A Superior

Marketplace
BOVESPA
Key Corporate Facts

• Founded in 1890
• Diversified membership base
– Non-for-profit organization, equity-owned by 92 member brokerage
firms from local independent brokers to main global players
• Governance
– Board of Directors with broad representation: member brokerage
firms, listed companies, institutional and individual investors
– Group of Executives responsible for managing the exchange’s
activities and supervising its operations
• Self-regulatory organization supervised by the Brazilian
Securities and Exchange Commission – CVM
BOVESPA
Diverse Business Structure

Brokerage Firms Clearing Agents

BOVESPA CBLC

INFO RISK CLEARING &

LISTING SURVEILLANCE
DISSEMINATION MANAGEMENT SETTLEMENT

EQUITY FIXED INCOME SECONDARY DEPOSITORY SECURITIES

TRADING TRADING BOARD SERVICES LENDING

INFORMATION
BACK-UP SITE
TECHNOLOGY
MAIN INNOVATIONS
Introduced by BOVESPA
1974 - Centralized Depository System 1999 - Launching of the Home Broker

1979 - Introduction of the Options Market 1999 - Trading Session After Market

1980 - Fungible Custody Service 2000 - BOVESPA became the national stock
exchange for corporate securities
1985 - Creation of the BM&F
2001 – Launching of BOVESPAFIX –
electronic trading system for corporate fixed
1990 - Dematerialization of Securities income instruments

1991 - Electronic Trading System – Cats 2001 - Launching of Novo Mercado -

corporate governance listing segment
1997 - On Line/Real Time Deposit. Service
2003 - Launching of Direct Market Access for
1997 - Electronic Trading System (Megabolsa)
Institutional Investors

1998 - Incorporation of the CBLC 2005 - All transactions carried out electronically
 BRAZILIAN CAPITAL MARKETS
Regulatory Environment
Ministry of
Finance

CMN BC CVM SRF

National Monetary Brazilian Central Brazilian Securities Brazilian Federal
Council Bank and Exchange Revenue Secretariat
Commission
> Establishes general > CMN executive body > Regulates the securities and > Tax regulations and
guidelines for monetary, > Regulates foreign derivatives markets procedures
credit and foreign exchange and payment > Registration of public companies > Tax collection
exchange policies
system and enforcement of corporate
> Regulates and supervise law
financial institutions > Registration of authorized
brokerage firms
> Registration of International
Investors
 BRAZILIAN CAPITAL MARKETS
Regulatory Framework
9 CPMF Tax exemption on equities - 9 Securities Law – Law 6385/76 as amended
Constitutional Amendment 37/02 and Congress by Law 10303/01 and Law 10411/02
Law 11312/06
Constitution and Laws 9 Corporate Law – Law 6404/76 as amended
9 Taxation on Financial and Capital
Markets - Law 11033/04 by Law 10303/01

CMN
SRF 9 Organization of Exchanges and Guarantee
National Monetary Fund – CMN Resolution 2690/00
Brazilian Federal Revenue Council 9 Non-resident portfolio investments – CMN
Secretariat Resolution 2689/00
Resolutions
(Normative Instructions)
9 Price Manipulation – CVM Instruction
9 Income Tax - SRF Normative 8/79
Instruction 25/01 9 Special Procedures on Stock
BC CVM Trading – CVM Instruction 168/95
9 Low Tax Jurisdiction - SRF
Normative Instruction Brazilian Central Brazilian Securities and 9 Registration and disclosure for non-
Bank Exchange Commission resident portfolio investors – CVM
188/02 Instruction 325/00
9 Legal Entity Federal Circulars Instructions 9 Disclosure of Material Events – CVM
Taxpayer Registry (CNPJ) - Instruction 358/02
9 Non-resident
SRF Normative Instruction
251/02
portfolio investment BOVESPA 9 Foreign Investors Identification-
procedures – BC Self-regulatory organization CVM Instructions 387/03, 419/05 and
9 CPMF Operational Circular 2963/00 and 437/06
Procedures - SRF Normative 2975/00 Internal rules and operational 9 Public Offerings – CVM Instruction
Instruction 450/04 procedures 400/2003
BRAZILIAN CAPITAL MARKETS
Building Blocks

State-of-the-art Popularization and

Technological Education
Infrastructure Engagement
Bovespa’s
Initiatives
Clearing and Settlement
Infrastructure adherent to NOVO MERCADO
International Standards Listing Segments

Improving the Non- Government–led,

Exempting Taxes on
resident investment focused changes
Stock Investments
Regulation

Reforming Corporate Strengthening of the Building a World-Class Government–led,

Governance Rules and Payment and overall changes
Practices Brazilian Securities and
Settlement System
Exchange Commission
PRODUCTS
AND
INDICES
PRODUCTS
Broad Product Base
EQUITY CASH EQUITY DERIVATIVES
• Stocks • Stock Options
• BDRs • Index Options
– on Bovespa Index
• REITs
– on IBrX Index
• Forward Contracts
FIXED INCOME • Warrants
• Debentures • ETFs
• Commercial Papers • POP - Protected New
• Mortgage-Backed securities and Participative Investment
• Asset-backed securities (FIDC)
 CASH MARKET
Daily trading value of the 40 most liquid shares
COMPANY TICKER VALUE US$ COMPANY TICKER VALUE US$

PETROBRAS PETR4 143.637.245,46 BRASIL BBAS3 13.249.765,83

VALE R DOCE VALE5 94.377.374,34 TAM S/A TAMM4 13.159.593,67
BRADESCO BBDC4 40.660.963,47 ELETROBRAS ELET6 12.528.207,27
USIMINAS USIM5 39.359.614,44 ELETROBRAS ELET3 11.827.547,59
TELEMAR TNLP4 30.059.864,89 SUBMARINO SUBA3 11.449.094,09
ITAUBANCO ITAU4 29.631.841,92 BRASKEM BRKM5 10.642.206,40
PETROBRAS PETR3 27.337.566,22 VIVO VIVO4 9.486.698,20
VALE R DOCE VALE3 25.784.228,34 CCR RODOVIAS CCRO3 9.280.647,18
SID NACIONAL CSNA3 21.804.901,26 CYRELA REALT CYRE3 9.177.898,75
GERDAU GGBR4 19.688.155,72 GOL GOLL4 8.787.078,41
TELEMAR TNLP3 18.524.415,54 COPEL CPLE6 8.434.021,47
CEMIG CMIG4 18.220.175,02 GERDAU MET GOAU4 7.700.320,91
NET NETC4 17.246.783,88 NATURA NATU3 7.404.999,53
ITAUSA ITSA4 16.776.566,72 TIM PART S/A TCSL4 7.097.540,43
ARCELOR BR ARCE3 16.455.343,57 LOJAS RENNER LREN3 6.746.801,80
COSAN CSAN3 16.156.637,14 PERDIGAO S/A PRGA3 6.440.249,13
ALL AMER LAT ALLL11 16.057.766,03 SADIA S/A SDIA4 6.401.658,47
BRADESPAR BRAP4 15.962.955,64 CESP CESP6 6.112.306,70
UNIBANCO UBBR11 15.278.626,35 BRASIL TELEC BRTO4 6.039.673,99
AMBEV AMBV4 14.260.578,38 EMBRATEL PAR EBTP4 5.918.381,73

Almost 100 shares with daily trading value of US$ 2 million or more
 EQUITY DERIVATIVES PRODUCTS
Options Markets
Top Ten Traded on Options on Equities
the BOVESPA´s Options Market Total 2006
2006
# of Notional
1. PETROBRAS - PN Exchange contracts – US$
2. IBOVESPA million billion
3. VALE R DOCE - PNA 1st International
584 n.a.
4. TELEMAR - PN Securities Exchange
5. NET - PN
2nd CBOE 391 n.a.
6. ELETROBRAS - ON
7. BRADESCO - PN 3rd São Paulo 286 516
8. CELESC - PNB
4th Eurex 273 969
9. EMBRATEL PAR - PN
10. CEMIG - PN 5th Philadelphia 265 90

Source: BOVESPA, WFE – World Federation of Exchanges and ISE - International Stock Exchange
EQUITY DERIVATIVES PRODUCTS
POP – Protected and Participative Investment
Main features ‘Collars’ listed
¾ It is a standardized product,
exchange traded, with 1. PETROBRAS PN
predetermined levels of capital 2. VALE DO RIO DOCE PNA
protection.
3. BRADESCO PN
4. USIMINAS PNA
¾ POP combines three financial
operations: buying shares in the 5. TELEMAR PN
cash market, buying a put option 6. ITAUBANCO PN
and selling a portion of a call
7. SIDERÚRGICA NACIONAL ON
option.
8. PIBB (ETF BASED ON THE IBRX-50)
¾ Series with 100% and 90% of the
capital protected are available,
corresponding respectively to 70%
and 80% participation on the upside
of the market. The expiration terms:
6 and 12 months.
FIXED INCOME PRODUCTS

• Debentures, Commercial Papers, Mortgage-Backed

securities and Asset-backed securities (FIDC)

In 2007, 7 FIDC (Receivable Investment Funds), 3 Corporate Bond

and 2 Real Estate Receivable Certificates were listed at BOVESPA
Fix and SOMA Fix Markets

– In February 2007, the market cap of fixed income products is BRL

107 billion, or USD 51 billion
– The trading value in February of BOVESPA fixed income markets
turned over BRL 16 million or USD 7 million
– Out of this total, BRL 697 thousand referred to FIDCs, BRL 6.7
million to CRIs and BRL 8.5 million to Corporate Bonds
FIXED INCOME MARKET
Value of securities listed

MAIN STATISTICS * USD Million

50.000

Number of issuers = 164 45.000

Number of issues listed: 275 40.000

Corporate Bonds = 133 35.000

Receivable Investment Funds = 97 30.000

Real Estate-Backed Securities = 45 25.000

20.000
Market capitalization: BRL 105 billion 15.000

10.000

5.000

-
2001 2002 2003 2004 2005 2006

Corporate Bonds CRI FIDC's quotes Commercial Papers

* as of December/06
FIXED INCOME PRODUCTS
Clearing and Settlement Features

Every trade is reported to and settled by CBLC in two alternative ways

• Guaranteed continuous net settlement module
• Non-guaranteed gross settlement module
– CBLC is central counterpaty and guarantor for all trades carried out
at the contiuous net settlement module
– In the gross settlement module, CBLC coordinates a simultaneous,
final and irrevocable Delivery Versus Payment (DVP) settlement

Depository Service
– CBLC has an account structure that segregates securities in
individual acconts in the name of beneficial owners
– All movements of securities al well as corporate events are
processed on-line and in real time basis
 FIXED INCOME PRODUCTS
Information disclosure • Real time dissemination of trades
prices available through vendors
• Wide information disclosure by internet
www.bovespafix.com.br
• Regular news report – BFix Bulletin

– All listed bonds features

– Prospectus and other documentation
– Reference prices – transparency rules
– Bonds quotation - offerings and trades
(15’ delay)
– Relevant information about issuers
 INDICES
Extensive Benchmarking
OVERALL MARKET INDICES SECTOR BASED INDICES
• IEE – ELECTRIC POWER INDEX
– Most liquid companies of the electric power
• IBOVESPA - BOVESPA INDEX sector
– Companies representing 80% of • ITEL – TELECOMMUNICATIONS INDEX
the total trading value – All companies in the telecommunication sector
• IBrX-50 – BRAZIL INDEX 50 • INDX – INDUSTRIAL SECTOR INDEX
– Industry most representative stocks
– 50 most liquid shares of the cash
market CORPORATE GOVERNANCE INDICES
• IBrX - BRAZIL INDEX • IGC – CORPORATE GOVERNANCE INDEX
– 100 most liquid shares of the cash – Companies traded in the Novo Mercado or
Levels 1 and 2
market
• ITAG – TAG ALONG COMPANIES’ INDEX
• IVBX – Valor BOVESPA Index – Companies that offer tag along rights to all
– 50 companies on second tier shares
• ISE - CORPORATE SUSTAINABILITY INDEX
governance issues
– Companies committed to environmental, social
and corporate governance issues
 INDICES
IBOVESPA Historical Evolution (inflation adjusted)
WORLD
44.000 IMPROVMENT ON THE VOLATILITY;
MACROECONOMICS INTEREST RATES
AGGREGATES; INTEREST ELEVATION IN US
40.000
RATE AND COMPULSORY
REDUCTION
36.000

New
32.000 APPROVAL OF THE
AMERICAN ECONOMY
economic
TELECOMMUNICATIONS SPEED REDUCTION; NEW
ARGENTINEAN CRISIS
scenario in
GENERAL LAW
28.000 Brazil and
reduction
of the
24.000
Brazil Risk
REAL
20.000 INTERNATIONAL ECONOMIC ASIAN
INVESTORS PLAN CRISIS
ALLOWED IN
16.000 PORTIFOLIO CORPORATE
INVESTMENT TERRORIST
RUSSIAN SCANDALS IN US;
ATACK IN US PRESIDENT
12.000 CRISIS
IRAQ ELECTIONS IN
BRAZILIAN INVESION BRAZIL
CURRENCY
8.000 DEVALUATION
MEXICAN ARGENTINEAN CRISIS
CRISIS AND BARINGS
4.000 BANKRUPTCY

COLLOR ECONOMIC PLAN

0
jan/90

jan/91

jan/92

jan/93

jan/94

jan/95

jan/96

jan/97

jan/98

jan/99

jan/00

jan/01

jan/02

jan/03

jan/04

jan/05

jan/06
 INDICES
IBOVESPA
Annual Performance in USD 2006
• Launched in 1968 IBOVESPA= + 45.5%
• The IBOVESPA is the main
indicator of the Brazilian stock
market’s average performance.
IBOVESPA
• IBOVESPA reflects the 25.000
oscillation of BOVESPA’s most
Base 5000 on Jan, 1995
traded stocks 20.000
• It maintained the integrity of its
historical series without any 15.000

P O IN T S
methodological change since its
inception in 1968.
10.000
• The stocks that integrate
Ibovespa’s theoretical portfolio 5.000
represent 80% of the number of
trades and the financial value
registered on BOVESPA’s cash 0
ja n / 9 5
ja n / 9 6
ja n / 9 7
ja n / 9 8
ja n / 9 9
ja n / 0 0
ja n / 0 1
ja n / 0 2
ja n / 0 3
ja n / 0 4
ja n / 0 5
ja n / 0 6
ja n / 0 7
market (round lot).
• The index is rebalanced
quarterly

Source: BOVESPA
INDICES
IEE, ITEL and INDX
• The Electric Power Index (IEE) was the first Annual Performance in USD 2006:
sector index created by BOVESPA. It was INDX = + 51.6%
launched in 1996 to measure the performance IEE = + 54.2%
of the electric power sector. In this sense, the
index is an instrument that makes possible the IBOVESPA = + 45.5%
performance analysis of portfolios specialized ITEL = + 21.2%
in the electric power sector.
IBOVESPA x ITEL x IEE x INDX
• The Telecommunications Sector Index Base 100 on Dec, 2002
(ITEL) launched in 2006, measures the 800
telecommunication sector performance. Such
700
index includes both wire-line telephony
companies and cellular-line telephony 600
companies listed on BOVESPA

P O IN T S
500
400
• The Industrial Sector Index (INDX), 300
launched in 2006, measures the performance 200
of the most representative companies of the
industrial sector, an important segment of 100
Brazilian economy. Its theoretical portfolio is 0
composed by the industry most representative

jun/03

jun/04

jun/05

june/06
april/03

aug/03

april/04

aug/04

april/05

aug/05

april/06

aug/06
dec/02

dec/03

dec/04

dec/05

dec/06
feb/03

oct/03

feb/04

oct/04

feb/05

oct/05

feb/06

oct/06
stocks, which are selected among
BOVESPA’s most actively traded securities in
terms of liquidity and are weighted according
to the outstanding shares’ market value.
IBOVESPA ITel IEE INDX

Source: BOVESPA
 INDICES
IGC - Special Corporate Governance Stock
Index
Annual Performance in USD 2006
• Launched in 2001 IGC = + 54.7%
IBOVESPA = + 45.6%
• The IGC - Special
Corporate Governance IBOVESPA x IGC
Stock Index is designed Base 100 on Dec, 2002
to measure the return of a 1000
theoretical portfolio 900

composed of shares of 800

companies with a good 700

POINTS
level of corporate 600

governance. 500
400
300
• Such companies should 200
be traded on BOVESPA's 100
"Novo Mercado" or should 0

jun/03

jun/04

jun/05

june/06
be classified at april/03

april/04

april/05

april/06
aug/03

aug/04

aug/05

aug/06
dec/02

dec/03

dec/04

dec/05

dec/06
oct/03

oct/04

oct/05

oct/06
feb/03

feb/04

feb/05

feb/06
BOVESPA's "Level 1" or
"Level 2".
IBOVESPA IGC

Source: BOVESPA
INDICES
ITAG – Special Tag Along Index
Annual Performance in USD 2006
ITAG = + 58.9%
• Launched in 2005 IBOVESPA = + 45.5%

• It is designed to measure ITAG x IBOVESPA

the return of a theoretical Base 100 on Dec, 2002
portfolio composed of 1000

shares of companies 900

which offer, in case of 800

control sale, better 700

conditions to minority 600

P O IN T S
500
shareholders than those
400
required by law.
300
200
100
0

oc t/03

oc t/04

oc t/05

june/06

oc t/06
dec /02
feb/03
april/03
jun/03
aug/03

dec /03
feb/04
april/04
jun/04
aug/04

dec /04
feb/05
april/05
jun/05
aug/05

dec /05
feb/06
april/06

aug/06

dec /06
IBOVESPA ITAG

Source: BOVESPA
INDICES
ISE - Corporate Sustainability Index
Annual Performance in USD 2006
• Launched in 2005 ISE = + 50.9%
IBOVESPA = + 45.5%

• ISE portfolio is composed by

securities of companies ISE x IBOVESPA
committed to social Base 1.000 on Nov 30, 2005
1.500
responsibility, corporate
sustainability and good 1.400
practices in Brazilian corporate
1.300
market.

POINTS
1.200

• The index is rebalanced 1.100

annually, in which occasion the
1.000
companies are re-evaluated in
relation to their sustainability 900
levels by fulfilling the 30/11/05

28/12/05

27/01/06

24/02/06

28/03/06

27/04/06

26/05/06

26/06/06

24/07/06

21/08/06

19/09/06

18/10/06

17/11/06

18/12/06
questionnaire that is constantly
improved, aiming at attending
ISE IBOVESPA
permanently the present
demands of society.

Source: BOVESPA
 Points in USD

0
100
200
300
400
500
600
700
800
900
1000

Source: BOVESPA
dec/02
feb/03
INDICES

april/03
jun/03
aug/03
oct/03
dec/03

IBOVESPA
feb/04
april/04
Market Performance

jun/04
aug/04
oct/04

IBrX-50
dec/04
feb/05
april/05
Base 100 on December 2002

jun/05
IBOVESPA x IBRX 50 x IGC x ITAG

aug/05
ITAG

oct/05
dec/05
feb/06
april/06
IGC

june/06
aug/06
oct/06
dez/06
PRODUCTS AND INDICE
Sophisticated market

NO RESTRICTIONS TO
INTERNATIONAL INVESTORS
 TRADING
INFRASTRUCTURE
TRADING INFRASTRUCTURE
State-of-the-art technology

• 100% of the trades executed electronically with specialized trading

systems for Equities and Corporate Bonds;
– Mega Bolsa (Athos Euronext) – operated in more than 20
exchanges around the world;
– BOVESPA FIX – a platform developed specifically for bond
trading;
• Trading system linked electronically, in real time basis, to the clearing
and settlement system – all trades are locked in for settlement;
• Direct Market Access Facilities
– HOME BROKER and Institutional Connection: 33% of the trades and
18% of the trading value (Jan/07)
 TRADING INFRASTRUCTURE
MEGA BOLSA – Main Features
TRADING MECHANISM CIRCUIT BREAKER
– Order driven market – These mechanisms are activated only in case of
– Opening and Closing calls large market decline, based on the IBOVESPA
– Competitive Market Makers closing level of the previous session:
• Trading halt of 30 minutes for a 10% fall;
PRICE FLUCTUATION LIMITS • An additional trading halt of 1 hour when the market
– No maximum fluctuation limits for stock prices. falls 5% more, completing a total fall of 15%.
– Automatic triggers for price fluctuation above
certain parameters (most liquid stocks 3%).
TYPES OF ORDERS
– Special auction, according to the price oscillation – Market order, limit order, managed order,
observed. discretionary order, order for funding, on-stop
– The price established in the auction is registered order and matched order.
and trading on the stock resume. TRADING HOURS
TRADING HALTS – Continuously from 10:00 a.m. to 5:00 p.m.
– BOVESPA can halt the trade on a particular stock – During daylight saving time months from 11:00
due to a.m. to 6:00 p.m.(October to February)
• Abnormal conditions arising from the issuer filing for
bankruptcy, judicial or extra-judicial reorganization OFF HOURS TRADING
• Determination from the Securities and Exchange – From 6:30 p.m. to 7:30 p.m.
Commission
– Exclusively on the cash market for the stocks that
• Information asymmetry arising from issuer failure to
disclose any material information had prices established during the regular trading
session.
TRADING INFRASTRUCTURE
Direct Market Access
TARGET AUDIENCE HOME BROKER
– Retail Investors (Home Broker) – Launched in 1999, internet trading
– Institutional investors (Institutional Connection) facilities for retail investors
TYPE OF ACCESS – Main Features:
– Automatic and direct access to MEGABOLSA • Access via the brokers’ website
offered by member brokerage firms • Secure website
ORDER EXECUTION • Order goes directly to the Mega Bolsa
System
– Automated, real time
– Immediate confirmation after execution – Implemented by 54 Brokerage firms
– Subject to operational limits – Statistics as of 2006
• More than 88,000 investors sending
STRAIGHT THROUGH PROCESSING orders
(STP) CONCEPT • 25% of total number of trades
– From the entering of an order, its execution,
identification to its final and irrevocable • 7.8% of total traded value
settlement.
REQUIREMENTS
– All investors must be previously registered and
authorized by the Brokerage Firm.
TRADING INFRASTRUCTURE
A permanent challenge

• More than 1200 terminals connected to Megabolsa

• Our execution speed is in average fractions of a second
In thousand
• At peak, the system processes over 195,000 trades
and 920,000 orders per day 87,4

62,2
CAGR 48%
53,8

39,5
28,2
26,8
22,4

2000 2001 2002 2003 2004 2005 2006

Daily Average Number of Trades Registered at Megabolsa Source: BOVESPA

TRADING INFRASTRUCTURE
MEGA BOLSA

• BOVESPA’s stocks and options

FIXED INCOME PRODUCTS
BOVESPA FIX – Main Features Continuously from
10:00 a.m. to 5:00 p.m.
TRADING MECHANISM
– Electronic trading
platform
– Order Driven
– Market Makers
– Real time dissemination
of trading prices
TRANSPARENCY RULES
– Daily Reference Price
– Oscillation Tunnel
– Price oscillation and
auction rules
SPECIAL FEATURE
– Register trades executed
OTC
BACK UP SITE
BOVESPA and CBLC Back Up Site
• Enable the Brazilian Stock Market to have 24 hours trade and
continuity of the systems in case of problems
• Located within a different electrical power grid and telephone-
telecommunications grid:
– Mainframes and servers duplication in both sites;
– ABC network, linking each BOVESPA’s participant with both sites,
through different providers of communication services;
– Real time communication between the main site and the back-up
site, through optical fiber (hot site back-up);
– Each site has different energy sub-stations providers;
– Several levels of access and password control;
– Secrecy of information through data encryption
– Full protection against intruders with IDS (Intruder Detection
Systems) and Firewalls.

The time for recovery is less than 1 hour

BOVESPA IN
NUMBERS
BOVESPA IN NUMBERS
Daily Average Trading Value

in USD million

1120

767
667
568
394 410 419
347
283 265 272
198

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
 BOVESPA IN NUMBERS
Cash Market
Trading Value Daily Average Number of
in USD Million Trading Value x Number of Trades Trades
1400 60000

1200
50000
949
1000
40000

800
30000
600 558

348 20000
400 345
220 220
166 10000
200

0 0
2000 2001 2002 2003 2004 2005 2006
Source: BOVESPA
 BOVESPA IN NUMBERS
Options Markets
Trading Value Daily Average Number of
in USD Million Trading Value x Number of Trades Trades

70 30.000

60 25.000

50 42,3
20.000
40 35,3
28,2 15.000
30
21,6
18,3 10.000
20 14,5
12,1
10 5.000

0 0
2000 2001 2002 2003 2004 2005 2006

Source: BOVESPA
BOVESPA IN NUMBERS
Leadership in Latin America
Latin American Exchanges
Total Traded Value in 2006

Buenos
Colom bia Lim a Aires
Santiago 3% 1% 1%
7%

Mexico
23%

BOVESPA
65%

Source: WFE – World Federation of Exchanges

BOVESPA IN NUMBERS
BOVESPA FIX and SOMA FIX

Total Trading Value

US$ million
900

750

600

450

300

150

-
2001 2002 2003 2004 2005 2006

Corporate Bonds CRI FIDC's quotes

INVESTORS
AT BOVESPA
 INVESTORS AT BOVESPA
Participation in the trading value
100%
14 13 10
18 2
32 3 3
37 37 34
80% 40 39 4

27 33 36
3 3 24
60% 7 4
4 6
25 26
22
26 25 22 28
40% 28 27
28
16 16 17
16
20% 19 18
26 28 25
20 22 22 23
12 16
10
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Individual Investors Institutional Investors International Investors Companies Financial Institutions

Source: BOVESPA
INTERNATIONAL INVESTORS
Trading by region

8% of the trading from international investors are carried

out throught routing orders
Middle East
Central America
1%
2%

Europe
21%

North America
South America 58%
16%

Asia and Pacific

2%

Source: BOVESPA
INTERNATIONAL INVESTORS
A fully accessible market

PORTFOLIO
– No restrictions in terms of the type of investments
– No diversification rules
– No minimum permanence period requirement

TAXATION
– Exemption on capital gains for equity instruments and government bonds
– Low tax jurisdiction are taxed as domestic investors
INTERNATIONAL INVESTORS
A fully accessible market

REQUIREMENTS
– A local representative in Brazil
– Tax ID number required (CNPJ)

REGISTRATION AT CVM (Securities and Exchange Commission)

– Granted in 24 hours
– Online registration through the website
– Registration form required (Basic Information)

CUSTODY
– Assets must be deposited at a recognized depository service
– Accounts hold under an authorized custodian
– Final beneficiary market
INDIVIDUAL INVESTORS
Solid Retail Segment

• 26% of trading value

• In 2002 BOVESPA launched an

educational campaign to
widespread the knowledge about Retail Clients Accounts 222.721
BOVESPA CBLC
CAGR 28.1%
• Investment Clubs: 1,700 155.183

• 258 opened in 2006 116.914

85.478
• Retail clients accounts - 2006: 85.249
222,721

2002 2003 2004 2005 2006

Source: BOVESPA
 INSTITUTIONAL INVESTORS
Investment Portfolio of Pension Funds
US$ 158,2
billion
• Regulation allows pension funds to investments up to
US$ 126,1
50% in equities, currently only 30% is allocated in equities 1,73%
billion
5,70%
US$ 96,4
2,08%
billion 30,14%
US$ 74,8,6 6,92%
billion 2,74%
28,91%
US$ 47,7 8,76%
billion 2,91%
9,32% 27,75%
29,01% 62,43%
3,60%
10,96% 62,09%
35,02% 60,75%
58,76%
50,42%

2002 2003 2004 2005 nov/06

Source: BOVESPA
Fixed Income Equities Real State Others
INSTITUTIONAL INVESTORS

Investment Portfolio of Mutual Funds

US$ 442
billion
US$ 324
US$ 237 billion 15,54%
US$ 186 billion
11,40%
billion
US$ 108
11,56%
billion 10,57%
84,46%
11,15% 88,60%
88,44%
89,43%
88,85%

2002 2003 2004 2005 2006

Fixed Income Equities
Source: BOVESPA
BOVESPA’S
LISTED
COMPANIES
BOVESPA’S LISTED COMPANIES
Market Capitalization
USD billion
723

482

341
255 234
217 229 225
161 185
148 124

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

397 companies
 BOVESPA’S LISTED COMPANIES
Market Capitalization Evolution
Market Capitalization Market Capitalization
In USD billion GDP ratio

2006 723 2006 70%

2005 482 2005 58%
2004 341 2004 48%
2003 234 2003 37%
2002 124 2002 24%
2001 185 2001 24%
2000 226 2000 25%
1999 229 1999 25%
1998 161 1998 12%
1997 255 1997 17%
1996 217 1996 14%
1995 148 1995 9%

* estimated
 BOVESPA’S LISTED COMPANIES
Largest Companies by market cap
Market Capitalization Ranking, in USD million (2006)
1. Petrobrás 107,750 11. Telesp 12,416
2. Vale R Doce (N1) 68,974 12. Gerdau (N1) 10,493
3. Itaubanco (N1) 40,529 13. Tim Part S.A. 10,011
4. Bradesco (N1) 39,693 14. Usiminas 9,295
5. Ambev 29,985 15. Sid Nacional 8,207
6. Banco do Brasil (NM) 24,705 16. Embraer (NM) 7,630
7. Itausa (N1) 17,356 17. Cemig (N1) 7,505
8. Unibanco (N1) 15,355 18. Vivo 7,358
9. Eletrobras (N1) 13,327 19. Telemar 7,312
10. Arcelor Br (N1) 12,788 20. Telemar N L 7,218
BOVESPA’S LISTED COMPANIES
A diverse market
Sectors Participation on the Market Capitalization
2006
Consumer non Construc. and Transp.
Cyclical 4,9%
Financial
8,7% 23,4%
Telecom.
9,9%
Info. Tech.
0,4%

Utilities
10,6%
Basic Materials
20,8%
Consumer Cyclical
Oil and Gas Capital Goods
3,5%
15,3% 2,5%
 BOVESPA’S LISTED COMPANIES
Driving the growth

Bovespa’s listed companies’ performance Return Over Equity

compared to the Brazilian GDP Bovespa’s Listed Companies
Brazilian GDP growth x Listed Companies Revenues growth (%)
x Ibovespa Companies Revenues growth (%)

20,1 19,7
14.7 17,4
13.9
13.0 13.2
12.5
15,1
11.3
9.4

7.3 9,4

5.0 5.2
4.3
4,9
2.3
1.3 1.9
0.5

2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 jun/06

GDP Listed Companies Ibovespa Companies Source: Economática

 BOVESPA’S LISTED COMPANIES
Higher dividend yield – sharing the upside
%
BOVESPA
Latin America BRICs Other Emerging
Markets
4,3 4,4
4,2
3,1
3 3
3,6 2,9
3,5 2,7 2,7
2,6 2,4
3,2 2,5
2,4
2,3 2,3
2 1,7
1,9
1,8
1,7
1,6 1,5 1,6
1,5 1,3 1,4
1,3 1,4
1,1
1
2001

2002

2003

2004

2005

Sep/06

A rgentina Chile M exico India Russia China So uth Egypt Ko rea

A frica

Source: BOVESPA and Morgan Stanley Capital International 2004 2005 2006 - 2nd Q
 BOVESPA’S LISTED COMPANIES
Price Earning Ratio - still room for growth
%
BOVESPA Latin America BRICs Other Emerging
Markets
31,5

21,7
21 20,2 20,2
19,5
17,1 17,3 17,0
15,8 15 15,7
14,6 14,7 14,2
10,9 12,2 12,3
10,5 11,4

BOVESPA Argentina Chile Mexico India Russia China South Africa Egypt Korea

2005 2006
Source: BOVESPA and Morgan Stanley Capital International
 ja
n/

0
25
50
75
100
125
150
175
200
225
250
275
300
9
ab 8
r/ 9
8
ju
l/9
8
ou
t /9
ja 8
n/ TELES PN
9
ab 9 BRASKEM PNA
r/ 9
9 GERDAU PN

Date of dual listing

ju
l/9
9 ULTRAPAR PN
ou
t /9
ja 9
n/
0
ab 0
r/ 0
0
ju VCP PN
l/0
0
ou
t /0 VALE PNA, EMBRAER PN
ja 0
n/ PETRO ON E PERDIGÃO
0
ab 1
r/ 0
1 PETRO PN
ju SADIA PN
l/0
1
ou
t /0
ja 1 CEMIG PN
n/
0 BRADESCO PN
ab 2

Foreign Investors Positions

r/ 0 ITAÚ
2 VALE ON
ju
l/0
2 SABESP ON
ou
t /0
ja 2
n/
0
ab 3
r/ 0
3
BOVESPA REFERENCE

ju
l/0
3
ou
t /0
ja 3

R$ billion - deflated by IBOVESPA (28/12/2006)

n/
0
ab 4
r/ 0
4
ju
l/0
4 GOL PN, ALL PN
ou
t /0 CPFL ENERGIA ON
ja 4
n/
0
ab 5
ADR Positions

r/ 0
5
ju
l/0
5
ou
t /0
ja 5
n/
0
ab 6
r/ 0
6 TAM
ju
l/0
6
ou
t /0
6
Local Market vs ADRs – Custody Value
Expressly recorvery
of shares X ADRs

Source: BOVESPA
 CORPORATE
GOVERNANCE
LISTING SEGMENTS
CORPORATE GOVERNANCE
Novo Mercado standard is set

• Special listing segment of companies committed to higher

corporate governance standards:

– Decision of joining NM is voluntary and market driven.

– Private sector initiative based on and enforced through a contract
with BOVESPA:
• Compliance with the Novo Mercado Listing Rules.
• Agreement to settle any shareholder company disputes by arbitration
– Two more corporate governance segments: Level 2 and Level 1.
CORPORATE GOVERNANCE
Listing Rules
NOVO MERCADO SPECIAL LEVELS OF CORPORATE
– Shareholders’ rights GOVERNANCE
• Only one class of shares, with full voting rights:
one share, one vote – NÍVEL 1 (level 1):
• Full tag along rights • Higher disclosure standards of Novo Mercado
– Higher disclosure Standards
• Annual financial statements in IFRS or US GAAP – NÍVEL 2 (level 2):
• Improved Quarterly Reports (ITRs), including an • Higher disclosure standards of Novo Mercado
English version, consolidated financial statements • Must comply with all the requirements of the
and cash flow statements Novo Mercado
• Related party transactions • Exception:
• Trading and ownership of the company´s shares – May continue to issue non-voting,«
by the management and the controlling preferred » shares (PN), but these
shareholders « preferred » shares will have voting rights
in exceptional circumstances
– Other listing requirements
• Delisting: tender offer at a price based, at least,
on the economic value
• Board of directors: a minimum of 5 members, may
be extended for up to two years.
• 25% minimum free-float and adoption of special
procedures in public offerings to enhance the
dispersion of the company´s shares
• Adhesion to an arbitration panel (dispute
resolution)
 BOVESPA’S LISTED COMPANIES
Adopting the highest standards of CG

Market Capitalization
In USD billion
723
• 75% provide financial
statements in USGAAP or
482
IFRS

341 • 35% voluntarily provide tag

255 234
along rights and belong to
217 229 225
161 185 Itag
148 124
• 55% adhered to Novo
Mercado, Level 2 or Level 1
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

397 Listed Companies Source: BOVESPA

CORPORATE GOVERNANCE
Listing Segments

• Novo Mercado´s Consolidation

6 years after launching
– 25% of total listed companies
– 59% of total market capitalization 101 companies
– 63% of total trading value

44 51
NM
18 N2
2 7 10 14 14 N1
2 7
3
3
31 33 37 36 36
18 24

2001 2002 2003 2004 2005 2006 2007

 CORPORATE GOVERNANCE
Novo Mercado – 51 Listed Companies
• ABYARA PLANEJAMENTO IMOBILIÁRIO S.A. • KLABIN SEGALL S.A.
• AMERICAN BANKNOTE S.A. • LIGHT S.A.
• BANCO DO BRASIL • LOCALIZA RENT A CAR S.A.
• BANCO NOSSA CAIXA S.A. • LOJAS RENNER S.A.
• BRASCAN RESIDENTIAL PROPERTIES S.A. • LPS – CONSULTORIA DE IMÓVEIS S.A.
• BRASIL ECODIESEL IND COM BIO. OL. VEG. S.A. • LUPATECH S.A.
• BRASILAGRO – CIA BRAS DE PROP AGRICOLAS • M. DIAS BRANCO S.A. IND COM ALIMENTOS
• CAMARGO CORREA DESNV. IMOBILIARIO S.A. • MEDIAL SAUDE S.A.
• CIA CONCESSOES RODOVIARIAS • MMX MINERAÇÃO E METÁLICOS S.A.
• CIA SANEAMENTO BASICO EST SÃO PAULO • NATURA COSMETICOS S.A.
• COMPANY S.A. • OBRASCON HUARTE LAIN BRASIL S.A.
• COSAN S.A. INDUSTRIA E COMERCIO • ODONTOPREV S.A.
• CPFL ENERGIA S.A. • PERDIGAO S.A.
• CIA SANEAMENTO BASICO DE MINAS GERAIS • PDG REALTY S.A. EMPREEND. E PARTICIPAÇÕES
• CSU CRDSYSTEM S.A. • PORTO SEGURO S.A.
• CYRELA BRAZIL REALTY S.A. EMPREEND E PART • POSITIVO INFORMATICA S.A.
• DATASUL S.A. • PROFARMA DISTRIB PROD FARMACEUTICOS S.A.
• DIAGNOSTICOS DA AMERICA S.A. • RENAR MAÇAS S.A.
• EMBRAER • RODOBENS NEGOCIOS IMOBILIARIOS S.A.
• EDP ENERGIAS BR • ROSSI RESIDENCIAL S.A.
• ETERNIT S.A. • SAO CARLOS EMPREEND E PARTICIPAÇOES S.A.
• GAFISA S.A. • SAO MARTINHO S.A.
• GRENDENE S.A. • SUBMARINO S.A.
• GVT (HOLDING) S.A. • TECNISA S.A.
• IGUATEMI EMPRESA DE SHPINGS CENTERS S.A. • TOTVS S.A.
• TRACTEBEL ENERGIA S.A.
CORPORATE GOVERNENCE
Level 2 – 14 Listed Companies
• ALL AMERICA LATINA LOGÍSTICA S.A
• CENTRAIS ELET SANTA CATARINA S.A.
• ELETROPAULO METROP. ELET. SÃO PAULO
• EQUATORIAL ENERGIA S.A.
• GOL LINHAS AREAS INTELIGENTES S.A.
• MARCOPOLO S.A.
• NET SERVIÇOS DE COMUNICAÇÃO S.A.
• SANTOS BRASIL S.A.
• SARAIVA S.A. LIVREIROS EDITORESSUZANO PETROQUIMICA S.A.
• SUZANO PETROQUIMICA S.A..
• TERNA PARTICIPAÇÕES S.A.
• TAM S.A.
• UNIVERSO ON LINE S.A.
• VIVAX S.A.
CORPORATE GOVERNANCE
Level 1 – 36 Listed Companies
• ARACRUZ CELULOSE S.A. • FRAS-LE S.A.
• ACELOR BRASIL S.A. • GERDAU S.A.
• BANCO BRADESCO S.A. • IOCHPE MAXION S.A.
• BANCO ITAU HOLDING FINANCEIRA S.A. • ITAU INVESTIMENTOS ITAU S.A.
• BRADESPAR S.A. • KLABIN S.A.
• BRASIL TELECOM PARTICIPAÇÕES S.A. • MANGELS INDUSTRIAL S.A.
• BRASIL TELECOM S.A. • METALURGICA GERDAU S.A.
• BRASKEM S.A. • RANDOM S.A. IMPLEMENTOS E PARTICIPAÇÕES
• CENTRAIS ELET BRAS - ELETROBRAS • S.A. FÁBRICA DE PRODUTOS ALIMENTÍCIOS VIGOR
• CESP – CIA ENERGETICA DE SÃO PAULO • SADIA S.A.
• CIA BRASILEIRA DE DISTRIBUIÇÃO • SÃO PAULO ALPARGATAS S.A.
• CIA ENERGÉTICA DE MINAS GERAIS • SUZANO BAHIA SUL PAPEL E CELULOSE S.A.
• CIA FIAÇÃO TECIDOS CEDRO CACHOEIRA • ULTRAPAR PARTICIPAÇÕES S.A.
• CIA HERING • UNIBANCO HOLDINGS S.A.
• CIA TRASMISSÃO DE ENERGIA ELET PAULISTA • UNIBANCO UNIÃO DE BANCOS BRASILEIROS S.A.
• CIA VALE DO RIO DOCE • UNIPAR UNIÃO DE INDÚSTRIAS PETROQ. S.A.
• CONFAB INDUSTRIAL S.A. • VOTORANTIM CELULOSE E PAPEL S.A.
• DURATEX S.A. • WEG S.A.
LISTED COMPANIES
INFORMATION ON
BOVESPA’S WEBSITE
EASY ACCESS TO COMPLETE INFORMATION
COMPANIES MONTHLY TRADING SUMMARY
COMPANIES MONTHLY TRADING SUMMARY
CAPITAL RAISING
ACTIVITY
 CAPITAL RAISING ACTIVITY
Record Number of IPOs at BOVESPA
2004

2005

2006

2007
 CAPITAL RAISING ACTIVITY
Capital raised through shares - Top 10 Emerging Markets
US$ million – 2006

Shanghai SE 16,761 ƒ Capital Raised by Brazilian

Companies:
BOVESPA 16,482
Æ 2006: US$ 16.5 billion
NSE India 14,191 Æ 2005: US$ 10.9 billion
Æ 2004: US$ 3.8 billion
JSE 13,227

Bom bay SE 7,008

Shenzhen SE 6,021

Singapore 5,747

Korea Exchange 5,281

Source: WFE – World Federation of
Thailand SE 4,030 Exchanges
IPO Secondary Offerings
Taiw an SE Corp. 2,128
 CAPITAL RAISING ACTIVITY
Distinctive Features
STRONG PARTICIPATION OF
INTERNATIONAL INVESTORS IN IPOs
2006
ƒ HIGHEST STANDARDS OF
71%
CORPORATE GOVERNANCE Lopes
OdontoPrev 63%
9 Most of the newcomers Brasil Ecodiesel 68%

joined Novo Mercado Terna 65%

Profarma 70%
ƒ PLACE OF LISTING Brascan 87%

M.Dias Branco 72%

9 Listings only at
Santos Brasil 80%
BOVESPA 69%
Klabin Segall
Medial 76%

Abyara 83%

MMX 76%

Datasul 80%

Lupatech 78%
Source: BOVESPA
Initial Public Offerings
2004 and 2005

PRIMARY SECONDARY TOTAL US$ FOREIGN

COMPANY SECTOR
US$ MM US$ MM MM PARTICIPATION
Natura Cosmetics 0 243 243 67%
Gol Civil Aviation 161 122 283 75%
ALL Logistic 86 103 189 71%
2004 CPFL Energia Electric Utilities 239 48 287 69%
Grendene Footwear 0 216 216 64%
DASA Medical Services 46 113 158 68%
Porto Seguro Insurance 47 90 136 71%
TOTAL 2004 578 935 1.513
Renar Maçãs Agricultural 6 0 6 5%
Submarino Diversified Retailer 50 126 176 75%
Localiza Rent a Car 0 108 108 93%
TAM Civil Aviation 158 68 226 74%
2005 EDP Electric Utilities 498 6 505 26%
OHL Toll Roads and High 58 154 212 70%
Nossa Caixa Bank 0 419 419 71%
Cosan Agricultural 399 0 399 72%
UOL Internet 138 129 267 71%
TOTAL 2005 1.308 1.010 2.318
Initial Public Offerings
2006 PRIMARY SECONDARY TOTAL US$ FOREIGN
COMPANY SECTOR
US$ MM US$ MM MM PARTICIPATION
Copasa Water Utilities 370 0 370 74%
Vivax Cable TV 27 214 241 69%
Gafisa Building Construction 233 204 438 72%
Company Building Construction 98 35 133 64%
TOTVS Software and Services 160 53 213 69%
Equatorial Electric Utilities 119 132 251 77%
Abnote Bank Services 0 228 228 80%
CSU Bank Services 48 116 165 83%
BrasilAgro Agricultural 282 0 282 82%
Lupatech Capital Goods 88 120 208 78%
GP Investim. Diversified Holding 311 0 311 78%
Datasul Software and Services 67 74 140 80%
MMX Mining 511 0 511 76%
2006
Abyara Building Construction 75 0 75 83%
Medial Heath 215 121 336 76%
Klabin Segall Building Construction 167 77 244 69%
Santos Brasil Warehousing and Stor 432 4 436 80%
M.Dias Branco Food 0 193 193 72%
Brascan Building Construction 439 116 555 87%
Profarma Pharmaceutical 146 43 188 70%
Terna Electric Utilities 196 98 294 65%
Ecodiesel Exploration and Ref. 175 0 175 68%
OdontoPrev Medical Services 75 166 241 63%
Lopes Property Agency 0 221 221 71%
Positivo Info Hardware 31 252 283 69%
Dufry Diversified Retailers 0 395 395 69%
TOTAL 2006 4.265 2.862 7.127
Initial Public Offerings
As of February 2007

PRIMARY SECONDARY TOTAL FOREIGN

COMPANY SECTOR
US$ MM US$ MM US$ MM PARTICIPATION
PDG Building Construction 202 101 304 93%
Camargo Corrêa Building Construction 225 20 246 56%
São Martinho Consumer non cyclical 123 77 200 53%
2007 GVT Telecommunications 515 0 515 76%
Rodobens* Building Construction - - - -
Tecnisa* Building Construction - - - -
Iguatemi Building Construction 263 - 263 72%
TOTAL 2007 1.328 199 1.527
*Not available at this date
CAPITAL RAISING ACTIVITY
IPO’s evolution

Number of IPOs
30

25

20 Actual Running
15
18
26
10

5 9
1 1 1 1 7 7
2 0 0 0 0
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
 CAPITAL RAISING ACTIVITY
.... some others in the pipeline ...

TO DATE 18 NEW OFFERINGS ALREADY

FILLED FOR REGISTRATION

• CPM S/A • Metalfrio Solutions SA

• Even Construt. E Incorp. S/A • Fertilizantes Heringer SA
• Banco Pine S/A • Inpar S/A
• JBS SA • CR2 Empreend. Imob. S/A
• JHFS Participações SA • Banco Sofisa SA
• Atmosfera Têxteis SA • Log-n Logistíca Intermodal SA
• INDS ROMI SA • Bematech Ind. Com. Equip. Elet. SA
• BR Malls Participações SA • Agra Empreend. Imob. SA
• Banco Cruzeiro do Sul SA • Goldfab Incorp. E Const. SA

Source: CVM – Brazilian SEC, updated Feb 28, 2006

Another alternative for Capital Raising
BOVESPA MAIS
To be launched soon

Pillars Investor with medium-

BOVESPA programs to term perspectives
support companies

Greater flexibility Companies

in trading committed to CG
requirements

Companies committed to their development in stock market

 MARKET
SUPERVISION
MARKET SUPERVISION
Self-Regulatory Powers
• BOVESPA, under the terms of Law N° 6.385 (the "Securities Act“) of
December 7, 1976, as well as under the terms of the Regulation Attached to
Resolution N° 2.690 of January 28, 2000, of the National Monetary Council, is
granted Self-Regulatory Powers.

• Therefore BOVESPA can establish rules and procedures (including those

related to conduct), besides monitoring the compliance of:
– brokerage firms;
– listed companies; and
– investors.

• Noncompliance with the rules and procedures established by BOVESPA, as

well as with the rules it is entrusted to supervise (also encompassing non-
equitable practices and any modality of fraud or market manipulation),
subjects the infringing party to the penalties that may be applied by BOVESPA
- warning, fine, suspension, exclusion and ineligibility to exercise specific
functions at the brokerage firm or on BOVESPA itself.
MARKET SUPERVISION
Self-Regulatory Powers
The application of Self-Regulatory Power by BOVESPA takes the
involved agent into consideration, as follows:

• (i) In relation to brokerage firms and The Stock Exchange itself:

– BOVESPA may apply penalties to the brokerage firm and managers, employees,
traders and subordinates thereof. It may also impose penalties on its own
managers and employees

• (ii) in relation to listed companies:

– BOVESPA may suspend the trading of securities issued by the company or may
cancel its trading license.

– BOVESPA cannot penalize the company's directors, employees or subordinates.

Only the Brazilian Securities and Exchange Commission/CVM is empowered to do
so.
MARKET SUPERVISION
Self-Regulatory Powers

• (iii) in relation to investors:

– BOVESPA cannot penalize investors. Only the CVM is empowered to do
so.

• (iv) in relation to trades:

– With regard to trades effected on the exchange, BOVESPA may:

– do not allow the effecting of trades which are being carried out when there
are signs of breaches in regulations, or of unfair practices; and

– cancel trades already carried out or ask the suspension of their settlement
to the clearing agents, in the cases where there are signs of breaches in
regulations, or of unfair practices, fraud or manipulation.
MARKET SUPERVISION
Self-Regulatory Powers
CVM INSTRUCTION No 387, DATED APRIL 28, 2003

Establishes standards and procedures to be followed in the securities and exchange

transactions on the floor and in electronic trading and registration systems in the stock
exchange and in the future and commodities exchange and other provisions.

Art. 20. It is the responsibility of the exchanges, as auxiliary bodies of CVM, to

inspect the activities of their members, and of establishing the complementary
standards needed to the compliance with what is provided in this Instruction.

– §1st Exchanges will keep at the disposal of CVM data and information obtained through the
activities of inspection developed by them.

– §2nd Whenever any of the entities mentioned in the caput of this article, in the exercise of self-
regulation, identifies the practice, by any people or entity submitted to this jurisdiction, of illicit
acts, as well as the existence of irregularities, the CVM should be immediately informed, also
in relation to the arrangements being made.

– §3rd Whenever any of the entities mentioned in the caput of this article suspects of the practice
of illicit acts, or of the existence of irregularities involving a person or entity that is not
submitted to its jurisdiction, it shall immediately communicate CVM of its suspicions.
MARKET SUPERVISION
Self-Regulatory Powers
BOVESPA conducts self-regulatory activities, under the supervision of the
CVM
– responsibility of maintaining and protecting an equitable market
– ensuring properly conducted trading and fair price formation
– 80 professionals, are engaged

• Self-Regulatory Activities occur at interconnected stages, as follows:

– PRIOR TO AND DURING THE TRADING SESSION

• selects news related to listed companies

• material facts are analyzed
• trading rules on the basis of this analysis
• company-related information and events are sent to the press and
electronic news agencies
MARKET SUPERVISION
Self-Regulatory Powers
– DURING THE TRADING SESSION

• trading system is previously programmed to stop trading that infringes specific

parameters related to price fluctuations and trading volumes
• trading operations are submitted to an immediate auction or to an auction within a
specified term.

– DURING AND AFTER THE TRADING SESSION

• analyses of trades that presented atypical price and volume fluctuations

• investors identified
• type of investors trading on the cash and derivatives markets are also analyzed.

– AUDITING OF TRADING ACTIVITIES

• the auditing of BOVESPA is conducted internally on the basis of information gathered

from its records and electronic systems.

• external auditing is conducted through audits carried out directly at brokerage firms.
MARKET SUPERVISION
Market Supervision – Structure

MARKET
SUPERVISON

MARKET
AUDITING
SURVEILLANCE
MARKET SUPERVISION
Self-Regulatory Activities
AUDITING

Conducted through audits carried out directly at brokerage firms. The

main purpose of such auditing procedures is to ensure that trading
operations are being legally and regularly carried out by brokerage firms:

• Membership requirements
• Operational risks, tax law, accountancy and “money laundering”
• Compliance policies and internal procedures
• Sales compliance, Investment advice
• Financial examinations
• Investors registrations details, including the documents (as ID and
residence voucher)
• Trading limit
• Transfers between different custody account
MARKET SUPERVISION
Self-Regulatory Activities

MARKET SURVEILLANCE

– Monitors trading activity to confirm that it meets Exchange and CVM rules.

– Surveillance system is used by the staff to detect and investigate:

• Market manipulation
• Insider Trading
• Front running
• Unfair practices in general

– CVM – Relationship
• Monthly report
MARKET SUPERVISION
Self-Regulatory Activities
SELF-REGULATORY ACTIVITIES 2006
Requests for clarification to companies 2,358
Listed companies suspended from trading 103
Trades submitted to auction 39,604
Trades cancelled by BOVESPA 4,802
Trades cancelled as requested by brokerage firms 1,916
Analysis of atypical transactions 54,802
Reports forwarded to the CVM 199
Routine auditing of brokerage firms 45
Internal control auditing of brokerage firms (compliance) 95
Specific inspection in brokerage firms (guarantee fund and claims
11
from clients)
INVESTORS’
PROTECTION
 INVESTORS’ PROTECTION
A comprehensive framework

GUARANTEE FUND ARBITRATION PANEL

– Funded by brokerage firms
– Established in July, 2001, by
– Direct claim to BOVESPA BOVESPA
– Fully accessible to international
investors – Resolve conflicts among
– Net worth: USD 52 million in shareholders, companies, companies’
December, 2006 management, controlling
shareholders and BOVESPA
OMBUDSMAN – Field of action: Corporate Law, capital
– Enhanced credibility markets’ regulations, listing rules and
– Mediation of conflicts companies bylaws
– Easy and inexpensive conflict – Definitive decision: Award cannot be
resolution alternative. appealed to the Courts
– Advantages:
DEPOSITORY SERVICES
– Individual account in the name of • Greater agility
• Lower costs
the final beneficial owner • Highly specialized arbitrators
• Confidentiality
 MARKET
POPULARIZATION
MARKET POPULARIZATION
Objectives
Investor’s Education Promote business

– Clarify about the market – Reach individual investors;

economic function and how it
operates;
– Promote Investment Clubs;
– Increase the quality and
quantity of information – Recover the link between
available to the general public; the investors and brokerage
firms;
– Raise interest on stock
investments;
– Train employees of
brokerage firms.
MARKET POPULARIZATION
Main Initiatives
“BOVESPA WHERE YOU ARE” Campaign
– Bovespa organizes exhibitions on popular locations
• Beaches, Touristic cities, Theaters, Shopping Centers, Large Companies, Universities,
Subway stations

BOVESPA’s Visitors Center

– Former floor open to the public on daily basis: monitored visits, museum and 3D
movie sessions

Investors’ Institute
– Support for the creation of the INI – National Investors Institute www.ini.org.br
– Assistance to individual investors and investment clubs

Investment Clubs
– Back-office facilities with CBLC
– Special commissions with brokerage firms
MARKET POPULARIZATION
Some results
• Establishment of a Capital Market Plan subscribed by more than 80
organizations.
• Working Group on the Capital Market Development composed by the
most important Ministers and Secretaries.
• Tax Reduction:
– Exemption of CPMF tax on stock investments
– Reduction of Income tax on stock investments

• More than 1,400 New Investment Clubs

– out of the current 1,700 clubs

• Evolution of individual investors’ share in the trading value

– 1999: 13%
– 2006: 25%
CORPORATE
CITIZENSHIP
CORPORATE CITIZENSHIP
The UN Global Compact Initiative
• In June 2004, BOVESPA is the first stock exchange in the world to
subscribe the Global Compact Principles
• BOVESPA together with other 10 stock exchanges announced their
support to the Global Compact Principles and a commitment to
develop alternatives to disseminate the principles to their listed
companies
• BOVESPA’s Commitment
– Disseminate the principles among the listed companies
– Promote more generally the subscription of other Brazilian organizations to the
principles
– Contribute to disseminate the principles among the Brazilian population
• Initiatives
– Social Stock Exchange
– Corporate Sustainability Index
CORPORATE CITIZENSHIP
Social Exchange

• What is it?
– A trading mechanism for social investments
• Why?
– Leverage BOVESPA’s experience as a marketplace to channel resources
to the social sector;
– Link investors and social projects through a mechanism that reproduces
the stock market
• Main concepts
– Listed companies: NGOs and their projects
– Social stocks
– Social profits
• How to participate?
www.bovespasocial.com.br
BOVESPA IN THE
WORLD
BOVESPA IN THE WORLD
Main initiatives
• BEST – Brazil Excellence in Securities Transactions
– Institutional effort to promote the Brazilian capital markets to investors in the
main financial centers – US, Europe and Asia
– Participation of regulators and market operators

• One-on-one meeting with international investors

– In-depth discussion on issues and concerns when investing in Brazil

• Latin American integration initiative

– Pilot plan with Mexico
BOVESPA IN THE WORLD
Thought Leadership

• Member of the Board

• Chairman of the Ibero-American Federation of Exchanges

• Member of the SRO Consultative Committee

• National Numbering Agency for ISIN Codes

• OECD – Member of the Roundtable on Corporate

Governance
www.bovespa.com.br