BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros. The Brazilian Securities, Commodities and Futures Exchange

Transcription

1 The Brazilian Securities, Commodities and Futures Exchange Quarterly Financial Statements at June 30, 2010

2 .2. MANAGEMENT S DISCUSSION AND ANALYSIS OF THE SECOND QUARTER 2010 Dear Shareholders, We are pleased to present to you this discussion and analysis of our financial condition and results of operations for the second quarter OPERATING PERFORMANCE Our performance in overall volumes traded in the second quarter 2010 on markets comprising our BM&F segment increased by 6.3% when compared to the previous quarter, whereas volumes traded on markets comprising our Bovespa segment climbed 4.6% quarter on quarter. Additionally, quarter on quarter average daily traded volumes grew 2.8% in the BM&F segment and 1.3% in the Bovespa segment. Highlights for the quarter on BM&F markets include the high frequency participation, which reached 6.0% in overall volume, and the DMA system (Direct Market Access) reached 17.6% of total traded volume. Moreover, April 2010 achieved the second highest volume of trading on record, with average volume of 3.05 million contracts traded daily. In a quarter highlight for Bovespa markets, trading by local institutional investors accounted for a 34.6% of the traded value, as compared to 29.9% one quarter earlier. Additionally, the average daily traded value in May 2010 reached R$7.28 billion, and substantially contributed to the quarter s average daily traded value of R$6.7 billion, since this average fell in June due to the impact of a decline in the average market capitalization of listed issuers and the slow pace of business during the FIFA World Cup matches. Set forth below is a discussion of our operating performance. BM&F segment The average daily traded volume in the quarter soared 54.2% year on year to 2.52 million contracts, from 1.64 million earlier, the highest on record for the segment. This high is attributable primarily to a 70.5% surge in volumes traded in BRL interest rate contracts and a 33.3% climb in FX contracts. The volume traded in interest rate contracts in the second quarter was positively influenced by different perceptions of the outlook for the benchmark interest rate. In previous meetings, the Copom had increased the benchmark rate (Selic rate) by an aggregate 1.5% and, just recently, it decided to raise it by an additional 0.50%, to 10.75%. Other factors leading to the increase in trading volume include heightened banking exposure to credit risk and the rise in net assets pooled in investment funds, in particular multi asset funds. Additionally, the average number of open interest of interest rate in BRL contracts jumped 172% year over year. On a quarter on quarter basis, volumes traded in 2Q10 picked up 2.8%, due primarily to a 16.6% growth in volumes traded in index-based contracts and mini contracts.

3 .3. BM&F Segment Evolution in Average Daily Trading Volume - ADTV (in thousands of contracts) Contracts 2Q10 2Q09 1Q10 % 2Q10/2Q09 % 2Q10/1Q10 1H10 1H09 % 1H10/1H09 BRL interest rate contracts 1, , % 1.9% 1, % FX contracts % 2.3% % Index-based contracts % 16.6% % USD interest rate contracts % 8.5% % Commodities contracts % -12.2% % Mini contracts % 16.6% % OTC derivatives % -29.6% % Total 2, , , % 2.8% 2, , % Source: BM&FBOVESPA The 2Q10 average rate per contract (RPC) for BM&F markets, of R$1.14, dropped 17.5% year on year, primarily due to: the greater volume of trading in BRL interest rate contracts, which have a lower RPC in comparison with the RPC of other products the 18% 1 appreciation of the Brazilian real against the U.S. dollar, which adversely impacted revenues from Fx, USD interest rate and commodities contracts, as the fee rates for these contracts are based on the foreign exchange rate, therefore having resulted in 21.2%, 29.3% and 10.7% declines in the average rate for these particular contracts, respectively; the fact that increases in volume correlate with drops in average rate per contract, as our pricing policy includes progressive discounts which apply as trading volume ranges go up; and the fee rate discounts given to DMA and high frequency trading activities, regarding which volumes have been rising significantly in the last few months. The table below sets forth data on RPC evolution. The rate per contract rose 1.7% quarter on quarter mainly due to the impact of volumes traded in BRL interest rate contracts, which picked up 8%. BM&F Segment Evolution in Average Rate per Contract (RPC) (in Brazilian reais) Contracts 2Q10 2Q09 1Q10 % 2Q10/2Q09 % 2Q10/1Q10 1H10 1H09 % 1H10/1H09 BRL interest rate contracts % 8.0% % FX contracts % -4.7% 1, % Index-based contracts % -0.8% % USD interest rate contracts % -4.5% % Commodities contracts % 12.1% % Mini contracts % -3.4% % OTC derivatives % 16.1% % Total % 1.7% % Source: BM&FBOVESPA DMA evolution 1 The average exchange rate for FX futures and options fell to R$1.775 from R$2.155 earlier.

4 The volume of trading via DMA (Direct Market Access) has been increasing consistently in the last few months to account for 17.6% 2 of the overall volume in the second quarter, with record high average daily volume of 889 thousand contracts (both sides of the trade included). Our Traditional DMA channel continues to account for most DMA trading; however, the other DMA models, which include co-location services and DMA via Provider have been growing at even higher rates. The chart below sets forth a breakdown of monthly volumes by DMA model on a quarter-on-quarter and year-over-year basis, and as a percentage of the overall average daily trading volume. DMA Evolution (ADTV in thousands of contracts) % 13.9% % 11.3% % % Q09 2Q09 3Q09 4Q09 1Q10 2Q10 20% 16% 12% 8% 4% 0% Traditional DMA CME Globex DMA Provider CoLocation % of DMA in overall ADTV Source: BM&FBOVESPA. The flow of orders routed through the CME-Globex system achieved in the second quarter 2.9% of the overall trading volume on BM&F markets, with average thousand daily contracts (buys and sells sides included). The drop from the first quarter is mainly due to participants that traditionally used this access system migrate to co-location arrangements. The chart below sets forth data on evolution of the flow of orders routed to the CME- Globex system for the periods indicated, by type of contract most actively traded, i.e., FX contracts, index-based contracts and mini contracts. 2 We determine this percentage by dividing the volume of contracts by two (2), as we take into account both sides of the trade, i.e. buy side and sell side, which is an industry practice adopted by exchanges across the world. 3 Includes FX contracts, index-based contracts and mini contracts, which account for an aggregate 147 thousand daily trades added to 1 thousand of other contracts.

5 .5. Evolution of trading via CME-Globex (ADTV in thousands of contracts) (20) 3.2% 2.9% 4.1% % % % Q09 2Q09 3Q09 4Q09 1Q10 2Q10 FX Equities Mini-Contracts % in Overall Volume 5,5% 5,0% 4,5% 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0% 0,5% 0,0% Source: BM&FBOVESPA. Moreover, increasingly and consistently high frequency trading has been gaining significance in terms of volume traded. May 2010 registered record high volumes from high frequency trading with average 410 thousand contracts traded daily (both buy and sell sides included), which accounted for nearly 9% of the overall volume for BM&F markets, mainly due to the peak levels of FX contracts that reached average daily traded volume of 670 thousand contracts, once this is the main contract traded by high frequency traders. The table below sets forth a breakdown (by type of contract, and as a percentage of the overall average daily trading volume) of data on high frequency volumes for the quarter, which accounted for 6.0% of the overall volume, with average 298 thousand daily contracts traded. Evolution of high frequency trading (ADTV in thousands of contracts) % 3.8% % % % % Q09 2Q09 3Q09 4Q09 1Q10 2Q10 FX Equities Mini-Contracts % in Overall Volume 9,5% 8,5% 7,5% 6,5% 5,5% 4,5% 3,5% 2,5% 1,5% 0,5% -0,5% Source: BM&FBOVESPA.

6 .6. High frequency traders have been focusing largely on FX contracts, index-based contracts and mini contracts. The chart below sets forth data on evolution of high frequency trading by type of contract, where index-based and mini contracts stood out in June 2010, having accounted for 23.5% and 57.6% of the overall volume, respectively. This evolution tends to lower the rate per contract, not only due to rate discounts granted to high frequency traders, but also because of predominant day-trading activities which are charged at lower rates. Volume of high frequency trades as a percentage of volume by type of contract 70% 60% 50% 57.6% 40% 30% 23.5% 20% 10% 0% 11.9% Source: BM&FBOVESPA. FX contracts Index-based contracts Mini contracts On a breakdown of volume by type of investor, second quarter trading by foreign investors increased to 25% from 22% in the prior quarter, positively swayed by growth in high frequency trading, as most of these traders are foreigners. In addition, volumes traded by institutional investors dropped to 27% of the overall volume from 29% in the previous quarter, whereas volumes traded by financial institutions kept at 43%. Trading volume in BM&F segment by type of investor 3% 3% 2% 2% 9% 8% 8% 6% 4% 2% 4% 2% 19% 19% 20% 22% 22% 25% 21% 24% 26% 25% 29% 27% 48% 46% 44% 44% 43% 43% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Central Bank Companies Individuals Foreign Investors Institutional Investors Financial Institutions Source: BM&FBOVESPA.

7 Bovespa segment Second quarter average daily trading value of R$6.7 billion was up 28.2% year over year and 1.3% quarter on quarter. As measured in number of trades, this represented average 431 thousand daily trades, a 32.3% surge over the average volume of 326 thousand daily trades for the same period one year ago, and 6.1% over average 406 thousand daily trades in the prior quarter. Average daily traded value (ADTV) and number of trades.7. 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1, Q09 2Q09 3Q09 4Q09 1Q10 2Q10 1H09 1H ADTV (BRL billions) Number of Trades (thousands) Source: BM&FBOVESPA. Average daily traded value (ADTV) (in R$ millions, except as otherwise indicated) Bovespa markets 2Q10 2Q09 1Q10 % 2Q10/2Q09 % 2Q10/1Q10 1H10 1H09 % 1H10/1H09 Stocks and equity derivatives 6, , , % 1.2% 6, , % Stocks (cash market) 6, , , % 0.9% 6, , % Equity derivatives % 5.2% % Stock forwards % -14.6% % Options on stocks + stock indices % 14.6% % Fixed income and other debt securities cash market % 123.1% % Total 6, , , % 1.3% 6, , % Source: BM&FBOVESPA. Average daily number of trades Bovespa markets 2Q10 2Q09 1Q10 % 2Q10/2Q09 % 2Q10/1Q10 1H10 1H09 % 1H10/1H09 Stocks and equity derivatives 431, , , % 6.1% 418, , % Stocks (cash market) 348, , , % 6.6% 337, , % Equity derivatives 82,990 58,377 79, % 4.0% 81,402 60, % Stock forwards 1,485 1,103 1, % -22.8% 1,700 1, % Options on stocks + stock indices Fixed income and other debt securities cash market 81,505 57,274 77, % 4.7% 79,702 59, % % 21.3% % Total 431, , , % 6.1% 418, , % Source: BM&FBOVESPA.

8 The market capitalization 4 reached R$2.1 trillion at the end of the second quarter, up 16.2% year over year, but down 11.8% at the end of the first quarter. Based on a 3-month rolling average, turnover velocity 5 rose to 69.2% in the quarter to June Stock exchange capitalization (in R$ trillions) Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Source: BM&FBOVESPA. The domestic Institutional investors were the most active traders on Bovespa segment in the second quarter and accounted for 34.6% of the overall value traded, followed by foreign investors and retail investors, which accounted for 28.7% and 26.1% of the overall second quarter value traded, respectively. Share of value traded on Bovespa segment by type of investor 0% 0% 0% 0% 0% 6% 2% 6% 2% 6% 2% 2% 2% 2% 10% 9% 8% 34% 37% 35% 32% 27% 29% 24% 25% 26% 27% 30% 35% 33% 30% 30% 29% 31% 26% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Individuals Institutional Investors Foreign Investors Financial Insitutions Companies Others Source: BM&FBOVESPA The participation of foreign investors in the second quarter accounted for 28.7% of the overall value traded, up from 27.2% in the prior quarter. However, the net balance of foreign investment flows ended the quarter slightly negative due to the participation of those investors in May, when the net flow was negative in R$1.5 billion. 4 The stock exchange capitalization is measured as the sum total of the market capitalization of all listed companies in BOVESPA market; market capitalization in turn is a measurement of size of a public company equal to the share price times the number of shares outstanding by listed company. 5 Turnover velocity refers to the annualized ratio between value traded on the cash market in the period presented and average market capitalization for the same period.

9 .9. Bovespa Segment Net flow of foreign investment (in R$ billions) (15.4) Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Source: BM&FBOVESPA. In addition, retail investors accounted for 26.1% of the value traded in the second quarter, down from 31.4% in the quarter earlier and 30.4% one year ago. The number of active custody accounts at the end of the quarter to June 2010 was thousand, virtually flat from March 2010 and 6.7% up from June Number of active custody accounts (in thousands) Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Source: BM&FBOVESPA The quarterly retail trading via the Home Broker system declined to account for rates between 17% and 18% of the overall value traded over the last three months, as compared to an average of 21% in the prior quarter, explaining the decrease in financial value traded by retail investors in the period.

10 .10. Home Broker trading as a percentage of average daily traded value (ADTV) 21% 22% 21% 18% 17% 18% 17% 17% 16% 17% 19% 19% 20% 21% 18% 17% 18% 18% Source: BM&FBOVESPA Exchange-traded funds ETFs In the second quarter, ETFs listed on the equities market traded between R$24 million and R$33 million per day. With the end of an additional round of bidding processes for index-funds, new ETFs are expected to launch in the near future, adding to the seven currently listed ETFs. Average daily traded value (ADTV) by ETFs (in R$ millions) Jan- 09 Feb- 09 Mar- 09 Apr- 09 May- 09 Jun- 09 Jul- 09 Aug- 09 Sep- 09 Oct- 09 Nov- 09 Dec- 09 Jan- 10 Feb- 10 Mar- 10 Apr- 10 May- 10 Jun- 10 Source: BM&FBOVESPA

11 Public offerings.11. In 2Q10, the capital raising activity totaled R$4.5 billion, as Mills and Julio Simões carried through with their market debuts, while Even, JBS and Hypermarcas conducted follow-on offerings. In addition, early in July Renova launched its IPO and Banco do Brasil a follow-on offering, such that total proceeds from offerings in 2010 already add to R$23.5 billion. Moreover, eight additional offerings are in the pipeline for 2010, including seven IPOs and one follow-on offering (Petrobras that released to the market its intention). Volume of offering proceeds (in R$ billions) IPO Follow-On * * Preliminary data through August 04 th, 2010 Source: BM&FBOVESPA Securities lending The volume of open interest positions at the end of 2Q10 had climbed to R$20.3 billion, a 57.8% increase over June 2009 and 4.5% increase over March This growth largely correlates with volatility and stock prices rallies over the last few months, which swayed market exposure, and contributed to boost the average monthly number of transactions by 41.7%, to 83 thousand from 58.6 thousand one year ago.

12 .12. Bovespa segment - Open interest in securities lending transactions 25,0 20,0 15,0 10,0 5, Source: BM&FBOVESPA Q09 2Q09 3Q09 4Q09 1Q10 2Q10 Open Interest (BRL billions) Monthly Average Number of Trades (thousands) 100,0 80,0 60,0 40,0 20,0 - CONSOLIDATED FINANCIAL PERFORMANCE Operating revenues Second quarter gross operational revenues climbed 25.3% to R$527.0 million from R$420.6 million in the same period one year ago, primarily due to the rebound in volumes traded on our markets and thus in revenues from transactions. Revenues from trading and settlement activities in the Bovespa segment, which accounted for 50.0% of the overall revenues, amounted to R$263.5 million and were up 29.2% from the same period one year ago. This climb correlates with a 28.2% year on year rise in volumes traded on Bovespa segment; and Revenues from trading and settlement activities in the BM&F segment which accounted for 35.1% of the overall revenues, amounted to R$184.9 million and were up 26.5% from the same period one year before. This climb likewise correlates with a 54.2% year on year rise in volumes traded on BM&F markets, which however were partially impacted by the reduction in RPC for the segment. As a result, revenues from trading and settlement activities in both equities and derivatives markets accounted for 85.1% of total revenues, as compared to 83.3% in the quarter to June one year ago. Other revenues (including dividends received from the CME Group) totaled R$78.5 million, up 11.5% from the same period in the prior year (R$70.4 million). This increase is due primarily to the following: Market data (vendors): fees from distribution of market data to vendors and other customers amounted to R$16.8 million, which accounted for 3.2% of total revenues. This revenue line dropped 16.7% year on year due mainly to appreciation of the Brazilian real against the U.S. dollar leading to a decline in revenues from fees charged from international customers. The average number of broadcast terminals or market data customers increased 4.0% year on year. Access fees charged from market participants: revenues of R$13.4 million in this line item, accounted for 2.5% of the total, as compared to R$10.2 million one year ago, a 31.4% year on year rise. This climb is attributable to increased demand from brokerage firms for access at more expensive ranges that allow for greater number of trades and larger order flows, which in turn correlate with the increase in trading activity.

13 .13. Depository and custody services: revenues from depository and custody services surged 37.7% year on year, to R$22.3 million from R$16.2 million in the second quarter one year ago, and accounted for 4.2% of total revenues. Specifically, revenues derived by our central depository facility grew by 13.2%, to R$16.6 million from R$14.6 million in the earlier year, mainly due to the additional fee based on value of assets held in custody for resident investors, the impact of which has been felt starting from May In addition, the average number of custody accounts at the end of the quarter to June 2010 (580.1 thousand) went up 7.2% from one year ago (541.0 thousand), and the average value of assets held in custody (not including ADRs and foreign investors) soared 20.8% year on year to R$435.2 billion from R$360.2 billion earlier, thus positively swaying this revenue line. Securities lending: at R$12.3 million, this revenue line accounted for 2.3% of total revenues in 2Q10 and a 65.4% year on year gain (R$7.5 million in 2Q09), primarily as a result of the increase in average financial value of open interest positions, which totaled R$19.9 billion in the quarter, a climb of 78.2% when compared to R$11.2 billion one year before. Listing: revenues from listing, in the amount of R$10.8 million rose by 15.2% year on year and accounted for 2.0% of total revenues. The increase in revenues is due to a higher number of fillings for IPOs and Follow Ons, which have an analysis fee, to new listed companies in the last 12 months, and to the discount reductions rendered to the listed companies. Operating Expenses Second quarter operating expenses totaled R$140.6 million, picking up 9.7% from the same period one year ago. This rise is due mainly to changes in the following line items Personnel: expenses of R$64.4 million for the quarter fell 3.0% from the prior year primarily due to a drop in expenses with the 2010 stock option program (to R$7.0 million versus R$13.4 million in 2Q09); Data processing: expenses of R$24.6 million for the quarter were up 20.2% from the year before, mainly due to rent expenses related to the start of operations of our new contingency site and to expenses with projects related to the network structure implementation; Marketing and promotion: these expenses amounted to R$9.9 million, soaring 80.3% from the same quarter in the prior year, as a result mainly of costs incurred in bolstering our financial education programs and market popularization campaigns, in line with our strategy to educate and attract future and prospective retail investors and boost trading activities; and Sundry: second quarter sundry expenses amounted to R$8.5 million versus R$5.3 million one year ago, a 60.0% year on year surge correlated mainly with non-recurring expenses consisting of: o R$1.8 million write off of receivables attributable to BVRJ (Bolsa de Valores do Rio de Janeiro) in connection with brokers in litigation process. o R$1.1 million in intangibles written off (reversal of Capex); o R$0.5 million related to the contingent liability provision associated with civil lawsuits.

14 .14. Interest Income, net Net interest income for the quarter to June 2010, in the amount of R$77.5 million, increased 41.4% from the same period one year ago. On a year over year comparison, financial revenues increased to R$83.6 million from R$68.0 million earlier, whereas financial expenses dropped to R$6.1 million from R$13.1 million the year before. Income tax and social contribution and deferred income tax and social contribution Income before taxes for 2Q10 totaled R$410.5 million, as compared to R$304.9 million in the quarter to June 2009, a 34.6% rise which correlates primarily with improved operating and net interest income results. The line item income and social contribution and deferred income and social contribution taxes totaled R$102.1 million and consists primarily of: Recognition of deferred tax liabilities of R$111.6 million related to temporary differences from yearly amortization of goodwill for tax purposes, with no impact on cash; Recognition of tax credits amounting to R$13.0 million related to tax losses carried forward which correlate mainly with payment of interest on shareholders equity to shareholders, and the social contribution loss for the quarter; and R$3.5 million related to other transitory provisions, as follows: BRL Millions 2Q10 (-) Tax Liabilities (+) Recognition of tax credits (-) Other transitory Provisions -3.5 Income tax and social contribution and Deferred income tax and social contribution EBITDA and net income EBITDA for the second quarter of 2010 was R$341.7 million, which is up 31.4% from R$259.9 million in the same period one year ago. In addition, the EBITDA margin rose to 72.1% from 68.7% one year ago. The rises in EBITDA and EBITDA margin correlate primarily with increase in volumes traded. Net income for the second quarter 2010, of R$308.8 million, was up 64.2% from R$188.1 million for the same period one year before. This increase in net income is due primarily to the following: Improved operating performance; Higher net interest income; and The recognition of deferred tax liabilities related to temporary differences from yearly amortization of goodwill for tax purposes, which we recognized only in the second quarter of 2009, such that the net impact for the entire first half of 2009 was reflected in the 2Q09 financials;

15 Main lines items under Assets Total Assets.15. At the end of the quarter to June 2010, the consolidated balance sheet of BM&FBOVESPA reported total assets of R$21,304.4 million, down 3.2% from R$22,002.2 million in March Cash and cash equivalents; financial investments Cash and cash equivalents, including short- and long-term financial investments, amounted to R$4,262.4 million and accounted for 20.0% of total assets. This is 7.0% up from R$3,985.1 million in the previous quarter, when cash and cash equivalents accounted for 18.1% of total assets. This drop from the first quarter 2010 correlates with the fall in volume of collateral pledged by market participants, as recorded in the line item collateral for transactions under Current Liabilities, and the payment of dividends and interest on equity during the second quarter, which amount to R$248 million and R$137 million, respectively. Non-current assets Non-current assets totaled R$18,121.2 million, including long-term receivables (including long-term financial investments) of R$1,638.1 million, investments of R$39.0 million, property and equipment of R$275.2 million, and intangible assets (goodwill) of R$16,168.9 million. Intangible assets consist primarily of goodwill correlated with expectation of future profitability related to the acquisition of Bovespa Holding. Goodwill was tested for impairment in December The test was based on a valuation report prepared by a specialist firm and has not resulted in any necessity to adjust the carrying amount of goodwill. In the first semester, management has not identified any internal or external indicators which could change the conclusions reached regarding the absence of reasons requiring adjustments for recognition of impairment of goodwill. Main lines items under Liabilities and Shareholders Equity Current liabilities Current liabilities amounting to R$1,355.5 million accounted for 6.2% of total liabilities at the end of the quarter to June 2010, and are 17.6% down from R$1,645.6 million, representing 7.5% of total liabilities at the end of the previous quarter. This drop is due mainly to the lower amount of cash collateral pledged by market participants, which fell to R$901.7 million from R$1,171.4 million earlier. Long-term liabilities Long-term liabilities at the end of the quarter to June 2010 amounted to R$548.0 million, 26.7% higher than the previous quarter, and consist primarily of deferred income and social contribution taxes, as well as provision for contingencies and legal obligations. Shareholders equity Shareholders equity totaled R$19,385.1 million, down 0.6% from the previous quarter, and is composed basically of capital stock of R$2,540.2 million and a capital reserve of R$16,508.3 million.

16 OTHER FINANCIAL HIGHLIGHTS Earnings distribution.16. Earnings distributions in the six-month period to June 2010, which were paid by way of interest on shareholders equity, amount to an aggregate of R$227 million, as follows: R$ 30 million on March 11, 2010; R$60 million on April 13, 2010; and R$137 million on May 27, Risk management - Central Counterparty Risk BM&FBOVESPA manages the following central counterparty clearing facilities absorbed during the exchange integration process of BM&F and Bovespa: (i) equities and corporate debt clearing facility, (ii) derivatives clearing house, (iii) FX clearing house; and (iv) government securities clearing house. The Central Bank considers that these clearing facilities perform systemically material roles. They act as central counterparty (CPP) to ensure multilateral settlement of transactions carried out on the equities markets, the derivatives markets, the spot Fx market, and the government bonds and corporate debt securities markets. The central counterparty clearing facilities are responsible for providing efficiency and stability to the market by ensuring trades are properly cleared and settled. A CCP interposes itself between counterparties to financial transactions, becoming the buyer to the 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 For proper risk mitigation, each clearing facility has its own risk management system and safeguard structure. These structures comprise the universe of mechanisms and remedies a clearing house may resort to cover losses from failed settlement by a participant. The key components of these safeguard structures include collateral deposited by market participants, often in the form of margin, plus special funds intended to cover possible losses due to defaults and, in addition, co-liability undertaken by broker and clearing agents regarding transactions they intermediate or clear. Transactions carried out on our markets are secured by collateral margins pledged in the form of cash, government bonds and corporate debt securities, bank letters of guarantee and stocks, among other things. As of June 30, 2010, pledged collateral totaled R$120.7 billion (versus R$102.6 billion as of June 30, 2009), 75.8% of which in the form of cash and government bonds. This compares to R$123.2 billion in total collateral at the end of March 2010, 74.8% of which in the form of cash and government bonds. The table below sets forth comparative data on pledged collateral at the end of the periods indicated. In R$ billions Clearing facility June 30, 2010 March 31, 2010 December 31, 2009 June 30, 2009 Derivatives Forex Debt Securities Equities (CBLC) TOTAL

17 .17. The fall in pledged collateral at end of the quarter to June is due primarily to the decline in volumes traded in stocks (Bovespa segment), the aggregate guarantees of which dropped to R$39.8 billion from R$41.7 billion in the earlier quarter. CME Dated June 22, 2010, BM&FBOVESPA and the CME Group, Inc. executed the transaction documents contemplated in a February 11 Term Sheet, which implement our mutual global preferred strategic partnership. These documents include (i) a Share Purchase Agreement whereby we will increase to 5% (from 1.78%) our ownership interest in CME shares; (ii) a Technology Agreement contemplating the joint development of a multi-asset class electronic trading platform; and (iii) a Preferred Strategic Partnership Agreement whereby we agree to cooperate in identifying strategic co-investment opportunities, including commercial partnerships with other international exchanges, which operate equities and derivatives markets. Bond offering Dated July 16, 2010, BM&FBOVESPA completed a US$612 million global notes issuance. The notes will pay interest every six months, in January and July, at the annual rate of 5.50%. The proceeds of this offering were invested in our purchase of CME shares. Credit Ratings Moody's. On May 27, 2010, Moody's Investors Service assigned a local currency issuer rating of A1 on the global scale and Aaa.br on the Brazilian national scale to BM&FBOVESPA. The outlook on the ratings is stable. Also, Moody s assigned a Baa2 long-term foreign currency debt rating to the notes, with a positive outlook. Standard & Poor s: Dated June 22, 2010, Standard & Poor's Ratings Services assigned its 'BBB+ (long-term) and A-2 (short-term)' counterparty credit ratings to BM&FBOVESPA. The outlook on the ratings is stable. 2Q10 HIGHLIGHTS New Pricing Policy We have recently announced to the market the new pricing policy for high frequency trading (HFT) on both BM&F and Bovespa segments. Pursuant to this policy, high frequency traders will hold HFT registration accounts and the granting of progressive discounts based on ranges of volume traded will hinge on the account under which an investor registered as high frequency trader. The pricing policy implementation will be in two phases, the first on November 1, 2010, and the second on January 3, CHI X BM&FBOVESPA and Chi-X, a company specialized in electronic trading systems, recently executed a Term Sheet contemplating the joint development of data feed and order routing software system designed to convert stock quotes into different foreign currencies in real time, and give foreign investors the ability to transmit orders to the Brazilian

18 .18. exchange in their local currencies. This transaction is part of our initiative to offer foreign investors, in particular retail investors, an efficient tool to simplify the trading of Brazilian equities on their local market. This order routing software will be designed to convert quotes from Brazilian reais into foreign currency at exchange rates provided in real time by local banks adhering to the project, for these quotes to be displayed in foreign currency in data feeds sent to brokerage firms, which will then display them to customers. Already Bradesco, Citibank, HSBC and Itaú have adhered to the project, while other banks consider adhering. Continuing market popularization programs We are proceeding with our market popularization programs, which focus primarily on educating future and prospective retail investors through mass media initiatives (including free-to-air television, radio broadcasts and the Internet), in particular the Financial Education TV Show, Radio Web, free online courses, the SimulAção (investment simulator), a radio channel for our Mulheres em Ação ( Women in Action ) gateway, courses, Q&A sessions, lectures, and other education actions, such as Desafio BM&FBOVESPA (BM&FBOVESPA Challenge, a student contest), Dinheiro no Bolso ( Saving Money ), and our sponsorship of the Brazilian government s program known as National Financial Education Strategy (Estratégia Nacional de Educação Financeira), or ENEF. BDRs By end-april 2010 we announced the first ten local listings of Unsponsored Level I BDRs, which will trade on our Exchange and will be deposited with Deutsche Bank. We have conducted a bidding process to list ten additional BDR issuances, thus ensuring fair conditions are extended to institutions that wish to tap into this market. This bidding process was carried out with three bidders, with Citibank Distribuidora de Títulos e Valores Mobiliários S.A emerging as the winning bidder. New ETFs On June 4, 2010, we announced bidding processes to register new ETFs. The first such bidding process took place for the launch of an ETF that mirrors the Financial Services Index (IFNC) and Itau-Unibanco S.A. won the bidding process and obtained a 3-year exclusive license for the use of the IFCN and the creation of its ETF (ETF IFCN). Technology developments In addition to initiatives related to pricing policies and new products, we invest continually in developing our trading platforms and the network for access to our markets, and in cutting latency down for efficient traffic. Technology development highlights for the period include: BVMF-CME joint development of multi-asset class trading platform: work is ongoing for development in cooperation with the CME Group of an electronic platform for the trading of equities, derivatives, foreign currency and fixed income securities. It has been designed as a fully integrated platform, which we will develop on the basis of the existing Globex technology. When fully implemented, this multi-asset class trading platform is expected to replace our GTS, MegaBolsa, Sisbex and BovespaFix systems. The joint project team includes 200 experienced professionals, each party contributing half of the team. Phase 1 of the project (derivatives and FX modules for replacement of the GTS system) is set to be implemented in the first quarter of 2011.

19 .19. DMA modalities 2, 3 and 4: the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários or CVM) has approved the implementation of the Direct Market Access trading platforms in BOVESPA segment, which will be offered via Provider, via Direct Connection and via Co-location (investor model), or DMA modalities 2, 3 and 4, respectively. Thus, starting as of September 1, Throughput capacity: we are now working to boost our systems throughput capacity to 3 million daily transactions in the Bovespa segment (from 1.5 million presently) and 400 thousand daily transactions in the BM&F segment (from the current 200 thousand). Implementation is set to take place in 4Q10. INDEPENDENT AUDITORS The Company and its subsidiaries have retained PricewaterhouseCoopers to audit the financial statements. The policy that governs the hiring of independent auditing services by the Company and subsidiaries is based on internationally accepted principles which preserve the independence of these services and include the following practices: (i) the auditors cannot hold executive or managerial positions in the Company and its subsidiaries; (ii) the auditors cannot perform operational activities in the Company and its subsidiaries which may compromise the audit work; and (III) the auditors must be impartial in order to avert conflicts of interest and loss of independence, and must be objective in their opinions and reports regarding the financial statements. In the six months ended, the independent auditors and their related parties have not provided services unrelated to the audit to the Company and its subsidiaries.

20 BM&FBOVESPA S.A. Bolsa de Valores, Mercadorias e Futuros Review Report of Independent Accountants on Quarterly Information June 30, 2010

21 Review Report of Independent Accountants To the Board of Directors and Shareholders 1 We have reviewed the accounting information included in the Quarterly Information (Parent Company and Consolidated) of BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros (the Company ) and subsidiaries for the quarter ended June 30, 2010, comprising the balance sheet, the statements of income, of comprehensive income, of changes in shareholders equity, of cash flows and of value added, explanatory notes and the management report. This Quarterly Information is the responsibility of the Company's management. 2 Our review was carried out in accordance with specific standards established by the Institute of Independent Auditors of Brazil (IBRACON), in conjunction with the Federal Accounting Council (CFC), and mainly comprised: (a) inquiries of and discussions with management responsible for the accounting, financial and operating areas of the Company with regard to the main criteria adopted for the preparation of the Quarterly Information and (b) a review of the significant information and of the subsequent events which have, or could have, significant effects on the financial position and operations of the Company and its subsidiaries. 3 Based on our review, we are not aware of any material modifications that should be made to the accounting information included in the Quarterly Information of the Parent Company referred to above in order that it be stated in accordance with technical pronouncement CPC 21 - Interim Statements, applicable to the preparation of Quarterly Information, consistent with the standards issued by the Brazilian Securities Commission (CVM). 4 Based on our review, we are not aware of any material modifications that should be made to the accounting information included in the Consolidated Quarterly Information referred to above in order that it be stated in accordance with the accounting practices adopted in Brazil applicable to the preparation of Quarterly Information, consistent with the standards issued by the Brazilian Securities Commission (CVM). 2

22 5 As mentioned in Note 2, the Brazilian Securities Commission (CVM), through Deliberation CVM no. 603/09, provided that companies could submit their Quarterly Information during the year 2010 based on accounting standards effective until December 31, 2009, provided that those interim financial statements were subsequently restated, including comparative figures, to meet the new standards. Accordingly, the present Quarterly Information differ from that originally disclosed by the Company on August 12, 2010, in compliance with CVM Deliberation no. 603/09 and CVM Instruction no. 457/07. São Paulo, February 17, 2011 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 Edison Arisa Pereira Contador CRC 1SP127241/O-0 3

23 BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros at June 30 and March 31, 2010 (In thousands of reais) (A free translation of the original in Portuguese) BM&FBOVESPA Consolidated Assets Notes 6/30/ /31/2009 6/30/ /31/2009 Current assets Cash and cash equivalents 4 (a) Financial investments 4 (b) Accounts receivable - net Other receivables Taxes recoverable and prepaid Prepaid expenses Non-current Long-term receivables Financial investments 4 (b) Other receivables - net Deferred income tax and social contribution Judicial deposits 15 (g) Prepaid expenses Investments Interest in subsidiaries 7 (a) Investment Property 7 (b) Property and equipment Intangible assets Goodwill Software and projects Total assets The accompanying notes are an integral part of this Financial Statements. 4

24 BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros Balance Sheet at June 30 and March 31, 2010 (In thousands of reais) (A free translation of the original in Portuguese) BM&FBOVESPA Consolidated Liabilities and shareholders equity Notes 6/30/ /31/2009 6/30/ /31/2009 Current Collateral for transactions Earnings and rights on securities in custody Suppliers Salaries and social charges Provision for taxes and contributions payable Income tax and social contribution Financing Dividends and interest on own capital payable Redemption of preferred shares to be settled Other liabilities Unearned discount Non-current Financing Deferred income tax and social contribution Provision for contingencies and legal obligations Shareholders equity Capital Capital reserve Revaluation reserves Statutory reserves Treasury shares ( ) ( ) ( ) ( ) Valuation adjustments Additional Dividend proposed Retained earnings Interest of non-controlling shareholders Total liabilities and shareholders equity The accompanying notes are an integral part of this Financial Statements. 5

25 BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros Statement of Income Quarters and six month periods ended June 30, 2010 and 2009 (In thousands of reais, unless otherwise stated) (A free translation of the original in Portuguese) BM&FBOVESPA Notes 2 nd Quarter Accumulated 2 nd Quarter Accumulated Gross operating revenues Trading and/or settlement system - BM&F Derivatives Foreign exchange Assets Trading and/or settlement system - Bovespa Negotiation trading fees Transactions clearing and settlement Other Other operating revenues Loans of marketable securities Listing of marketable securities Depository, custody and back office Trading participant access Vendors quotations and market information Commodity classification fee Other Deductions of revenue (52.962) ( ) (42.039) (77.105) PIS and COFINS taxes (47.022) (92.637) (37.788) (68.668) Taxes on services (5.940) (11.484) (4.251) (8.437) Net operating revenue Operating expenses ( ) ( ) ( ) ( ) Administrative and general Personnel and related charges (61.800) ( ) (65.649) ( ) Data processing (23.746) (44.212) (19.562) (45.575) Depreciation and amortization (11.074) (19.926) (9.444) (17.950) Outsourced services (9.502) (18.511) (8.723) (17.298) Maintenance in general (2.191) (4.708) (2.309) (4.910) Communications (6.417) (12.329) (5.180) (10.142) Rents (541) (1.071) (530) (1.201) Supplies (755) (1.205) (566) (1.031) Promotion and publicity (9.724) (14.852) (5.316) (7.502) Taxes (2.258) (3.294) (156) (472) Board and committee members compensation (1.830) (2.878) (1.572) (2.701) Sundry 21 (6.325) (17.009) (4.670) (9.247) Equity in the results of subsidiaries 7 (669) (2.178) Financial results Income before taxation of profit Income tax and social contribution 20 (c) ( ) ( ) ( ) ( ) Current Deferred ( ) ( ) ( ) ( ) Net income for the period Attributable to: Shareholders of the parent Non-controlling interest (1)Information relating to earnings per share are presented in Note 16(g) The accompanying notes are an integral part of this Financial Statements. 6

26 BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros Statement of Income Quarters and six month periods ended June 30, 2010 and 2009 (In thousands of reais, unless otherwise stated) (A free translation of the original in Portuguese) Consolidated Notes 2 nd Quarter Accumulated 2 nd Quarter Accumulated Gross operating revenues Trading and/or settlement system - BM&F Derivatives Foreign exchange Assets Trading and/or settlement system - Bovespa Negotiation trading fees Transactions clearing and settlement Other Other operating revenues Loans of marketable securities Listing of marketable securities Depository, custody and back office Trading participant access Vendors quotations and market information Commodity classification fee Bolsa Brasileira de Mercadorias Bank Other Deductions of revenue (53.365) ( ) (42.339) (77.709) PIS and COFINS taxes (47.325) (93.212) (37.967) (69.033) Taxes on services (6.040) (11.685) (4.372) (8.676) Net operating revenue Operating expenses ( ) ( ) ( ) ( ) Administrative and general Personnel and related charges (64.371) ( ) (66.337) ( ) Data processing (24.642) (45.908) (20.494) (47.177) Depreciation and amortization (11.524) (20.826) (9.887) (18.838) Outsourced services (10.126) (19.763) (9.703) (18.822) Maintenance in general (2.332) (5.014) (2.566) (5.392) Communications (6.470) (12.441) (5.249) (10.240) Rents (678) (1.343) (665) (1.490) Supplies (764) (1.236) (580) (1.057) Promotion and publicity (9.870) (15.198) (5.475) (7.767) Taxes (2.340) (3.485) (339) (834) Board and committee members compensation (1.830) (2.878) (1.572) (2.701) Sundry 21 (8.527) (21.097) (5.331) (10.841) Financial results Income before taxation of profit Income tax and social contribution 20 (c) ( ) ( ) ( ) ( ) Current (637) (1.132) Deferred ( ) ( ) ( ) ( ) Net income for the period Attributable to: Shareholders of the parent Non-controlling interest (426) (678) (251) 44 (1)Information relating to earnings per share are presented in Note 16(g) The accompanying notes are an integral part of this Financial Statements. 7