BM

1
32nd Annual International Futures Industry
Conference
Info Exchange The Brazilian Mercantile Futures
Exchange - BMF
Boca Raton March 14th 2007
2
Brazilian Business Environment is Attractive
to International Capital Flows

• Improved Macroeconomic Fundamentals

3
Enhanced Performance of Brazilian
Economy Reflects Upon the Decrease of Sovereign
Risk
EMBI BR - Spread Over US Treasury
900
800
700
600
500
400
300
200
100
Feb-04
Jul-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Source JP Morgan Securities WC, Emerging
Markets Research and Bloomberg
4
Building Up International Reserves Protects the
Brazilian Economy Against External Turbulences
Brazilian Central Bank International Reserves
101.1
105
90
75
60
US Billions
45
30
15
0
Feb-04
Jun-04
Oct-04
Feb-05
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Feb-07
Source Brazilian Central Bank
5
Helping to Attract Non-Resident Investors
Non-Residents Investors at BMF
2,000
16
1,500
12
1,000
US Billion
8
500
4
0
0
00
01
02
03
04
05
06
Traded Contracts
of Total Contracts of BMF
6
Brazilian Business Environment is Attractive
to International Capital Flows

• Improved Macroeconomic Fundamentals
• Strong Base to Build Derivatives Business

7
BMF Highlights

• World class derivatives exchange and
  selfregulatory organization
• Markets are supervised by the Brazilian
  Securities Commission (CVM) and
  Clearinghouses are regulated by the Brazilian
  Central Bank (BCB)
• Provides hedge and asset allocation related to
  the main exposures of the Brazilian economy
  and exports commodities prices
• The number of traded contracts grew 42.2 in
  2006 to USD 283.6 million
• The financial volume increased 38.9 in 2006
  to USD 10.6 trillions
• More than 90 of BMF clients are qualified
  investors buyers

8
One of the Top 10 Futures Exchanges in the World
Traded Contracts Jan Nov 2006
Exchange
Rank
Chicago Mercantile Exchange (CME) Eurex
Deutchland (EUREX) Chicago Board of Trade
(CBOT) Euronext Mercado Mexicano de Derivados
(MexDer)
1st 2nd 3rd 4th 5th
1,010,066,878 890,077,317 630,869,854 397,660,221
265,881,288

New York Mercantile Exchange (Nymex) National
Stock Exchange of India (NSE) Dalian Commodity
Exchange (DCE) ICE Futures
199,900,022 155,511,862 104,586,832 84,707,576
7th 8th 9th 10th
Source FIAs Monthly Volume Reports
9
BMF is an Institutional Investor Arena
Breakdown by Financial Volume
Financial Institutions
52.25
Others
1.72
Private Individuals
Institutional Investor
6.66
23.06
Foreign Investors
16.30
10
BMF Business Model Guarantees the Safety and
Soundness of Brazilian Financial Markets
Settlement Bank 2004
11
Growth of Daily Traded Volume at BMF
1,800
1,600

1,400
1,200

1,000
Thousand Contracts
800


600

400



200
0
00
01
02
03
04
05
06
Jan-Feb
07
12
Increasing and Steady Open Interest at BMF
16,000
14,000


12,000


10,000

Thousand Contracts

8,000

6,000

4,000
2,000
0
13
What Can You Trade at BMF?
OTCDERIVATIVES
SWAPS - INTEREST RATE - EXCHANGE RATE -
PRICE INDEX - STOCK INDEX - GOLD FLEXIBLE
OPTIONS - STOCK INDEX - EXCHANGE RATE -
INTEREST RATE

• FUTURES OPTIONS
• - STOCK INDEX
• - INTEREST RATE
• - EXCHANGE RATE
• - DOLLAR DENOMINATED DOMESTIC YIELD
  CURVE
• INTEREST RATE X PRICE INDEX
• (PPI/CPI) SPREAD
• PRICE INDEX (PPI/CPI)
• - SOVEREIGN DEBT BOND - GLOBAL BOND
• - A BOND
• - US TREASURY
• STRUCTURED PRODUCTS
• - SPREAD STRATEGIES
• - VOLATILITY TRADING
• - STOCK INDEX
• - INTEREST RATE
• - EXCHANGE RATE
• - FORWARD RATE AGREEMENTS

• FUTURES OPTIONS
• - ARABICA COFFEE
• - CONILLON COFFEE
• - SUGAR
• - ETHANOL
• - COTTON
• - CORN
• - SOYBEAN
• - LIVE CATTLE
• - FEEDER CATTLE
• SPOT
• - GOLD
• - U.S. DOLLAR EXCHANGE RATE

14
BMF - Full Fledged Exchange Offering
Solutions to Non-Resident Investors
BMF Product Breakdown
Interest Rates
Exchange Rates
66.38
25.61
Stock Indices
6.96
Agricultural Commodities
OTC Market
0.42
0.63
Feb07
15
A Sharp Increase of Non-Resident Participation at
BMF

• 41 million traded contracts (D05 78.5)
• Average traded volume of 166 thousand contracts
  (D05 81.4)
• 14.7 of negotiated contracts (D05 25.5)
• USD 1.6 trillion in financial volume (D05 66.0)
• Average daily financial volume of USD 6.3 billion
  (D05 68.7)
• 14.8 of the total financial volume negotiated
  (D05 20.3)

16
Non-Resident Investors Are Trading More
Contracts in the Most Liquid Markets

Million Contracts
25.4
18.3
17.7
13.3
10.6
14.1
12.4
7.7
7.4
7.4
3.1
1.3
Interest Rates
Exchange Rates
Stock Indexes
2005
2006
Relative Participation 2005
Relative Participation 2006
17
Non-Resident Investors Are Increasing Volumes in
the Most Liquid Markets

USD Billion
993.7
22.0
21.3
20.0
17.3
13.5
530.5
482.2
9.5
353.8
67.8
44.5
Interest Rates
Exchange Rates
Stock Indexes
2005
2006
Relative Participation 2005
Relative Participation 2006
18
Non-Resident Investors Are Trading
More Agricultural Commodities Markets Contracts

Thousand Contracts
21.5
135.5
105.7
10.1
7.9
4.0
14.2
1.9
1.7
7.5
3.6
1.1
Agricultural Commodities
Gold
Sovereign Bonds
2005
2006
Relative Participation 2005
Relative Participation 2006
19
Non-Resident Investors Participation is
Increasing in the Agricultural Commodities
Markets

USD Million
1,447.7
1,196.0
11.9
11.8
840.5
5.6
5.3
1.7
0.6
75.0
16.9
6.5
Agricultural Commodities
Gold
Sovereign Bonds
2005
2006
Relative Participation 2005
Relative Participation 2006
20
Pledged Collateral by Non-Resident Investors Will
be Facilitated in New York
20
15
10
5
0
01
02
03
04
05
06
21
Derivatives Clearinghouse CCP to Every Contract
Traded at BMF

• Clears, guarantees and settle every contract
  traded at BMF
• Average daily trading volume 1.8 million
  contracts
• Average daily notional financial volume USD 64
  billion
• Open interest 13.71 million contracts
• Open interest notional financial value USD 656
  billion
• Value deposited as collateral USD 28.3 billion

Feb07
22
Why it is Safe to Trade at BMF?
BMFs financial safeguard system is based on
self contained layers of protection
facilitated by a defaulter, survivor, and third
party payment structure BMFs has expertise in
dealing with unexpected volatility peaks and a
capacity to handle a boost in the settlement
volume BMF utilizes state-of-the-art risk
management procedures to mitigate market and
counterparty risk
23
Derivatives Clearinghouse Participant Structure
BMF Participants Structure
24
Derivatives Clearinghouse Sound Safeguards System
USD 28.3 billion
Feb07
25
Sturdy and Conservative Collateralization
BMF Derivatives Clearinghouse Collateral
Composition
Federal
Government
Bonds
87.13
Gold 0.05
Other Assets
0.87
Stocks
Bank CDs
4.15
Letters of
Credit 5.23
2.56
Feb07
26
Derivatives Clearinghouse Sound Safeguards System
USD 45 million

USD 469 million
BMF equity

Customer collateral
USD 28.3 billion
Feb07
27
Why it is Safe to Trade at BMF?
BMFs financial safeguard system is based on
self contained layers of protection
facilitated by a defaulter, survivor, and third
party payment structure BMFs has expertise in
dealing with unexpected volatility peaks and a
capacity to handle a boost in the settlement
volume BMF utilizes state-of-the-art risk
management procedures to mitigate market and
counterparty risk
28
High Standards for Liquidity Risk Management
Achievement of Lamfallusy Plus Criteria
900
Access to Central Bank Discount Window
800
700
600
500
USD Million
400
2002/2003 Event
May 2006 Event
300
200
100
0
06/03
12/03
06/04
12/04
06/05
12/06
12/01
06/02
12/02
12/05
06/06
BMF credit facilities
Sum of the two largest clearing members'
settlement debts
29
Why it is Safe to Trade at BMF?
BMFs financial safeguard system is based on
self contained layers of protection
facilitated by a defaulter, survivor, and third
party payment structure BMFs has expertise in
dealing with unexpected volatility peaks and a
capacity to handle a boost in the settlement
volume BMF utilizes state-of-the-art risk
management procedures to mitigate market and
counterparty risk
30
Efficient and Modern Risk Management
BMF Derivatives Clearinghouse Risk Management
31
Foreign Exchange Clearinghouse CCP for Interbank
FX Transactions

• The worlds first clearing and settlement system
  for interbank FX market
• 95 market share on T1 and T2 BRL/USD FX
  Transactions
• 72 participating banks
• Average daily registered gross volume USD 2.5
  billion
• Average daily net settled volume USD 932 million
• 81 of netting power
• The Clearinghouse mitigates principal,
  volatility, and operational risks through DVP,
  pre-pledged collateral and deferred net settlement

32
FX Clearinghouse Settlement Accounts
Foreign currency settlement account
BMF FXClearinghouse
Localcurrencysettlementaccount
33
Securities Clearinghouse CCP and SSS for
government Bonds

• Renders registration, clearing and settlement
  services for federal government bonds cash
  transactions on the spot market
• Provides services that contributes to higher
  liquidity and lower operational and credit risks
• General and specific collateralized repos for the
  cash driven and securities driven repo markets
• Settlement of primary government auctions
• Securities lending facility
• Average daily volume of USD 6.5 billion (Mar-06
  to Feb-07)
• Clearing 41 of the Brazilian repo market, i.e.,
  the on the run National Treasury Bills trading
  (LTN)

34
Sisbex Screen
REAL-TIME QUOTES
NEWS
REFERENCE PRICES
AUCTIONS
35
Settlement Bank Enhances Competitiveness of
Brokers and Clearing Members

• The business model is based on three pillars
• Risk management mitigation Access to Brazilian
  Central Banking reserves accounts, efficiency of
  margin charge and allocation, and a full platform
  integrated to the BMF clearing systems
• Settlement facilities Real time collateral
  management and liquidity assistance trough repo
  transactions and FX services for non-resident
  investors
• Custody Pre-matching and post trading
  reconciliation of securities positions under
  fiduciary ownership of the CSDs
• A wholly-owned BMF subsidiary, with capital of
  USD 11 million
• STP structure not exposed to market and credit
  risks
• Services 50 of BMFs members

36
Brazilian Business Environment is Attractive
to International Capital Flows

• Improved Macroeconomic Fundamentals
• Strong Base to Build Derivatives Business
• Sound Regulatory Framework for Investments

37
Resolution 2689 An Efficient Legal Gateway
for Non-Resident Investors to Access Brazilian
Markets

• Allows nonresidents investors to invest in the
  Brazilian capital and financial markets,
  including BMFs products
• Focuses on foreign institutional investors,
  financial institutions, corporations, and
  individuals
• Creates a Privileged Taxation Regime for
  Non-Resident Investors from Non-Tax
  Havens
• Makes foreign investment more efficient
• Eliminating investment restrictions
• Simplifying procedures
• Creating operational safety

38
Resolution 2689 A Step by Step Process for
Non-Resident Investors Access to BMF

• Select a legal representative in Brazil
• Receive a registration number from CVM
• Select a local custodian
• Select a BMF Brokerage House member
• Provide documents required
• Select a Brazilian bank FX transactions
• Starts to trade

39
Brazilian Business Environment is Attractive
to International Capital Flows

• Improved Macroeconomic Fundamentals
• Strong Base to Build Derivatives Business
• Sound Regulatory Framework for Investments
• Following Global Tendencies

40
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42
Volumes are Moving to Our Electronic Trading
System
92.9
87.6
78.8
74.9
66.6
54.0
51.8
48.2
46.0
33.4
25.1
21.2
12.4
7.1
01
02
03
04
05
06
Jan-Feb 07
Open Outcry
Electronic Trading
43
WebTrading Facility
44
The WebTrading Volume Reached 8.8 million
Contracts Traded in 2006
4,000
10
8
3,000
6
2,000
Thousand Contracts
4
1,000
2
0
0
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
Jan-Feb
07
Number of Traded Contracts (WebTrading)
of Contracts Traded Electronically (WebTrading
GTS)
45
Carbon Trading System

• Electronic Certified Emission Reduction Auctions
• Web based trading system
• To be scheduled on demand
• Direct Access to Authorized Participants
• BMF Brokers
• Carbon Funds
• Carbon Brokers/Traders
• Government Entities
• Multilateral Organizations
• First Stage
• Spot market (already issued CERs)
• Clearing
• Delivery Versus Payment
• CER Physical Delivery CDM Registry UN / EU ETS
• Full integration with BMF Carbon Facility

46
BMF Carbon Facility
47
Demutualization A Tendency Adopted by the Top
Exchanges

• Creates competitive advantages
• Maximizes the value of members titles
• Provides access to capital markets to boost
  investments on new projects
• Creates opportunities to businesses combinations,
  joint ventures, and strategic alliances with
  other exchanges and markets participants

48
Demutualization Agenda

• Demutualization approved by General Meeting of
  Members in December 2006
• Appointment of Rothschild as advisor
• Expected changes on Bylaws and corporate
  structures in July 2007
• Regulatory approvals
• IPO expected to be conclude at the end of 2007

49
BMF New York Office
BMF Shanghai Office
Phone [phone]
Phone [phone]
BMF Headquarters São Paulo
Phone [phone]
internacional_at_bmf.com.br
50
32nd Annual International Futures Industry
Conference
The Brazilian Mercantile Futures Exchange BMF
www.bmf.com.br
Boca Raton March 14th 2007