Exchangeable Derivatives Market in Brazil

Transcription

1 Exchangeable Derivatives Market in Brazil 2012

2 Exchangeable Derivatives Market in Brazil How Itaú BBA is structured 2 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

3 Itaú Unibanco Group Overview Itaú Unibanco is the largest private financial group in Brazil ESA Family Moreira Salles Family (ITSA3, ITSA4) 2 Cia. E. Johnston de Participações Industrial Arm IUPAR Itaú Unibanco Part.S.A. Elekeiroz (Chemicals) Duratex (Construction Supplies / Fixtures) Itaú Unibanco Holding S.A. 1 (ITUB 2, ITUB4, ITUB3) Itautec (IT) Notes: 1 Itaú Unibanco Holding S.A. Free Float 53.77% of Total. 2 Itaúsa: Free Float 65.47% of Total. 2 New York Stock Exchange. Branch Network (Retail) SMEs Credit Card and Consumer Finance Wealth Management & Services Vehicle and Real Estate Financing Insurance Banco Itaú BBA S.A. Corporate Bank Investment Bank Institutional Treasury Financial Arm... and is structured to provide targeted services for each segment of the market. 3 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

4 Itaú BBA Investment Bank Organizational Structure Full product suite to meet client needs supported by a highly experienced and qualified team Candido Bracher CEO Investment Bank Jean-Marc Etlin Investment Banking Fernando Iunes M&A Fixed Income Alexandre Aoude Debt Capital Markets / Syndication / Structured Products Equities & Prime Services Christian Egan Sales & Trading Structuring Exchange Traded Derivatives Equity Capital Markets Distribution Electronic Trading Fixed Income Research Research Sector Coverage Cells Derivatives Prime Services 51 Professionals 139 Professionals 149 Professionals 4 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

5 Itaú BBA s Trading Structure Itaú BBA concentrates proprietary trading in its Institutional Treasury s desk, Wholesale Banking Investment Bank Institutional Treasury Ultra Large Itaú BBA Corretora Banking, External Units and Trading Large Corporate Corporate Fixed Income ALM, Funding Financial Institutions Investment Banking Economic Research while there is no risk taken under Corretora s management 5 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

6 Itaú BBA Corretora Itaú BBA offers a full brokerage related services coverage to all types of clients Products / Departments Main Clients Foreign Institutional Local Institutional Private Retail Cash Equities Sales & Trading Futures Sales & Trading Derivatives Sales & Trading Futures & Derivatives Clearing Stock Lending ECM Distribution Electronic Trading (DMA / Home Broker) Research FX Average Share of Revenues Contribution 50% 25% 25% Cash Equities ECM Futures & Derivatives 40% 35% 25% Foreign Inst. Local Inst. Private & Retail 6 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

7 Futures & Derivatives Services & Products / Execution vs Clearing Futures Execution Futures & Derivatives Clearing Financials (#9 Traders) Commodities (#2 Traders) #Team Interest rates Crystal sugar Sales #3 Exchange rates Stock indices Inflation indices Gold Live cattle Arabica coffee Ethanol Corn Middle & Back Office Clearing Collateral and margin management Distribution and maintenance of accounts for both local and foreign clients #10 Sovereign debt bonds Cross-listing: S&P Soybeans Cross-listing: Soy / Oil (TBA) Technology Specialized in pre/post trading and risk #8 Derivatives Execution Risk Specialized in clearing #2 Fixed Income (#2 Traders) Equities (#2 Traders) Services FRA Index Futures FX Futures Global IDI (Future Interest Index) Interest Exotic Options Swaps Swaptions Treasuries Stock Options (Call/Put) Stock Futures Stock Swaps Stock Forward Back & Middle Office Risk Management Technological Solutions Most processes are automatized Dedicated Team to support BM&F operations In-house developed risk management tools (real-time risk monitors and simulators) available for the clients SAG: flexibility and customized files, FTP, web services for client s systems (customized reports and technological integration) 7 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

8 Futures & Derivatives Sales Approach Conferences & Events Macro Research and Periodic Reports Macrovision Conference Investor Meetings (Ilan Goldfajn) Latam Talking Points Latam Macro Monthly Central Bank Visits Investor Trip Latam Projections Brasilia Trip Private Calls Brazil Projections World Projections Macro Brazil Daily Highlights FI Daily 8 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

9 Exchangeable Derivatives Market in Brazil Market Figures 9 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

10 Stock Exchanges Overview Regarding cash equities, Latin American markets in general are up & running and becoming gradually mature... Market Cap Sep/12 (USD bln) Traded Volume Sep/12 YTD (USD bln) Brazil Mexico Chile Colombia Peru Argentina Brazil Mexico Chile Colombia Peru Argentina # of Domestic Listed Companies 356 # of Futures & Options Contracts Sep/12 YTD (mln) Brazil Mexico Chile Colombia Peru Argentina Source: WFE 10 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information CME BM&FBovespa CBOE NYSE NASDAQ OMX ISE Euronext (US) (US) Single Stocks Interest Rate ETF Index Commodities Currency however, its activity in exchangeable derivatives is still undeveloped.

11 Brazilian Exchangeable Market BM&FBovespa Business Model & Products Portfolio BM&FBovespa works through a broad products platform including a diversified range of assets Securities Financial Derivatives Agricultural Derivatives Other Derivatives OTC markets Equities Brazilian Depositary Receipts Gold Stock indices Crystal sugar Live cattle Forwards Swaps \ Flexible options Investment fund shares Inflation indices Arabica coffee Spot U.S. Dollar Debentures Exchange rates Ethanol Settlement: T+0, T+1, T+2 Stock receipts ETFs Interest rates Sovereign debt bonds Corn Soybeans Federal Government Securities Floating rate bonds Fixed rate bonds Inflation-indexed bonds 11 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

12 Market Figures Equities In the last 12 months the volumes of transactions in BM&FBovespa increased strongly because of High Frequency Trading Ibovespa vs ADTV YoY (R$ Bln) # of Trades Daily Average YoY (#Thd) 53,2 55,3 52,8 67,3 61,3 60, ,6 5,2 4,9 6,0 6,2 7, YTD ADTV R$ bln Ibovespa (points thd) YTD Share by type of investor 2012 YTD Individuals 18% Banks Corporates 8% 2% Foreign Institutional 40% ADTV Equity Derivatives YoY (R$ mln) 6,9% 6,5% 6,5% 7,0% 6,1% 5,5% Local Institutional 32% Equity Options Equity Forwards % / Total Equities Source: BM&F Bovespa 12 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

13 Market Figures Derivatives ADTV by type of underlying asset YoY (#mln contracts) 2,9 2,7 2,5 0,3 0,3 0,2 1,7 0,5 0,5 0,5 1,6 1,5 0,2 0,2 0,2 0,5 0,5 0,4 1,7 1,8 1,9 1,0 0,8 0,8 # of Trades Daily Average YoY (#Thd) 32,5 33,6 21,5 14,9 16,3 38, YTD YTD Interest Rate Currency Index Others Share by Type of Investor 2012 YTD Individuals Corporates 5% 1% Foreign Institutional 26% Banks 35% ADTV by type of derivative YoY (#mln contracts) 2,9 2,7 2,5 0,6 0,5 1,7 0,6 1,6 1,5 0,2 0,3 0,3 1,9 2,2 2,3 1,5 1,3 1,2 Local Institutional 33% YTD Futures Options Source: BM&F Bovespa 13 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

14 Market Figures DMA Total Cash Equities vs High Frequency Trdg (R$ Bi) YoY Total Derivatives vs DMA (# mln contratcs) YoY 8,7% 9,0% 23% 27% 1,3 16% 1,6 1,1 1,1 10% 1,2 4,5% 0,8 0,5 0,4 2% 0,3 0,2 0,3 0,4 0,0 0,0-0,1 Nov-Dec YTD Aug-Dec YTD ADTV HFT (Buy + Sell) ADTV Co-location (Buy + Sell) ADTV DMA BM&F (Buy + Sell) ADTV HFT BM&F (Buy + Sell) % HFT / Bovespa % DMA / BM&F Source: BM&F Bovespa 14 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

15 Exchangeable Derivatives Market in Brazil Market Players & Trading Strategies 15 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

16 Equity & Index Derivatives Market Dynamics Who are the main players? Why invest through Derivatives? Local Institutional Investors (Pension Funds, Mutual Funds and Hedge Funds) Positioning Non-resident Investors Hedging Financial Institutions Corporations Leverage Individuals Liquidity 16 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

17 Trading Strategies Cash & Carry Arbitrage the local yield curve using cash stocks and Index Future Characteristics Premium / Discount occur due to inflows / outflows into the cash market or the future market Arbitrating this premium / discount promotes liquidity and narrow the range that the index future should trade Graph Buy Ibov Cash Fut Fair Value > + Transaction Costs Sell Discount Sell Ibov Future Ibov Cash Buy Ibov Future Ibovespa T Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

18 out-11 nov-11 nov-11 dez-11 dez-11 jan-12 jan-12 jan-12 fev-12 fev-12 mar-12 mar-12 abr-12 abr-12 mai-12 mai-12 jun-12 jun-12 jul-12 jul-12 jul-12 ago-12 ago-12 set-12 set-12 out-12 Trading Strategies Relative Value Relative Value using Index Future Characteristics Market Neutral strategy Investor expects that his holding or portfolio will perform better than the underlying index LONG Chosen Portfolio vs SHORT Index Futures IBOV Portfolio 18 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

19 Collar Short Position Collar Long Position Trading Strategies Equity / Index Collar Limits downside risk of a position at little or no cost, but place a cap on potential upside of an existing position LONG Position BUY a Put and SELL a Call Equity / Index Collar () () () () () () () () () SHORT Position BUY a Call and SELL a Put Equity / Index Collar () () () () () () () () () 19 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

20 Price Expectation Down Price Expectation Up Trading Strategies Call Spread Directional bet with limited downside and limited expected upside BUY a Call with lower strike SELL a Call with higher strike Call Spread () () () () () () () () () BUY a Call with higher strike () () () SELL a Call with lower strike () () () Call spread () () () 20 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

21 Price Expectation Down Price Expectation Up Trading Strategies Put Spread Directional bet with limited downside and limited expected upside BUY a Put with Lower strike SELL a Put with higher strike Put Spread () () () () () () () () () BUY a Put with higher strike SELL a Put with Lower strike Put spread () () () () () () () () () 21 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

22 Collar Short Position Trading Strategies Covered Call Generate additional income from an existing position in price equilibrium or moderately bullish Characteristics Expectation that underlying asset and call strike prices will converge Exercise wouldn t be triggered in the case of a price below strike LONG position SELL a Call with higher strike Covered Call () () () () () () () () () 22 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information

23 Trading Strategies Protective Call / Put Pay a premium to be protect against any price movement against holding position LONG Position BUY a Put Protective Put () () () () () () () () () SHORT Position () () () BUY a Call () () () Protective Call () () () 23 Itaú BBA Exchangeable Derivatives in Brazil 2012 Public Information