COLOMBIA, MOVING TOWARDS A BETTER INVESTMENT ENVIRONMENT. MaríaJoséRamírezBotero Investors and Brokers Vice-President mramirez@bvc.com.

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1 COLOMBIA, MOVING TOWARDS A BETTER INVESTMENT ENVIRONMENT MaríaJoséRamírezBotero Investors and Brokers Vice-President mramirez@bvc.com.co 1

2 BOLSA DE VALORES DE COLOMBIA Introduction Permissible Market Recent developments Projects 2

3 BOLSA DE VALORES DE COLOMBIA BVC was created on 2001 as a fully demutualized company and a for profit exchange Integration of Bogotá Stock Exchange, Medellín Stock Exchange and Occidente Stock Exchange It Runs the cash equities, fixed income, derivatives, and FX markets (SetFx) It is member of the FIAB and the WFE. BVC listed since July 2007 BVC has about 1087 current stockholders Colombia and the BVC are regional leaders in the practice of corporate governance and in the scheme of Self regulation of the capital markets The BVC is stockholder of Deceval (CSD), of the Cámara Central de Riesgo de Contraparte (Central Counterparties for Derivatives) and of the Cámara de Divisas (FX Clearing House) 3

4 BOLSA DE VALORES DE COLOMBIA BVC has been working together with market participants, infrastructure providers and regulators to build a world class technological infrastructure and legal framework - More than US$ 10 million investment Colombian government is committed with the further expansion of the market as a real financing option for Colombian companies 4

5 BOLSA DE VALORES DE COLOMBIA Introduction Permissible Market Recent developments Projects 5

6 PERMISSIBLE MARKET Calpers FTSE Thomas Murray Derivatives market Deep and developed Liquid cash equities market Free and well developed Sufficient broad market liquidity to support sizeable global investment Well-built and stable legal framework Formal stock market regulatory authorities actively monitor market Clear and stable rules for all investors Fair and non-prejudicial treatment of minority shareholders Costs and efficiency Efficient trading mechanism Transaction costs - implicit and explicit costs to be reasonable and competitive 6

7 PERMISSIBLE MARKET Calpers FTSE Thomas Murray Stock lending and short sales International integration Non or simple registration process for foreign investors No objection to or significant restrictions or penalties applied on the repatriation of capital and income Political stability Information availability and transparency Transparency - market depth information / visibility and timely trade reporting process Custody and settlement standards Custody-Sufficient competition to ensure high quality custodian services Custody - Omnibus account facilities available to international investors Settlement - Free delivery available Labor market practices 7

8 BOLSA DE VALORES DE COLOMBIA Introduction Permissible Market Recent developments Projects 8

9 RECENT DEVELOPMENTS Derivatives market Structure DERIVATIVES MARKET Term trades Clearing Settlement Counterparty risk management 9 Derivatives Products MEMBERS CLIENTS Electronic Platform (Nasdaq-OMX) Trading BVC Standarized Derivatives Central Counterparty Futures Clearing House Options (CCP) CCP Post -Trading

10 RECENT DEVELOPMENTS Derivatives market Actual products Treasury 2Y Bond Future Treasury 5Y Bond Future Treasury 10Y Bond Future Underlying Asset Treasury 2Y Notional Bond Treasury 5Y Notional Bond Treasury 10Y Notional Bond Contract Size COP USD Aprox COP USD Aprox COP USD Aprox Maturity Cycle Two nearest quarterly months of the march cycle Two nearest quarterly months of the march cycle Two nearest quarterly months of the march cycle Tick Size / Value Price% USD 5 Aprox Price% USD 5 Aprox Price% USD 5 Aprox Settlement Method Physical settlement Physical settlement Physical settlement Last trading day Wednesday of the 1st week of the delivery month Wednesday of the 1st week of the delivery month Wednesday of the 1st week of the delivery month Maturity Day Friday of the 1st week of the delivery month Friday of the 1st week of the delivery month Friday of the 1st week of the delivery month OTC Block Trade 400 minimum tradable contracts 400 minimum tradable contracts 400 minimum tradable contracts Maximum sweep parameter 360 ticks (TS 36) 600 ticks (TS 60) 720 ticks (TS 72) 10 Trading sessions 8 AM 1 PM Opening Auction Trading Closing Auction Opening Auction Trading Closing Auction Opening Auction Trading Closing Auction

11 RECENT DEVELOPMENTS Derivatives market Coming soon COP / USD ColCap Index Stocks Money Market Interest Rate Underlying Asset Representative Exchange Rate Central Bank Capitalization stock index Individual stocks IBR Interbank lending index rate Settlement Method Cash Settlement Cash Settlement Physical delivery Cash Settlement Contract Size USD COP * index points (USD ) 1000 stocks COP MM USD 1 MM Aprox Maturity Cycle Nearest three months and quarterly cycle up to one year quarterly cycle up to one year quarterly cycle up to one year Nearest three months and quarterly cycle up to one year Quoting Method COP/USD exchange rate Index value Stock price Price: 100 IBR 11 Options roadmap: Launch of european options on futures, FX and stock indexes, and american options on sotcks beginning 2010

12 RECENT DEVELOPMENTS Derivatives market Trading platform NASDAQ OMX X-Stream trading system. Technical specs 1500 orders per second 24 different order types Round trip in less than 0.2 seconds We are now open to electronic direct access (DMA) 12

13 RECENT DEVELOPMENTS Derivatives market Clearing and settlement CENTRAL COUNTERPARTY Individual Clearing Member General Clearing Member Non Clearing Members Prop Trading Clients Prop Trading Clients Prop Trading Clients Individual account base register model. 13

14 RECENT DEVELOPMENTS Derivatives market Clearing and settlement Clearly defined by law that CCP interpose through novation All trades and guaranties in the CCP are covered by the finality principle. The market is protected against Member insolvency. Complete position and guarantee segregation. Risk management is defined at an individual level. The market complies with IOSCO recommendations Foreign investment is feasible through a Foreign Capital Fund. Cash and securities settlement is done directly through the central bank and the central security depository. 14

15 CCP Protection levels CLEARING MEMBERS GUARANTEE STRUCTURE REAL TIME RISK LIMITS MARGIN CALL GUARANTEE FUND CCP CAPITAL 15 Guarantee Fund will be in place in 2010

16 RECENT DEVELOPMENTS Cash equities New trading methodology and technological platform launched on February 9 th 2009 Trading methodology based on international standards Automatic matching with price controls and volatility auctions for liquid shares Auctions for illiquid shares Based on FIAB model World class technological platform Based on X-Stream by NASDAQ-OMX Increases growth potential for Colombian market 24 different types of orders 1500 orders per second Allows DMA and order routing 16

17 RECENT DEVELOPMENTS Legal framework Book building Derivatives Central Counterparty Clearing House (taxes) Exchange Traded Funds Securities intermediation and trading venues Capital controls Stock trading 17

18 RECENT DEVELOPMENTS Market efficiency Enterprise Service Bus (SOA: Service Oriented Architecture) TIBCO Connectivity mechanism FixML Language Exchanges data between BVC, its brokers and other infrastructure providers Order routing Agora 360 Outsourcing back office for market participants Order routing 18

19 BOLSA DE VALORES DE COLOMBIA Introduction Permissible Market Recent developments Projects 19

20 PROJECTS Short selling and securities lending XM electricity derivatives market Advisory Committee for Capital Markets Development Sponsored by Ministry of Trade Its mission is to design a program for Colombian capital market development Stable legal framework for foreign investors Improved legal framework for institutional investors Access for retail investors Access for Colombian companies to capital markets 20

21 Thank You MaríaJoséRamírezBotero Investors and Brokers Vice-President 21