Conference Call Transcript

International Conference Call BM&FBovespa st 1 Quarter 2013 Earnings Results May 10th, 2013 Operator: Good morning, ladies and gentlemen, and welcome to the audio conference call about the earnings results of BM&FBOVESPA for the first quarter of 2013. Thank you for standing by. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions to participate will be given at that time. If you should require assistance during the call, please press the star key followed by zero (*0). As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Eduardo Refinetti Guardia, Chief Product and IR Officer of BM&FBOVESPA. Mr. Eduardo Refinetti Guardia: Thank you. Hello everybody. Welcome to BVMF first quarter earnings call. I would like to start with this conference call by discussing the change in our management team announced last night. As you know, yesterday our Board of Directors elected the company's Executive Board with the mandate of two years and there were two changes; the first one is that our Chief Product Officer – Marcelo Maziero – has decided to leave the company and on behalf of the management team I would like to take this opportunity to thank Maziero for his important contribution to our company. During the almost one and a half year he worked with us leading this important area Maziero has started several important projects notably the OTC project making an outstanding contribution to the company. We wish him all the best for the future and we thank him for his dedication and contribution throughout the period in which he worked in the company. So the Board of Director elected me to replace Maziero, so from now on I will be the Chief Officer responsible for products and I will continue to be the Investor Relations Officer. It means that Claudio will continue working with me and I would also like to take this opportunity to comment on a change in Claudio's role within the company. We have extended his responsibilities by giving him Business Development Activity. We believe these activities and IR have a lot in common so from now on Claudio will continue taking care of Investor Relations supervising Rogerio, but will
1

also become responsible for the analysis of growth opportunities working alongside our product officers in the development of new products and heading the discussion on fee structure. Yesterday the Board of Directors also approved the name of the new CFO to replace me; his name is Daniel Sonda. I have known Daniel for a long time and I can assure you he's the right person for the job. Daniel and I worked together 10 years ago when I was the Secretary of Finance for the state of São Paulo so I know him quite well and I am absolutely confident he will assure the continuity and improvement of all of our efforts to control costs and increase capital efficiency. Daniel currently service as a Managing Director responsible for structured credit funds at Credit Suisse, which he joined in 2006. He will need some time before starting to work with us and in the meantime I will continue acting as CFO. The Board of Directors also reelected Edemir as CEO, Cicero as COO and Luis Furtado as CIO. So the message here to you is that you should not expect any change related to this change in management. Maziero decided to leave the company and we will continue to work in product development working on the OTC project as we were before. So it will not…it doesn't mean any change in our strategy. So that's very important to emphasize. Now, moving on to the presentation, I would like to start with a brief overview on the quarter's financial and operational highlights on page 3. So very briefly we continue to see a strong performance on the BMF segment with an 11% growth in volumes and 3.4% increase in the revenue per contract. As Claudio will explain, this is mainly related to the interest rate contract. Adjusted expenses are strictly under control; down 1.1% compared to the first quarter 12 and operating income totaled R$ 348 million; up 3.5% compared to first quarter 12. This positive result was not fully reflected in the adjusted net income due to the reduction in net financial income, which was affected by low interest rates and currency depreciation. Adjusted net income totaled R$ 394 million; down 3.6% compared to first quarter 12. In line with what we have been doing related to dividend payments, yesterday our Board of Director approved a payout equivalent to 80% of GAAP net income equivalent to $ 0.11 per share or R$ 213.6 million. The payment will be done on June 7th.
2

Before I hand over to Claudio, I would like to highlight the developments of our main projects. First, is the successful implementation of Puma equities module, which was deployed in the beginning of April. We know it is still very early to estimate the possible impact on volumes, but we are glad to see that since its implementation we have observed a meaningful increase in the number of messages. As a matter of fact the average number of messages per minute has increased 20% since the system rollout from the leverage of 68,000 messages per minute in the first quarter of the year to an average of 72,000 messages per minute in the last 30 days. The second, in Q1 we have started the certification process for registration of MDS and in July we will is start the testing of the new clearing house for the derivatives. So this is very important step. Regarding time deposit and real estate credit bills a few weeks ago we got a feedback from the Central Bank. We were requested to add new functionalities into our systems. I am particularly referring to the automation of the financial settlement procedures for time deposits. We expect that it will take around six months to adjust the system comply with Central Bank requests. Once we finish the necessary adjustments we will submit our platform again for approval. So these were my initial comments. Now I would like to hand over to Claudio. Mr. Claudio Jacob: Thank you Eduardo. Hello everybody. Please, let's move to page 4. Here we can see some numbers of equity segments, the Bovespa segments. Once this is already known by everybody, I would like just to highlight some main messages that are the consistent volumes that we have seen in the last 5 quarters that the numbers have been above R$ 7 billion in a consistent way. And this is mainly supported and the main responsible is the foreign investor and behind the foreign investor we have the HFTs growing in our cash markets. We had as well as a consequence of this growth a higher turnover that is reaching over the 70% per year in the last few quarters. On the other hand, at the table that we can see on the left side of the page, we are seeing margins in bps falling. We have two main reasons to explain it: The first one is the reduction of the average margin for auctions markets and this is in line with our strategy of sponsoring market maker performance.

3

So just to remind you we have market makers for the most liquid stocks in the cash markets and these market makers they have incentives in terms of fees to play in the auctions markets for these stocks. The other reason is the reduction of participation of the volumes of options in the overall volumes and once this product has a higher average price we have a mix impact once they lose share. Let's go to page 5. Here we see some data from BMF segments. The numbers were again very good. Volumes are increasing more than 11% when we compare with first quarter 2012 and this is combined with a higher average rate per contract where is completely in line with a trend that we've been observing in the last few years that is the lengthening of the positions in interest rate contracts, but it's not just interest rates that are responsible for this higher average RPC; we have the currency appreciation that impacts some of our contracts denominated in US dollar like the futures on effects and commodities. We also have a smaller participation of HFTs, once they don't trade very much interest rate contracts so it's again a mix effect. Please, let's go to the page number 6. In here to go very briefly it's important to show that our cash segment in terms of trading is responding for 9% and I would like to remind you that we announced in mid-March a change in the fee structure of the cash market that will take into effect only in April. So, in April… actually, in the second quarter 13 we are going to be able to see the new distribution of the revenues and it's probably that the cash markets trading revenues will be around 6%. Going to page 7, changing to expenses side. We've seen the Sell Side report so we have no surprise in what we reported, actually, I would say we have an interesting reduction comparing first quarter 12, actually, 1% is not that much, but when you consider that we had a 5 to 6% inflation impact it's a very relevant for us and this is mainly due to lower expenses from IT and Marketing and some other expenses as well that we reduced that more than offset the higher expenses that came from personnel. And this personal line, everybody knows, carries the inflation effects. We also had some provisions in the year and these are not considered in adjusted expenses that amounted to something like R$ 9 million and this is majorly related to some legal disputes in the civil and labor area. So the or not recurrent. Going to the next page, page 8, Eduardo has already mentioned this, so here is just to illustrate better the impact that we had from the financial income effects reduction that is due to interest rate reduction and increase in expenses (that we

4

are going to see in more detail on the next page) impacting in our operating performance that combines a better revenues with a lower expenses. So in terms of bottom line we have actually a declined here as well in terms of adjusted numbers. A decline because of this financial income impact in terms of GAAP net income you have as well of the equity accounting that we booked from CME. Going to next page, as I mentioned, we have here in a more detailed way the decline in financial income that is the result of the low interest rates. So financial results reduces…actually, the revenues of the financial income are almost 30% down and the financial expenses increased around 15% and just reminding that we have US$ 600 million bond that we paid the COPOM in US dollar, so any change in FX impacts this line. Still in this page we see the cash position as always we show in the third quarter and the quarter numbers reaching R$ 4.2 billion. What is important here; the available cash is this one that is highlighted here, is 2.3 and I would like to remind you that this position dates from end of March and in April we had a payment of almost R$ 390 million and we had a buyback up over R$ 40 million, so it's going to be natural to see a change of this cash position in the coming quarters. The other thing that is important to mention and to remind is that this R$ 390 million that we are paying out means 100% payout for 2012 fiscal year. Going to page 10, we changed a little to a more long-term perspective. Here I would like to mention the interesting growth that we have seen in derivatives interest rate contracts. The main message is not just to the lengthening of the positions, but the kind of investor that is growing. So it's interesting to see institutional being domestic and foreigners growing much more than financial institutions that were the main player of this kind of contract some years ago. In the equity side the message is the increase in volumes that we've seen in the last two years. So we booked a 6.5 billion in 2010 and 11, 2012 just to remind we got 7.3 billion per day. Reminding also that we had in the end of 2011 the removal of the IOF for foreign investors and this year the growth continues. Actually, we have here the first quarter, but we had a very good April, so year to date considering April, we are broking R$ 7.7 billion per day. If we see the IBovespa performance that we can see in the chart here on average in 2010 was 67,000 points now the average is less than 60,000 points and everybody knows the reason. You have the other number here that is the market capitalization that is not growing meaningfully, so the consequence of this is a much higher turnover, so we see the turnover going from 64% in 2010 to almost 72% in 2013 and we consider this as success and a well succeed action that we
5

had in our products area in terms of lunching and sponsoring new products like ETFs auctions on single stocks, securities lending that contributed a lot for turnover and sponsoring new clients that are mainly the HFTs. And talking about this, we have on page 11 some illustration. We see here real estate funds growing significantly in the last two years, so 2013 it's almost R$ 40 million per day in terms of ADTV against 50 million or less than 2012 and less than 4 million in 2011. Other project that is showing a growth in 2013 is the securities lending, so the average position is growing almost 40% in 2013 versus 2012, so as I mentioned, this has a very strong the impact in the cash market because the (0:19:31 unintelligible) in transaction becomes usually a sale after a buy so it is stimulates and incentivizes trading and we have as well the auctions with market maker that is here at the last growing more than 50%. Going to page 12, we are very happy to say that we delivered a very important phase of our investment program that most of you probably remember started in 2010 that is the new trading platform. And this has a very strong meaning to our company and the market once we are delivering…having an enormous upgrade in terms of capacity, latency and functionalities. Okay, now I will return the word to Eduardo. Thank you. Mr. Guardia: Thank you Claudio. Moving to page 13, as our final remarks, I just would like to emphasize our efforts not only to increase revenue, but also to have a more diversified revenue base that's why we are focused in products we believe have a strong growth potential in that will allow us to have a more diversified revenue base. Second, our strong commitment on one hand to increase operational efficiency by keeping costs under control and increasing capital efficiency, but also to provide a state-of-the-art in terms of our IT systems in both trading and post-trading activities. Third, our focus on the customer needs to deepen the relationship with investors, brokers, issuers so that's very important to strengthen the company's position in the local market. We have several activities with respect to this like the revision of the pricing policy, the new products that we are launching, so these all have this focus on customer needs. And last, but not least, our commitment to shareholder return by keeping a very high payout ratio and the share buyback program. So these were our initial
6

comments. I also have here with me today Luis Furtado and Cicero and now we would like to open up the call for your questions. Thank you. Question & Answer Session Operator: Ladies and gentlemen, we will now begin the Question and Answer session. If you have a question, please press the star (*) key, followed by the one (1) key on your touch-tone phone now. If at any time you would like to remove yourself from the questioning queue, press star 2. Our first question comes from Mr. Alexandre Spada, from Itaú BBA. Mr. Alexandre Spada: Hi gentlemen. Good morning. I have two questions actually. The first relates to Puma and to the new fee structure for cash equities. My question here is: How long do you guys expect it will take until the combination of these two new events will reach the full potential in terms of increase in volumes in the cash equities business? And then I'll come back with the second question. Thank you. Mr. Guardia: Ok Alexandre, thank you. In terms of the fee structure remember that we are introducing the changes in two stages, so initially we have already reduced the fees for trading from 0.7 to 0.5 and the measures that we believe will help this increase volumes are the ones we will be implementing after December 2nd, which is the incentives high-frequency traders and daytraders that will have the same discounts and the reduction of the fees based on volumes. So, unfortunately, we have the time necessary to adjust to the system, so it will be operational only by the end of this year. With respect to Puma Luis and Cicero can give you more color on that. It's not easy to make a very straightforward relation between Puma and volumes, but what we can say, as I said in my initial comments, is; we are already observing a higher volume in number of messages, the average number of message per minute has increased at least a 20%. We saw something similar with the limitation of Puma for the derivatives segment and we are (although we only have a little bit more than 30 days) already observing something similar with respect to cash equity. So, having said all that I think what Puma will really allow us is to remove any possible obstacles for volumes increase as it is a more reliable and efficient and low-latency platform and the benefits of fee structure only after December.

7

Mr. Spada: Okay, thanks, that's very clear. Now, on the second question, can you give us an update on those new derivatives on the futures based on SELIC rate? I know they are quite new, but are those contracts going according to plan so far? Thank you. Mr. Guardia: The SELIC future, as we all know, it will take time to gain traction so we never expect to see volumes increased immediately. We have a very liquid DI contract, we know that the government has…by the way; it's in the newspapers today that the government wants to create incentives for this migration from DI to SELIC. What I can tell you is that we did our part, we are ready, we have the contracts, we launched new contracts related to the SELIC rate recently, but honestly we didn't see any meaningful volumes yet. So this is a process that will take time and the good news here for us is that we see that the government is really interested in creating incentives for this migration. Mr. Spada: And then just to make sure, I thought you would be (given the numbers of this new contract) separate from the other one, but I'm assuming you were not doing that yet just because the volumes are still not significant, right? Mr. Guardia: Yes, that's true Alexandre. Mr. Spada: Okay, thank you very much. That was very very clear. Mr. Guardia: Thank you. Operator: Excuse me, our next question comes from Mr. Marc Jason, with Invesco. Mr. Marc Jason: Yes, hi, good morning gentlemen. My first question is related to your expenses as we see on page 7 that your first-quarter expenses were R$ 124 million and what I would like to know is; given your guidance of 560 to 580 will you be maintaining that guidance or will you be lowering it? And also in respect to expenses, what is the long-term sustainable level? Mr. Guardia: Ok Marc, thank you. With respect to expenses, yes, we are keeping the guidance. Remember that the guidance in nominal terms is the same guidance we gave last year although we have inflation close to 6% in Brazil today. So I think it is a very good result to be able to keep the same nominal guidance in 2013 compared to 2012. If you look to 2012, 2011 even 2010 we always have a lower level of execution in the first quarter, so you should not in my view today expect any reduction in the
8

expense guidance. I think that we are very comfortable with the guidance we gave and you should expect considering the whole year to see adjusted expenses between the range we gave to you; from 560 to R$ 580 million. Going forward of course it's too late to give a guidance for 2014, but I would say that it's reasonable if we have some small nominal increase in total expenses next year because keeping expenses flat in nominal terms for three years it would be very challenging. So, although I will not give the guidance now, but my expectation is that if we have some nominal increase next year I expect to have it below the number adjusted for inflation. So we will continue to seek, to have gains in efficiency in real terms. If we have some nominal increase last year we would love to see it below inflation. But again, it's too early to give any guidance for 2014. Mr. Jason: Great. Thank you. Let me ask my second question. Mr. Guardia: Please. Mr. Jason: You talk about the turnover velocity and we saw that it has reached a new level. So what my question would be; going forward, what are you looking at in terms of a sustainable level of turnover velocity? Mr. Guardia: Well, it's…honestly it's not easy to give you the sustainable level, but I believe that if you really manage to increase the number of listed companies and if we really obtain an increase in the free float of the listed companies in Brazil, which is still relatively small compared to international standards, I believe we still can see an increase in turnover velocity going forward. Claudio, would you like to add something? Mr. Claudio Jacob: Just to remind here, some other countries that have similar size or structure that we have here are over than 100%, okay, so I'm not saying that we are giving to reach 100%, but my point is; our capital market started or reborn some 10 or 12 years ago with Novo Mercado, with new offerings and now we are seeing the developments of new type of clients like HFTs, long and short that are using different kind of products, so this is (0:31:21 inaudible) here. So I see this as a start, ok? Mr. Jason: Okay, thank you very much. Mr. Jacob: Thank you.

9

Operator: Excuse me, our next question comes from Mr. Ken Worthington, with J.P. Morgan. Mr. Ken Worthington: Hi good morning. Congratulations Eduardo and Claudio on your expanded roles. Eduardo, given your expanded role, I mentioned that management has been very proactive in cultivating products that it sees potential for greater volumes, ETF's tradable rates is just a number of them. How does that pipeline of new products look today? And then two others; HFTs have been absent from the trading of interest rate derivatives, which is an enormous product for you and seems if you can get it right it would have enormous potential for them. Do you think there is a solution there even as it had just some point? And then equity derivatives if I look at other exchanges around the world fix income derivatives is a big part of their business, but equity derivatives is another large part and at BM&F it is unusually small relative to the very large size of the interest rate product. You guys have taking some actions there to try to expand that. It doesn't seem to have worked at least as of yet. Do you think there is a potential solution there at some point as well? And if there is a problem, what might that problem be as we stand today? Mr. Guardia: Well Ken, thank you. You have three interesting questions. The first one is with respect to the pipeline. I think the pipeline I see a great opportunity when we look to the OTC products, so that's a whole new possibility for the company and you know we are working hard to become a relevant player in this market, so this is definitely one very interesting opportunity for the company. The other one is to continue to take advantage of the opportunities we have to do cross listing. With CME we have this 7500 now being traded in Brazil and the performance’s started, but it's good. We will launch the WTI, we will launch other contracts in this cross listing with CME. We believe we have a lot of opportunities to explore the products we already have, like ETFs, fixed income ETFs that is one of the products that we are discussing with the government to launch and we are discussing with the government because to launch because a fixed income ETF we need to solve some tax issues that are still pending. Remember we have the product and to offer another book in foreign currency, which is the Brazil Easy Investing that we are very optimistic that soon we will get to the authorization from the revenues service to give a fast-track solution to the foreign investors that want to use this platform to trade stocks in Brazil.

10

So I'm just giving examples, not to mention the real estate funds that are growing very fast, so the pipeline I think we have today is a good one, and we still have opportunities to explore better the products we have at the moment. Your second question is related to the HFT and particularly the interest rate contracts. You are right; high-frequency traders are not trading our most important contract amount which is the DI contract. And my understanding is that they are not doing that because the contracts we have in Brazil with floating rate is different from the contracts they are used to trading in US and Europe, which are fixed rate contracts, so one alternative to have high-frequency traders trading interest rate contracts would be to have a type of contract more similar to what they are used in the US. But that's not something we will be able to deliver in the short term. So, honestly, I don't expect to see in the short term an increase in the participation of HFT in the derivatives segment because the interest rate contract is the one who is growing faster. But if you look to the other products, derivative products, HFTs are very aggressive and have an important participation in this segment. With respect to equity derivatives, I agree; we have opportunities and I went to mention some initiatives that we have already discussed with you and some good results and one of them is the auctions on single stocks. So the idea is to use more aggressively market makers. I think that's an opportunity we have. By the way, market makers can also be an alternative for interest rate contract when you think about long-term contracts. And I think using market makers can be one alternative, on the other hand we see that the market is becoming more sophisticated; so there is more demand for this type of equities derivatives. What we have to do now is to discuss with the market participants to make sure that our next steps, in our next steps we will provide the right product that the market is demanding. But I agree with you that we have a huge opportunity when we talk about equity derivatives. Claudio, Cicero I do know if you want to add anything? Mr. Worthington: Great. Thank you very much. Mr. Guardia: Welcome Ken. Operator: Excuse me, our next question comes from Mr. Jim Young, with West Assembly Investments.

11

Mr. Jim Young: Yes, can you discuss how much cash flow did you generate during the quarter and how much free cash flow was also generated in the March quarter? And what are your expectations for the full year 2013? Thank you. Mr. Guardia: Okay. For cash generation it's very close to our Ebitda. Our Ebitda in the first quarter was around R$ 400 million, so the cash generation is very close to this number. Let me see if I have… If you look on page 8 that’s what I said; use the adjusted net income also as a proxy for the cash generation so it's close to the R$ 400 million I mentioned to you. So that's very close to the cash generation we have in the first quarter. Mr. Young: And how much of that would be considered free cash flow? Mr. Jacob: That would be the free cash flow. If you consider this almost 400 million in the quarter we have a Capex of 40 million and a depreciation of around 25 million that is very close. That's why we try to show the adjusted numbers very near to what we understand is the cash flow; to translate it. Usually we show the cash flow statement, but we put only one we have the year closed, not just the quarter because sometimes it's misleading because comparing different quarters can mislead. Regarding the expectations for the year, it's very hard for us to say because it's going to depend very much on the revenue side that we have many projects, but it's a policy the company that we don't give any guidance. What we can say is; the expensive side in terms of cash will not be higher than R$ 580 million and the Capex will not be higher than R$ 290 million. So that's the exercise that we do, the only (and the hardest) side is to try to see the revenue sides, ok. Mr. Young: Well I guess that if your net Capex is R$ 290 million that you would still expect to generate (0:41:07 inaudible) out of free cash flow for the full year? Mr. Jacob: If you see what's happening this year we are seeing a growth in all sides of the company; equities are growing, derivatives are growing. I think one point that is important first quarter with first quarter. It's another reason why we try to avoid this kind of comparison in a quarterly basis. It's important the annual basis because the difference I'm going to mention is diluted. But in the first quarter 13 we had 59 days, in the first quarter 12 we had 62 days. It means almost 15 to R$ 20 million difference in revenues. So when you consider

12

the business days during the year, some one or two days difference is not that much, but in a quarter it becomes kind of significant. So going in terms of performance, our performance in 12 I understand it was very good mainly when we compared with 11. In terms of operational performance we increased around 30% and that was offset by a poor performance in terms of financial results. This year we are improving even more the operational performance and having poor financial results in the first quarter. What is important; the average interest rate in the first quarter 2013 is lower than the first quarter 2012, but is more in line with the rest of the year of 2012 because the government reduced in a more accelerated way the interest rate in the first half, ok? I think the expectation is good. You can see in the Sell Side reports. I think we are very much in line with that. Mr. Young: Also can you talk about are there any new regulatory changes being considered or being discussed that we should be aware of? Mr. Guardia: There is nothing relevant that you should be aware of. We have some discussions with the government, as I told you, with respect for example for the ETFs tax issues related to fixed income ETFs, but we don't expect to see any regulatory change that could affect our business. So we are not expecting any change in the tax rules, IOF or these types of discussions. So no, we don't see any change in the regulatory environment going forward. Mr. Young: Okay and then lastly are there any new updates or any new changes from a competitive perspective either for the BM&F or Bovespa that we should be aware of? Mr. Guardia: No. We didn't have any news from possible competitors. You know there is a long discussion in Brazil about opening up the clearing house. We have already discussed this with the regulators, with Central Bank, with CVM. We are working on the clearing house integration. We are on track with the schedule. Cicero can give you an update on that if you want and we will only be able to offer our services to competitors once we finish the clearing house integration for derivatives and cash equities, and we expect the complete this integration by the end of 2014. So in terms of a new fully integrated exchange coming to Brazil I never heard any possible competitor considering this alternative. So the only possible way of having

13

competition is after 2015 when we have our integrated clearing house up and running. So that's what I have to say about competition. With respect to our efforts to go to the OTC market, we are moving in accordance to the schedule that we have already disclosed to you, as I mentioned in the beginning of the call. So we are preparing ourselves to become a relevant player in the OTC market in Brazil. Mr. Young: Okay, thank you. Operator: Excuse me, our next question comes from Mr. Victor Shabbel, with Credit Suisse. Mr. Victor Shabbel: Hi, good morning everyone. Congratulation to you Eduardo and Claudio on the new roles. I have just one follow up question on the comments that you just made, Eduardo, about the integration of the clearing houses. We had a few headlines on Reuters and Bloomberg saying that the kickstart of this process should be postponed a little bit by a few months. Could this, let's say, wait on the current schedule of implementation, which is expected to be concluded by late 2014, could it be postponed a little bit to something around mid-2015? Or are you guys still very confident about the current schedule? Thank you. Mr. Vieira: Ok Victor, this is Cicero speaking. We were explaining to journalists today about the schedule for the new CCP and what we explained is that we have our working group with certified institutions from the market and in this working group we monitor the readiness of such institutions to the new CCP, to the new clearing house because it's not only about BVMF integrating the four CCPs, in changing its internal processes, but also about the readiness of external institutions to connect to the new CCP to its new interfaces, new processes, new files and messaging specifications. And we saw that market institutions needed some additional time for testing the integration and that’s what we call “free certification”. So we are going to allow market institutions to connect to the new CCP in July, July this year. That's when we are going to expose the certification environment for everybody and then beginning in July and following August, September, October, November we are going to have this what we call “free certification” phase.

14

So the new functionalities of the CCP will be exposed gradually to market players and they will be able to test and to implement all types, all sorts of integrations that are needed. This extended free certification phase is giving to cause a few months delay for the launch of the new CCP in the production environment, so following the free certification we are going to have the mandatory certification by the end of the year and beginning of January and then finally in the Carnival of 2014 we will implement in production the new CCP according to this new schedule. Mr. Shabbel: Okay, so you guys continue to stick to late 2014 as the time for the integration? Mr. Vieira: Yes. For the time being yes. Mr. Shabbel: Ok. Mr. Vieira: It will be a little bit more challenging, but for the time being yes. Mr. Shabbel: Great. Thank you Cicero. Mr. Luis Furtado: Victor, this is Luis. It's important to notice that we are keeping the beginning of the certification phase in July, as recently planned. Mr. Shabbel: Okay, great. Thank you. Operator: Excuse me, our next question comes from Mr. Francisco Kops, with Banco Safra. Mr. Francisco Kops: Hello gentlemen. Thank you for the question and congratulations for the results. If I understood from Eduardo earlier, the Central Bank has postponed the BMF authorization to operate in the registration and fixed income products due to the financial settlement issue, I mean, is that true? Is my understanding right? And if it is, how complex is to develop this feature at the financial settlement in the middle… I know you guys are in the middle of the clearing integration process, so I don't know how complex it is to develop this feature in the middle of this? Thank you. Mr. Guardia: Okay, Francisco you are right. Remember we requested Central Bank to have authorization to registered time deposit and real estate credit bills. We got the authorization from CVM, but we were expecting to have the authorization from the Central Bank.

15

So a few weeks ago or one month ago, the Central Bank to those that they would like that we implemented all the functionalities in the platform to register time deposit and specifically the financial settlement procedures. We mentioned this in the past that our strategy was to start with time deposit without the financial settlement and then we would incorporate this functionality later on. And what the Central Bank said is that they would like us to offer the system with all functionalities including the financial settlement procedures. We are already working on that (Cicero can give you more details on that), but our expectation is that we will need at least, or around, six months to incorporate this Central Bank request. Mr. Vieira: Just to complement the initial phase of the registration system was meant to accept the registration of time deposit issued by banks to their customers. So in this is specific case, there is no need for financial settlement of those time deposits because the financial settlement is internal to each financial institution because it's simply a relationship between the bank and its internal costumers. What the Central Bank told us is that they expect to see a comprehensive system, which encompasses…which is not going to be implemented in phases anymore, but instead of having just phase 1, which is bank with customers, we are going to have in approximately 5 months the comprehensive systems, which encompasses bank with customers and also the settlement of CDs that may be traded in the secondary market and this is where the financial settlement of CDs is needed. Mr. Kops: Okay, thank you Cicero, thank you Eduardo. Just a quick second question. We are seeing like volumes growing (at least in my opinion) in a good speed and growing faster than revenues, I mean, if you get the investor mix it's going more towards high-frequency trade and institutional investors. So my question is: How to make this increase in volume be a little bit more profitable to the company? I mean, is through the return of the individual investors? How you guys are seeing this for the future? Thank you. Mr. Guardia: Well Francisco, if you look at the derivatives segment what we are actually seeing is an increase in volumes and an increase in the revenue per contract because, as Claudio emphasized, we are observing a lengthening of the maturity of the contracts particularly the DI contracts. So looking to the derivatives we have volumes increasing and revenue per contract increasing as well. On the cash equities I think it's a combination of higher participation of high-frequency traders. We saw this quarter a reduction in volumes, in equities derivatives, which have a higher margin, but I will not put this as a trend.

16

Remember that the quarter was negatively impacted by fewer business days, so we saw an increase in ADTV at the Bovespa segment, actually a 5% increase in volumes, but the revenues were I believe much more affected by the fewer business days then by the reduction in margin because the reduction in margin was actually a very small. So, I believe we are in a very good track and, of course, we have also to take into account duration that market capitalization of companies is not growing as we have a fee schedule based on bps, once we see an increase in market capitalization we will also see a positive impact on the revenues. So these are my comments. Claudio, I don't know if you want to add anything? Mr. Jacob: Yes, just to do an exercise here. These three days less that we had in number of trading days in the quarter, one day on average considering the volumes that we have now it's around 7.5, R$ 7.7 billion per day, it means around 4 to R$ 4.5 million of revenues per day, multiplying by three I'm talking about 12 to R$ 13 million revenues in the quarter. So we can see in our income statement the trading settlement revenues from Bovespa segment went to R$ 256 million and doing this exercise if we add this R$ 12 million we would be going to R$ 270 million, R$ 268 million that would show something like 2 or 3% growth compared to last year. Mr. Kops: Ok. Mr. Jacob: I added to the main effect in the number of trading days, that's something that I would like to emphasize here, that will be diluted in the year. Mr. Kops: Right, I know, that completely makes sense. Thank you Claudio. Mr. Jacob: Okay. Operator: Excuse me, our next question comes from Mr. Alexandre Spada, with Itaú BBA. Mr. Spada: Hi, thanks for taking another question. It's just a follow-up on the time deposits platform. You mentioned that you would need another six months to implement this further request made by the Central Bank. My question is: After this implementation, will you have to submit the platform for the Central Bank's approval again or do you think that will be more of an automatic type of approval? Mr. Guardia: No Alexandre, we have to submit again.

17

Mr. Spada: And how long do you think that should take for the Central Bank to finally approve your platform? Mr. Guardia: You know what that I cannot say it; it's up to the regulator. They have their timing, we don't have any control. What I can assure you is that we will deliver to the Central Bank all the functionalities they requested. So that's what we have to do, but I cannot give you in this case or in any other case any possible idea about how long the regulators will take to come up with an answer. So that's totally up to them. Mr. Spada: Okay, thank you. And one last question here. My understanding is that your initial plan was to firstly deliver a registration platform that is simpler or that doesn't have all the functionalities that Cetip’s platform does, but now after this request by Central Bank can we assume that your platform will have all the functionalities that Cetip’s platform currently has? Mr. Guardia: Absolutely. Yes. That's what Central Bank asked us to do; to provide a platform with all functionalities. Mr. Spada: Ok. Thank you. Very clear once again. Mr. Guardia: Welcome Alexandre. Operator: Excuse me, our next question comes from Mr. Jim Young, with West Assembly Investments. Mr. Young: Could you clarify; you mentioned for the first quarter a trading day with three days less this quarter of 13. How many trading days are there in the second quarter for 13 and how does that compared to the second quarter of 12? Mr. Jacob: You got me! [laughs] I can't take the… Mr. Guardia: We will check this number and we will send it to you and try to put it on the website, but… All members from Bovespa: It's on our website. Mr. Guardia: Is it already? Okay, but I apologize; I don't have the number here with me now. Ok?

18

Operator: This concludes today's question-and-answer session. I would like to invite Mr. Eduardo Refinetti Guardia to proceed with his closing statements. Please, go ahead Sir. Mr. Guardia: I just want to thank you everyone for joining us today and if you have any other doubt do not hesitate to contact me or Claudio. Thank you very much. Operator: This concludes BMF Bovespa audio conference for today. Thank you very much for your participation. Have a good day and thank you for using Chorus Call.

19