On April 28, 2010, the Brazilian Securities, Commodities and Futures Exchange (BM&FBOVESPA S.A – Bolsa de Valores, Mercadorias e Futuros – BVMF) announced that the first 10 Non-Sponsored Brazilian Depositary Receipts (BDRs) Level I, which represent stocks issued by foreign companies that are traded in Brazil, will be: Apple Inc, Google Inc, Bank of America Corporation, Arcelor Mittal CI A Ads, Goldman Sachs Group Inc, Billiton Limited Common, Wal-Mart Stores Inc., Exxon Mobil Corporation, McDonald's Corp, and Pfizer Inc, all traded at U.S. stock exchanges. The financial institution that will issue the BDRs is Deutsche Bank and trading is scheduled to begin in the second semester of 2010.
Non-Sponsored BDRs Level I are certificates issued by a depository institution in Brazil that represent stocks issued by publicly traded companies, with headquarters overseas, who are not registered in Brazil. Sponsored BDRs are issued by a depository institution that has an agreement with the issuer, a publicly traded company, with headquarters overseas, and can only be Level II and III. Non-Sponsored BDRs can only be Level I and do not involve the foreign company that issues the stocks.
The main characteristics of BDRs Level I are: (a) trading is limited exclusively to the non-organized over-the-counter (OTC) market and only between the persons referred to below in item (d); (b) exception from the need to provide information about the issuing company other than that required by law in its country of origin (in the Portuguese language); (c) exemption from the need to register the company with the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM); and (d) exclusive acquisition by financial institutions and other institutions authorized to function by the Central Bank of Brazil (Banco Central do Brasil – Bacen), by employees of the sponsoring company or its subsidiary, by insurance brokerage firms and savings capitalization corporations, by corporate entities with a net worth of more than R$ 5 million, and by securities portfolios worth more than R$ 500 thousand, carefully administrated by an administrator authorized by the CVM and by employees of the sponsoring company or its subsidiary.
The main characteristics of BDRs Level II are: (a) admission to trading on Stock Exchanges, OTC markets or electronic trading systems; and (b) registration of the company with the CVM. BDRs Level III present the following characteristics: (a) public distribution on the market; (b) admission to trading on the Stock Exchange, the organized OTC market or on the electronic trading system and; (c) registration of the company with CVM.
With the launching of Non-Sponsored BDRs Level I, BVMF seeks to broaden its offer of investment alternatives. For the launch of the first 10 Non-Sponsored BDRs Level I, BVMF authorized Deutsche Bank to issue the certificates due to its important contributions in the development and elaboration of the product. For the next BDRs, BVMF will allow other financial institutions to issue the certificates.
According to CVM regulation, investors authorized to acquire Non-Sponsored BDRs Level I are: financial institutions, investment funds, portfolio managers and consultants previously authorized by CVM. Non-Sponsored BDRs Level I are listed at BVMF's OTC market.
The OTC market is a BVMF-managed asset-trading segment where there is the presence of a self-regulating entity that oversees the trading. However, trading parameters and listing rules are less strict than those of the Stock Exchange Market. On the OTC market, not only brokerage houses play intermediary roles, but also dealers and investment banks. The organized OTC market is traded inside the Mega Bolsa electronic system.
Mega Bolsa is the electronic system where everything happens. It is used by over 20 derivative and stock exchanges throughout the world. Mega Bolsa enables brokerage houses to send their buy or sale orders directly from their offiices in Brazil to BVMF.
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