010, includes, in each case, an emphasis of matter paragraph to the effect that the unconsolidated financial
statements were prepared in accordance with the accounting practices adopted in Brazil. In the case of BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros, these practices differ from IFRS applicable to separate financial statements only in relation to the measurement of investments in subsidiaries and associate entities accounted for under the equity method, since IFRS would require them to be carried at cost or fair value. Our opinion is not qualified with respect to this matter.
10.5. Critical accounting policies a. 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. Thus, given the we are a securities, commodities and derivatives exchange, both in legal nature and corporate purpose, and because of the nature and objectives of our financial investments, Management typically determines that we recognize our financial investments as financial assets designated at fair value through profit or loss upon 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. They are classified as derivative financial instruments under current assets. A gain or loss on a financial asset classified at fair value through profit or loss results from changes in fair value, and is recognized as 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, 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 substantially comprise trade accounts receivable. Loans and receivables are measured at amortized cost on an effective interest rate basis, net of impairment charges.
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 not classified under 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 measured 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 holding (unrealized) gain or loss from changes in fair value is recognized in comprehensive income, in a fair value adjustment account, and recognized through profit or loss 82
when realized upon a sale or impairment of the relevant available-for-sale financial asset.
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.
(ii)
Derivative instruments and hedging activities
Derivatives are recorded at fair value on initial recognition, as of the date of the derivatives instrument, and are subsequently measured at fair value, with changes in fair value recognized through profit or loss, except where a derivative is designated as net investment 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 in the statement of income. 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.
(iv) Testing hedge effectiveness (hedge of a net investment in a foreign operation)

Under CPC 38 (IAS 39) we are required to assess the hedge effectiveness periodically by conducting retrospective and prospective effectiveness 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 our senior notes principa l amount to cumulative gain or loss on the net investment in a foreign operation over the relevant period. On testing forward-looking effectiveness, we adopt stress scenarios which we apply to the hedged variable (margin of effectiveness) in performing foreign currency sensitivity analysis to determine degree of sensitivity to changes in exchange rates. 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 is a gain recognized immediately through profit or loss for the period (as determined by the acquisition date). Goodwill is tested for impairment on an annual basis, and indications of potential impairment are reassessed at shorter intervals. Goodwill is stated at cost less impairment losses. Additionally, recognized impairment losses on goodwill are not subsequently 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, as identified based on operating segment.
Software and projects

Software licenses we acquire are capitalized at cost incurred and amortized over the estimated useful life. Software development or maintenance costs 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 over a one-year period, are recognized as intangible assets. Amortization expense is recognized in the statement of income unless included in the carrying amount of another asset. In such cases, the amortization of intangible assets used for development activities is included as part of the cost of the other intangible asset. Expenditures with development of software recognized as assets are amortized using the straight-line method over the software useful life. c. Associates - Step Acquisitions The cost of an associate acquired in steps is measured as the aggregate of the amounts paid in each transaction. 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 total book value of the investment is assessed for impairment by comparing carrying value and recoverable value (determined as the higher of selling value net of 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; 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. 83
Contingent assets whose realization is deemed to be probable, where 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; existing similar or issue-connected lawsuits; and court precedents. Contingent liabilities are recognized where a loss is assessed as probable, since this would imply probable outflow of funds for settlement of the obligation, provided a sufficiently reliable estimate of amount can be made. 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 our Company is discussing the legality, validity or constitutionality of certain taxes and charges. These are fully recognized 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 funds 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 tested for impairment on an annual basis, with indications of potential impairment again assessed at shorter intervals. Assets that are subject to amortization are tested 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. 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 relevant reporting date there has been a change in the estimates used to determine recoverable value. f. 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 forward-looking 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. The amounts recognized as income tax and social contribution assets and liabilities are offset only if there is a legally enforceable right to offset current tax assets against current tax liabilities and/or if the income tax and social contribution assets and liabilities correlate with income tax and social contribution levied by the same tax authority on the taxable entity, or different taxable entities, where there is intent to settle the balances on a net basis. g. Critical accounting estimates and assumptions i) Equity method of accounting We apply the equity method in accounting for equity investments concerning which we have 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 considers key factors as proportionate interest in the shares, representation at board level, whether or not we have a say in defining business guidelines, corporate and financial policies, or material intercompany transactions. With regard to the investment in the CME Group, their financial statements are originally prepared in accordance with the accounting principles generally accepted in the United States (US GAAP) and are adjusted to Brazilian accounting practices before applying the equity method. ii) Impairment of assets We test assets for impairment including in particular goodwill and fixed assets, on an annual basis or at shorter intervals if necessary. Impairment tests are conducted pursuant to the accounting practices set forth under subsection 10.5(b). iii) Recognition of financial instruments We classify financial assets under the following categories: (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 Our employees and executives and selected providers enjoy the benefit of a stock options plan. The fair value of these 84
options is recognized as expense in the period in which the option is granted. 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. v) Post-retirement healthcare plan The obligations with the healthcare plan depend on actuarial calculations based on multiple assumptions. Changes in these assumptions could affect the carrying value of the obligations with the healthcare plan. 10.6. Financial reporting internal controls a. Degree of effectiveness of the internal controls; deficiencies and corrective actions. The improvements and automation of internal control processes under responsibility of the financial department were consolidated over the course of 2012, giving Management more efficient and reliable tools to better control expenses and prioritize projects. The initiatives we implemented over the year include highlights as a development of a new ERP system (enterprise resource planning) using a SAP AGs integrated solution. Implemented in January 2013, the new system allows for automated control of the opex and capex budget and sustained improvement of management mechanisms for the operating expenses and capital expenditures, the internal payment policies; and procurement activities and activity based costing methods. 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 improvements 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. Use of offering proceeds. See subsection 10.1(f) of this form. 10.8. Material 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 subsection 10.9 below. (i) operating lease transactions (as lessor or lessee) There are no material off-balance sheet items. In particular, we have no material operating lease transactions undisclosed in our consolidated financial statements. (ii) obligations retained, risk supported under written off pools of receivables (and related liabilities) No pools of receivables have been written off over which we have retained obligations or incurred risk. (iii) commitments to purchase or sell products or services in the future There are no material off-balance sheet items. In particular, we have no material purchase or sale commitments undisclosed in our consolidated financial statements. (iv) unfinished construction contracts We have no construction contracts undisclosed in our financial statements. (v) take-out financing commitments We have no take-out commitments agreed with any parties. b. Other off-balance sheet arrangements Our Settlement Bank (BM&FBOVESPA Settlement Bank) manages the 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$179,440 thousand at December 31, 2012 (versus R$212,968 thousand and R$173,365 thousand at year-end in 2011 and 2010, respectively). In addition, in the course of their business the Settlement Bank provides financial services and frequently operates as custodian for financial assets (including within the scope of services and local legal representation provided for nonresident investors). Set forth below is summary information on the financial value of assets held in custody by the Settlement Bank at December 31, 2012 and the comparative years of 2011 and 2010, respectively. Securities held in custody on behalf of nonresident investors totaled R$154,911 thousand (versus R$117,815 thousand and R$118,610 thousand, respectively); Agricultural securities registered with the custody registration system operated by our Company totaled R$15,079 thousand (versus R$16,216 thousand and R$51,216 thousand, respectively). 85
10.9. Discussion of off-balance sheet items (i) how off-balance sheet items could impact or change revenues, expenses, interest expenses, results of operations and other balance sheet line items. (ii) nature and purpose of the off-balance sheet arrangements (iii) nature and amount of obligations undertaken and rights arising from off-balance sheet arrangements Central counterparty risk BM&FBOVESPA operates four central counterparty clearing facilities, which the Central Bank considers to perform systemically material roles. We call them (i) derivatives clearing house (for transactions carried out on futures, forward, options and swap markets); (ii) FX clearing house (for spot FX market transactions); (iii) bonds clearing house (transactions in, or based in government bonds, notes and treasury bills carried out on cash and forwards markets, in addition to repo transactions and lending and borrowing transactions); and (iv) equities and corporate debt clearing house (it provides clearance and settlement for transactions carried out on cash, forwards, options and futures markets for equities, equity securities and equity-based derivatives and corporate debt securities, and handles securities lending and borrowing transactions). Through these clearing facilities, BM&FBOVESPA acts as central counterparty to ensure multilateral clearing and settlement (CCP) for transactions carried out on these markets. This means that in acting as central counterparty we ensure full completion to transactions carried out or registered in our trading and registration systems and, therefore, to a substantial portion of all trading activity taking place in the domestic capital markets. Our 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 risk 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 modeling and managing CCP risks, we focus on calculation, control and mitigation of credit risk related to clearing participants. 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 in case of default, including collateral pledged by market participants as margin or oth erwise, special funds designed to cover losses, and co-liability undertaken by brokers and clearing agents regarding transactions they intermediate or clear. To a large extent, each of these safeguard structures adopts a defaulter pays model, meaning a l oss-sharing arrangement whereby each participant is required to collateralize, to a high degree of reliability, any exposures it creates for other participants, such that losses possibly resulting from a partys default are borne by the defaulting party. T hus, margin requirements, margin calls and other collateral we may require market participants to post are key elements of the structure by which we manage risks associated with our role as central counterparty clearing house. Transactions carried out on our markets are typically secured by collateral pledged as margin in the form of cash, government bonds and treasury bills, corporate debt securities, bank letters of guarantee and stocks, among other things. At December 31, 2012, the aggregate financial value of cash and other collateral pledged to our clearing houses totaled R$176,481,916 thousand (versus R$178,556,455 thousand and R$143,087,657 thousand at December 31, 2011 and 2010, respectively), with all cash collateral registered in the collateral for transactions line item under current liabilities in our balance sheet, whereas the remainder, i.e., non-cash collateral amounting to R$175,347,681 thousand (versus R$177,055,433 thousand and R$142,133,052 thousand at year-end in 2011 and 2010, respectively), was registered in offbalance sheet non-cash collateral accounts. For additional information on collateral pledged to our clearing houses and our safeguard structures, see Note 17 to our Financial Statements as of and for the year ended December 31, 2012. 10.10. Business plan. a. Investments. (i) Quantitative and qualitative description of ongoing and planned investments.
Since early 2010 we have been investing heavily in setting up a streamlined, efficient, modern technology infrastructure, with IT resources to match, with the aim of establishing a solid foundation on which to capture growth opportunities to better execute our strategy and build our future. These capital expenditures should further boost our strategic position and sharpen our competitive edge. Our 2010-2014 strategic growth plan calls for R$1.2 billion worth of investments, of which R$258,363 thousand, R$204,041 thousand and R$268,362 thousand were implemented in 2012, 2011 and 2010, respectively. The larger part of this plan consists of investments in technology. Moreover, we have redoubled our focus on identifying and pursuing new growth opportunities in Brazil and elsewhere, including through international partnerships; on investing in financial education to form an investment-minded middle class so as to widen the capital markets penetration; on widening the issuer base by promoting equity financing as one of the cheaper and more flexible sources of finance, on developing new products and markets to meet or anticipate demand as trading strategies become more elaborate and the capital markets grow. Additionally; we plan to strengthen our relationship with customers, our socially responsible investing initiatives and the regulatory framework for issuers, as well as to bolster market surveillance. Furthermore, we firmly believe in BM&FBOVESPAs potential for growth and a have clear understanding of the important role 86
our Exchange performs as a driver of strength and development for the Brazilian capital markets. We strongly believe our investments in technology, in market development and a wider range of products and services are key factors to improve the quality of the services we offer, and to strengthen and enhance the transparency of the Brazilian capital markets. Technology Developments BM&FBOVESPA aims to offer prime information technology resources and excellence in information technology services to customer market participants and investors. To this end, our investments in multiple IT projects in over 2012, 2011 and 2010 totaled R$231,722 thousand, R$183,444 thousand and R$219.261 thousand, respectively. The discussion below highlights the main projects on whose implementation we have been working.
The PUMA Trading System, our new multi-asset class trading platform.
In the first half of 2010, consistent with our partnership agreement with the CME Group, we 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 co-owned by our Company and the CME Group. The PUMA Trading System will ultimately replace our existing trading systems. 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 the second half of 2011 we completed the implementation of the first stage of the PUMA project, comprising the derivatives and spot forex module, which is now fully operational. And late in 2012 we completed the development stage and internal testing of the equities module of out PUMA Trading System. Now, production testing is ongoing, with mock trading sessions being conducted with the participation of market participants. The equities module is set to implement in the first half of 2013.
Integrated Central Clearing Facility.

Since completing the integration of the two formerly independent local exchanges into BM&FBOVESPA, one of our more important projects has been to combine the four clearing houses (equities and corporate debt securities; derivatives, forex, bonds) we operate into a single, fully-integrated, central clearing facility. Our new central clearing facility has been planned to give us highly efficient, multi-asset, multi-market, integrated risk management capabilities, allow for cross-margining, and improve risk management processes and the management of cash and other collaterals pledged by market participants, so we have the ability to offer highly solid and efficient clearing and settlement services to market participants and investors. The project made headway in the last quarter of 2011, when we announced a partnership with Cinnober, a Sweden-based global provider of advanced financial technology, which will include a perpetual license for use of TRADExpress RealTime Clearing, their high performance, multi-asset, clearing and real-time risk management system. The RealTime Clearing system (RTC system) will be the backbone our future multi-asset, multi-market, integrated clearing facility for its technologically innovative, high performing capabilities, high capacity, stability and security features. Then, late in 2012, we announced the launch of our Post-Trade Integration Program (Programa de Integrao da PsNegociao - IPN) in connection with the upcoming creation of our multi-market central clearing facility, which will be based on CORE, or CloseOut Risk Evaluation, our new, pioneering, purpose-developed central counterparty multi-asset, multi-market, risk management framework, and the lynchpin of a solid risk management system architecture, with performance to match the RTC system. In addition, our derivatives clearing house is set to migrate to the new infrastructure at the beggining of 2014, whereas equities clearing activities are expected to complete the migration stage by end-2014. We are required to obtain regulatory approval to implement the IPN-CORE project.
New Data Center

We have been making substantial investments in our technology infrastructure, as part of our efforts towards reorganizing and streamlining our data centers to benefit from a truly modern, efficient, safe and high-performing technology platform, which is better prepared to support our future growth. We centered our strategy on two primary data centers, one designed for our trading systems and applications, the other planned to house our post-trade systems and applications. One such data center has been operational since June 2010 after having relocated, along with some of our IT team, to a leased high-capacity hosting facility. The other data center will be a brand new, especially planned and designed facility, custom-made to meet our specific needs and demands. The construction of our new data center began late in 2012 and is set to complete by late 2013, when we plan to start the equipment relocation and migration phase.
New OTC trading platform for derivatives and fixed-income securities

In November 2011, in the context of our project for a new, streamlined, state-of-art OTC platform for over-the-counter derivatives, we announced a partnership with Calypso Technology, Inc., a global application software provider of an integrated suite of trading and risk applications to financial and capital market institutions. The Calypso system will give us a new operating model for registration and treatment of OTC transactions, risk calculation and collateral management, while offering nimble, flexible and cost efficient features and capabilities, fit to meet regulatory requirements and market demands. Early in 2013 we began the certification process for the first stage of the new OTC platform, meaning the module for registration and treatment of transactions in currency non-deliverable forwards (of the unsecured category). Following the certification, market participants will be asked to test the system functionalities before it launches, which is set to take place in the second quarter of 2013. In addition, we are in the process of developing a platform for registration and treatment of transactions in fixed-income securities. The first two modules, for transactions in bank deposit certificates ( certificados de depsito bancrio, or CDBs) and in real estate credit bills (letras de crdito imobilirio, or LCIs), are set to implement in the first half of 2013. 87
(ii) sources of financing for these investments. The primary source of funds we currently use to finance our strategic investment plans is operating cash flow. We may also consider alternative sources of financing, such as bank loans or a government or development bank financing program, or we may elect to source funds by accessing the domestic or international capital markets. In 2010, with the aim of sourcing funds with which to pay for an additional interest in CME shares, we carried out a cross-border offering of global senior notes. We have since been funding our project with our operating cash flow. (iii) planned and ongoing material divestments. Not applicable, as there have been no, and there are no material divestments being considered or ongoing. 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 started the
joint development of our PUMA Trading System, a multi-market, multi-asset class trading platform which will ultimately replace the four existing trading systems.
Purchase of land for the new data center. In 2010 we purchased a 20,000 square meter plot of land in Santana do Parnaba,
state of So Paulo, Brazil, where since November 2012 our new data center has been under construction. Construction of this new facility is set to complete by end-2013.
Integrated central clearing facility. We announced in the last quarter of 2011 a partnership with Cinnober, which will include a
perpetual license for use of TRADExpress Real Time Clearing to advance our central clearing facility project. The module for clearing and settlement of financial and commodity derivatives is set to implement in 2014.
Expansion and modernization of OTC trading platform. In second half of 2011 we announced a partnership with Calypso
Technology for the licensing and development of a platform for registration and treatment of transactions in OTC derivatives. This new OTC platform is set to implement in the second half of 2013. c. new offerings of products and services, including: (i) previously disclosed and ongoing product research.
Not applicable, as our ongoing research studies relate to projects discussed under subsection 10.10(c)(iii) below. (ii) total expenses incurred in research for development of new products or services. Not applicable, as our expenses with research studies are discussed under subsection 10.10(c)(iv) below in connection with our ongoing projects. (iii) previously disclosed and ongoing development projects. PUMA Trading System, our new multi-market, multi-asset class trading platform; Integrated central clearing facility, which will permit cross-margining, improve risk management processes and the management of cash collateral pledged by market participants; Construction of a new data center in Santana do Parnaiba, state of So Paulo; New OTC trading platform, a state-of-art platform which will give us a new operating model for registration and treatment of transactions in OTC derivatives, for risk calculation and collateral management, while offering nimble, flexible and cost efficient features and capabilities which will meet market expectations; New platform for registration and treatments of and fixed-income securities; Market making program for financial and commodity derivatives; Market making program for options on single stocks and stock indices. (iv) total expenses incurred in developing new products or services. Total capital expenditures over the course of 2012 amounted to R$258,363 thousand, where R$231,722 thousand have been invested in technology, as the new PUMA Trading System (our new multi-market, multi-asset class electronic trading platform), the first phase of the our central clearing facility project and development of CORE (CloseOut Risk Evaluation), and the projects for development and implementation of new platforms for registration and treatment of OTC derivatives and fixed-income securities, in addition to construction of our new data center. Total capital expenditures over the course of 2011 amounted to R$204,041 thousand, where R$183,444 thousand are investments in technology projects such as implementation of the derivatives and forex module of our new multi-asset class trading platform (PUMA Trading System), and the integration of our clearing facilities into a single central clearing facility. Total capital expenditures over the course of 2010 amounted to R$268,362 thousand, where R$219,261 thousand are investments in IT projects, such as development of a new multi-asset class trading platform, a joint cooperation with the CME Group within the scope of the global preferred strategic partnership we agreed in February 2010, and the expansion of throughput capacity in both segments, in addition to purchase of a plot of land for us to build our new data center. 10.11. Other factors which materially influence operating performance Other than as discussed elsewhere herein, there are no reportable factors which could materially influence our operating performance.
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11.
PROJECTIONS
a. the subject matter
11.1. Released estimates and assumptions On December 17, 2013, we released our operating expenses budgets (adjusted to eliminate depreciation expenses, provisions, expenses with stock option plan and taxes on dividends the CME Group paid to us) for 2014, between R$595 million and R$615 million, and revised our capex budget range for 2014, previously released on December 11, 2012, to R$230 million and R$260 million from R$170 million and R$200 million and estimate our 2015 capex between R$190 million and R$220 million. The budget ranges for 2013 for adjusted operating expenses is between R$560 million and R$580 million and capital expenditures between R$260 million and R$290 million. b. the time frame and valid time The 2013 budget was prepared for a 12-month time frame ending December 31, 2013. The 2014 budget was prepared for a 12-month time frame ending December 31, 2014. The 2015 budget was prepared for a 12-month time frame ending December 31, 2015. c. the underlying assumptions, including indication of those that may be influenced by Management and those that are beyond Managements control
Opex budget.
Our 2013 opex budget provides a forecast of expenses adjusted to eliminate depreciation and provision expenses, expenses with the stock options plan and taxes on dividends paid by the CME Group, and is in the same range of the 2012 budget, reflecting zero nominal growth. Therefore, it does not anticipate any increase in headcount throughout 2013. We will work towards deepening our internal controls and costs management (using a SAP AG solution integrated to our ERP system, see subsection 10.6(a) above) in order to offset the effects of salary increases due to promotion, changes in wages and the annual salary adjustments contemplated under our collective bargaining agreement with the unions. The 2014 budget includes primarily adjustments due to inflation in the period.
Capex budget. Our budget for 2013, 2014 and 2015 includes forecast estimates for capital expenditures related to investments
we expect to make in developing our IT infrastructure and platforms, as follows: d. Equities module of our new multi-asset class trading system (PUMA Trading System); Integration of all our clearing houses into a single, multi-market central clearing facility; Building of new data center; New OTC trading and registration platform; Improvements in IT infrastructure; Deepening initiatives (securities lending, market makers, pre-trade risk controls); Other capital expenditures. budget indicators
Our budget forecasts for capital expenditures and expenses may be influenced by Management. Our 2012 budget projects capital expenditures at an interval between R$230,000 thousand and R$260,000 thousand, and adjusted operating expenses at an interval between R$560,000 thousand and R$580,000 thousand. Our 2011 budget projects capital expenditures at an interval between R$180,000 thousand and R$210,000 thousand, and adjusted operating expenses at an interval between R$580,000 thousand and R$590,000 thousand. Our 2010 budget projects capital expenditures at an interval between R$250,000 thousand and R$272,000 thousand, and adjusted operating expenses at an interval between R$540,000 thousand and R$545,000 thousand. 11.2. Monitoring and revisions of budget projections a. identify updated projections and repeat included herein The same kind of capex and opex budgets we released in 2010, 2011 and 2012 were prepared and released for 2013, 2014 and 2015, pursuant to updated projections and forecasts. b. comparison of estimates versus actual data for prior periods; reasons leading to budget deviations, if any.
Our 2012 capital expenditure budget was set at an interval between R$230,000 thousand and R$260,000 thousand, whereas the budget for adjusted operating expenses was set at an interval between R$560,000 thousand and R$580,000 thousand. Ultimately, actual capex amounted to R$258,363 thousand and actual adjusted opex totaled R$563,487 thousand, in either case within the budget range. Our 2011 capital expenditure budget was set at an interval between R$180,000 thousand and R$210,000 thousand, whereas the budget for adjusted operating expenses was set at an interval between R$580,000 thousand and R$590,000 thousand. Ultimately, actual capex amounted to R$204,041 thousand and actual adjusted opex totaled R$584,521 thousand, in either case within the budget range. Our 2010 capex budget was set at an interval between R$250,000 thousand and R$272,000 thousand, while the adjusted opex budget was set at an interval between R$540,000 thousand and R$545,000 thousand. Ultimately, actual capital expenditures amounted to R$268,362 thousand and actual adjusted operating expenses totaled R$543,881 thousand, in either case within the budget range. 89
c.
report and explain, as the case may be, sustained and revised projections for the current period as of the date of this form
As of the date of this reference form, our 2013, 2014 and 2015 budgets forecasts stand unchanged.
12.
SHAREHOLDERS MEETING; MANAGEMENT

a.
responsibilities of each administrative body and committee;
12.1. Administrative structure 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 budgets, 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; (c) monitoring 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 shareholders' 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' meeting the proposal for allocation of net income for the year; (g) giving 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 budget, except liquidity facilit y 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 approval for investments in excess of the reference amount, if not contemplated in the annual budget; (i) granting approval for any loan, financing, issuance or cancellation of simple, nonconvertible 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 approval fo r 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 amendm ents 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 acting as central counterparty to settlement transactions related to our or a subsidiarys clearing and se ttlement 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 auditors, 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; and (v) within fifteen days after the announcement of any type of tender offer initiated for shares issued by us, expressing and disclosing to the market a reasoned opinion advising shareholders on the timing and convenience of the bid, its impact on our business interests and other factors related to the bid. 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 b y us or a subsidiary; (b) approving rules related to listing, suspension and delisting of securities and contracts, and relevant issuers or writers ; (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, in addition to regulating the operations and composition of the Ethics Committee a nd 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 ; (g) deciding on whether to suspend or cancel access permits, in addition to reviewing 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 , which adversely affects regular market operations, promptly giving notice of the decision 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 90
ensure the regular course of business and fulfill our corporate purpose, and (c) coordinate the activities of our subsidiaries. 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 participant s in our clearing facilities and organized OTC markets, and ordering appropriate action; (ii) setting the operating, credit and risk limits attributable to participants in registration or clearing facilities; (iii) defining processes for common adoption by registration and clearing facilities, and for their integration with our trading systems, risk 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. For the composition of this committee, see the information under section 12.7 of this Form.
Compensation Committee. The primary responsibilities of the compensation committee include evaluating and
adjusting our compensation guidelines, standards and policy, including as to benefits for directors, committee and management members. For the composition of this committee, see the information under section 12.7 of this Form.
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. For the composition of this committee, see the information under section 12.7 of this Form.
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. For the composition of this committee, see the information under section 12.7 of this Form.
Advisory Committee for the Securities Intermediation Industry . The primary responsibility of this committee is
evaluate issues that affect the intermediaries institutions that take part in the markets managed by BM&FBOVESPA and proposes suggestions to the Board with the aiming of contribute to the strengthening of these institutions. For the composition of this committee, see the information under section 12.7 of this Form.
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 guidelines 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. For the composition of this committee, see the information under section 12.7 of this Form.
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. date the fiscal council was established (if not a permanent body), and the dates on which committees were established;
Our fiscal council has not been active since our incorporation. We take the view that the absence of an active fiscal council is adequately fulfilled by our audit committee because it has been conceived and established with responsibilities (listed under article 47 of our Bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corporate Law. As with our compensation committee and nomination and governance committee (both previously comprising one body named compensation and nomination committee), our audit committee was established at the extraordinary shareholders meeting held on May 8, 2008, whereas our risk committee was established at a board meeting held on May 12, 2009. The Executive Market Risk Committee was created on May 8, 2008. Additionally, at a meeting held on March 5, 2013, the board of directors established the Advisory Committee for the Investment Intermediation Industry. 91
c.
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 fo cus, (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 mulling 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 establishes the related improvement action plan.
d. 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, 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 th eir role, responsibilities, composition and operating regulation; (h) set prices, fees, commissions and other dues payable by participants holding permits for access to our markets and by other parties, as compensation for our offerings of products and ser vices provided in connection with our core business activities, including our regulatory and surveillance activities, auditing and grading activities; (i) submit to our board proposals on regulatory, operational, clearance and settlement rules to regulate market activities and 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) in certain instances contemplated in the access regulation and other rules enacted by our board of directors, and in the event of suspected violation of the code of ethics, to take the cautionary measure of suspending the access permit of recalcitrant participants (for no more than ninety days) whereas promptly communicating the suspension to the CVM and the Central Bank; (o) prevent the completion of transactions entered in our trading, registration, clearing and settlement sy stems where there are indications of violation of the legislation and regulations which we are responsible for surveilling and enforcing; (p) cance l transactions entered or registered in our trading, registration, clearing and settlement systems, as long a s 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 trading, 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 markets operated by us; and (s) forward to the CVM timely information and reports related to transactions entered or registered in our trading, registration, clearing and settlement systems.
Chief Financial and Corporate Affairs Officer. The chief financial officer accumulates responsibilities as officer for
corporate affairs. As such, this officers responsibilities include (a) planning and preparing yearly and multi-year budget forecasts, work plans and capital expenditure plans; (b) controlling the execution of yearly and multi-year budgets; (c) managing and investing financial resources, and supervising the performance of these activities by our subsidiaries; (d) directing and managing our accounting, financial planning and taxation departments; (e) managing the provision of administrative services required by our business, in particular with regard to contract management, asset management, asset security, supplies and logistics, engineering and maintenance; (f) supervising the legal team in connection with legal advice on corporate, litigation and tax matters, as well as regarding our regulatory activities; and (g) supervising the activities of the issuer regulations department as relating to the processing and analysis of listing applications, issuer compliance with disclosures and reporting requirements, issuer compliance with listing regulations. We should note the Nominations and Governance Committee (a standing board advisory committee) has the prerogative of monitoring the activities of the issuer regulations department with the aim of mitigating the potential for conflicts resulting from our capacity as a self-listed company.
Chief Operations Officer. The chief operations officer accumulates responsibilities as chief officer for trade and post-trade
operations. As such, this officers authority and responsibilities include (a) directing, managing trade operations and monitoring the connectivity to our electronic trading platforms (b) directing and managing all clearing activities for the 92
equities, derivatives, fixed-income, commodities and foreign exchange markets, supervising activities at public offerings, including clearing and settlement related thereto; (c) directing and managing services at our central securities depository and custody activities provided for equities, fixed-income securities, gold and agricultural securities registered or deposited with our central securities depository and our other custody systems; (d) directing and managing our activities as central counterparty clearing house; and (e) managing the processing applications for permits for access to our markets and the markets operated by the Brazilian Commodities Exchange ( Bolsa Brasileira de Mercadorias ), our subsidiary.
Chief Product and Investor Relations Officer. The chief product and investor relations officer is responsible for (a)
coordinating the research and development of new products and trading structures; researching market needs in cooperation with market participants, regulatory entities and private capital market institutions; (b) promoting market efficiency and market education in cooperation with market participants, regulatory entities and private capital market institutions and developing solutions to tackle technical hurdles; (c) establishing guidelines for business development activities in local and international markets, (d) identifying and designing strategies for new business opportunities and establishing business relationships with market participants seeking to expand distribution channels; and (e) interfacing with customers for our products and services; (f) managing reporting and disclosure activities, and acting as primary interface between our Company and the shareholders, the CVM, the market, other exchanges and markets on which Company securities trade, and ensuring we keep current registration information as required by applicable CVM regulation, in addition to directing and managing compliance with other regulatory requirements.
Chief Technology and Information Security Officer. The chief technology and information security officer directs and
manages our information technology and information security activities, and is responsible for our technology infrastructure, as well as for (a) managing and 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.
e. 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 pro ject 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 short term 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 directors, 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 performance of committee members, as each of their overall performance is evaluated as discussed above. In addition, while we have no mechanisms for individual evaluation of directors, t heir performance as a collective body is evaluated pursuant to the process discussed above, in item c of this subsection. 12.2. 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 sharehold ers 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 exist ing 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 amount 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 consolidation 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. 93
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;
At this time we adopt no particular mechanism or policy to detect and identify instances where the interests of a shareholder may entail conflict with our interest on 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 having some of our senior management members act as proxies for shareholders who wish to appoint them giving voting instructions on how they are to vote their 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 corporate documents that prove authority for the granting of proxies (or powers of attorney). However, we do not require 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 available 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 other general meetings held since then, 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 P rovisional Measure No. 2200-2 dated August 24, 2001.
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 for published notices, documents and other releases required under Brazilian Corporate Law.
2012 Event Notice of release of financial statements Publication date(s) Not published March 15, 2013 March 18, 2013 March 19, 2013 March 15, 2013 March 16, 2013 March 19, 2013 Newspaper(s) N/A Publication date(s) Not published February 23, 2012 February 24, 2012 February 27, 2012 February 23, 2012 February 24, 2012 February 25, 2012 2011 Newspaper(s) N/A Publication date(s) Not published March 18, 2011 March 21, 2011 March 22, 2011 March 18, 2011 March 19, 2011 March 22, 2011 2010 Newspaper(s) N/A
Call notices for annual shareholders meetings
Valor Econmico
Official Gazette of the State of So Paulo
Valor Econmico
Valor Econmico
Date of the meeting Minutes of the annual shareholders meeting that judged the financial statements
April 15, 2013, 11 am April 16 2013
March 27, 2012, 10 am March 29, 2012
April 18, 2011, 3 pm April 20, 2011
Valor Econmico
Valor Econmico
Valor Econmico
April 16, 2013
March 29, 2012
April 20, 2011
February 20, 2013 Financial statements February 20, 2013
Valor Econmico
February 15, 2012
Valor Econmico
February 18, 2011
Valor Econmico
February 15, 2012
February 18, 2011
94
12.4.
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. A majority of our directors must be independent directors. Our directors must not accumulate duties as our officers or 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 directors 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 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.
2012 February 14, 2012 March 27, 2012 May 10, 2012 June 26, 2012 August 7, 2012 September 13, 2012 October 3, 2012 November 6, 2012 December 11, 2012 -
2011 February 17, 2011 April 19, 2011 May 5, 2011 May 12, 2011 June 16, 2011 August 9, 2011 September 1, 2011 September 20, 2011 November 8, 2011 December 13, 2011
-
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
-
b.
provisions in shareholders agreements (if any) restricting or otherwise tying the voting rights 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 shareholders 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) 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; 95
(b) 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 (c) 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 rulebook. While for the most part our board is composed by independent directors, the interests of all our directors are in line with our interests. 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 Ruling 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 chairman 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 direct or must not vote or take part in the decision-making process regarding the pertinent matter. Additionally, should a director who could potentially ascertain a personal gain from any given decision choose to silence about a conflict of interest, any informed peer may unveil 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 Novo Mercado listing agreement or the Novo Mercado listing rules and sanctions regulation, 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 are to be conducted by the Market Arbitration Chamber under its rules. 12.6 and 12.8. Composition of the board of directors, board of executive officers and fiscal council; professional experience of directors, executive officers and fiscal council members Board of Directors
Alfredo Antnio Lima de Menezes Age Profession Taxpayer ID (CPF) Position Election date Investiture date Term of office 50 Banker 037.958.008-03 Director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that Andr Santos Esteves 43 System Analyst 857.454.487-68 Director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that Candido Botelho Bracher 54 Business Administrator 039.690.188-38 Director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that Claudio Luiz da Silva Haddad 65 Industrial and mechanical engineer 109.286.697-34 Independent director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that Jos de Menezes Berenguer Neto 46 Bachelor of Laws 079.269.848-76 Director April 15, 2013 April 15, 2013 Through to the date of the annual meeting
Charles P. Carey 58 Manager Director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that
96
convenes to judge the 2014 financial statements convenes to judge the 2014 financial statements convenes to judge the 2014 financial statements convenes to judge the 2014 financial statements convenes to judge the 2014 financial statements that convenes to judge the 2014 financial statements Advisory Committee for the Securities Intermediation Industry coordinator; Nominations and Governance Committee member; Compensation Committee member No
Other positions
Risk Committee member
Nominations and Governance Committee member; Compensation Committee member
Appointed by controlling shareholder
No
No
No
No
No
Jos Roberto Mendona de Barros Age Profession Taxpayer ID (CPF) Position Election date Investiture date 69 Economist 005.761.408-30 Independent director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that convenes to judge the 2014 financial statements
Luiz Fernando Figueiredo 49 Business Administrator 013.124.158-35 Independent director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that convenes to judge the 2014 financial statements Risk Committee coordinator; Advisory Committee for the Securities Intermediation Industry member No
Luiz Nelson Guedes de Carvalho 67 Accountant 027.891.838-72 Independent Director April 15, 2013 April 15, 2013 Through to the date of the annual meeting that convenes to judge the 2014 financial statements
Marcelo Fernandez Trindade 47 Lawyer 776.785.247-49 Vice Chairman (Independent director) April 15, 2013 April 15, 2013 Through to the date of the annual meeting that convenes to judge the 2014 financial statements
Pedro Pullen Parente 60 Business Executive 059.326.371-53 Chairman; (Independent director) April 15, 2013 April 15, 2013 Through to the date of the annual meeting that convenes to judge the 2014 financial statements Governance and, Compensation Committee coordinator; Compensation Committee coordinator; Risk Committee member No
Term of office
Other positions
Risk Committee member
Audit Committee coordinator
Appointed by controlling shareholder
No
No
No
The following is a brief biographical description of the directors. Pedro Pullen Parente (Chairman; Independent director)
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, B udget 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 Fernando 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, SBR and Ita Unibanco. 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. He is currently a director of Ita Unibanco. 97
No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Marcelo Fernandez Trindade (Vice Chairman; Independent director) 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. Previously, he was a partner at the law firms of Cardoso, Rocha, Trindade e Lara Resende Advogados (1994 1998) 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 director of Globex Utilidades S.A. (2008-2009). No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Alfredo Antnio Lima de Menezes (Director) Mr. Menezes holds a graduate degree in business administration from Faculdades Integradas Tibiri-(FATI), Brazil. Early in his career (1985) he joined Banco BCN as a junior trader and may his way up to executive officer. Mr. Menezes is a former department head of Banco Bradesco S.A, (from 2001) and served as its assistant executive officer between December 2010 and January 2012, when he was elected to serve as executive managing. Mr. Menezes is a member of the governing board of the Bradesco Foundation. He is currently a member of the board of directors of the Institute of Digestive Disease and Nutrition Foundation (Fundao Instituto de Molstias do Aparelho Digestivo e da Nutrio FIMADEN); Chairman of the Fixed-Income, Currencies and Derivatives Advisory Committee of BM&FBOVESPA, and a member of the Advisory Committee for Securities, Currencies and Bonds Clearing Houses of BM&FBOVESPA. Previously, Mr. Menezes was a Vice Chairman of the Operating and Ethics Committee and a director of the Brazilian Financial Markets Association ( Associao Nacional das Instituies do Mercado Financeiro ANDIMA); a director of CentralClearing de Compensao e Liquidao S.A., and a member of the Deliberative Committee of the Brazilian Association of Real Estate Loans and Savings Companies ( Associao Brasileira das Entidades de Crdito Imobilirio e Poupana ABECIP). No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Andr Santos Esteves (Director) Mr. Esteves holds a graduate degree (BS) in Computer Sciences from the Federal University of Rio de Janeiro. Mr. Esteves is the chief executive officer of Brazilian investment bank Banco BTG Pactual S.A. Previously of funding Banco BTG, he was the chairman and chief executive officer of UBS Pactual from 2006 to 2008. He served as global head of fixed income of UBS Investment Bank since August 2007 until 2008 and Global Head of FICC (Fixed Income, Currencies and Commodities) since October 2007. He held both positions until his departure from UBS in 2008. He work for 17 years at Banco Pactual until its sale to UBS in 2006. He joined the bank in 1989 and was its partner since 1993 and was its managing partner (executive committee member) since 2002. He served as a Member of the Board of BM&F - Bolsa de Mercadorias e Futuros (the Brazilian Mercantile and Futures Exchange) from 2002 to 2006. In the last five years, he served as executive officer of Pactual Asset Management S.A DTVM, of the brokerage firm Pactual Corretora de Ttulos e Valores Mobilirios S.A., and of Sistema Leasing S.A Arrendamento Mercantil. He served chief executive and chairman of the board of Banco BTG Pactual S.A, and global head of fixed income and global head of FICC (Fixed Income, Currencies and Commodities) of UBS AG; and director of the Brazilian Federation of Banks - FEBRABAN. 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), an assistant manager for exports at Braswey Indstria e Comrcio S.A. (1980) and foreign trade assistant at Port Trading S.A. (1979). 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 Peter 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, having performed a leading role in the 2007 merger of the CBOT and the CME. 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 spearheaded the transformation of CBOT, a member-run institution for more than 155 years, into a for-profit, NYSE-listed public company in 2005. 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. 98
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 Insper - Instituto de Ensino e Pesquisa, the principal shareholder of IBMEC So Paulo, and chairman of the board of directors and principal shareholder of the IBMEC Group, a higher education conglomerate. Additionally, he is a member of the boards of directors of the David Rockefeller Center for Latin American Studies of the Harvard University, of Hospital Israelita Albert Einstein, Ideal lnvest S.A. and Instituto Unibanco. Other positions in public companies. Mr. Haddad was a director of Petrobras (2002-2006). No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Jos de Menezes Berenguer Neto (Director) Mr. Berenguer Neto holds a Bachelor of Laws (LLB) degree from the Pontifical Catholic University of So Paulo (1989). He has been appointed to serve as Chief Executive Officer of JP Morgan Brazil from April 1, 2013, and is the Chief Executive Officer of Gvea Crdito Estruturado (project finance). Previously, from 2007 and 2012, he worked for Banco Santander S.A., where he served as lead executive of the Santander segments for retail customers, private banking, asset management, global markets and products. He also served as a member of their executive committee and, until September, 2012, as a member of the board of directors of Banco Santander Brasil. Between 2002 and 2007, he served as Executive Vice President of the Corporate segment of Banco ABN-Real, where he was responsible for Global Markets, Private Banking, Products, Finance and the Asset-Liability Committee (ALCO). From 1999 to 2002, Mr. Berenguer Neto was an executive, and also member of the board of directors, at Banco BBA, being responsible for Balance sheet Management, Gapping, Proprietary Trading e Capital Markets. He was also a member of the Board of Directors. He also was co -founding partner at the Utor Investment Group. From 1997 to 1998 act as Co- Head of Emerging Markets and High Yield Fized Income of Banco ING New York, as member of executive committee of Corporate and Private Baking, and also act as member of the Regional Management Committee of the Americas. From 1994 to 1997 serves as Director of ING Barings Brasil in Head of Fixed Income, Equities Trading, Sales and Research. Also, Mr. Berenguer Neto was member of the Board of Directors of Gvea Investimentos S.A, of FEBRABAN, ANBIMA, Fudandao Brasileira de Proteo da Juventude e Infncia, and of Emerging Markets Traders Association. Further, he was Vice-President of Federao Bancria Brasileira Treasury, from 2000 to 2002. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Jos Roberto Mendona de Barros (Independent director) 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. Luiz Fernando Figueiredo (Independent director) Mr. Figueiredo holds a graduate degree in business administration, with specialization courses in Finance from Fundao Armando lvares Penteado (FAAP). He was formerly a Professor of the MBA program of the same institution. Mr. Figueiredo is a co-founder and the head managing partner of Mau Sekular Investimentos. He also serves as director of the Brazilian Financial and Capital Markets Association (Associao Brasileira das Entidades dos Mercados Financeiro e de Capitais ANBIMA) and its executive officer, and serves as director of Companhia Brasileira de Distribuio. Previously, he served as Chairman of Association of Capital Market Investors (Associao de Investidores no Mercado de Capitais AMEC), member of the board of BM&F (prior to its merger with BM&FBOVESPA), and member of the board of Indstrias Romi. He was founder of Gvea Investimentos, and a partner and executive officer Banco BBA. Between 1999 and 2003, he served as Monetary Policy Director of the Central Bank of Brazil. He also served in various management roles at Banco Nacional, JP Morgan and other local brokerage firms, in a number of areas, including trading, currencies, commodities and equities. No judgment of guilty (final or otherwise) has been entered against any of our directors in any disciplinary or court proceedings. Luiz Nelson Guedes de Carvalho (Independent director) Mr. Carvalho holds graduate degrees in Economics from the School of Econom ics, Business and Accounting of the University of So Paulo (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; 99
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 Pronunciamentos Contbeis), or CPC, where he also serves as Vice Coordinator for International Relations. He serves 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 of the Chamber of Commerce Brasil-Canad, SP. In addition, Mr. Carvalho is 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 analyz es the 500 biggest and fastestgrowing 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 an d Reporting (ISAR), an UNCTAD/ONU 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 de Crdito Real de Minas Gerais, 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; a member of the Sustainability Committee of BM&FBOVESPA; Vice Pres idente at large da International Association for Accounting Education and Research IAAER; a member of the Audit Committee of BMF&BOVESPA. Previously, he was a member of the Board of Directors of XBRL International Inc. (2009 2011); 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); the Chairman of the IASB Standards Advisory Council (SAC) from July 2005 to December 2008; a 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. 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 60 Economist 614.304.988-20 Chief Executive Officer May 9, 2013 May 9, 2013 2 years No Ccero Augusto Vieira Neto 40 Economist 128.501.208-98 Chief Operations Officer May 9, 2013 May 9, 2013 2 years Market Risk Committee member No Daniel Sonder 37 Economist 283.092.178-03 Chief Financial and Corporate Affairs Officer May 9, 2013 July 1, 2013 2 years No Eduardo Refinetti Guardia 47 Economist 088.666.638-40 Chief Product and Investor Relations Officer May 9, 2013 May 9, 2013 2 years Market Risk Committee member No Lus Otvio Saliba Furtado 46 System Analyst 926.046.687-34 Chief Technology and Information Security Officer May 9, 2013 May 9, 2013 2 years No
Age Professional degree Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions Appointed by controlling shareholder
The following is a brief biographical description of the members of the 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). On deciding appeal No. 7530, the Appeals Board of the Brazilian Financial System (CRSFN), with grounds on article 11 of Law No. 6,385/76, reversed the earlier acquittal issued in CVM sanction proceedings No. 37/2000 to enter a judgment of warning against Mr. Edemir Pinto for oversight failure related to certain transactions in Ibovespa futures. Ccero Augusto Vieira Neto
Chief Operations Officer
Mr. Vieira Neto holds a graduate degree in economics from the school of economics of the University of So Paulo. He joined Brazilian Mercantile and Futures Exchange (BM&F) in 2001, where he served as executive officer for the BM&F clearing houses. At our company, prior to the merger with Bovespa Holding, he was head of derivatives clearing and risk management (2006-2008). Since July 2008 he was our chief operations and technology officer, responsible for trade and post-trade operations, the IT infrastructure and architecture, and IT external services. Since September 2011, became chief operations officer of BM&FBOVESPA, responsible trade and post-trade operations, including clearing houses and depository services. 100
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. Daniel Sonder
Chief Financial and Corporate Affairs officer
Mr. Daniel Sonder currently serves as a Managing Director and is responsible for the Structured Credit Funds area in the Asset Management Division of Credit Suisse, which he joined in 2006. Previously, between 2003 and 2006, he was a member of the cabinet of the So Paulo State Secretary of Finance. Earlier, between 2002 and 2003, he was assistant to the Director of Structured Products at the Brazilian National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econmico e Social), or BNDES, and held several positions at J.P. Morgan Chase from 1999 to 2001. Mr. Sonder holds a degree in Economics and Internacional Relations from TUFTS University and a masters degree in International Relations from the Fletcher School of Law and Diplomacy. Other positions in public companies. None at this time. 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 Product and 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 Campi nas (Unicamp) and a doctorate degree from the Economic Research Institute of the school of economics of the University of So Paulo (USP). Since June 2010 he is the chief financial and investor relations officer. 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), Deputy Secretary of Economic Policy of the Ministry of Finance, partner of Pragma Gesto de Patrimnio Ltda, an asset management firm, between June 2007 and May 2010 and was a professor at PUC-So Paulo (1990 to 1997). Other positions in public companies. Mr. Guardia is a former CFO and IRO of GP Investments and former chairman of the boards of directors of Banco Nossa Caixa and Cosesp (Insurance Company of So Paulo). He was previously a mebers of the boards of directors of Droga Raia, ETC Participaes S.A., Ideal Invest, CESP/EMAE, Sabesp, CTEEP, Cosipa and the state savings and loans bank (Banco Nossa Caixa). He was also afiscal council member at Banco do Brasil, Sabesp and the Brazilian National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econmico e Social, or BNDES). 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 Technology and Information 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 S.A., 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. Fiscal Council The fiscal council is not active at this time. See subsection 12.12 below, under the heading Additional Reportable
Information Supplemental Information for Subsection 12.6 Fiscal Council.
12.7. Composition of standing committees established in the bylaws, and the audit, risk, finance and compensation committees. Audit Committee
Luis Nelson Guedes de Carvalho 67 Accountant 027.891.838-72 Committee coordinator June 13, 2013 June 13, 2013 June, 2015 Independent director Paulo Roberto Simes da Cunha 62 Accountant 567.047.048-68 External member June 13, 2013 June 13, 2013 June, 2015 Pedro Oliva Marcilio de Sousa 39 Lawyer 726.224.745-04 External member June 13, 2013 June 13, 2013 June, 2015 Srgio Darcy da Silva Alves 67 Financial Consultant 050.933.687-68 External member June 13, 2013 June 13, 2013 June, 2015 Member of the Regulation Committee(*) Tereza Cristina Grossi Togni 63 Accountant 163.170.686-15 External member June 13, 2013 June 13, 2013 June, 2015 -
Age Professional degree Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions
( )
* The Regulation Committee is a CEO advisory committee established to support Management on regulatory issues.
The following is a brief biographical description of the members of the audit committee.
Tereza Cristina Grossi Togni Ms. Grossi holds degrees in Business Management and Accounting Sciences from the Minas Gerais Catholic University (1977). 101
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 September 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. Luis Nelson Guedes de Carvalho Independent director. For biographical information, see subsection 12.8 above. 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. Pedro Oliva Marcilio de Sousa Mr. Sousa holds a graduate degree in Law from the Federal Univeristy of Bahia. In 1997, Mr. Sousa joined the law firm of Machado, Meyer, Sendacz e Opice Advogados where he was a partner from 2001 to 2005, when he left to serve a two-year term (2005-2007) as a Commissioner with the Brazilian Securities Commission (Comisso de Valores Mobilirios). He was also vice-president of the investment bank division of Goldman Sachs Banco de Investimento S.A. and served as managing director of Banco Standard de Investimento S.A., in charge of corporate acquisitions between 2009 and 2010. Since 2010 Mr. Sousa has been a managing director of BR Advisory Partners Participaes S.A. Other positions in public companies. None at this time. No judgment of guilty (final or otherwise) has been entered against any of our committee members in any disciplinary or court proceedings. 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 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. No judgment of guilty (final or otherwise) has been entered against any of our committee members in any disciplinary or court proceedings. Risk Committee
Luiz Fernando Figueiredo 49 Administrator 013.124.158-35 Committee Coordinator April 15, 2013 April 15, 2013 2 years Independent director Alfredo Antnio Lima de Menezes 50 Banker 037.958.008-03 Committee member April 15, 2013 April 15, 2013 2 years Director Jos Roberto Mendona de Barros 69 Economist 005.761.408-30 Committee member April 15, 2013 April 15, 2013 2 years Independent director Pedro Pullen Parente 60 Executive 059.326.371-53 Committee member April 15, 2013 April 15, 2013 2 years Independent director (Chairman)
102
Compensation Committee
Pedro Pullen Parente Age Professional degree Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions 60 Executive 059.326.371-53 Committee Coordinator April 15, 2013 April 15, 2013 2 years Independent director (Chairman) Claudio Luiz da Silva Haddad 65 Mechanical and industrial engineer 109.286.697-34 Committee member April 15, 2013 April 15, 2013 2 years Independent director Jos de Menezes Berenguer Neto 46 Bachelor of law 079.269.848-76 Committee member April 15, 2013 April 15, 2013 2 years Director
Nominations and Governance Committee

Pedro Pullen Parente Age Professional degree Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions 60 Executive 059.326.371-53 Committee Coordinator April 15, 2013 April 15, 2013 2 years Independent director (Chairman) Claudio Luiz da Silva Haddad 65 Mechanical and industrial engineer 109.286.697-34 Committee member April 15, 2013 April 15, 2013 2 years Independent director Jos de Menezes Berenguer Neto 46 Bachelor of law 079.269.848-76 Committee member April 15, 2013 April 15, 2013 2 years Director
Advisory Committee for the Investment Intermediation Industry

Jos de Menezes Berenguer Neto 46 Bachelor of law 079.269.848-76 Committee Coordinator April 15, 2013 April 15, 2013 2 years
Director, Compensation Committee member; Nominations & Governance Committee member
Age Professional degree Taxpayer ID (CPF) Position Appointmen t date Investiture date Term of office Other positions
Luiz Fernando Figueiredo 49 Administrator 013.124.158-35 Committee member April 15, 2013 April 15, 2013 2 years
Independent director; Risk Committee member
Carlos Arnaldo Borges de Souza 50 Administrator 006.031.278-51 External member April 15, 2013 April 15, 2013 2 years
Joaquim da Silva Ferreira 72 Executive 478.956.918-72 External member April 15, 2013 April 15, 2013 2 years
Julio de Siqueira Carvalho de Arajo 58 Banker 425.327.017-49 External member April 15, 2013 April 15, 2013 2 years
Caio Weil Villares 41 Engineer 258.999.908-99 External member September 17, 2013 September 17, 2013 2 years
Executive advisory committees

Market Risk Committee
Andr Eduardo Demarco 38 Business Administrator 157.259.718-64 Committee member May 13, 2009 May 13, 2009 Indefinite term
Products And Services Engineering Officer
Ccero Augusto Vieira Neto 39 Economist 128.501.208-98 Committee member May 8, 2008 May 8, 2008 Indefinite term
Chief Operations Officer
Marcelo Wilk 36 Economist 215.977.998-90 Committee member December 10, 2013 December 10, 2013 Indefinite term
Central Securities Depository and Transactions Registration Officer
Andr Monteiro d'Almeida Monteiro 41 Engineer 631.491.505-82 Committee member October 14, 2013 October 14, 2013 Indefinite term
Risk Management Officer
103
Eduardo Refinetti Guardia 47 Economist 088.666.638-40 Committee member Jun. 03, 2013 Jun. 03, 2013 Indefinite term
Chief Product and Investor Relations Officer
Age Profession Taxpayer ID (CPF) Position Appointment date Investiture date Term of office Other positions
Viviane El Banate Basso 35 Economist 267.030.438-92 Committee member July 05, 2011 July 05, 2011 Indefinite term
Settlement Officer
Mrio Palhares 39 Business Administrator 025.278.567-30 Committee member Febr. 18, 2014 Febr. 18, 2014 Indefinite term
Trading Officer
Eduardo Farias 37 Systems analyst 027.002.197-32 Committee member Febr. 18, 2014 Febr. 18, 2014 Indefinite term
Internal controls, compliance and corporate risk officer
12.9.
Marital relationships or domestic partnerships or family relationships (to the second degree) between :
a. the directors of the registrant
There are no marital relationships or domestic partnerships or family relationships (to the second degree) between any of our directors.
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 (to the second degree) between any of our directors and the directors of our direct or indirect subsidiaries.
c. (i) the directors of the registrant and direct or indirect subsidiaries, and (ii) the direct or indirect controlling shareholders (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.

d.
Not applicable, as we have no controlling shareholders. 12.10. Work or employment or service provision relationships (subordinate relationships) tying directors, officers, subsidiaries, controlling shareholders, other.
a. direct or indirect subsidiaries
There are no subordinate relationships (work, employment or service provision relationships) between any of our directors or officers and us or any of our wholly-owned or other subsidiaries.
b. c. direct or indirect controlling shareholders material suppliers, debtors, creditors and significant customers of the registrant, its subsidiaries, controlling shareholders, companies under common control.
Not applicable, as we have no controlling shareholders.
For information on subordinate or contractual relationships, see subsection 12.12 below, under the heading Additional
Reportable Information Supplemental Information for Subsection 12.10(c) Subordinate and Contractual Relationships with Our Affiliates.
12.11. Directors and officers liability insurance policies or indemnification agreements
We provide directors and officers (D&O) 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 policy is effective through January 04, 2014, but coverage for future claims regarding events preceding such date may in our discretion extend for an additional period covering up to 72 months. However, the policy renewal is not automatic, requiring notice of renewal being given. The premium we paid for a one-year coverage worth R$344.0 thousand (ending January 04, 2014) totaled R$100.000 thousand. 12.12. Additional reportable information
Adherence to the ABRASCA Code of Self-Regulation and Good Practices of Public Companies
On December 12, 2011, BM&FBOVESPA adhered to the ABRASCA Code of Self-Regulation and Good Practices of Public Companies ("ABRASCA Code"). In so doing, BM&FBOVESPA declared to abide by the principles and standards established in the ABRASCA Code, except with regard to the standard which calls for a Disclosures Committee to be established, as we have yet to formally create the Committee. Nonetheless, we should note our investor relations officer (as supported by other Company departments) is responsible for analyzing information related to us and ensuring we comply with existing legal and regulatory disclosure and reporting requirements. Moreover, in line wit h our Disclosures Policy, we do 104
plan to formally establish a Disclosures Committee.

Positions our directors hold in other companies or entities.
Pedro Pullen Parente, Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Parente is the Chief Executive Officer and
President of Bunge Brazil. He serves as chairman of the board of Unica and as directors of SBR.
Marcelo Fernandez Trindade, Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Trindade is a partner at the law firm of
Trindade Sociedade de Advogados and a director of Wilkers Participaes S.A. Alfredo Antnio Lima de Menezes, Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Menezes serves as Executive Managing Officer
of Banco Bradesco S.A., as member of the Board of Directors of the Institute of Digestive Disease and Nutrition Foundation (Fundao Instituto de Molstias do Aparelho Digestivo e da Nutrio FIMADEN); member of the Governing Board of the Bradesco Foundation. Andr Santos Esteves, Non Executive Director
Board or senior management positions held in other companies or entities. Chairman and Chief Executive Officer of BTG
Pactual S.A., Chief Executive Officer of BTG Pactual Holding S.A., Director and executive officer of BTG Pactual Participations Ltd., Vice Chairman of Banco Pan S.A. Also a member of the Board of Directors of BR Properties S.A., Universo Online S.A. and the Brazilian Finance and Real State S.A. and Member of the Board of the Fundao Estudar.
Candido Botelho Bracher, Non Executive Director
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 member of its board of directors since December 2008. He has been President of Itau BBA S.A. since 2005. Previously, he served as vice president of Unibanco Unio de Bancos Brasileiros S.A., which deregisted as a public company following the merger with Banco Ita in April 2009.
Charles Peter 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. He also serves in the management of Henning-Carey Proprietary Trading, LLC and as General Partner of Henning & Carey Trading Company. Additionally, Mr. Carey serves as President of the Chicagoland Sports Hall of Fame.
Claudio Luiz da Silva Haddad, Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Haddad is the president of Instituto Insper,
which owns and maintains the IBMEC So Paulo, and chairman of the board of directors of the IBMEC Group, a higher education conglomerate. He is a member of the board of directors of the David Rockefeller Center for Latin American Studies of the Harvard University, and of the boards of directors of Hospital Israelita Albert Einstein, of Ideal lnvest S.A and of Instituto Unibanco.
Jos de Menezes Berenguer Neto, Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Berenguer Neto serves as Chief Executive Officer of JP Morgan Brazil, is a member of the boards of Santos Futebol Clube (a football or soccer club), of Central de Exposio de Derivativos (a derivatives institute), a non-profit firm dedicated to enhance transparency of domestic derivatives,
and of New Ventures Brasil and the Akatu Institute.
Jos Roberto Mendona de Barros, Non Executive 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, serves as advisory committee member at the Brazilian Federation of Banks (Febraban) and as director of Tecnisa S.A. and of Banco Santander (Brasil) S.A.
Luiz Fernando Figueiredo, Non Executive Director
Board or senior management positions held in other companies or entities. Mr. Figueiredo serves as Head Managing Partner
of Mau Sekular Investimentos and as director of Companhia Brasileira de Distribuio S.A. He also serves as Director of the Brazilian Financial and Capital Markets Association (Associao Brasileira das Entidades dos Mercados Financeiro e de Capitais ANBIMA).
Luiz Nelson Guedes de Carvalho , Non Executive Director Board or senior management positions held in other companies or entities. Mr. Carvalho is serves as director of the Accounting, Actuarial and Financial Research Institute Foundation ( Fundao Instituto de Pesquisas Contbeis, Atuariais e Financeiras), or FIPECAFI, Member of the Brazilian Accounting Standards Board ( Comit de Pronunciamentos Contbeis ), or
CPC, representative at the Emerging Economies Group (EEG) of the International Accounting Standards Board (IASB) in London. He is also a member of the International Integrated Reporting Committee (IIRC), 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; assistant coordinator of the Strategic Committee of the XBRL-CFC Brazil project; vice chairman of the International Executive Committee of the International Association for Accounting Education & Research IAAER; director of Fundao Amaznia Sustentvel (Sustainable Amazon Foundation), a non-governmental organization; member of the Self-Regulatory Board of the Brazilian Federation of Banks (Febraban); managing partner of NISA Solues Empresariais Ltda. and Nisa Consultoria Empresarial Ltda.
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Supplemental Information for Subsection 12.2 Practices related to shareholders meetings .
The table below sets forth data on turnout information for shareholders' meetings held in the last three years.
Type of general meeting Annual shareholders meeting Extraordinary shareholders meeting Extraordinary shareholders meeting Annual shareholders meeting Extraordinary shareholders meeting Annual shareholders meeting Extraordinary shareholders meeting Extraordinary shareholders meeting Annual shareholders meeting Extraordinary shareholders meeting Extraordinary shareholders meeting Combined annual and extraordinary shareholders meeting Meeting date April 28, 2009 April 28, 2009 May 8, 2009 April 20, 2010 April 20, 2010 April 18, 2011 April 18, 2011 April 28, 2011 March 27, 2012 March 27, 2012 April 10, 2012 April 15, 2013 Convened on first or second call First call First call Second call First call First call First call First call Second call First call First call Second call First call Shareholder Turnout (% of shares issued and outstanding) 54.6% 54.6% 36.7% 36.8% 36.8% 50.0% 51.7% 41.2% 44.1% 44.2% 45.0% 40.4%
Supplemental Information for Subsection 12.6 Board of Executive Officers.
Mr. Eduardo Guardia will be acting as Financial and Corporate Affairs Officer through July 01, 2013, when Mr. Sonder is set to take office.
Supplemental Information for Subsection 12.6 Fiscal Council.
We take the view that the absence of an active fiscal council is adequately fulfilled by our audit committee because it has been conceived and established with responsibilities (listed under article 47 of our Bylaws) that overlap with those legally assigned 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 nominations 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 in either auditing and accounting and taxation or compliance and internal controls. They must also meet the independence standards set forth in article 46 of our Bylaws.
Supplemental Information for Subsection 12.10(c) Subordinate and Contractual Relationships with Our Affiliates.
Our director Charles P. Carey is also a director of the CME Group Inc., which holds a 5.1% ownership interest in our shares and has an order routing agreement with us. In addition, we hold a 5.1% interest in the shares of the CME Group. You should note that while the CME Group is an affiliate of ours, it is also a foreign company which has is not a local taxpayer and, thus, has no taxpayer ID (CNPJ) in Brazil. 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 PUMA (BM&FBOVESPA) platform; (ii) a technology agreement whereby we will cooperate in the development and implementation of a multi-asset class electronic trading platform; 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.
13. MANAGEMENT COMPENSATION

13.1 Compensation policy and practices regarding the board of directors, board of executive officers and other upper management members. a. objectives of the compensation policy or practices The aim of the compensation policy is to foster alignment between corporate objectives and managements as well as the staff s productivity and efficiency, whereas maintaining the Companys competitiveness in the exchange industry. b. compensation composition (i) compensation components and objectives of each o them Board of directors. The members of the Board of Directors are paid fixed monthly compensation. The board chair is paid an additional semiannual fixed amount equivalent to twice the compensation for a six-month period. As an exception, in the second half of 2012, we paid 50% of the additional compensation to the board chair and the other 50% to the vide chair. The purpose of a fixed compensation is to adequately remunerate the directors for participating in the meetings and company affairs, while the additional fee paid to the board chair is compensation for the additional responsibilities assigned to this office. Moreover, the shareholders convening in the combined annual and extraordinary shareholders meeting of April 15, 2013, approved a proposal to amend our stock options plans so as to adopt a specific mechanism by which stock option grants are to be awarded to our directors. You will find additional details on this proposal in subsection 13.4 below. Board of executive officers and other senior management members. Total compensation for executive officers and other senior management members comprises the following components: 106
Base yearly compensation comprising thirteen monthly payments which remunerate executives directly for the services provided, in line with market practices; Benefits including health and dental care plans, life insurance, meal tickets, retirement pension, company car, parking, medical check-ups, and company cell phone, all of which aims to provide an attractive package minimally compatible with industry standards for senior executives; Variable semiannual payments distributed under the companys profit-sharing program (PLR), in accordance with Law 10,101 dated December 19, 2000. The companys profit-sharing program (PLR) is based on a salary ratio formula tied to company earnings as well as individual job level and performance, aligning senior executives with the companys short- and medium-term results of operations; Long-term compensation structured as a stock options plan tied to company earnings, as well as individual job level and performance, to align the interests of senior executives with those of our company on a long-term horizon and foster retention of key personnel.
Committees. The members of any board advisory committee earn fixed monthly compensation. Directors holding a seat on any these committees are paid an additional fixed monthly compensation. No director may serve on more than three committees. The standing board advisory committees currently established are the Audit Committee, the Nominations and Corporate Governance Committee, the Compensation Committee and the Risk Committee. The executive advisory committees, which report to the chief executive officer, include the Agribusiness Committee, the Market Committee, the Market Risk Committee, the Athletic Club Committee and the Regulation Committee, but we pay fixed monthly compensation just to members of the latter. Moreover, no director or staff member that serves on any of the executive committees are entitled to additional compensation. Where compensation is paid, the purpose of such payments is to compensate the professionals concerned for participating in committee meetings. Fiscal council. Our fiscal council is a non permanent body, which is not active at this time. The compensation policy for fiscal council members (assuming the council is active in any given year) will be established pursuant to applicable legislation. We take the view that the functions of a fiscal council are adequately fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under article 47 of the bylaws) that overlap with those of legally assigned to a fiscal council under Brazilian Corporate Law. The Audit Committee is a standing advisory committee which reports directly to the Board of Directors. It is composed of five independent members, four of whom are external members plus one independent director. All of them must meet the requirements of CVM Ruling 308/99, as amended. The Audit Committee members are nominated by the Nomination and Corporate Governance Committee and appointed by the Board for two-year terms. External members must have expertise and/or experience in auditing, compliance, controls, accounting, taxation and related activities, and must fulfill the independence requirements specified in article 46 of the companys bylaws to ensure that they perform their duties impartially and serve the interests of the company and its shareholders. (ii) each component as a percentage of total compensation The table below sets forth the average percentage of each compensation component under the 2012 compensation policy.
2012 Salary, fees Participation in committees Benefits Variable compensation, short-term (PLR) Variable compensation, longterm (stock options) Total
Board of Directors Executive Officers and Senior Management Committees
88.86% 25.76% 100%
11.14% 0.0% 0.0%
0.0% 3.75% 0.0%
0.0% 30.96% 0.0%
0.0% 39.53% 0.0%
100% 100% 100%
Percentages may vary from one year to year, especially in the case of variable compensation components. (iii) methodology for calculating and reviewing each compensation component The compensation of the members of the board of directors and the board of executive officers is reviewed every year by the Compensation Committee (per article 49, paragraph 1, item (a), of the bylaws), which makes recommendations for the board concerning the compensation proposal to be put forward to the annual shareholders meeting in line with the requirements of Brazilian Corporate Law. Similarly, the compensation committee reviews the compensation we pay board advisory committee members on a yearly basis and makes recommendations to the board of directors. With regard to the executive officers, their fixed monthly compensation or salary is adjusted pursuant to a collective bargaining agreement we negotiate yearly with the labor union that represents our employees. In addition, merit raises may also be granted in line with the compensation policy. Moreover, the compensation committee is responsible for proposing standards and guidelines for the board of directors to decide on the policies concerning short-term variable compensation (profit-sharing plan) and long-term variable compensation (stock options plan). Additionally, in the latter case the board must decide giving regard to the guidelines established in the stock options plan approved at the extraordinary shareholders meeting of May 8, 2008, as amended at the extraordinary meeting of April 18, 2011. Our company periodically conducts salary surveys in order to maintain the competitiveness of its fixed and variable compensation strategy and ensure alignment with the industry best practices. These surveys sample companies of similar size as ours which operate in the financial services industry. The survey findings are adjusted by job matching to enable a comparison of functions and job level within the company with those of peers across the industry. The adjusted findings are then reviewed by the compensation committee and recommendations forwarded to the board of directors. Benefits are adjusted as deemed necessary to maintain competitiveness on the basis of regular reviews and surveys of market practices. 107
(iv) rationale for the compensation composition The primary purpose of our compensation strategy is to make certain we offer short-, medium- and long-term compensation components that ensure alignment with the corporate objectives, maintain competitiveness in the marketplace, attract and retain executives, and remunerate our executives according to the responsibilities of their job descriptions and in line with their individual performance. To this end the compensation strategy seeks to position the executives pay at the median salary for the industry, with additional short- and long-term variable compensation tied to the companys collective performance and their individual performance.
c. key performance indicators taken into account to determine each compensation component
With regard to short-term variable compensation, i.e. profit sharing, and long-term variable compensation, i.e. stock options, the key performance indicators we take into account to determine compensation are (i) individual performance assessments based on factors proper to each job description or level, and (ii) the companys collective key performance indicator (KPI). These indicators are taken into account for a determination as to total profit sharing payment as well as stock option eligibility and grants. In 2009 we elected EBITDA margin as our KPI. Started from 2010 our board decided the collective KPI would thereafter be adjusted net income, as determined on a quarterly basis. Thus, the calculation of annual short-term variable compensation payable to executive officers and other employees was set as a ratio of actual adjusted net income for the period, the actual ratio (ultimately, 3.5%) being determined by how well the performance target was accomplished. In 2010, the collective KPI was adjusted net income, as determined on a quarterly basis, and annual short-term variable compensation of the executive officers and other executives was set as a ratio of actual adjusted net income for the year, depending on how well the performance target was accomplished. As the companys results fell within the expected range (i.e., between 70% and 130% of the target set for the year), the total short-term compensation paid to executive officers and other executives for 2010 was calculated at a rate of 3.5% of our adjusted net income for the year. In 2011, pursuant to the compensation committees recommendations after assessing actual versus target performance, our board of directors approved short-term variable compensation in the equivalent of 3.2% of adjusted net income for the year. We made this profit sharing payment to the executive officers and other executives over the course of 2011, and fully recognized it in the statement of income. Starting from 2012, the total amount of short-term variable compensation for executive officers and other executives has been established as a ratio (3.5%) of adjusted net income, provided we meet the opex budget. Thus, if the actual operating expenses go over budget, a reduction factor applies so that every percentage point by which actual opex exceeds the budget target brings the pool down by 5%. Moreover, the portion of the total yearly profit sharing payment which is attributable to the executive officers is apportioned so each individual allocation (calculated as a multiple of base pay, i.e., a salary ratio formula) is then adjusted to take individual performance into account (the reward). In 2012, the opex budget was met after having been revised down, and the total short-term variable compensation paid for 2012 to the executive officers and other executives was calculated at 3.5% of the adjusted net income for the year. With regard to long-term compensation (stock options), in addition to the criteria determining option gr ants, as first discussed in this item, it is our understanding that a grantee will only truly benefit from a stock option if the market pric e of our shares rise, such that after the transfer restrictions are lifted or expire, the grantee can sell the stock s for more than the exercise price thereof. Thus, the potential gain for stock option grantees lies in the appreciation of the market price of ou r shares. On the other hand, no performance indicators are taken into account for purposes of determining fixed compensation or benefits. These compensation components are tied to the level of responsibility involved in each persons job. Additionally, in establishing fixed compensation, we do take into account each persons qualifications to perform his or her job.
d. how the compensation is structured to reflect evolution of KPIs
In accordance with our policy for short- and long-term variable compensation, the profit-sharing pool and stock options grants are affected by the extent to which the company achieves performance targets set in terms of adjusted net income and operating expenses. In other words, the size of the pool and the options grants are determined on the basis of actual performance by the company compared to the collective performance targets for the period. Furthermore, our policy provides for differing compensation levels designed to reward executive officers, other executives and employees for individual performance based on key performance indicators for the respective jobs, functions and responsibilities.
e. how the interests compensation policy or practices align with the companys short-, medium- and long-term
We offer compensation that is market competitive in order to retain and attract talent that helps us achieve our short-, medium- and long-term objectives. Given that longer cycles of sustained growth are naturally ingrained in our business model, which aims to strengthen, develop and expand the markets we operate, retaining skilled professionals is critical for our growth, such that our compensation strategy must include ways and means encouraging them to stay with us for a long time. Our compensation strategy seeks to balance fixed compensation (in the form of a base salary) with the short -term compensation (in the form of profit sharing payments) and medium- to long-term compensation (in the form of stock option grants). With this we aim to give employees incentives for them to achieve, even eclipse the half -year and annual targets that are tied to our profit sharing program, and inducement for effective implementation of medium - and longterm actions that add value to our company, and should therefore help to drive up the market price of our shares and 108
better reward recipients of stock option grants.

f. disclosure of compensation supported by subsidiaries, affiliates or controlling shareholders, if any
None of our subsidiaries or affiliates supports compensation we pay to directors, officers and employees. Additionally, given our widespread ownership structure, we have no controlling shareholders.
g. disclosure of compensation or benefit tied to specific corporate actions, as a sale of controlling interest.
The compensation we pay to directors, officers and employees is not tied to the consummation of any particular corporate action involving our company, including mergers, acquisitions, sale of controlling interest, or announcement of strategic partnerships. In addition, our stock option plan provides that in the event of our dissolution or liquidation, or a transformation of corporate type, or of a merger, consolidation, spinoff or other corporate restructuring transaction from which we do not emerge as the surviving company, or even if we do, would entail a delisting of our shares or a going private process, then, in the discretion of our board of directors, either the surviving company would succeed us as option grantor or any outstanding stock options would vest earlier than anticipated so the option grantees can exercise them for a given period, after which the stock option plan will end and any unexercised options forfeit with no right to indemnity or consideration for the grantee. 13.2 Compensation of directors, officers and fiscal council members. See subsection 13.16 under the heading Information on long-term compensation and current year projections, per
subsection 13.2.
13.3 Variable compensation directors, officers and fiscal council members. The variable compensation policy for executive officers is based on salary ratios, which may vary based on seniority of job position and, where job positions are leveled, based on individual performance assessments.
Full-year information. The tables below present information on the variable compensation paid to executive officers. (i) as
recognized in the income statements for the years ended December 31, 2012, December 31, 2011, and December 31, 2010, based on number of members of each governance body to whom variable compensation was paid in the relevant years, and (ii) as projected for the current year.
Year ended December 31, 2012
Board of Directors Executive Board Fiscal Council Total
No. of members Bonus (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets realized Actually recognized in the income statement Profit sharing (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets realized Actually recognized in the income statement
n/a n/a n/a n/a n/a n/a n/a n/a n/a

Board of Directors
5 n/a n/a n/a n/a

R$9,072,748.56 R$10,978,025.75 R$9,980,023.41 R$8,827,692.36
Executive Board
n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Fiscal Council
5 n/a n/a n/a n/a

R$9,072,748.56 R$10,978,025.75 R$9,980,023.41 R$8,827,692.36
Total
Year ended December 31, 2011 No. of members Bonus (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets realized Actually recognized in the income statement Profit sharing (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets were achieved Actually recognized in the income statement

Board of Directors
5.67 n/a n/a n/a n/a

R$ 8,668,042.47 R$ 10,488,331.39 R$ 9,534,846.72 R$ 8,702,085.66
Executive Board
Fiscal Council
5.67 n/a n/a n/a n/a

R$ 8,668,042.47 R$ 10,488,331.39 R$ 9,534,846.72 R$ 8,702,085.66
Total
Year ended December 31, 2010 No. of members Bonus (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets realized Actually recognized in the income statement Profit sharing (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets realized Actually recognized in the income statement
6 n/a n/a n/a n/a

R$ 8,308,036.10 R$ 10,154,266.35 R$ 9,231,151.23 R$ 8,416,729.19
6 n/a n/a n/a n/a

R$ 8,308,036.10 R$ 10,154,266.35 R$ 9,231,151.23 R$ 8,416,729.19
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Current year projections. The table below sets forth information on projected variable compensation for 2013. Given that the
short-term variable compensation (profit sharing payments) for executive officers is tied to yearly performance targets being realized, the projections below assumed a probable results scenario and may change to the extent our actual adjusted net income and operating expenses (both determining the profit sharing pool) depart from the budget (including the opex budget). Pursuant to the method described under 13.1(c) above, the total 2013 allocation to short-term compensation for executive officers and other employees (i.e., the profit sharing pool) should be calculated at a 3.5% rate of our adjusted net income for the year, provided we meet the opex budget. Part of this total would then be allocated to the executive officers, with each individual allocation being calculated as a multiple of base pay (salary ratio formula) adjusted to reward individual performance. However, if actual operating expenses are in excess of the budget, a 5% reduction factor would apply so that every percentage point by which actual opex exceeds the budget target would bring the pool down by 5%. With regard to projections for minimum and maximum allocations, you should bear in mind that, consistent with the allocation method previously discussed, the true size of the profit sharing pool is directly affected by our actual adjusted net income and the extent to which we adhere to the opex budget, so that ultimately (i) if we are not profitable, there may be no profit sharing allocation at all; and (ii) if we are profitable, there will be no caps limiting the allocation, as long as the calculation guidelines previously discussed are observed. The minimum and maximum allocation amounts set forth in the following table were projected assuming adjusted net income 10% above or below the collective performance target, respectively.
Current financial year 2013 Budget

Board of Directors Executive Board Fiscal Council Total
No. of members Bonus (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets realized Actually recognized in the income statement Profit sharing (in R$) Minimum projected in Comp. Plan Maximum projected in Comp. Plan Projected in Comp. Plan if targets realized Actually recognized in the income statement
5 n/a n/a n/a n/a

R$9,569,329.99 R$11,578,889.28 R$10,526,262.98
5 n/a n/a n/a n/a

R$9,569,329.99 R$11,578,889.28 R$10,526,262.98
n/a
n/a
13.4 Share-based compensation plan for directors and executive officers.

a. General terms and conditions
Our company has adopted a stock option plan approved at an extraordinary shareholders meeting held on May 8, 2008, and amended at an extraordinary shareholders meeting held on April 18, 2011. Under the Plan, the directors, executive officers and other executives, including the executive officers and executives of our subsidiaries and, in certain special cases, employees and service providers designated by our chief executive officer (beneficiaries), are eligible for awards of option grants conveying rights to buy common shares issued by our company. Under the existing stock option plan, our board of directors (or compensation committee, as applicable) establish from time to time stock option programs which define (i) the eligible beneficiaries; (ii) the total number of shares for which the options are exercisable; (iii) where an option breaks down into lots, the number of shares underlying each option lot; (iv) the exercise price; (v) the vesting schedule; (vi) any transfer restrictions applicable to the shares for which an option is exercised; and (vii) provisions on penalties, if any. The stock option plan also calls for our board of directors to decide on additional options granting special rights to eligible key executives. Under the plan, as a pre-requisite for an additional option grant and, eventually, the exercise thereof, a beneficiary is required to (1) buy shares issued by us (Own Shares) by disbursing own funds, and keep them for a holding period at least equal to the vesting period under the additional option grant, failing which the additional option will be lost; and (2) adhere to certain transfer restrictions (lock-up) applicable to Own shares and effective for the holding period. Our board of directors may delegate authority for our compensation committee to make certain decisions and recommendations concerning the stock options plan. Currently, in line with certain bylaws provisions allocating responsibilities to the Compensation Committee, the committee members assist and advise our directors in defining terms and conditions related to option grants. In addition, consistent with our stock options plan, and acting in its discretion, our board (as advised by the compensation committee) may establish stock option programs and (upon hearing the recommendations of our chief executive officer) define the terms and ratios under which additional options (contemplated under each particular program) may be awarded to eligible key employees to reward outstanding performance, as assessed based on collective and individual performance targets. Where launching an option program, our board is responsible for establishing terms and conditions applicable to stock option grant agreements beneficiaries will be required to execute with us within the scope of that particular program. These agreements typically include provisions at least covering the following: 110
a) b) c) d) e)
The number of shares for which an option is exercisable by a beneficiary grantee, and the exercise price per share, as calculated pursuant to the method adopted in the relevant program; The ratio by which the base number of option grants may be increased and the criteria as well as performance period determining the increment; The vesting period, the vesting schedule (whether or not a staggered schedule) and the exercise date or staggered exercise dates, and the option expiration date; Transfer restrictions applicable to shares for which an option is exercised, inclu ding as related to Own Shares held by beneficiaries of additional stock option grants, and penalties for failures to adhere to such restrictions; Other terms and conditions of contract, as long as not conflicting with the stock option plan and relevant program.
Shares for which an option is exercised enjoy rights established under the stock option plan, and the relevant program and stock option grant agreement, and are assured rights to payouts after delivered to a beneficiary. Consistent with the stock option plan and related stock option programs and grant agreements, the following additional terms and conditions apply: a) The delivery of shares for which an option is exercised shall in any event be contingent on all applicable legal and regulatory requirements having been met in every respect; b) The provisions of the stock option plan and related programs and grant agreements are not to be construed as assurance of continuing services or employment relationship between a beneficiary and our company, and no such provision affects in any way our right to remove any beneficiary from office or position or to terminate the relevant service or employment contract at any time; c) neither a stock option grant, nor the shares for which an option is exercised have any bearing whatsoever either on the fixed compensation we pay to beneficiaries or on profit sharing payments we may or may not make to a beneficiary; d) beneficiaries enjoy none of the rights or privileges of shareholders in the company except those to which the Option Plan refers with regard to the options covered by the relevant Agreement; e) A beneficiary shall only be entitled to the rights and prerogatives inherent in the capacity of shareholder after the shares for which an option is exercised are registered and delivered to such beneficiary. The shareholders convening in the combined annual and extraordinary meeting held on April 15, 2013, approved amendments to the existing stock options plan for adoption of a mechanism that applies specifically to stock option awards to members of our board of directors, as follows: (i) the directors are eligible to stock option awards starting from the date there are elected or such other date as the shareholders may determine at the time; (ii) at the annual me etings the shareholders are to decide on the number of stock option grants for that particular year up to an aggregate of 330,000 stock options (the Collective Lot) and the collective lot for the year will be apportioned equally amongst the directors (linear apportioning); (iii) the collective lot is to be awarded to the directors on the same occasion as the regular stock options are awarded to other beneficiaries; (iv) the stock options thus awarded to beneficiary directors are to vest within two (2) years after the their terms end; (v) the stock options will be exercisable over a five (5) years period after the vesting date; (vi) where a director is removed from office due to breach of responsibilities or fiduciary duty (per applicable civil and corporat e law), or for any of the reasons which otherwise would justify termination for cause under the labor laws, any outstanding stock options (vested and unvested) forfeit with no right to indemnity or consideration; and (vii) if a director resigns his or her office, any outstanding stock options (vested and unvested) will be exercisable, except for options granted over the course of the year in which the resignation takes place. There are currently seven board-approved, ongoing stock option programs, namely the BVMF 2008 Stock Option Program, the BVMF 2009 Stock Option Program, the BVMF 2010 Stock Option Program, the BVMF 2011 Stock Option Program and the BVMF 2011 Additional Options Program, in addition to the BVMF 2012 Stock Option Program and the BVMF 2012 Additional Options Program. The terms and conditions of these programs are discussed elsewhere herein. In addition to our stock option plan and the programs we implemented under this plan, on merging with BM&F S.A as part of the process by which we absorbed the business of the former Mercantile and Futures Exchange, we succeeded the mergee as grantor company under their previously existing stock option plan (the BM&F Option Plan, which had been approved at an extraordinary shareholders meeting dated September 20, 2007). The stock options granted under the BM&F Option Plan are exercisable for 19,226,388 shares on a one-to-one basis. While our own stock options plan established limits for shares attributable to stock options under each stock option program, these limits are not applicable to the BM&F Stock Options Plan. Furthermore, with regard to our stock options plan, and the programs implemented thereunder, we should note that, pursuant to a decision of our board of directors dated February 23, 201 0, long-term compensation in the form of stock options attributable to executives in any particular year materializes in the form of stock option grants at the start of the next year. Thus, for example, while stock options to reward the 2010 performance were granted in January 2011, with effects on our results for 2011; stock options to reward the 2011 performance were granted in January 2012, with effects on our results for 2012, and stock options to reward the 2012 performance were granted in January 2013, with effects on our results for year 2013; stock options to reward the 2013 performance will be granted in January 2014, with effects on our results for 2014.
b. Key objectives of the stock options plan
Our stock option plan was established pursuant to article 168, paragraph 3, of Brazilian Corporate Law (Law 6,404/1976, as amended) as incentive with the primary objective of giving eligible executive officers, employees and providers of ours and our (direct or indirect) subsidiaries an opportunity to become our shareholders. By exposing optionees to the market risk associated 111
with fluctuations in the market price of our shares, this incentive is expected to align the interests of executives, employees and providers with the interests of our shareholders, in addition to serving as a talent retention tool.
c. How the plan helps achieve these objectives
The objective of fostering closer alignment with our interests and the interests of shareholders is achieved by means of offering selected executives, employees and providers an opportunity to become our shareholders, and thus share in the inherent investment profit opportunity on a medium- to long-term time horizon, committing themselves to our long-term objectives, and working harder to create value for the market price of our shares to rise on a consistent basis. Moreover, by structuring stock options as a longer term investment with prospects for future gains, which materialize only if the option beneficiaries stay with us for a longer time span, we expect to retain a key talent pool and keep these executives, employees and providers motivated to pursue our success over the long run. In the particular case of our Additional Options Program, beneficiaries also undertake to buy and hold company shares (Own Shares) as a condition for both a grant and, eventually, the option exercise. This leads to deeper alignment of their interests with ours, because as shareholders they are partners invested in, and highly committed to our longer term results. Additionally, given that this Program has been designed for a key group in the organization, and requires a deeper level of commitment to our future through longer vesting periods, it should operate as a stronger tool for retention of professionals we consider to be critical for short-, medium- and long-term value creation.
d. How the plan fits into the companys compensation policy
Our stock option plan is a key component of the total compensation attributable to executive officers and other executives, employees and service providers. Accordingly, it is part of our compensation policy goal of tying individual performance to our corporate objectives, while serving as an additional incentive to implement medium- and long-term actions that add value to the company. This incentive consists of the opportunity for future gains from the appreciation of the market price of our shares. Furthermore, as the prospects for future gains are tied to commitment towards our company over the long run, the stock options grants operate as a means for us to attract and retain talent.
e. How the plan aligns the interests of executive officers with those of the company in the short-, mediumand long-term
Our stock option plan ties in performance to differing levels of compensation, so compensation becomes an incentive towards the achievement of certain targets and a driver towards the pursuit of medium- to long-term actions that add value to the company, affect growth and spurs appreciation of the market price of our shares. Thus, our executives are encouraged to pursue sustainable results that add value to the company over time. The stock option plan aligns the interests of executives with the companys interests insofar as it enables them to become shareholders, spurring efficient management of company affairs, while also attracting and retaining highly qualified professionals, fueling growth and spurring value creation for the company. Mechanisms to nurture interest alignment over time include, for example, the options vesting period and vesting schedule, as they determine the pace at which options are exercised. Where the options break down into lots, staggered vesting fosters talent retention, enabling beneficiary optionees to increase their holdings in our shares gradually whereas continuing to invest in our future growth and profitability as they continue to work for us. Moreover, in order to deepen the alignment of interests between eligible executives and our company, we have put in place a new program, the Additional Options Program, which gives key employees the right to exchange options for shares at preset exercise prices and, as a prerequisite for the grant, and, eventually, the option exercise, requires beneficiaries to buy shares issued by us (Own Shares) by disbursing own funds, and keep them for a holding period at least equal to the vesting period under the additional option grant. This leads to deeper alignment of their interests with ours, because as shareholders they are partners invested in, and highly committed to our longer term results. Additionally, given that this Program has been designed for key group in the organization, and requires a deeper level of commitment to our future through longer vesting periods, it should operate as a stronger tool for retention of professionals we consider to be critical for short-, medium- and long-term value creation.
f. Maximum number of shares in a program
Our stock option plan was approved at an extraordinary general meeting held on May 8, 2008, and amended at an extraordinary meeting held on April 18, 2011. Under the plan option grants are exercisable for a limited number of shares set as the equivalent of 2.5% of the shares of common stock issued and outstanding as of the date of each grant. Based on the number of shares issued and outstanding as of December 31, 2012, the operative limit for option grants encompasses 49.5 million shares. In addition to our stock option plan and the programs we implemented under this plan, on merging with BM&F S.A as part of the process by which we absorbed the business of the former Mercantile and Futures Exchange, we succeeded the mergee as grantor company under their previously existing stock option plan (the BM&F Option Plan, which had been approved at an extraordinary shareholders meeting dated September 20, 2007). The stock options gra nted under the BM&F Option Plan are exercisable for 19,226,388 shares on a one-to-one basis. As of December 31, 2012, there still remained 229,000 outstanding stock options granted under the BM&F Options Plan. While our own stock options plan established limits for shares attributable to stock options under each stock option program, these limits are not applicable to the BM&F Stock Options Plan.
g. Maximum number of option grants
Our stock option plan was approved at an extraordinary general meeting held on May 8, 2008, and amended at an extraordinary meeting held on April 18, 2011. Under the plan option grants are exercisable for a limited number of shares set as the equivalent of 2.5% of the shares of common stock issued and outstanding as of the date of each grant. Based on the 112
number of shares issued and outstanding as of December 31, 2012, the operative limit for option grants encompasses 49.5 million shares.
h. Conditions for stock purchase
Under the existing stock option plan, our board of directors, as advised by our compensation committee, establish stock option programs (Programs) from time to time, which are required to define (i) the eligible beneficiaries; (ii) the t otal number of shares for which the options are exercisable; (iii) where an option breaks down into lots, the number of shares underlying each option lot; (iv) the exercise price; (v) the vesting schedule; (vi) any transfer restrictions applicable to the shares for which an option is exercised; and (vii) provisions on penalties, if any. The stock option plan also calls for our board of directors to decide on additional options granting special rights to eligible key executives. Under the plan, as a pre-requisite for an additional option grant and, eventually, the exercise thereof, a beneficiary is required to (1) buy shares issued by us (Own Shares) by disbursing own funds, and keep them for a holding period at least equal to the vesting period under the additional option grant, failing which the additional option will be lost; and (2) adhere to certain transfer restrictions (lock-up) applicable to Own shares and effective for the holding period. In addition, consistent with our stock options plan, and acting in its discretion, our board (as advised by the compensation committee) may establish stock option programs and (upon hearing the recommendations of our chief executive officer) define the terms and ratios under which additional options (contemplated under each particular program) may be awarded to eligible key employees to reward outstanding performance, as assessed based on collective and individual performance targets. For more information on the terms and conditions under which stock options are exercisable for shares, and the relevant stock option programs, see subsections 13.4(a) above, and 13.4(i) and (j) below. As previously discussed, the shareholders convening in the combined annual and extraordinary meeting held on April 15, 2013, approved amendments to the existing stock options plan for adoption of a mechanism that applies specifically to stock option awards to members of our board of directors, as follows: (i) the directors are eligible to stock option awards starting from the date there are elected or such other date as the shareholders may determine at the time; (ii) at the annual meetings the shareholders are to decide on the number of stock option grants for that particular year up to an aggregate of 330,000 stock options (the Collective Lot) and the collective lot for the year will be apportioned equally amongst the directors (linear apportioning); (iii) the collective lot is to be awarded to the directors on the same occasion as the regular stock options are awarded to other beneficiaries; (iv) the stock options thus awarded to beneficiary directors are to vest within two (2) years after the their terms end; (v) the stock options will be exercisable over a five (5) years period after the vesting date; (vi) where a director is removed from office due to breach of responsibilities or fiduciary duty (per applicable civil and corporate law), or for any of the reasons which otherwise would justify termination for cause under the labor laws, any outstanding stock options (vested and unvested) forfeit with no right to indemnity or consideration; and (vii) if a director resigns his or her office, any outstanding stock options (vested and unvested) will be exercisable, except for options granted over the course of the year in which the resignation takes place.
i. Criteria determining exercise price
Under the stock option plan, the general pricing rule requires the exercise price is to be set as the average market price for our shares in the 20 trading sessions prior to the grant date. However, on establishing a program and setting the exercise price, the board of directors may approve up to a 20% discount on this average. But a discount is not mandatory and, where authorized, the actual discount rate is entirely in the discretion of our board. No discounts have been authorized under stock option programs previously implemented, except that in determining the exercise price for options awarded under our BVMF 2012 Stock Option Program, a 20% discount was computed on the average closing price for the shares over the twenty previous trading sessions. In the particular case of the Additional Options Program, the discount on the average market price that determined the exercise price may be granted at a higher rate than 20%, in the discretion of our board of directors, as advised by the compensation committee, provided the following conditions apply in any event: (i) a pre-requisite purchase of shares issued by us, for which the beneficiary is required to disburse own funds, observing the number of shares (set as a percentage) and other terms and conditions defined in the program (Own Shares); and (ii) a beneficiarys requisite adherence to a holding period at least equal to the vesting period under the relevant additional option grant, during which transfer restrictions apply as provided in the program (lock-up). In the case of each of the BVMF 2011 Additional Options Program and the BVMF 2012 Additional Options Program, on setting the exercise price, our board authorized a 50% discount rate on the base price (average market price extrapolated for the closing price in the 20 previous trading sessions). Pursuant to the amendment proposal approved at the shareholders meeting held on April 15, 2013, the exercise price under options awarded to members of our board of directors will be determined pursuant to the stock option plan rules, meaning the average market price for BM&FBOVESPA shares in the 20 trading sessions prior to the grant date. The grant dates are to be the same as our regular stock option programs may determine.
j. Criteria determining vesting periods
Under our stock option plan, the vesting schedule under each program may be such that the options vest at once or on a staggered schedule, in the discretion of our board of directors (as advised by our compensation committee). In any event, on setting the vesting schedule these bodies must take into account the objectives of our stock option plan so as to ensure the schedule aligns with the companys medium- and long-term interests and our talent retention strategy. Pursuant to the vesting schedules adopted under our existing stock option programs (except the additional options program), each option grant breaks down into lots exercisable for of the underlying shares according to the following staggered scheduled: 113
BVMF 2012 Stock Option Program: (i) January 2, 2014 (); (ii) January 2, 2015 (); (iii) January 2, 2016 ();
(iv) January 2, 2017 (). January 2, 2016 (). January 3, 2014 ().
BVMF 2011 Stock Option Program: (i) January 2, 2013 (); (ii) January 2, 2014 (); (iii) January 2, 2015 (); (iv) BVMF 2010 Stock Option Program: (i) January 3, 2011 (); (ii) January 3, 2012 (); (iii) January 3, 2013 (); (iv) BVMF 2009 Stock Option Program: (i) December 30, 2009 (); (ii) December 30, 2010 (); (iii) December 30, 2011
(); (iv) December 30, 2012 (). BVMF 2008 Stock Option Program: (i) June 30, 2009 (); (ii) June 30, 2010 (); (iii) June 30, 2011 (); (iv) June 30, 2012 (). Under the terms and conditions established for these programs, the exercise period under each option grant is to span a time frame that commences promptly after the vesting date for each lot and expires as of a date seven years after the vesting date for the very first lot.
Under the BVMF 2011 Additional Options Program, the options are likewise staggered (each lot being exercisable for 50% of the underlying shares) but the vesting periods are longer. This has been designed as a stronger tool for retention of key professionals in the organization. Accordingly, the vesting schedule under the BVMF 2012 Additional Options Program is (i) January 2, 2016 (); (ii) January 2, 2018 (), whereas under the BVMF 2011 Additional Options Program the vesting schedule is (i) January 2, 2015 (); (ii) January 2, 2017 (). These programs also allow for exercise periods for each lot to be extended provided the options expire as of a date seven years after the grant date. Under the additional options program, as a pre-requisite for an option grant and, eventually, the exercise thereof, a beneficiary is required to (1) buy shares issued by us (Own Shares) disbursing own funds, and keep them for a holding period at least equal to the vesting period under the additional options, failing which the additional option will be lost; and (2) adhere to certain transfer restrictions (lock-up) applicable to Own Shares and effective for the holding period. Additionally, after the vesting date, and provided applicable grant requirements are met, the option (or lot thereof) will be exercisable (for a predefined number of shares) at any time over the exercise period, failing which the option forfeits with no right to indemnity or consideration. Pursuant to the proposal approved at the shareholders meeting held on April 15, 2013, the existing stock options plan was amended for adoption of a mechanism that applies specifically to stock option awards to members of our board of directors. See additional details under subsection 13.4(h) above.
k. Settlement
Beneficiaries that wish to exercise vested options are required to give us written notice of exercise by filling out an Exercise Notice Form. This notice must state the number of shares for which the option is exercised. Exercise notices are valid only if given within the relevant exercise period, pursuant to deadlines we establish to allow for time to plan, make shares available and arrange for share delivery. Upon receiving an exercise notice we are required to respond by returning notice of the exercise price and making arrangements for the transaction consummation. Beneficiaries are required to pay the exercise price in the manner and conditions defined by our board of directors or compensation committee, as applicable. The arrangements include the execution of transaction completion documents, which must give due regard to applicable legal and regulatory rules our bylaws, and include undertakings related to trading and transfer restrictions applicable to the shares under the law and applicable regulations. Except for applicable transfer restrictions, the shares thus acquired by beneficiaries enjoy the same rights as any other common shares issued by us. Moreover, we may order temporary suspensions of beneficiaries rights to exercise options, where necessary under the law or regulations to prevent or halt trading in our shares by a beneficiary. Beneficiaries are typically required to make lump-sum payments of the exercise price. Additionally, the delivery of shares for which an option is exercised will in any event be contingent on all applicable legal and regulatory requirements having been met in every respect.
l. Share transfer restrictions
The stock option plan also calls for our board of directors (or the compensation committee, as applicable) to establish a lock-up period during which beneficiaries may not sell, transfer or otherwise dispose of shares acquired under our stock option plan, as well as any bonus shares attributable to such shares, or shares resulting from stock splits thereof, or shares acquired through exercise of subscription rights or any manner other than through disbursement of the beneficiarys own funds, and any securities convertible into, or exercisable or exchangeable for shares, which are in any way attributable to shares exercised for stock options granted within the scope of our stock option. Additionally, no such lock-up period may extend for over two years after the original option grant date. Nevertheless, a beneficiary may at any time sell any number of shares in his or her holding, as may be necessary for the proceeds of such sale to be used for payment of all or some of the exercise price, including for a down payment if the program establishes a time payment plan. Where time payment is permitted under any given stock option program, and except upon prior consent of our board or under an approved proposal of the compensation committee of directors, a transfer restriction will apply preventing any sale of shares for which an option is exercised until such time as the exercise price is fully paid. Additionally, where an exception applies, the proceeds of such sale must be used primarily for payment of any outstanding balance of the exercise price. In the particular case of our additional options program, a lock-up period may apply (as established in the discretion of our board of directors or the compensation committee, as applicable), such that beneficiaries will only be permitted to sell, transfer or otherwise dispose of their Own Shares, as well as any bonus shares attributable to such shares, or shares resulting from 114
stock splits thereof, or shares acquired through exercise of subscription rights or any manner other than through disbursement of the beneficiarys own funds, and any securities convertible into, or exercisable or exchangeable for shares, which are in any way attributable to their Own Shares, after the expiration of the lock-up period. Where established, the lock-up period must coincide with, and be proportional to the additional options vesting periods, such that Own Shares can be sold as the option s exercised for additional shares. Moreover, unless our board of directors (or the compensation committee, as applicable) decides otherwise, a sale or other disposition of Own Shares by a beneficiary prior to the date the relevant additional option or lot thereof vests, any outstanding unvested or unexercised options forfeit, with no right to indemnity or consideration. In addition, beneficiaries are required to undertake to refrain from establishing liens or otherwise encumber Own Shares under lock-up restriction, and any shares arising from the exercise of additional options for as long as the exercise price or any portion thereof remains unpaid, as any such lien or encumbrance could prevent us from seizing the shares or Own Shares in case of default in the payment of the exercise price.
m. Events (and criteria) triggering a suspension, modification or termination of the plan
The stock option plan may be discontinued at any time upon a decision of our board of directors. If this were to occur, any existing lock-up or trading restrictions should continue in place, and the rights and obligations arising under any option grant agreements would not change or be affected in any way. In addition, our stock option plan provides that in the event of our dissolution or liquidation, or a transformation of corpo rate type, or of a merger, consolidation, spinoff or other corporate restructuring transaction from which we do not emerge as the surviving company, or even if we do, would entail a delisting of our shares or a going private process, then, in the discreti on of our board of directors, either the surviving company would succeed us as option grantor or any outstanding stock options would vest earlier than anticipated so the optionees can exercise them for a given period, after which the stock option plan will end and any unexercised options forfeit with no right to indemnity or consideration for the option holder. This being the case, the option holders would be given sufficient notice of the event for them to make a decision in their sole discretion a s to whether they wish to exercise their options and, in the affirmative, would be required to do so within a deadline assigned by our board of directors (as advised by the compensation committee). n. Effects of termination on rights attributable to departing executive officers under the share-based compensation plan Where an option holder officer is removed from office for breach of duty, and where an option holder employee or service provider is terminated for cause (as defined under Brazilian labor and civil law, respectively) any unvested or unexercised options forfeit, with no right to indemnity or consideration for the holder. Unless otherwise determined by our board, acting on recommendation of the compensation committee, or by our chief executive officer, acting on board-delegated authority, where an option holder resigns his/her office or is replaced (if an officer), or resigns his/her job or is terminated without cause (if an employee) or terminates his/her service contract or is terminated with or without cause (if a provider), then (i) any vested options will be exercisable within ninety days after the event, having regard for the exercise deadline established in the relevant stock option program and agreement; whereas (ii) any unvested options will forfeit with no right to indemnity or consideration. In addition, if an option holder were to die or become permanently disabled, unvested options would vest forthwith and the options would be exercisable by either the holder or the heirs or successors, as the case may be, for a perio d of one after the event, following which any unexercised options would forfeit, with no right to indemnity or consideration for the holder, or his/her heirs or successors. In any such event, the options would be exercisable for all or some of the underlyi ng shares, and the exercise price be payable in one lump-sum. The option holder being deceased, the option rights would be apportioned amongst heirs and successors according to the decedents last will and testament or the laws of intestate succession. The shares for which an option is exercised by either a disable holder or the heirs and successors of a holder shall be free and clear of liens and encumbrances and transfer or trading restrictions, and may be sold at any time after delivered. Retiring option holders are treated similarly, except however a retiring holder would be required to commit to a 120-day noncompete covenant preventing him/her from providing services (whether or not as employee) to direct or indirect competitors in the Brazilian capital markets or other markets where we may operate at the time. Moreover, the provisions of the stock option plan and related programs and grant agreements are not to be construed as assurance of continuing services or employment relationship between an option holder and our company, as no such provision affects in any way our rights to remove any beneficiary from office or position, or to terminate the relevant service or employment contract at any time. Pursuant to the proposal approved at the shareholders meeting held on April 15, 2013, the existing stock options plan was amended for adoption of a mechanism that applies specifically to stock option awards to members of our board of directors (see additional details under subsection 13.4(h) above). Under the amended plan, where a director is removed from office due to (i) breach of responsibilities or fiduciary duty (per applicable civil and corporate law), or for any of the reasons which otherwise would justify termination for cause under the labor laws, any outstanding stock options (vested and unvested) forfeit with no right to indemnity or consideration; and (ii) if a director resigns his or her office, any outstanding stock options (vested and unvested) will be exercisable, except for options granted o ver the course of the year in which the resignation takes place.
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13.5 Interest in shares and other convertible securities held by directors, officers, fiscal council members.
2011
Governance Body Board of Directors Executive Board Fiscal Council Total Shares of common stock (%)
1,132,300 2,804,318 n/a 3,936,618
0.057% 0.142% n/a 0.199%
13.6 Share-based compensation of directors and executive officers. The tables below set forth information on stock-based compensation paid to executive officers, (i) as recognized in the income statements for the years ended December 31, 2012, December 31, 2011, and December 31, 2010, based on the number of members of each governance body to whom such compensation was actually allocated in the years concerned, and (ii) as projected for the current year. We should note that long-term compensation in the form of stock options attributable to executives in any particular year materializes in the form of stock option grants at the start of the next year. Thus, stock options to reward the 2011 performance were granted in January 2012, with effects on our results for 2012, whereas options to reward the 2010 performance were granted in January 2011, with effects on our results for 2011.
BVMF 2011 Stock Option Program

No. of members Option grants Grant date No. of options granted Vesting date Expiration date Lock-up period Weighted average exercise price of groups below: - options outstanding at start of financial year - lost during financial year - exercised during financial year - expired during financial year Fair price on grant date Potential dilution if all options granted are exercised
Board of Directors
Board of executive officers
Total
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 Directors
5 January 2, 2012 3,250,000 812,500 - Jan. 2, 2013 812,500 - Jan. 2, 2014 812,500 - Jan. 2, 2015 812,500 - Jan. 2, 2016 Jan. 2, 2020 n/a R$10.07 R$10.07 R$10.07 R$10.07 R$10.07 R$2.79 0.16%
5 January 2, 2012 3,250,000
Jan. 2, 2020 n/a R$10.07 R$10.07 R$10.07 R$10.07 R$10.07 R$2.79 0.16%
Total
BVMF 2011 Additional Options Program

No. of members Option grants Grant date No. of options granted Vesting date Expiration date Lock-up period Weighted average exercise price of groups below: - options outstanding at start of financial year - lost during financial year - exercised during financial year - expired during financial year Fair price on grant date Potential dilution if all options granted are exercised
Board of Directors
5 Jan. 2, 2012 1,337,170 668,585 - Jan. 02, 2015 668,585 - Jan. 02, 2017 Jan. 2, 2019 n/a R$5.04 R$5.04 R$5.04 R$5.04 R$5.04 R$4.19 0.07%
5 Jan. 2, 2012 1,337,170
Jan. 2, 2019 n/a R$5.04 R$5.04 R$5.04 R$5.04 R$5.04 R$4.19 0.07%
Total
No. of members Option grants Grant date No. of options granted Vesting date Expiration date
n/a n/a n/a n/a n/a
6 Jan. 3, 2011 3,420,000 855,000 - Jan. 3, 2011 855,000 - Jan. 3, 2012 855,000 - Jan. 3, 2013 855,000 - Jan. 3, 2014 Jan. 3, 2018
6 Jan. 3, 2011 3,420,000
Jan. 3, 2018
116
Board of Directors Board of executive officers Total
Lock-up period Weighted average exercise price of groups below - options outstanding at start of financial year - lost during financial year - exercised during financial year - expired during financial year Fair price on grant date Potential dilution if all options granted are exercised
n/a n/a n/a n/a n/a n/a n/a n/a

Board of Directors
n/a R$12.91 R$12.91 R$12.91 R$12.91 R$12.91 R$4.50 0.17%

n/a R$12.91 R$12.91 R$12.91 R$12.91 R$12.91 R$4.50 0.17%

Total
No. of members Option grants Grant date No. of options granted Vesting date Expiration date Lock-up period Weighted average exercise price of groups below - options outstanding at start of financial year - lost during financial year - exercised during financial year - expired during financial year Fair price on grant date Potential dilution if all options granted are exercised
0 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
0 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
BVMF 2008 Stock Option Program. On December 19, 2008, our company awarded 1,540,000 stock options exercisable for
shares at the exercise price of R$5.174 per share (the average closing price in the 20 trading sessions prior to the grant date). The options were set to vest on a four-year staggered vesting schedule. As of December 31, 2012, all stock options in this program had vested, and their holders are now poised to exercise them for shares.
BVMF 2009 Stock Option Program. On March 1, 2009, our company awarded 2,490,000 stock options exercisable for shares at
the exercise price of R$6.60 per share. There were no subsequent or additional grants under this program or changes to the staggered vesting schedule. As of December 31, 2012, all stock options in this program had vested, and their holders are now poised to exercise them for shares.
BVMF 2010 Stock Option Program. On January 3, 2011, our company awarded 3,420,000 stock options exercisable for shares
at the exercise price of R$12.91 per share. There were no subsequent or additional grants under this program and the staggered vesting schedule remains unchanged. As of December 31, 2012, there remained 1,185,000 unvested options in this program.
BVMF 2011 Stock Option Program. On January 2, 2012, our company awarded 3,250,000 stock options exercisable for shares
at the exercise price of R$10.07 per share. There were no subsequent or additional grants under this program and the staggered vesting schedule remains unchanged. As of December 31, 2012, there remained 3,250,000 unvested options in this program.
BVMF 2011 Additional Options Program. On January 2, 2012, our company awarded 1,337,170 additional options exercisable
for shares at the exercise price of R$5.04 per share. There were no subsequent or additional grants under this program and the staggered vesting schedule remains unchanged. As of December 31, 2012, there remained 1,337,170 unvested options in this additional options program. Additionally, we should note that, as long-term compensation (stock options) for the officers and executives in any particular year materializes in the form of stock option grants at the start of the next year. Therefore, stock options to reward the 2012 performance were granted in January 2013, with effects on results for year2013.
BVMF 2012 Stock Option Program and BVMF 2012 Additional Stock Option Grants Program. On January 2, 2013, pursuant to a
decision of our board of directors, we completed two rounds of option grant awards, one within the scope of the BVMF 2012 Stock Option Program, the other within the scope of the BVMF 2012 Additional Options Program. Accordingly, within the scope of the former program we awarded 3,300,000 stock options exercisable for shares representing 0.17% of the shares of stock issued and outstanding, whereas having awarded within the scope of the latter program a total of 999,485 additional options exercisable for shares representing 0.05% of the shares of stock issued and outstanding. In either case, the exercise price was set according to the rules provided in our stock options plan.
Year ending December 31, 2013 Projections for Share-Based Compensation

No. of members Option grants Grant date No. of options granted Vesting date
Board of Directors
Total
n/a n/a n/a n/a
5 Jan. 2, 2013 3,300,000 825,000 - Jan. 2, 2014 825,000 - Jan. 2, 2015 825,000 - Jan. 2, 2016 825,000 - Jan. 2, 2017
5 Jan. 2, 2013 3,300,000
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Expiration date Lock-up period Weighted average exercise price of groups below: - options outstanding at start of year - lost over the year - exercised over the year - expired over the year Fair price at grant date Potential dilution if all options granted are exercised
Board of Directors
Total

Board of Directors
Jan. 2, 2021 n/a R$10.78 R$10.78 R$10.78 R$10.78 R$10.78 R$5.55 0.17%
Jan. 2, 2021 n/a R$10.78 R$10.78 R$10.78 R$10.78 R$10.78 R$5.55 0.17%
Total

No. of members Option grants Grant date No. of options granted Vesting date Expiration date Lock-up period Weighted average exercise price of groups below: - options outstanding at start of year - lost over the year - exercised over the year - expired over the year Fair price at grant date Potential dilution if all options granted are exercised
5 Jan. 2, 2013 999,485 499,743 - Jan. 2, 2016 499,742 - Jan. 2, 2018 Jan. 2, 2020 n/a R$6.74 R$6.74 R$6.74 R$6.74 R$ 6.74 R$6.98 0.05%
5 Jan. 2, 2013 999,485
Jan. 2, 2020 n/a R$6.74 R$6.74 R$6.74 R$6.74 R$6.74 R$6.98 0.05%
Pursuant to the proposal approved at the shareholders meeting held on April 15, 2013, the existing stock options plan was amended for adoption of a mechanism that applies specifically to stock option awards to members of our board of directors (see additional details under subsection 13.4(h) above). Under the amended plan, stock options to reward 2013 performance will only be granted in January 2014, with effects on our results for 2014. 13.7 Outstanding stock options held by directors and executive officers at the year-end The tables below set forth information on stock options outstanding at December 31, 2012, as stated based on number of members per governance or management body that rewarded with variable compensation. We should note that, pursuant to a decision of our board of directors, long-term compensation (in the form of stock options) attributable to executives in any particular year materializes in the form of stock option grants at the start of the next year. Thus, stock options to reward the 2012 performance were granted in January 2013, with effects on our results for 2013.

No. of members Unvested options Quantity Vesting date Expiration date Lock-up period Weighted average exercise price Fair price at year-end Vested options Quantity Expiration date Lock-up period Weighted average exercise price Fair price at year-end Aggregate fair price (all options) at year-end
Board of Directors
Total
n/a n/a n/a n/a n/a n/a
5 3,250,000 812,500 - Jan. 3, 2013 812,500 - Jan. 3, 2014 812,500 - Jan. 3, 2015 812,500 - Jan. 3, 2016 Jan. 2, 2020 n/a R$10.07 R$10.07 0 n/a n/a n/a n/a n/a
5 3,250,000 n/a Jan. 2, 2020 n/a R$10.07 R$10.07 0 n/a n/a n/a n/a n/a
Total

Board of Directors

No. of members Unvested options Quantity
n/a n/a
5 1,337,170
5 1,337,170
118

Vesting date Expiration date Lock-up period Weighted average exercise price Fair price at year-end Vested options Quantity Expiration date Lock-up period Weighted average exercise price Fair price at year-end Aggregate fair price (all options) at year-end
Board of Directors
Total
n/a n/a n/a n/a
668,585 - Jan. 2, 2015 668,585 - Jan. 2, 2017 Jan. 2, 2019 n/a R$5.04 R$5.04 0 n/a n/a n/a n/a n/a
n/a Jan. 2, 2019 n/a R$5.04 R$5.04 0 n/a n/a n/a n/a n/a
Total

Board of Directors
BVMF 2010 Stock Options Program

No. of members Unvested options Quantity Vesting date Expiration date Lock-up period Weighted average exercise price Fair price at year-end Vested options Quantity Expiration date Lock-up period Weighted average exercise price Fair price at year-end Aggregate fair price (all options) at year-end
5.67 1,185,000 592,500 - Jan. 3, 2013 592,500 - Jan. 3, 2014 Jan. 3, 2018 n/a R$12.91 R$4.50 1,185,000 Jan. 3, 2018 n/a R$12.91 R$4.50 R$4.50
5.67 1,185,000 n/a Jan. 3, 2018 n/a R$12.91 R$4.50 1,185, 500 Jan. 3, 2018 n/a R$12.91 R$4.50 R$4.50
As a result of the merger which combined the two formerly independent exchanges, Bovespa and BM&F, into BM&FBOVESPA, our company succeeded the mergee (BM&F) as grantor of 19,226,388 stock options (7,859,384 of which awarded to former executives of BM&F), such that the options grantees were now entitled to buy an equal number of shares issued by us (in lieu of shares of the mergee) at the exercise price of R$1.00 per share. As of December 31, 2012, no unvested options remained.
BVMF 2008 Stock Option Program. On December 19, 2008, our company granted 1,540,000 stock options with exercise price
set at R$5.174 per share (the average closing price in the 20 trading sessions prior to the grant date). The options were set to vest on a four-year staggered vesting schedule. As of December 31, 2012, all stock options in this program had vested and there remained 70,000 vested options were still outstanding.
BVMF 2009 Stock Option Program. On March 1, 2009, our company granted 2,490,000 stock options with exercise price set at
R$6.60 per share (the average closing price in the 20 trading sessions prior to the grant date). The options would vest on a four-year staggered vesting schedule. As of December 31, 2012, all stock options in this program had vested, and there remained 475,000 vested options still outstanding. 13.8 Exercised options and shares delivered to directors and executive officers as share-based compensation. The tables below set forth information on options exercised by, and shares delivered to executive officers by way of stockbased compensation in the years ended December 31, 2012, December 31, 2011, and December 31, 2010, taking into account the number of governance body members that actually exercised options and received shares. As a result of the merger which combined the two formerly independent exchanges, Bovespa and BM&F, into BM&FBOVESPA, our company succeeded mergee BM&F as grantor of 19,226,388 stock options (7,859,384 of which awarded to former executives of BM&F, such that the options grantees were now entitled to buy an equal number of shares issued by us (in lieu of shares of the mergee) at the exercise price of R$1.00 per share. As of December 31, 2012, 337,500 options had been exercised at a weighted average price of R$1.00. The difference between exercise price and market price for shares thus acquired yielded gains amounting to aggregate R$3,615,536.25.
No. of members Options exercised No. of shares Weighted average exercise price Aggregate of difference between exercise price and market price of shares for which options were exercised Shares delivered
n/a n/a n/a n/a n/a
5 170,000 R$6.01 R$1,011,584.50 0
5 170,000 R$6.01 R$1,011,584.50 0
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No. of shares Weighted average exercise price Aggregate of difference between exercise price and market price of shares for which options were exercised
n/a n/a n/a
0 0 0
0 0 0

No. of members Options exercised No. of shares Weighted average exercise price Aggregate of difference between exercise price and market price of shares for which options were exercised Shares delivered No. of shares Weighted average exercise price Aggregate of difference between exercise price and market price of shares for which options were exercised
5.67 497,500 R$6.40 R$2,934,395.00 0 0 0 0
5.67 497,500 R$6.40 R$2,934,395.00 0 0 0 0

No. of members Options exercised No. of shares Weighted average exercise price Aggregate of difference between exercise price and market price of shares for which options were exercised Shares delivered No. of shares Weighted average exercise price Aggregate of difference between exercise price and market price of shares for which options were exercised
6 547,500 R$6.05 R$3,581,148.80 0 0 0 0
6 547,500 R$6.05 R$3,581,148.80 0 0 0 0
13.9 Summary of information required to understand data disclosed in subsections 13.6 to 13.8 above.
a. pricing model
Taking into account the factors described under (b) and (c) below, the fair price of granted stock options was determined using the binomial tree option pricing model developed by Hull. This model produces results equivalent to those of the Black-Scholes model for simple European options with the advantage of capturing the effects of early exercise and dividend payments associated with the options concerned.
b. data and assumptions used by the pricing model, including weighted average share price, exercise price, expected volatility, option life, expected dividends and risk-free interest rate
The main assumptions used in pricing the options were as follows: The option pricing took into account the market parameters as of each grant date under the relevant Program; The estimate of risk-free interest rates was based on rates provided by interest-rate futures contracts whose maturity correlate with each option duration; Share prices were adjusted to account for the effect of dividend payments; Expected volatility was determined as explained in (d) below; The last exercise date (expiration) determined the option life. Other classic assumptions associated with option pricing models also taken into account were the absence of arbitrage opportunities and constant volatility over time. The table below summarizes the main data and assumptions:
Data & Assumptions Grant date Share price (in R$) Exercise price (in R$) Expected volatility (year) Option life (last exercise date) Expected dividends (payouts) Risk-free interest rate (p.a., 252 trading days) Data & Assumptions Grant date Share price (in R$) Exercise price (in R$)
2012 Stock Option Program
Jan. 2, 2013 14.11 10.78 29.18% Jan. 2, 2021 80.00% 9.21%

2012 Additional Options Program
Jan. 2, 2013 14.11 6.74
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Expected volatility (year) Option life (last exercise date) Expected dividend (payouts) Risk-free interest rate (p.a., 252 trading days) Data & Assumptions Grant date Share price (in R$) Exercise price (in R$) Expected volatility (year) Option life (last exercise date) Expected dividends (payouts) Risk-free interest rate (p.a., 252 trading days) Data & Assumptions Grant date Share price (in R$) Exercise price (in R$) Expected volatility (year) Option life (last exercise date) Expected dividend (payouts) Risk-free interest rate (p.a., 252 trading days) Data & Assumptions Grant date Share price (in R$) Exercise price (in R$) Expected volatility (year) Option life (last exercise date) Expected dividend (payouts) Risk-free interest rate (p.a., 252 trading days) Data & Assumptions Grant date Share price (in R$) Exercise price (in R$) Expected volatility (year) Option life (last exercise date) Expected dividend (payouts) Risk-free interest rate (p.a., 252 trading days)
29.18% Jan. 2, 2020 80.00% 9.21%

Jan. 2, 2012 9.80 10.07 29.99% Jan. 2, 2020 80.00% 11.07%

2011 Additional Options Program
Jan. 2, 2012 9.80 5.04 29.99% Jan. 2, 2019 80.00% 11.05%

Jan. 3, 2011 13.40 12.91 25.00% Jan. 3, 2018 80% 11.78%

Mar. 2, 2009 5.80 6.60 67.57% Dec. 30, 2016 50% 13.47%
c.
method and assumptions adopted in capturing the expected effects of early exercise
The stock options granted under our plan resemble European-style options (i.e., early exercise not allowed) through to the vesting date, and thereafter through to expiration have the features of American-style options (i.e., early exercise allowed). Options with these characteristics are known as Bermudan or Mid-Atlantic options. They should by construction be priced between European and American options with equivalent characteristics. As for dividend payments, two effects on option pricing should be taken into account: (i) a fall in the share price after ex-dividend dates; and (ii) the influence of dividend payments on an early-exercise decision. Taking into account the above factors, we used the binomial model to determine the fair price of these stock options. This model produces results equivalent to the Black-Scholes pricing model for simple European options, with the advantage of simultaneously capturing the effects of early exercise and dividend payments associated with the options proper. The main assumptions we used in pricing these options were as follows: a) Option pricing took into account the market parameters as of each grant date under the relevant Program; b) The estimate of risk-free interest rates was based on rates provided by interest-rate futures contracts whose maturity correlate with each option duration; c) The farthest, last exercise date (expiration) determined the option life. Other classic assumptions associated with option pricing models also taken into consideration include the absence of arbitrage opportunities and constant volatility over time.
d. method for determining expected volatility
Because of the relative illiquidity of the stock options at the time they were granted under the relevant programs, their implied volatility was not immaterial and could not be used to estimate volatility. Moreover, our stock exchange listing was relatively recent at the time the stocks options were granted, historical volatility also failed to provide sufficient information on volatility of the market price of our shares, particularly considering the relatively long life of these options. As a result, for an estimate of implied volatility we used the market price of stocks of peer international stock exchanges with sufficient liquidity to ensure quality data on which to base our estimate. 121
e.
other characteristics of the options taken into account in measuring fair value.
The discussion above covers the principal features and considerations related to the stock options granted under our plan. 13.10 Existing pension plans for directors and executive officers.
Board of Directors Board of executive officers
Total
No. of members Name of plan No. of executives eligible for retirement No. of executives eligible for early retirement Present value of contributions paid into pension plan at the close of most recent full year, discounting direct contributions from executives Total cumulative value of contributions paid into pension plan over most recent full year, discounting direct contributions from executives Conditions of early redemption (if any)
5 Mercaprev 1 n/a R$4,445,052.77 R$339,054.64 Yes. Employee portion only
5 1 n/a R$4,445,052.77 R$339,054.64 -
13.11
Highest, lowest, average compensation paid to directors, executive officers and fiscal council members.
For the discussion on the subject matter of this subsection, see subsection 13.16 under the heading Information on compensation of directors and officers per subsection 13.11. 13.12 Compensation, indemnification arrangements with directors and executive officers in case of dismissal or retirement.
The company adopts no policy or arrangements or schemes contemplating retirement or termination compensation for directors and executive officers in case of dismissal or retirement, except in the latter case for benefits contemplated in our existing pension plan (as discussed in subsection 13.10 above). It is worth noting that the Directors & Officers (D&O) liability insurance policy taken out by us provides no coverage related to dismissal or retirement; rather, it merely gives directors and officers and other senior managers financial protection against claims arising from day-to-day decisions so they can perform their duties with serenity, whereas for us this policy gives a competitive benefit designed to foster the retention of qualified professionals. 13.13 Percentage of total compensation attributable to directors, executive officers and fiscal council members that are related parties of the controlling shareholders.
Given that we have a widespread ownership structure and no controlling shareholders, there has never been compensation paid to any director or executive officer deemed to be a related party of any direct or indirect controlling shareholder and, therefore, none has been recognized in any income statement. 13.14 Compensation paid to directors, executive officers and fiscal council members (grouped by body) for reasons other than their position in the company (such as commissions or fees for services).
No amounts are recognized in the income statement as compensation for directors and executive officers on any account or for any reason other than their serving in the position they hold in our company. 13.15 Compensation paid to directors, executive officers and fiscal council members, which has been recognized in the income statements of direct or indirect controlling shareholders, companies under common control or the companys subsidiaries.
Given that ownership is widely dispersed and we have no controlling shareholders, the above premise is not applicable with regard to controlling shareholders or companies under common control. Additionally, no recognitions were made in the income statements of any subsidiary or affiliate relative to compensation paid to our directors and executive officers. 13.16 Additional reportable information
Information on long-term compensation and current year projections, per subsection 13.2
The tables and notes below set forth data and information on annual compensation paid to directors and executive officers, as well as audit committee members (as discussed previously, while the fiscal council is not active at this time, its responsibilities overlap to a certain extent with those of the audit committee, which is a standing board advisory committee and is active) (i) as recognized in the income statements for the years ended December 31, 2012, December 31, 2011 and December 31, 11 2010, based on average number of members per governance body or committee (per data set forth in the following table ); and (ii) as projected for the current financial year.
Year ended December 31, 2012 Average number of members Month Board of Directors Executive Board January 11 5 February 11 5 March 11 5 April 11 5 May 11 5 June 11 5
11
Sum total of the number of members in each governance body or committee at each months of 2011 divided by 12 (months). This calculation is performed by a company department, as required under CVM Circular Letter SEP/N. 03/2011.
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July August September October November December Total Average 11 11 11 11 11 11 132 11.0 5 5 5 5 5 5 60 5.0
Pursuant to a decision of our board of directors, the long-term compensation attributable to executives (in the form of stock options) in any particular year materializes in the form of stock option grants at the start of the next year. Thus, stock options to reward the 2011 performance were granted in January 2012, with effects on results for 2012. According to guidelines provided within the scope of our stock options plan (as approved at an extraordinary shareholders meeting held on May 8, 2008, and amended at the extraordinary meeting held on April 18, 2011), we adopted in 2011 a new stock options program, the additional options program, which contemplates additional stock option grants as an added incentive for retention of key professionals in our talent pool. This means the new program gives key employees the right to exchange options for shares at preset exercise prices and, as a prerequisite for the grant, requires these employees to buy shares issued by us (Own Shares) and keep them for a holding period at least equal to the vesting period under the additional option grants, failing which the option holder loses the options. We have since completed two rounds of option grant awards, one within the scope of the BVMF 2011 Stock Options Program, the other within the scope of the BVMF 2011 Additional Options Program with effects on our results for 2012. The first round contemplated stock option grants awarding rights to buy aggregate 3,250,000 shares, or 0.16% of the shares issued and outstanding, whereas the second round contemplated additional options granting rights to buy aggregate 1,337,170 shares, or 0.07% of the shares issued and outstanding. The exercise price for options granted within the scope of each of these Programs was established pursuant to the rules set out in the stock options plan (see subsections 13.6 and 13.9 below). Ultimately, the exercise price was set at R$2.79 for the first round (BVMF 2011 Stock Options Program) and R$4.19 for the second round (BVMF 2011 Additional Options Program), pursuant to a calculation method that takes into account certain market variables at grant time and the particular features of each program.
BVMF 2011 Stock Option Program The stock option grants under the 2010 Program are exercisable for aggregate 3,420,000
shares, or 0.17% of the shares issued and outstanding. The fair market price for stock options grants related to the BVMF 2010 Stock Option Program, as calculated based on market variables at the time of granting, was R$4.50, substantially higher than fair price under the BVMF 2009 Stock Option Program. However, we should note there was no change in pricing model, such that the difference in fair price is attributable primarily to changes in market conditions between the two periods, as discussed under subsections 13.6 and 13.9 above.
Board of Directors Executive Board Fiscal Council (*) Total
No. of members Annual fixed compensation (in R$) Salary, fees Direct & indirect benefits Participation in committees Other Variable compensation (in R$) Bonuses Profit sharing Participation in meetings Commissions Other (1) Post-retirement benefits Stepping-down benefits Share-based payments Amount of compensation
(1)
( )
11 R$4,221,989.61 R$3,751,531.67 n/a R$470,457.94 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a R$4,221,989.61
5
R$4,923,976.91 R$4,308,556.10 R$615,420.81
n/a n/a
R$8,827,692.36
n/a
R$8,827,692.36
n/a n/a n/a n/a n/a

R$14,670,242.30 R$28,421,911.57
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
16
R$9,145,966.52 R$8,060,087.77 R$615,420.81 R$470,457.94
n/a
R$8,827,692.36
n/a
R$8,827,692.36
n/a n/a n/a n/a n/a

R$14,670,242.30 R$32,643,901.18
Severance dues and additional sign-on bonuses.
* As discussed in item 13.1 above, our fiscal council is not active at this time. We take the view that the functions of a fisc al council are adequately
fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under arti cle 47 of the bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corporate Law. The companys Audit Committee has five independent members, four of whom are external members and one an independent director. All of them mee t the requirements of CVM Ruling 308/99, as amended. The Audit Committee members were appointed for a two-year term. It is important to note that the compensation paid to external audit committee members in 2012 totaled R$997,765.48 and is not included in the above table.
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Year ended December 31, 2011 Average number of members Month Board of Directors Executive Board January 10 6 February 10 6 March 10 6 April 11 6 May 11 6 June 11 6 July 11 6 August 11 6 September 11 5 October 11 5 November 11 5 December 11 5 Total 129 68 Average 10.75 5.67
Pursuant to a decision of our board of directors, long-term compensation attributable to executives (in the form of stock options) in any particular year materializes in the form of stock option grants at the start of the next year. Thus, stock options to reward the 2010 performance were granted in January 2011, with effects on our results for 2011.
BVMF 2010 Stock Option Program The stock option grants under the 2010 Program are exercisable for aggregate 3,420,000
shares, or 0.17% of the shares issued and outstanding. The fair market price for stock options grants related to the BVMF 2010 Stock Option Program, as calculated based on market variables at the time of granting, was R$4.50, substantially higher than fair price under the BVMF 2009 Stock Option Program. However, we should note there was no change in pricing model, such that the difference in fair price is attributable primarily to changes in market conditions between the two periods, as discussed under subsections 13.6 and 13.9.
No. of members Annual fixed compensation (in R$) Salary, fees Direct & indirect benefits Participation in committees Other Variable compensation (in R$) Bonuses Profit sharing Participation in meetings Commissions Other (1) Post-employment benefits Stepping-down benefits Share-based payments Amount of compensation
(1)
( )
10.75 R$4,019,685.04 R$3,590,871.09 n/a R$428,813.95 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a R$4,019,685.04
5.67 R$5,171,880.30 R$4,561,959.75 R$609,920.55 n/a n/a R$9,302,085.66 n/a R$8,702,085.66 n/a n/a R$600,000.00 n/a n/a R$15,390,000.00 R$29,863,965.96
16.42 R$9,191,565.34 R$8,152,830.84 R$609,920.55 R$428,813.95 n/a R$9,302,085.66 n/a R$8,702,085.66 n/a n/a R$600,000.00 n/a n/a R$15,390,000.00 R$33,883,651.00
fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under arti cle 47 of the bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corporate Law. The companys Audit Committee has five independent members, four of whom are external members and one an independent director. All of them meet the requirements of CVM Ruling 308/99, as amended. The Audit Committee members were appointed for a two-year term. It is important to note that the compensation paid to external audit committee members in 2011 totaled R$973,513.44 and is not included in the above table. Year ended December 31, 2010 Average number of members Month Board of Directors Executive Board January 11 6 February 11 6 March 11 6 April 11 6 May 11 6 June 11 6 July 11 6 August 11 6 September 11 6 October 11 6
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November December (*) Total Average
( )
11 11 132 11.0
6 6 72 6.0
* Fabio de Oliveira Barbosa resigned from the board of directors by end-December 2010 and was paid the full fees that month.
We should note that, pursuant to a decision of our board of directors, long-term compensation attributable to executives (in the form of stock options) in any particular year materializes in the form of stock option grants at the start of the next year. Thus, stock options to reward the 2010 performance were granted in January 2011, with effects on our results for 2011.
No. of members Annual fixed compensation (in R$) Salary, fees Direct & indirect benefits Participation in committees Other Variable compensation (in R$) Bonuses Profit sharing Participation in meetings Commissions Other (1) Post-employment benefits Stepping-down benefits Share-based payments Amount of compensation
(1)
( )
11 R$3,835,734.86 R$3,399,044.36 n/a R$436,690.50 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a R$3,835,734.86
6 R$5,288,126.90 R$4,611,216.86 R$676,910.04 n/a n/a R$9,592,419.87 n/a R$8,416,729.19 n/a n/a R$1,175,690.68 n/a n/a 0,00 R$14,880,546.77
17 R$9,123,861.76 R$8,010,261.22 R$676,910.04 R$436,690.50 n/a R$9,592,419.87 n/a R$8,416,729.19 n/a n/a R$1,175,690.68 n/a n/a 0,00 R$18,716,281.63
fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under arti cle 47 of the bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corporate Law. The companys Audit Committee has five independent members, four of whom are external members and one an independent director. All of them meet the requirements of CVM Ruling 308/99, as amended. The Audit Committee members were appointed for a two-year term. It is important to note that the compensation paid to external audit committee members in 2010 totaled R$814,941.08 and is not included in the above table.
Compensation projections for 2013.
The table and notes below set forth data and information on annual compensation proposed to be paid to directors and executive officers, as well as the audit committee members for the year ending at December 31, 2013, which we are submitting to shareholders convening in the annual shareholders meeting called for April 15, 2013. Given that the short-term variable compensation (profit sharing payments) for executive officers is tied to certain yearly performance targets being accomplished, the projections below assumed a probable results scenario and may change to the extent our actual adjusted net income and operating expenses (both of which determine the profit sharing pool) depart from the 2013 budget, including the opex budget. For example, pursuant to the method described under subsection 13.1(c) above, where the actual year-end result hits a 10% threshold above the expected adjusted net income (per our 2013 budget), and as long as we adhere to the operating expense budget, the short-term compensation, i.e., the profit-sharing pool, will be adjusted by an additional amount of R$1,052,626.30, which is the equivalent of a 10% increment in expected adjusted net income for the year. Additionally, we should note that, pursuant to a decision of our board of directors, long-term compensation in the form of stock options attributable to executives in any particular year materializes in the form of stock option grants at the start of the next year. Thus, stock options to reward the 2012 performance were granted in January 2013, with effects on results for year 2013. Moreover, in 2012, within the scope of our stock options plan (as approved at the extraordinary shareholders meeting of May 8, 2008, and amended at the extraordinary meeting of April 18, 2011) we implemented a new program contemplating additional stock options as an added incentive for retention of key professionals in our talent pool. Accordingly, the new program gives key employees the right to exchange options for shares at preset exercise prices and, as a prerequisite for the grant, requires these employees to buy shares issued by us (Own Shares) and keep them for a holding period at least equal to the vesting period under the additional option grants, failing which the option holder loses the options. We have since completed two rounds of option grant awards, one within the scope of the BVMF 2012 Stock Options Program, the other within the scope of the BVMF 2012 Additional Options Program, w ith effects on our results for 2013. The first round contemplated stock option grants awarding rights to buy aggregate 3,300,000 shares, or 0.17% of the shares issued and outstanding, whereas the second round contemplated additional options granting rights to buy aggregate 999,485 shares assuming exercise at R$13.70 per share, which corresponds to an interest in 0.05% of the shares issued and outstanding. The exercise price for options granted within the scope of each of these Programs has been established pursuant to the rules set out in the stock options plan (see subsections 13.6 and 13.9). Ultimately, the exercise price was set at R$5.55 for the first round (BVMF 2012 Stock Options Program) and R$6.98 for the second round (BVMF 2012 Additional Options Program), pursuant to a fair price calculation method that takes into account 125
certain market variables at grant time and the particular features of each program. When compared to the exercise price set for option grants under each of the 2011 programs, the exercise price was substantially. Absent any changes in pricing method, as was the case, this increase is attributable only to a change in existing market conditions at the time of pricing (see the discussion under subsections 13.6 and 13.9). In addition, at the combined annual and extraordinary shareholders meeting of April 15, 2013, we will be submitting a proposal to amend the Stock Options Plan to adopt a specific mechanism by which stock option grants can be awarded to our directors. However, assuming the shareholders vote for the proposal, this mechanism would only be adopted in connection with stock option grants awarded under our 2013 programs (BVMF 2013 Stock Options Program and BVMF 2013 Additional Options Program), which is set to take place in January 2014 and, therefore, should influence our results for 2014.
Current financial year 2013 Compensation Budget
11 5 n/a 16 No. of members R$5,276,664.34 R$5,395,931.35 R$10,672,595.69 n/a Annual fixed compensation (in R$) R$4,433,298.59 R$4,587,144.80 R$9,020,443.39 n/a Salary, fees R$808,786.55 R$808,786.55 n/a n/a Direct & indirect benefits R$843,365.75 R$843.365.75 n/a n/a Participation in committees n/a n/a n/a n/a Other R$10,526,262.98 R$10,526,262.98 n/a n/a Variable compensation (in R$) n/a n/a n/a 0 Bonuses R$10,526,262.98 R$10,526,262.98 n/a n/a Profit sharing n/a n/a n/a n/a Participation in meetings n/a n/a n/a n/a Participation in commissions n/a n/a n/a n/a Other n/a n/a n/a n/a Post-retirement benefits n/a n/a n/a n/a Stepping-down benefits R$25,291,405.30 R$25,291,405.30 n/a n/a Share-based payments R$5,276,664.34 R$41,213,599.64 R$46,490,263.98 n/a Amount of compensation ( ) * As discussed in item 13.1 above, our fiscal council is not active at this time. We take the view that the functions of a fiscal council are adequately fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under article 47 of the bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corporate Law. The companys Audit Committee has five independent members, four of whom are external members and one an independent director. All of them meet the requireme nts of CVM Ruling 308/99, as amended. The Audit Committee members were appointed for a two-year term. It is important to note that the compensation paid to external members in 2012 is projected to total R$1,258,996.92.
Information on compensation of directors and officers per subsection 13.11

We should note that, pursuant to a decision of our board of directors, long-term (share-based) compensation attributable to officers and executives in any particular year materializes in the form of stock option grants at the start of the next year. Thus, stock options to reward the 2012 performance were granted on January 2, 2013, with effects on our results for 2013. Likewise, stock options to reward the 2011 performance were granted on January 2, 2012, with effects on our results for 2012, whereas 2010 performance was rewarded with option grants on January 3, 2011, with effects on our results for 2011.
2012 compensation of executive officers. For purposes of the information set forth in the table below, we should note the
executive officers were all actively in office throughout the year, from January to December, such that compensation paid to them over the full 12-month period was recognized in the statement of income for the year ended December 31, 2012.
2012 compensation of directors. We should further note that one of our directors was not earning compensation in 2012, such
that information on lowest-highest individual compensation paid to directors in 2012 takes into account the just ten of the eleven directors that were actively in office throughout the year, from January to December. The reported figures include all compensation we recognized in the income statement for the year ended December 31, 2012.
Board of Directors Executive Board Fiscal Council (*)
No. of members 11 5 n/a Highest individual compensation (in R$) 1,211,162.20 11,089,578.38 n/a Lowest individual compensation (in R$) 224,400.00 3,635,723.78 n/a Average individual compensation (in R$) 383,817.24 5,684,382.31 n/a ( ) * As discussed in item 13.1 above, our fiscal council is not active at this time. We take the view that the functions of a fiscal council are adequately fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under article 4 7 of the bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corpora te Law. The companys Audit Committee has five independent members, four of whom are external members and one an independent director. The Audit Committee members were appointed for a two-year term. All of them meet the requirements of CVM Ruling 308/99, as amended. Taking into account the compensation paid to the four external committee members that received compensation over the full 12 -month period, from January to December, the highest compensation recognized for 2012 totaled R$280,002.81; the lowest R$240,876.42. The average compensation was R$249,441.37.
2011 compensation of executive officers . For purposes of the information set forth in the table below, we should note
126
that the organizational restructuring process implemented in September 2011 affected our board of executive officers in the following ways: (i) three executive officers resigned; and (ii) two new executive officers were later appointed. Thus, information on lowest individual compensation paid to executive officers in 2011 takes in to account the three executive officers that were in office for the full 12 months of the year. Additionally, for information on highest yearly compensation paid to executive officers in 2011 the reported figures include compensation we recognized in the i ncome statement for the year ended December 31, 2011. The executive officer that earned the highest compensation worked throughout the year, from January to December.
2011 compensation of directors . We should further note that one of our directors was not earning compensation in 2011.
Moreover, because our current board of directors was elected at the annual meeting held in April 2011, with some members having been reelected, information on lowest individual compensation paid to directors in 2011 takes int o account the nine directors that were actively in office throughout the year, from January to December. Additionally, for information on highest yearly compensation paid to directors, the reported figures include all compensation we recognized in the inc ome statement for the year. The director that earned the highest compensation was in office throughout the year, from January to December. The average annual compensation paid to our directors in 2011 amounted to R$412,275.39.
No. of members 10.75 5.67 n/a Highest individual compensation (in R$) 1,509,368.77 10,805,969.27 n/a Lowest individual compensation (in R$) 219,300.00 4,003,528.08 n/a Average individual compensation (in R$) 373,924.19 5,270,111.64 n/a ( ) * As discussed in item 13.1 above, our fiscal council is not active at this time. We take the view that the functions of a fisc al council are adequately fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under arti cle 47 of the bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corporate Law. The companys Audit Commi ttee has five independent members, four of whom are external members and one an independent director. The Audit Commi ttee members were appointed for a two-year term. All of them meet the requirements of CVM Ruling 308/99, as amended. Taking into account the compensation paid to the four external committee members that received compensation over the full 12 -month period, from January to December, the highest compensation recognized for 2011 totaled R$287,136.99; the lowest R$228,792.15. The average compensation was R$243,378.36.
2010 compensation of executive officers. We should note that because the departure of two executive officers (in April and
June 2010) was promptly followed by the appointment of two new executive officers (in April and June 2010, respectively), for purposes of the information on lowest yearly compensation set forth in the table below, we considered that in each case an officer was actively working for the full 12 months of the year. Additionally, for information on highest compensation paid to executive officers in 2011 the reported figures include all compensation we recognized in the income statement for the year ended December 31, 2010. The executive officer that earned the highest compensation worked throughout the year, from January to December.
2010 compensation of directors. We should further note that one of our directors was not earning compensation in 2010. The
average compensation paid to our directors in 2010 amounted to R$383,573.49.
No. of members 11.00 6.00 n/a Highest individual compensation (in R$) 1,403,705.84 4,208,247.98 n/a Lowest individual compensation (in R$) 204,000.00 1,769,140.17 n/a Average individual compensation (in R$) 348,703.17 2,480,091.13 n/a ( ) * As discussed in item 13.1 above, our fiscal council is not active at this time. We take the view that the functions of a fisc al council are adequately fulfilled by the Audit Committee, which has been established with responsibilities (prescribed under a rticle 47 of the bylaws) that overlap with those legally assigned to a fiscal council under Brazilian Corporate Law. The companys A udit Committee has five independent members, four of whom are external members and one an independent director. The Audit Committee members were appointed for a two-year term. All of them meet the requirements of CVM Ruling 308/99, as amended. Taking into account the compensation paid to the four external committee members that received compensation over the full 12 month period, from January to December, the highest compensation recognized for 2010 totaled R$241,352.46; the lowest was R$190,194.02. The average compensation was R$203,735.27.
14. HUMAN RESOURCES

Description of the human resources structure
a. headcount (by type of activity and geographic location)
Year ended December 31, 2012 Geographic location Activity Senior executives Executives Managers Other heads of department Specialists Operating personnel Number of employees 5 29 97 170 995 140 Total by geographic location
So Paulo
1,521
127
Interns Operating personnel Specialists Specialists Operating personnel TOTAL 85 1 1 2 1 1,526
Rio de Janeiro Porto Alegre Mato Grosso
1 1 3
The headcount at December 31, 2011, increased as a result of new hirings planned in 2010 which only materialized over the course of 2011.
Year ended December 31, 2011 Geographic location Activity Senior executives Executives Managers Other heads of department Specialists Operations personnel Interns Specialists Specialists Specialists TOTAL Number of employees 5 30 92 152 1,014 157 88 2 1 2 1,543 Total by geographic location
So Paulo
1, 538
2 1 2
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
3 1 2
b.
number of outsourced personnel (by type of activity and geographic location)

Geographic location So Paulo Geographic location So Paulo Geographic location So Paulo

c. turnover rate;
Activity Specialists Activity Specialists Activity Specialists
Outsourced personnel 94 Outsourced personnel 145 Outsourced personnel 175
Total by geographic location 94 Total by geographic location 145 Total by geographic location 175
Turnover rate
Year ended December 31, 2012 Year ended December 31, 2011 Year ended December 31, 2010
(%)
15.85% 17.72% 10.39%
d.
exposure to labor liabilities and contingent liabilities.
For more information on our exposure to labor liabilities and contingent liabilities, see subsection 4.3 of this Form. 14.2. Material changes. Other than the information provided in 14.1 above, we have no additional comments to make at this time. 14.3. Description of employee compensation policy
a. fixed 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 128
and retain talent, and keep a capable team of skilled and dedicated people, capable to help us attain our short-, mediumand long-term 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 sustainab le 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 eve ry 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 functio n of certain global performance indicators set for the Company, coupled with factors as job seniority and evaluations of individua l 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 we llness and quality of life, promoting healthy lifestyles and cultural activities and offering them good entertainment.
c. characteristics of 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 features of the share-based compensation plan to which our middle management employees are eligible are similar to those of the stock option plan for upper management members, and are discussed under subsection 1 3.4 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, we negotiate annual collective bargaining agreements with the union that represents our employees. These agreements establish specific 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 terms and conditions of our profit sharing program .
15.
CONTROLLING OWNERSHIP
% of shares issued and outstanding 198,348,826 10.44 129,910,260 101,078,580 95,366,266 1,315,367,684 59,928,384 1,900,000,000 6.84 Last changed 3/11/2014 2/4/2013 Brazilian or foreign shareholder Foreign Foreign Brazilian Foreign Shareholders or voting agreements No No No No Ties with controlling shareholder No No No No -
15.1 and 15.2. Material shareholder ownership interests

Shareholder Funds managed by OppenheimerFunds, Inc. Funds managed by Vontobel Asset Management, Inc. CMEG Brasil I Participacoes Ltda. Funds managed by BlackRock, Inc. Other Treasury stock Total Common shares
5.32 12/13/2011 5.02 4/22/2014 69.23 3.15 100.00 4/24/2014
15.3. Ownership structure; stock dispersion.

Ownership structure as at the combined annual and extraordinary shareholders meetings held on April 15, 2013
By type of shareholders
Number of individual shareholders Number of corporate shareholders Number of institutional investors Total number of investors Free float April 24, 2014
Number of shares
51,924 1,313 1,932 55,169 1,836,666,702 (96.67%)
129
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 of participants in the controlling group, directors and officers. 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. As of December 31, 2012, our directors and officers held combined ownership interest in 0.199% of our issued and outstanding shares, or an aggregate of 3,936,618 common shares of stock, versus 4,328,186 common shares (0,219% of total shares) at December 31, 2011, and 3,433,299 common shares (0,168% of total shares) at December 31, 2010. 15.7. Additional reportable information. The information filled in 15.3 refers to: i) the annual general meeting of April 15, 2013 with respect to the number of shareholders and (ii) February 20, 2014 relative to the free float.
16.
RELATED PARTY TRANSACTIONS
16.1. Rules, policies and practices regarding related party transactions. 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 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) is interested in shares issued by us to an extent permitting such person 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, board of executive officers, the audit officer, the human resources officer, and the chief operational officer of the BM&FBOVESPA 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 (i ii) 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. Where a director or executive officer (that could potentially ascertain a personal gain from any particular decision) fails to make proper disclosure about any particular conflict of interest, any peer having knowledge of the fact is allowed to make such disclosure. A director or officer silencing about a conflict of interest would be deemed to be in breach of our policy and the matter would be submitted to our Nominations 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. 130
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 transactions
Related Party Relation to Co. TXN date Transaction Amount Outstanding balance (at year-end) Amount Security & attributable to Term Perf. Bonds Related Party Termination Loans or other credit transactions
(In R$ thousands)
(In R$ thousands)
(In R$ thousands)
Rio de Janeiro Stock Exchange (BVRJ)
Affiliate BM&FBOVESP A is Brazilian Commodities Exchanges principal member BM&FBOVESP A is Brazilian Commodities Exchanges principal member
Monthly
Membership fees
2012: 0 2011: 0 2010: (475) 2012: 92 2011: 62 2010: 115 2012: (1,198) 2011: (1,271) 2010: (1,319) 2012: (22) 2011: (21) 2010: ..-0
Acct, Payable: 2012: .0 2011: .0 2010: (2,315) Acct, Receivable: 2012: 21 2011: .8 2010: .5 Acct, Payable: 2012: (51) 2011: (218) 2010: (337) Acct, Payable: 2012: .(22) 2011: .(21) 2010: ..(0) Cash & cash equivalents 2012: 0 2011: 0 2010: 17 Acct, Receivable: 2012: 1,282 2011: 597 2010: 527 Transactions to settle: 2012: ..1 2011: 20 2010: 153 Acct, Receivable: 2012: 826 2011: 636 2010: 452 Acct, Payable: 2012: .(15,000) 2011: ...0 2010: ...0 Sundry expenses: 2012: 1,839 2011: 1,207 2010: .0 Sundry expenses: 2012: 1,208 2011: 1,924 2010: .0 Funds to transfer: 2012: ..0 2011: .(81) 2010: ..0 Acct, Receivable: 2012: ..0 2011: ..0 2010: 24
N/A
N/A
N/A
N/A
NO
Brazilian Commodities Exchange
Monthly
Costs refund mainly w/ IT services
N/A
N/A
N/A
N/A
NO
Monthly Brazilian Commodities Exchange
Membership fees
N/A
N/A
N/A
N/A
NO
Monthly
Rent payments
N/A
N/A
N/A
N/A
NO
Not applicable
Bank acct. deposits Use of our IT and logistics infrastructure; use of staff.
N/A
N/A
N/A
N/A
NO
BM&FBOVESPA Wholly-owned Settlement subsidiary Bank
Monthly
2012: 6,450 2011: 6,617 2010: 5,402
N/A
N/A
N/A
N/A
NO
Foreign exchange Not applicable transactions to settle Agmt. for cost recovery and refund for use infrastructure and staff. Operational funding
N/A
N/A
N/A
N/A
NO
Our Company Monthly BM&FBovespa is the Market principal Surveillance member and (BSM) sponsor of Not applicable BSM
2012: 2,801 2011: 2,441 2010: 2,570 2012: (15,000) 2011: .0 2010: .0
N/A
N/A
N/A
N/A
NO
N/A
N/A
N/A
N/A
NO
BM&F (USA) Inc.
Wholly-owned subsidiary
Monthly
Expenses with representation office Expenses with representation office Pass-through of broker contributions (based on trading value)
N/A
N/A
N/A
N/A
NO
BM&FBOVESPA Wholly-owned UK Ltd. subsidiary
Monthly
N/A
N/A
N/A
N/A
NO
Monthly
N/A
N/A
N/A
N/A
NO
Guarantee fund managed by of BSM. Investor BM&FBovespa Compensation is the Mechanism principal Fund (MRP) member and sponsor of BSM
N/A
N/A
N/A
N/A
NO
Restricted funds transferred to the MRP for unification of safeguard funds Not applicable under management of BSM (previously registered as a bylaws reserve)
Non-recurrent expense: 2012: ..........0 2011: .(92,342) 2010: 0
N/A
N/A
N/A
N/A
NO
131
Related Party
Relation to Co.
TXN date
Transaction
Amount
Outstanding balance (at year-end)
Amount Security & attributable to Term Perf. Bonds Related Party
Termination
Loans or other credit transactions
BM&FBOVESP Refund of Co. A is the Not applicable Bovespa donations founding Institute for member of Social & this civil Environmental society Responsibility organization Not applicable (CSO)
Acct, Receivable: 2012: 3 2011: 2 2010: 1 Acct, Payable: 2012: 0 2011: 0 2010: 0 Acct, Receivable: 2012: 115 2011: 6,517 2010: 6,947 Acct, Payable: 2012: 0 2011: 0 2010: 0 Contribution: 2012: (2,173) 2011: .0 2010: ...0 Acct, Receivable: 2012: 5 2011: ..3 2010: 1 Acct, Payable: 2012: 0 2011: (59) 2010: 0
N/A
N/A
N/A
N/A
NO
N/A
N/A
N/A
N/A
NO
Not applicable
General cost recovery
N/A
N/A
N/A
N/A
NO
BM&F Association
BM&FBOVESP Expenses related A is an human resources honorary Not applicable and use of our member of infrastructure the association Not applicable BM&FBOVESP A is an honorary member of the association -
N/A
N/A
N/A
N/A
NO
N/A
N/A
N/A
N/A
NO
Bovespa Association
N/A
N/A
N/A
N/A
NO
CME Group, Inc.
Affiliate
Monthly
Order routing Agreement.
2012: 0 2011: 0 2010: 106
N/A
N/A
N/A
N/A
NO
Abbreviations per abbreviations_itc-nrcs-usda-gov_scdm_doc_OD-Abbreviations.pdf at http://www.itc.nrcs.usda.gov (2010)
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. Measures to tackle conflict or interest and evidence related party transactions are agreed on an arms length basis (mutually beneficial or adequately compensated transactions).
a. actions taken to tackle conflict of interest
Our transactions with other parties, in particular transactions with related parties, are typically subject to approval eithe r by our board of directors or board of executive officers, as pertaining to each of their spheres of authority and provided in ou r 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 related party transactions are agreed on an arms length basis.
Set forth below is additional information about transactions with related parties carried out last year, as shown in the table under subsection 16.2 above.
BVRJ Rio de Janeiro Exchange. Payments we made to BVRJ are required under their bylaws, which provides that members
(as we are) must pay membership dues in a timely fashion. At a meeting held on December 13, 2004, the Board of BVRJ set at R$400.00 the minimum monthly dues payable per membership certificate. Additionally, in a meeting held on January 28, 2011, the Board of BVRJ terminated the minimum monthly contribution previously charged from BM&FBOVESPA, as the company is now financially independent.
Brazilian Commodities Exchange . Payments we made to Brazilian Commodities Exchange are required under their bylaws,
which provides that members (as we are) must pay membership dues in a timely fashion. The ordinary general meeting held on December 18, 2003, set at of R$ 500.00 the minimum monthly dues payable per membership certificate. For inactive members, the board of directors of Brazilian Commodities Exchange set the monthly dues at twice the minimum monthly contribution. In addition, BM&FBOVESPA was reimbursed for expenses incurred on behalf of Brazilian Commodities Exchange with technical assistance, system development and data processing equipment maintenance.
BM&FBOVESPA Settlement Bank. Payments the BM&FBOVESPA Settlement Bank makes to us are relate to refund for use
of our resources in their operations, as contemplated in the relevant agreement between us and the bank. These payments are made pursuant to a specification report prepared by us and approved by the BM&FBOVESPA Settlement 132
Bank, as required under the agreement.
BSM Market Surveillance .
We charge BSM for costs related to the use of our resources and infrastructure in their operations. These costs are calculated and charged on a monthly basis pursuant to a contractually agreed calculation method. These operations also include management of the Investor Compensation Mechanism Fund (MRP), which BSM operates.
17.
CAPITAL STOCK
17.1. Capital stock Our capital stock is represented solely by shares of common stock.
Type of shares Common shares Number of shares 1,900,000,000 Issued and outstanding Capital stock Authorized share capital
(in R$)
(in R$)
2,540,239,563.88 Authorized share capital
(in R$)
Payment term Not applicable
Last changed February 13, 2014.
2,540,239,563.88
2,540,239,563.88
Number Our board is authorized to increase the capital stock by up to two billion and five hundred million (2,500,000,000) shares of common stock
(in R$ thousands)
Within the authorized limit, our board has powers to decide on any issuance of shares and on the issue price per share.
Amount
Authorization date
May 8, 2008
As of the date of this Form no convertible securities have been issued by us. 17.2. Share issuances, increases in capital stock amount
Date of decision Governance body approving the action Issue date Total issuance amount Total shares in the issue Issue price per share (in R$) Manner of payment Criterion determining the total issuance
August 19, 2008 Board of directors August 19, 2008 R$ 3,216,300.00 3,216,300 R$ 1.00 Issue price id in cash (Brazilian currency) on or before December 31, 2008. Shares issued within the authorized limit set in our Bylaws. Under article 8, paragraph 1, of our bylaws, the board has powers to decide on any issuance implemented, as well as on the issue price and manner and terms of payment, provide the issue must be implemented within the authorized limit of the share capital. Private issuance shares purchased by holders of vested stock options under our stock option plan. 0,16%
Private issuance or public offering Issuance as a ratio of capital stock (%)
17.3. Stock splits, reverse splits, bonus shares. As of the date of this Form, there have been no share splits or reverse splits and no bonus shares have been distributed. 17.4. Reductions in capital stock. As of the date of this Form, there has been no reduction of our capital stock. 17.5. Additional reportable information. At a meeting held on February 13, 2014, the Board approved the cancellation of eighty million (80,000,000) treasury shares, which were previously repurchased within the scope of share buyback programs adopted by the Company, such that the cancellation entails no reduction in capital stock. As a result, hereafter, the fully subscribed and paid -in capital stock amounting to two billion, five hundred and forty million, two hundred and thirty-nine thousand, five hundred and sixty-three Brazilian reais and eighty eight centavos (R$2,540,239,563.88) is represented by one billion, nine hundred million (1,900,000,000) common shares. Therefore, at the extraordinary general meeting, the shareholders will be asked to amend the main provision of article 5 of the Bylaws accordingly. At a meeting held on December 13, 2011, our board approved the cancellation of 64,014,295 treasury shares following repurchases carried out within the scope of the share buyback program. There was no reduction of capital stock. As a result, our capital stock amounting to R$ 2,540,239,563.88 is now represented by 1,980,000,000 shares of common stock. Additionally, at the extraordinary general meeting held on April 10, 2012, our shareholders amended Article 5 (Capital Stock; Shares; Shareholders) of the bylaws to reflect the number of issued and outstanding shares following the cancellation of treasury stock, among other changes to our bylaws. 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 All our shares are shares of common stock. Holders of record of our common shares have tag along rights giving them the ability to sell shares in a tender offer or takeover bid at 100% the bid price offered for the shares or paid for controlling shares, if any (see items e and h below in this subsection). 133
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 55 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
Reimbursement due to exercise of 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 val ue of their shares, as determined pursuant to Brazilian Corporate Law.
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 (winding up). 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 in takeover bids and tender offers triggered by acquisition of control
Under the Novo Mercado listing regulation and our bylaws, an acquisition 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 (within the legally prescribed deadline) 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 offered for the controlling shares, if any (equitable treatment), such that in a takeover bid or tender offer triggered by a disposition of control all shareholders may adhere to sell the shares at 100% the selling price paid for all other shares or controlling shares, as applicable. See the information under item (h) below in this subsection 18.1. f. transfer restrictions (lock up) There are no transfer restrictions related to our shares. g. conditions to amend rights assigned to the 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: (i) Rights to a proportionate participation in profit distributions; (ii) Right to a proportionate participation in the distribution of assets outstanding in a winding up process (after all corporate liabilities are settled); (iii) Preemptive rights to subscribe for shares, convertible debenture or subscription warrants, except in certain circumstances permitted by Brazilian Corporate Law.; (iv) Right to review and judge the company financials and the management of business operations in the manner prescribed under Brazilian Corporate Law; and (v) Right to withdraw under certain legally prescribed circumstances. h. other material share features Under Brazilian Corporate Law, the CVM regulation and the Novo Mercado listing regulation, as well as under our bylaws, a tender offer to purchase all our shares is required in the event our shareholders decide for a going private process (implying our deregistration as public company) or for a delisting from the Novo Mercado segment for our shares to trade on another market. 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 our outstanding shares. i. foreign issuers Not applicable, as we are a company organized and existing under the laws of Brazil. 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
134
While under article 7 of our Bylaws each share entitles the holder to one vote in decisions of shareholders meetings, the sa me 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, because of this voting cap, our Bylaws provide that no shareholders or voting agreement (whether or not filed and registered with us for enforceability) will be permitted to predefine a consistent majority by establishing 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 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. Moreover, if in response to a takeover bid, and after considering the best interests of shareholders and the interests and prospects of our subsidiaries, our board of directors were to recommend the offer be accepted, it must then call a shareholders meeting to decide on whether our bylaws should be amended to eliminate existing voting caps, provided however the bidder should acquire at least two-thirds of the outstanding shares (thus, not including treasury stock) for the amended Bylaws to take effect.
Tender offer requirements Protection of widely dispersed ownership structure and the free float
Accumulation of 15% ownership interest. Any shareholder or group of shareholders sharing similar interests (acquirer)
which seeks to acquire a 15% or higher interest in our shares, or acquire rights in our shares as beneficial owners (including through usufruct or a trust), whether incrementally or otherwise, but so as to hold voting rights on 15% or more of our outstanding shares, must first seek consent from the CVM, and observe certain regulatory rules, the Novo Mercado listing regulation and our bylaws.
Post-acquisition tender offer (material ownership interest).
Any shareholder or group of shareholders sharing similar interests (acquirer) seeking to acquire (incrementally or otherwise) a 30% (or higher) 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 our outstanding shares, must first seek consent from the CVM, and is required (within 30 days after obtaining consent) to initiate or register a tender offer to purchase all other outstanding shares, observing applicable legal and regulatory requirements in jurisdictions where our shares trade at the time, listing regulations and our bylaws. The bid price per share in a tender offer triggered by accumulation of a 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 distributio ns 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 beyond the 30% threshold 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 th eir 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 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. 135
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 have abused his 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 volume and stock quotes (highs and lows).
Market price per common share
Highest price
(in R$)
Lowest price
(in R$)
Average price
(in R$)
Average daily trading value

(in R$)
Financial value traded

(in R$)
2010 First quarter Second quarter Third quarter Fourth quarter 2011 First quarter Second quarter Third quarter Fourth quarter 2012 First quarter Second quarter Third quarter Fourth quarter
13.94 12.76 15.00 15.70 13.52 12.49 10.95 10.82 12.65 11.81 13.24 14.44
11.05 9.81 10.95 12.50 10.84 10.22 7.50 8.33 9.65 8.84 10.24 12.00
12.11 11.74 12.98 13.67 11.77 11.36 9.29 9.95 11.37 10.30 11.69 13.07
163,108.70 177,097.20 159,399.99 167,850.43 173,897.77 133,877.89 153,076.53 122,792.94 141,125.20 129,085.47 142,307.76 138,973.90
9,786,521,890.00 10,980,026,639.00 10,201,599,549.00 10,238,876,045.00 10,607,764,206.00 8,300,429,256.00 9,949,974,407.00 7,490,369,153.00 8,749,762,110.00 8,003,229,100.00 8,965,389,091.00 8,199,460,218.00
18.5. Other securities issued We have issued no securities other than shares, as discussed elsewhere in this Form. 18.6. Brazilian markets where securities of the issuer have been listed to trade BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros. 18.7. Cross-border markets where securities of the issuer have been listed to trade No securities issued by us have been listed to trade on cross-border markets. 18.8. Previous securities offerings 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 implemented previously for sale of shares issued by us. 18.9. Previous equity offerings, takeover bids, tender offers for shares of another company. We have not carried out or registered any equity offering. In addition, there has been no takeover bid for shares issued by us and we have not initiated any tender offers for shares of any other company. 18.10. Additional reportable information 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 (in US$ million) Transfer restrictions Convertibility Redemption
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 30day months), at a rate equal to the sum of the applicable U.S. treasury rate plus 40 basis points.
Events of redemption; redemption price calculation method
136
Key features of the notes
The notes are unsecured, denominated in U.S. dollars and have been issued by us abroad. Interest calculated at the rate of 5.50% per annum will be payable semi -annually on each January and July. Trustee, Registrar, Transfer Agent and Paying Agent (the Trustee): Deutsche Bank Trust Company Americas
19.
BUYBACK PROGRAMS; TREASURY STOCK
19.1. Implemented share buyback programs The table below sets forth information related to our current share buyback program.
Program (or program extension) approval date: August 12, 2010
(1)
June 16, 2011
(2)
June 16, 2012
(3 )
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii)
Number of shares in the program (by share type and class) Authorized buyback as a percentage of total issued and outstanding shares (by share type and class) Repurchase period Reserves, earnings available for allocation to the program Other key program features Actual repurchase (by share type and class) Weighted average repurchase price (by share type and class) Actual repurchases as a ratio of authorized buyback
60,000,000 common shares 3.03% August 18, 2010 to June 30, 2011 R$17,510,138,000.00 (1) 60,000,000 R$12,81 per share (R$768,3 million) 100,00%
60,000,000 common shares 3.12% July 1, 2011 to June 30, 2012 R$16,837,920,000.00 (2) 31,284,700 R$9,22 per share (R$288,6 million) 52,14%
60,000,000 common shares 3.11% July 2, 2012 to June 28, 2013 R$16,615,253,000.00 (3)
0.0% (through to Dec. 31, 2012)
(1) On August 12, 2010, with the objective of creating shareholder value through efficient management of our capital structure, our board approved a share buyback program (2010 Program) for us to repurchase up to 31 million shares through December 31, 2010. However, on December 16, 2010, the board increased to 60 million the number of common shares in the buyback program, which was extended through June 30, 2011. (2) On June 16, 2011, with the objective of creating shareholder value through efficient management of our capital s tructure, our board approved a new buyback program (2011 Program) spanning from July 1 st to December 31, 2011, which authorized the repurchase of no more than 30 million shares. Then, on December 13, 2011, our board approved an extension of the 2011 Program which now ends June 30, 2012. The maximum number of shares in the program increased to 60 million shares. (3) On June 26, 2012, with the objective of creating shareholder value through efficient management of our capital structure, our board of directors approved a new share buyback program (2012 Program) spanning from July 2, 2012, through June 28, 2013 which authorized the repurchase of no more than 60 million shares.
For supplemental information on our share buyback programs, see the tables under subsection 19.4 of this Form, under the heading Additional Reportable Information Supplemental Information for Subsection 19.1 Share Buyback Programs. Treasury stock information
Treasury stock
Type of security Common shares
Number of treasury shares
2012
Aggregate value Weighted average repurchase price per share Number of treasury shares
2011
Aggregate value Weighted average repurchase price per share Number of treasury shares
2010
Aggregate value Weighted average repurchase price per share
(R$ thousands)
Balance at start of year Total repurchases for the year Treasury shares reissued (sold) Treasury shares cancelled Balance at year-end
(in R$)
(R$ thousands)
(in R$)
(R$ thousands)
(in R$)
52,008,012 1,732,200 5,312,707 0 48,427,505
521,553 16,281 53,247 0 484,587
10.03 9.40 10.02 0.0 10.01
64,093,102 57,602,500 5,673,295 64,014,295 52,008,012
613,903 606,888 57,284 641,955 521,553
9.58 10.54 10.10 10.03 10.03
39,247,983 31,950,000 7,104,881 0 64,093,102
230,102 435,116 51,315 0 613,903
5.86 13.62 7.22 0.00 9.58
19.2. Treasury stock at year-end

Repurchase date Number of treasury shares Weighted average repurchase price per share
(in R$)
As a percentage of total shares issued and outstanding

(%)
December 31, 2012
48,427,505
10.01
2.45%
19.3. Additional reportable information At a meeting held on December 13, 2011, our board approved the cancellation of 64,014,295 treasury shares following repurchases carried out within the scope of the share buyback program. There was no reduction of capital stock. As a result, our capital stock amounting to R$2,540,239,563.88 is now represented by 1,980,000,000 shares of common stock. 137
Additionally, at the extraordinary general meeting held on April 10, 2012, our shareholders amended our bylaws to reflect the number of issued and outstanding shares following the cancellation of treasury stock, among other changes.
Supplemental Information to Subsection 19.1 Share Buyback Programs

2010 Program
Periods Number of shares Average price per share (in R$) Total repurchase amount (in R$)
August 2010 September 2010 October 2010 November 2010 Original program December 2010 Total for 2010 January 2011 February 2011 March 2011 April 2011 May 2011 June 2011 Total for extended period Sum total for 2010 Buyback Program
5,650,000 8,280,000 12,447,900 2,872,100 29,250,000 2,700,000 31,950,000 16,570,000 1,800,000 250,000 2,500,000 4,150,000 2,780,000 30,750,000 60,000,000
2011 Program
12.83 13.89 14.02 13.22 13.67 12.80 13.60 12.33 11.41 11.24 11.69 11.24 10.89 11.98 12.81
72,466,569.00 115,044,628.00 174,497,469.00 37,966,234.00 399,974,900.00 34,556,255.00 434,531,155.00 204,307,384.00 20,536,843.00 2,809,176.00 29,224,397.00 46,631,717.00 30,266,460.00 368,332,232.00 768,307,132.00
Periods
Number of shares
Average price per share (in R$)
Total repurchase amount (in R$)
July 2011 August 2011 September 2011 October 2011 November 2011 December 2011 Original program Total for 2011 May 2012 June 2012 Total for 2012 Total for extended period Sum total for 2011 Buyback Program
6,500,000 19,000,000 1,771,900 240,500 1,252,500 787,600 29,552,500 57,602,500 1,250,000 482,200 1,732,200 1,732,200 31,284,700
9.90 8.92 9.31 8.72 9.52 10.00 9.21 10.52 9.22 9.86 9.40 9.40 9.22
64,378,535.00 169,531,039.00 16,496,138.00 2,097,641.00 11,923,993.00 7,875,425.00 272,302,771.00 606,078,748.00 11,525,173.00 4,755,642.00 16,280,815.00 16,280,815.00 2882,583,586.00
20.
SECURITIES TRADING POLICY

a. Date of adoption
20.1. Securities trading policy. The securities trading guidelines, standards and rules that apply to our directors, officers, fiscal council members (where it is active) and members of technical or advisory committees established under our bylaws are stated in our Material Disclosures and Securities Trading Policy Rulebook, which was approved at a board meeting held on May 8, 2008, and amended pursuant to a board decision in a meeting held on December 11, 2012. The Policy Rulebook regulates confidential treatment of privileged information and provides rules on trading in our securities by a number of persons, including so-called connected persons (see item b below) and our Company as well.
b. Persons bound by the policy
As stated in the Policy Rulebook, our securities trading policy applies to, and is binding on our directors, officers, consultants and other insiders (i.e., subject persons). In addition, it bans our Company from trading in its own securities during certain periods which the rulebook defines.
c. Key policy features
Policy Rulebook
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: (i) before the public disclosure of any material act or fact with respect to us, our business, our subsidiaries and affiliates, and their businesses; (ii) 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; (iii) applicable only to our directors and officers (and direct or indirect controlling shareholders, if any were to 138
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.
Exceptions to trading restrictions under the Policy Rulebook

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: (i) 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; (ii) a purchase of shares issued by us using the proceeds of variable compensation paid by way of profit sharing; or (iii) 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 as well as programmed use and source of funds, and 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 unde r any such individual investment program must not influence any investment or divestment decisions.
d. provisions governing blackout and close periods; compliance and enforcement processes.
Our employees 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. Moreover, our directors, officers, fiscal council members and members of technical or advisory standing committees (established under the bylaws) are required to notify us of their holdings in our shares as well as the holding of connected persons (as defined in our Code of Conduct, discussed in subsection 20.2 below), and of any changes to such holdings. These notices are required to be given to our Company (1) on the first business day after they take office, and (2) no later than five days after any buying or selling transaction closes. 20.2. Additional reportable 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 Ruling 358/02. Given that ownership in BM&FBOVESPA shares is widespread and control is dispersed at this time, the provisions included in our Policy Rulebook specifically with regard to trading activities by controlling shareholders would only serve the purpose if a controlling shareholder were to emerge in the future.
Code of Conduct
At a meeting held on March 17, 2009, our board approved, and we adopted a Code of Conduct (which was amended on February 23, 2010). The Code of Conduct provides a set of rules that express the values that guide our ethical conduct, including as to trading in securities issued by us (and other issuers), and to this extent it incorporates rules and standards provided in our securities trading policy. The Code is binding on our and our subsidiaries directors and officers, fiscal council and committee members, employees and interns, consultants and regular service providers, all of whom we call Collaborators. In addition, persons bound to comply with our Code include those we call Collaborators and persons connected with any Collaborator, whom we define as close family members to the first degree (parents, children, siblings), spouses or common law spouses, dependents so declared in a collaborators income tax return, and any legal entity in which a Collaborator holds powers to decisively influence the decision-making process. The definition of connected persons further includes investment funds in which a Collaborator holds powers to influence the investment decisions of the fund manager or administrator. Accordingly, there will be no restrictions to a Collaborator investing in investment funds where the actual management of funds and assets is deferred to independent professional managers, such that a Collaborator would hold no power to influence investment decisions. Under our Code, 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 and other securities markets operated by our Company (i.e., on markets comprising our BM&F segment or Bovespa segment). Additionally, Collaborators and connected persons are not permitted to join or invest in investment clubs. Exceptions to the rule banning trading on our markets include a permission for Collaborators and connected persons to 139
(1) invest in shares or units of index ETFs listed on our stock exchange (Bovespa segment), as long as they hold no powers to influence the fund administration or asset management, and provided a 90-day period spans between any buying and selling in the funds shares or units; (2) invest in shares of open-end, non-exclusive, diversified portfolio funds, as long as they hold no powers to influence the fund administration or portfolio management; and (3) invest in securities that trade on Bovespa markets on the basis of an individual investment program previously approved by us. 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. In addition, Collaborators and connected persons are permitted to invest in government bonds and other government debt securities traded on our Tesouro Direto (Treasury Direct) platform. Our audit office continually monitors trading activities by our Collaborators. Where there are indications of a breach, formal clarification is sought; the case is investigated, analyzed and referred to our 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.
21.
DISCLOSURE POLICY
21.1. Guidelines, rules and internal procedures applicable to release of financial information. 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. Our board of directors approved the disclosure policy on the same date and jointly with our securities trading policy (see subsection 20.1 above). 21.2. Material disclosure policy; privileged information. All our directors and officers, as well as our insiders as employees, consultants and providers with access to privileged 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 (IRO), who is responsible for ensuring proper disclosure in accordance with our policy and article 3 of CVM Ruling 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 on which our shares are listed to trade. In performing this function, our investor relations officer reports to, and is advised by the disclosure committee (section 7 of the policy rulebook). The responsibilities of the disclosure committee include managing and overseeing the implementation of our disclosure policy, as well as making recommendations as to timing, process and extent of disclosures and release of privileged information. 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 include: (i) Material facts occurring in the course of business or in connection with our business operations are to be disclosed promptly after occurring; (ii) 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; (iii) Disclosures of information related to material litigation contingencies are required to observe certain objective criteria; (iv) 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; (v) 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 (vi) The investor relations officer is charged with providing additional clarification related to any particular disclosure of material development, whenever so requested by the relevant regulatory entities. 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 widely-circulated newspapers we customarily use to publish corporate acts and notices to the market. Insiders are required to keep the information strictly confidential until such time as it is properly disclosed to the market. Material litigation disclosures are required to observe certain objective criteria, including the following:
Material litigation
Assessment of prospects for a defeat Probable defeat Possible defeat Remote defeat
Below 1 RV(*) Between 1 RV and 3 RV
-Material Fact 140
-Release Notice of Material Fact
---
Above 3 RV
( )
Material Fact
Release Notice of Material Fact
Release Notice of Material Fact
* RV is an acronym for Reference Value, which our bylaws define as an unit amount in the equivalent of 1% of the book value of shareholders equity, as determined in the most recent full-year balance sheet statement. In addition, any person with access to privileged information (an insider) is required to refrain from actin g on such knowledge in any way, directly or indirectly for his own or a third partys benefit, which includes any type of insider tradi ng. These persons are also required to ensure persons working under him or her and persons of trust also refrain from act ing 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. Moreover, any person bound under our disclosure policy is required to sign an instrument of adherence to the policy. Under our disclosure policy and pursuant to the main provision of article 6 of CVM Ruling 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. 21.3. Directors and officers responsible for implementing, enforcing, assessing, 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. Additional reportable information Under article 10 of our bylaws, every shareholder or group of shareholders sharing similar interests are required to give notice to us disclosing any shares purchases (incremental or otherwise) which ultimately result in aggregate ownership interest in excess of 5% of our issued and outstanding shares of common stock. Thereafter, any purchase of additional 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 Ruling 358/02. We should also clarify that, while active, our disclosure committee (see subsection 21.2 above) has not been formally established by us.
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, thereby raising from 1.8% to 5.1% our total ownership interest in shares of the CME Group. As result of our acquisition of additional shares in the CME Group, 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). 22.2. Significant changes in the way business is conducted. There have been no significant changes in the way we do business. 22.3. Material contracts and agreements not directly related to the business activities. There have been no material contracts or agreement not directly related to our business activities. 22.4. Additional reportable information There is no additional material information to be provided at this time under this section.
141

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The Brazilian Securities, Commodities and Futures Exchange

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

Reference Form 2013

Version 10 April 30, 2014.

1. PERSONS RESPONSIBLE FOR THE REFERENCE FORM

The above identified executive officers hereby represent to:

3. SELECTED FINANCIAL AND OPERATING INFORMATION

19,413,882 24,147,114 2,064,750 1,659,791 1,074,256

19,419,048 22,633,975 1,898,742 1,592,515 1,144,486

9.807990 0.572058 0.568172

Non-GAAP financial measures

Years ended December 31, 2012, 2011 and 2010

Amount of profit retentions

Years ended December 31, 2012, 2011 and 2010

Dividend distribution frequency

Summary of distributions of net income and retained earnings.

(in R$ thousands, unless otherwise indicated)

1,074,290 1,074,290 100.0%

5.4% 135,726 ASM - March 27, 2012

Gross distribution per share

Total gross distribution

0.014951 0.029890 0.068231 0.022422 0.098957 0.119101 0.016156 0.207025 0.576733

March 10, 2011

Total gross distribution

0.051128 0.034054 0.121740 0.121139 0.117420 0.470942

0.116161 0.124359 0.067921 0.046599 0. 201237 0.556277

Debt to Equity Ratio

Debt obligations by type and time to maturity

0 0 0 0 0 0 0 0 0 0 3,072,623 1,242,239 1,739,644 63,207 27,533 3,072,623

Senior Unsecured Notes

Supplemental Information for Subsection 3.7

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

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

b. Risks relating to direct or indirect controlling shareholder or controlling group

Volumes from foreign investors.

I.1 BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros (BM&FBOVESPA) I.1.1)

Purpose and principal related facts

Purpose and principal related facts

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

Purpose and principal related facts

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

Purpose and principal related facts

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

Stage (degree of jurisdiction)

Purpose and principal related facts

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

Purpose and principal related facts

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

(II) Civil law cases

Purpose and principal related facts

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

Amounts, assets, rights at risk

Purpose and principal related facts

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

II.2 BM&FBOVESPA II.2.1)

Amounts, assets, rights at risk

Purpose and principal related facts

Impact in case of a defeat

Stage (degree of jurisdiction)

Purpose and principal related facts

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

Stage (degree of jurisdiction)

Amounts, assets, rights at risk