Brazilian Mercantile & Futures Exchange

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Brazilian Mercantile & Futures Exchange
BM&F2.jpg
Founded 1985
Headquarters São Paulo
Key People Chairman, Manoel Felix Cintra Neto
Products Futures, options and swaps on interest-rate products, currencies, indexes and commodities
Website www.bmf.com.br

The Brazilian Mercantile & Futures Exchange (BM&F) was formerly the largest derivatives exchange in Latin America.

Current exchange, BM&F Bovespa, was created in March 2008 with a merger between BM&F and Bovespa Holding SA, the publicly traded company that owns the Brazilian Stock Exchange.[1]

BM&F ranked sixth globally in 2006[2], with volumes rising 37.6 percent to 258.5 million contracts. In 2007, it posted a 49-percent jump in net profits, and net income rose to 293.3 million reais ($174.5 million) from 197.2m reais in 2006.[3]

The exchange converted into a for-profit company in September of 2007 and secured investment from the CME Group and a private equity firm ahead of an initial public offering on Nov. 30, 2007.[4]

The stock opened at R$25 a share, with R$5.98 billion raised from the sale of a 33.2 percent stake by the existing shareholders.[5]

Interest-rate and currency futures and options dominate trading, with compound annual growth in volumes of 24 percent since the launch of electronic trading in 2000. The exchange settles through three clearinghouses and also lists equity index and commodity contracts, as well as clearing over-the-counter products. In 2005 it launched a carbon-trading project.

History and Ownership

The Bolsa de Mercadorias & Futuros (BM&F) was founded in July 1985 by members of the Bovespa stock exchange, and trading started on Jan. 31, 1986. It merged on May 9, 1991 with the older São Paulo Commodities Exchange (founded in October 1917), and acquired Rio de Janeiro’s rival Brazilian Futures Exchange in 1997. It launched the Brazilian Commodities Exchange in August 2002, consolidating the country’s agricultural trading businesses from their regional centers.[6]

The BM&F board agreed in December 2006 to convert to a for-profit company and seek a stock market listing by the end of 2007. The exchange owners agreed to convert to a for-profit organization on Sept. 20, 2007, and hired Rothschild to manage the process. Exchange officials expect to float a minority stake in the group on the Bovespa.

The stock was first priced on Nov. 8, 2007 at R$14.50-R$16.50 a share, with 28.8 percent slated for sale on Nov. 30, rising to 33.2 percent if a greenshoe was exercised.[7]

General Atlantic, the U.S. private equity group, agreed on Sept. 23, 2007 to acquire a 10 percent stake in the exchange for R$1 billion, including a two-year lock-up.

The BM&F announced a cross-equity swap and marketing pact with the CME Group in October of 2007, with the U.S. exchange taking a proposed 10 percent stake in the Brazilian operator, which will in turn acquire 1.19 million CME shares, with a four-year lock-up. CME Group will distribute BM&F’s products through the Globex platform while and BM&F will connect its distribution network to CME Globex. In February of 2009, CME Group said it was taking a pre-tax charge of $275 million on a $700 million cross-equity deal it struck in 2007 with the Brazilian Mercantile and Futures Exchange.[8]

BM&F agreed to merge with Bovespa Holding on March 25, 2008.[9] BM&F went public in November 2007, raising BRL 5.98 billion in the initial public offering. Bovespa went public in October 2007, raising BRL 6.6 billion.[10]

In 2011, BM&F announced that they had joined forces with the Shanghai Stock Exchange to explore cross-listing opportunities. [11]

Structure and Business Model

The BM&F combines open outcry and electronic trading and is one of only two exchanges launched since 1986 - alongside France’s Matif - to incorporate a pit.[12]

The volume of screen-based business overtook the floor for the first time at the start of 2007. Around 54 percent of trades were transacted on their Global Trading System platform in January and February 2007, compared with 48.2 percent in calendar 2006. The exchange incorporates three clearinghouses covering financial and commodity derivatives, foreign exchange and securities.

Trading is conducted from Monday to Friday, from 0900 to 1700 with after-hours sessions from 1445 to 2000. After-hours transactions are cash settled on T+2.

Key People

Products and Services

Real-denominated interest rate contracts dominate trading at the BM&F, and accounted for 57 percent of volume in the 12 months to Aug. 31, 2007. Currency contracts ranked second at 27 percent, followed by indexes (10 percent), U.S. dollar-denominated interest rate products (5 percent) and commodities (1 percent).

Locations

São Paulo - Headquarters
Praça Antonio Prado, 48
Cep: 01010-901 - Sao Paulo - SP
Phone : 55 (11) - 3119 2000 - Fax: 55 (11) - 3107 9911


Campo Grande - Campo Grande Office
Rua Aratu, 156 - Chácara de Cachoeira
79040-330 - Campo Grande - MS
PhoneFax.: 55 (67) 341-6560


Santos - Santos Office
Rua 15 de Novembro, 41 - Loja 43 - Centro
11010-151 - Santos - SP
Phone : 55 (13) - 219 2812 - Fax: 55 (13) - 219 5583


BM&F (USA) Inc
61 – Broadway, 26 th Floor - Suite 2605
New York, NY -10006-2828 USA
Phone: +1 - 212 - 750-4197 - Fax: +1 - 212 - 750-4198

 

Rio de Janeiro - Rio Office
Praça XV de Novembro nº 20 - 1º subsolo
20010-010
Phone: (21) 2514-1054
Fax: (21) 2514-1050 and 2514-1060


BM&F (China)
200 Yincheng (M) Rd, Suite 404 Pudong New Area
Shanghai 200120 China.
Telephone: 86-21-5037-2886;
Fax: 86-21-5037-2885.


Brasília - Brasília Office
SCN QD 04 Bloco "B" - Sala 404A
Centro empresarial Varig
70714-900 - Brasília - DF
Phone.: (61) 3328-6301/02/03

References

  1. "Brazil's BM&F, Bovespa announce merger deal". MarketWatch.
  2. "Annual volume rankings". Futures Industry Association.
  3. "Brazil BM&F futures market's 2007 profit up 49 pct,” Feb. 27, 2008. Reuters.
  4. "Company report". BM&F.
  5. Press release. BM&F.
  6. "BM&F profile". Best Brazil.
  7. "BM&F listing set to raise R$4.6bn". Financial Times.
  8. CME Hit By Trading Slowdown. Financial Times.
  9. Brazil's BM&F Bovespa posts second-quarter net profit. Rueters.
  10. "Brazil's BM&F, Bovespa announce merger deal". MarketWatch.
  11. The Shanghai Stock Exchange and BM&F Join Forces. RapidSavr.
  12. "Stages In The Evolution of an Exchange". Leo Melamed.