In 2007, BM&F traded 426.3 million contracts, a 50.4% growth over 2006. The daily average trading volume reached 1.74 million contracts, a 50.97% surge in volume. Products such as interest rates, foreign exchange, and stock index contracts presented a 30% (or higher) turnover growth. The average price per contract (RPC) reached BRL1.42, 10 cents of a real more than the price obtained during the last quarter of 2006.
Total revenue with exchange fees, registration fees, delivery fees, and permanence fees – the four items that compose the trading costs of the products offered by BM&F – registered BRL508.9 million, a growth of 42.56%.
“Electronification of products, focus on integration, and cost reduction. These are the three pillars that will sustain the company’s growth in 2008,” emphasized BM&F’s CEO, Edemir Pinto, during a press conference held today. The modernization of the products includes a new electronic platform model that connects via Financial Information Exchange (FIX), an international protocol that allows direct access for international and domestic market players to the Exchange’s markets through order routing.
According to BM&F’s CEO, besides the agreement with CME Group, which controls Globex, the world’s largest electronic platform, there are also ongoing talks to establish other agreements with international providers of order routing systems, like Reuters and Bloomberg.
The Exchange is also preparing to trade all of its products simultaneously on the trading floor and electronically, a system known as side-by-side trading. BM&F predicts it will have Ibovespa futures contracts trading side-by-side as early as the first quarter of 2008 and US dollar futures by the second quarter. “This will allow direct market access to medium-sized and large clients in Brazil and abroad,” stated Edemir Pinto.
Integration will be the company’s second pillar of growth and its objective is the consolidation of BM&F not only in Brazil, but also in Latin America and North America. “We will be a leading force in the derivatives market,” said the CEO, supporting the investment in integration based on the company’s 22 year history in mergers and acquisitions. Cost reduction will also be in the company’s path towards growth. “It is possible to expand one’s market by being streamlined and cost efficient.”
During the event, Edemir Pinto also announced new products and services the Exchange plans to launch this year, among them: Direct Market Access; algorithmic trading; credit default swaps (CDS) future contracts on Brazilian sovereign debt; emissions reduction credits (in partnership with Government of the State of São Paulo); and derivatives referenced in Brazilian commodities index. In addition, BM&F will continue to implement the Introducing Broker (IB) program.
CME Group: Brazil is an important part in the Chicago Exchange’s expansion strategy
“We are proud to be here.” It was with this phrase that CME Group’s CEO, Craig S. Donohue, summarized with enthusiasm the agreement between the two exchanges. “Brazil is an important part of CME’s expansion strategy. The agreement not only involves an exchange of investments, but also access to all of our markets,” explained Donohue. “Taking into account the size of the Brazilian economy, the impressive GDP rates, and the already strong existence of well-developed capital formation; this partnership represents one of the most important investment opportunities for CME,” added Donohue.
The agreement was also commemorated by Edemir Pinto, who highlighted the possibility of expanding the commercialization of BM&F products: “By this year’s third quarter, we will be connected to Globex and then the whole world will have access to our markets.” The Exchange will offer agricultural and financial derivatives to foreign investors that are connected to Globex. This represents approximately 90,000 investors in more than 80 countries.
Craig Donohue also stressed the fact that investors have an “appetite” for new markets: “This agreement between the exchanges will help to diminish access barriers, reduce costs and improve connectivity. We hope to see many CME clients participating in Brazilian markets.”
CME Group’s vice-president, Charles P. Carey, agrees. “BM&F is the ideal partner,” he declared, pointing out that the agreement’s second phase contemplates the proposal of “joining the two platforms and stepping up discussions in order to offer joint products.”
During the event, BM&F’s Chairman, Manoel Felix Cintra Neto, emphasized the importance of the agreement towards the Exchange’s internationalization plans: “We will speed our access to international markets and investors,” he affirmed stating that “the consolidation the derivatives around the world is going through mergers and associations. BM&F wants to become the center of negotiation for Latin America.”
During the Special Shareholders’ Meeting, held on 26 February 2008, the agreement between the two exchanges was approved unanimously. BM&F now holds a 2.18% stake in CME Group; the latter holds a 10% stake in BM&F. As a result of the agreement and of the cross investment, BM&F’s capital stock value referred to in the relevant Bylaws article has now been increased to BRL1,010,785,800.00, divided into 1,010,785,800 common shares. “BM&F became CME Group’s seventh largest shareholder, and CME Group is BM&F’s largest shareholder,” said Edemir Pinto.
The Special Shareholders’ Meeting also elected two new directors: Mr. Craig Donohue, CME Group’s Chief Executive Officer, as a representative of the new shareholder, and Mr. Marcelo Trindade, former chairman of the Brazilian Securities and Exchange Commission (CVM), as an independent member.
Click here for the presentation (portuguese only)
Click here for press conference