How we are working to develop the Stock Market? Sergio Luiz Cerqueira Silva São Paulo Stock Exchange WASHINGTON, APRIL 15, 2003

n adequate legal framework n proper regulatory and supervisory framework n efficient infra-structure for trading securities n efficient and reliable clearing and settlement systems How to make capital markets viable STRENGTHCAPITAL MARKET ?

Macroeconomic level must provide a healthy environment for the development of a sound microeconomic structure

Major challenges for the Exchanges Cross border trading Issuers and investors are expanding their horizons beyond their home markets New demands from investors Prominent role of institutional investors International cross-listing Cross-listing of companies in the U.S. and also in other markets CHALLENGES FOR EXCHANGE’S COMPETITIVENESS Recover the confidence Investors became much more demanding after the scandals in US stock market

Exchanges in Latin America have an additional challenge: face the problem of low volume and, in consequence, the low scale of operations

Exchanges need to improve n Accessibility – opportunity for a wider range of investors – adequate infra-structure for: n individual investors n institutional investors n Efficiency – minimize fiscal burdens – efficient settlement conditions – local market consolidation n Transparency – enhance Corporate Governance n Liquidity

Several improvements at BOVESPA and other Latin American exchanges have been noticed

BOVESPA provide high level of Accessibility n Electronic Trading System - Mega Bolsa – 2000 terminals widespread through 113 Brokerage Houses n Home-Broker/ After-Market – Internet trading n Connectivity Device for remote access and broader connectivity Promotes retail investors’ trading Possibility of linkage to routing and trading systems

Complementary services Efficiency n Independent clearing house DVP and full services in custody and depository services n Electronic trading for corporate bonds n Developed derivatives market – stock market (BOVESPA) and mercantile and futures (BM&F) n Efficient settlement routine Migration to an electronic trading environment n Sophisticated and safety strategies

Regulatory improvement Transparency and Corporate Governance Corporate Governance Protection to minority Shareholders Disclosure Source: McKinsey Recover market’s confidence

What we still have to do? Infra-structure, regulatory framework for local and cross border investment are completed.

Main achievement for a sustainable capital market n Create a “consensus” about the importance of the capital market: – Adequate Taxes regime – To attract new participants: companies and investors n Enlarge individual’s investment by facilitating the access: – Internet Access – Investment Clubs n Strengthen the domestic investment: – Improve the knowledge about the market mechanisms through Strong educational activities for investors

How we are working to develop the Stock Market? Sergio Luiz Cerqueira Silva São Paulo Stock Exchange WASHINGTON, APRIL 15, 2003