Upload
nguyenthuan
View
216
Download
0
Embed Size (px)
Citation preview
COMISSÃO DO MERCADO DE VALORES MOBILIÁRIOS
2011 ANNUAL REPORT ON THE CMVM’s ACTIVITY
AND THE SECURITIES MARKETS
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
2
CMVM
LIST OF ACRONYMS ECB - European Central Bank.
BdP - Bank of Portugal.
BRIC - Brazil, Russia, India and China.
CAPE - Cyclically-Adjusted Price Earnings.
CBPP - Covered Bond Purchase Programme.
CCC - Co-ordination Committee on Clearing.
CCP - Central counterparties.
CDS - Credit Default Swaps.
EC - European Commission.
CEMA - Committee on Economic and Market Analysis.
ESRB - European Systemic Risk Board .
CESR - Committee of European Securities Regulators.
CFD - Contracts for Difference.
CIF - Committee of Financial Innovation.
CMVM - Portuguese Securities Market Commission.
CNEF - National Committee for Financial Stability.
CNSA - National Council for Audit Supervision.
CNSF - National Council of Financial Supervisors.
CódVM - Securities Code.
CVM - Securities Depository.
MiFID - Markets in Financial Instruments Directive.
EAIG - European Audit Inspection Group.
EBA - European Banking Authority.
EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization.
EECS - European Enforcers Coordination Sessions
EFAMA - European Fund and Asset Management Association.
EFRAG - European Financial Reporting Advisory Group.
EGAOB - European Group of Auditors ' Oversight Bodies.
EIOPA - European Insurance and Occupational Pensions Authority.
EMIR - European Market Infrastructure Regulation.
EPS - Earnings Per Share.
ESRB - European Systemic Risk Board.
ERSE - Energy Services Regulatory Authority.
ESMA - European Securities and Markets Authority.
ETF - Exchange Traded Fund.
ETN - Exchange Traded Note.
ETV - Exchange Traded Vehicle.
U.S. - United States of America.
FASB - Financial Accounting Standards Board.
FCR - Venture Capital Funds.
EFSF - European Financial Stability Facility.
FEI - Special Investment Funds.
FEII - Special Real Estate Investment Funds.
FESE - Federation of European Securities Exchanges.
FII – Real Estate Investment Funds.
FINOVA - Support Fund for Financing Innovation.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
3
CMVM
IMF - International Monetary Fund.
FSB - Financial Stability Board.
FTC - Credit Securitisation Funds.
FUNGEPI - Real Estate Management Funds.
HHI - Herfindahl - Hirschman Index.
IAS - International Accounting Standards.
IASB - International Accounting Standards Board.
ICI - Investment Company Institute.
ICR - Investors in Venture Capital.
IFRIC - IFRS Interpretations Committee.
IFRS - International Financial Reporting Standards.
IGCP - Institute of Public Credit Management.
INE - National Statistics Institute .
IOSCO - International Organization of Securities Commissions.
IRC - Collective Income Tax.
IRS - Income Tax.
LTCM - Long Term Capital Management.
LTRO - Long Term Refinancing Operations.
MEDIP - Special Market for Public Debt.
MIBEL - Iberian Electricity Market.
MSCI - Morgan Stanley Capital International.
ME MSCI - MSCI Emerging Markets.
OECD - Organization for Economic Cooperation and Development.
CIU - Collective Investment Undertakings.
UCITS - Undertakings for Collective Investment in Transferable Securities.
OMIP - Iberian Energy Market Operator (Portuguese pole).
OPA – Take-over Bid.
IPO - Initial Public Offering.
OROC - Order of Chartered Accountants.
OT - Treasury Bonds.
OTC - Over- the- Counter.
PBR - Price -to -Book Ratio.
PER - Price Earnings Ratio.
GDP - Gross Domestic Product.
PFC - Complex Financial Products .
SME - Small and Medium -Size Companies.
NSRF - National Strategic Reference Framework.
RGICSF - Legal Framework of Credit Institutions and Financial Companies.
SAFPRI - Support System Financing Risk and Innovation.
SCR - Corporate Venture Capital .
SCRR - Standing Committee on Risk and Research.
ESA95 - European System of Accounts 95.
ESFS - European System of Financial Supervisors.
SGFII - Management Companies of Real Estate Investment Funds.
SGFIM - Management Companies Mutual Funds.
SGPS - Management Companies Investments.
IBS - Investors Compensation Scheme.
Sivam - Integrated Surveillance of Market Abuse.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
4
CMVM
SNC - Accounting Standards System.
SNM - Multilateral Trading Facilities.
SGFTC - Securitisation Fund Management Companies.
IRR - Internal Rate of Return.
TR - Trade Repositories.
TREM - Report Transaction Exchange Mechanism.
UCITS - Undertakings for Collective Investment in Transferable Securities.
EU - European Union.
EU - Economic and Monetary Union
VaR - Value-at -Risk.
NAV - Net Asset Value of the Funds.
WEO - World Economic Outlook
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
5
CMVM
Index
LIST OF TABLES .......................................................................................................................... 7 LIST OF CHARTS ......................................................................................................................... 9
LIST OF TEXTBOXES ................................................................................................................ 11 1. SECURITIES MARKETS IN 2011 .......................................................................................... 14 1.1. INTERNATIONAL SHARE AND BOND MARKETS..................................................... 14
1.1.1. International Financial Markets ................................................................................. 14 Chart 19 – Trend in the Number of Traded Contracts .................................................................. 51 1.3. INVESTMENT FUNDS ........................................................................................................ 61 2. THE PORTUGUESE SECURITIES MARKET ....................................................................... 74
2.1.1 Profitability and attractiveness of the Securities Market ........................................... 85 2.2 OVERALL TREND IN THE SECURITIES MARKET AS A SOURCE OF
FINANCING ....................................................................................................................... 93 2.2.1 Domestic Market ........................................................................................................ 93 2.2.2 Comparison between the National Market and Other European Markets ............... 103
2.3 SECURITIES ISSUANCE ................................................................................................ 108 2.3.1 Shares ....................................................................................................................... 108
2.3.2 Bonds........................................................................................................................ 109 2.3.3 Complex Financial Products .................................................................................... 113
2.4 SECONDARY MARKET ................................................................................................. 120 2.4.1 Spot Market .............................................................................................................. 120
2.4.2 Spot Market .............................................................................................................. 128 2.4.3 Centralised Securities System .................................................................................. 132 2.4.4 Public Offers ............................................................................................................ 132
2.4.5 Loss of Public Company Status ............................................................................... 138 2.5 FINANCIAL INTERMEDIATION .................................................................................. 138
2.5.1 Reception of Order on behalf of Third-Parties ........................................................ 138 2.5.2 Execution of Orders on behalf of Third Parties ....................................................... 148
2.5.4 Day-Trading ............................................................................................................. 152
2.5.5 Registration and Deposit of Financial Instruments on behalf of Third Parties ........ 154
2.6 ASSET MANAGEMENT ................................................................................................. 154 2.6.1 Individual Portfolio Management on behalf of Third Parties .................................. 154 2.6.2 Undertakings for Collective Investment in Transferable Securities and Special
Investment Funds ..................................................................................................... 157 2.6.3 Holdings in Foreign Collective Investment Schemes Marketed in Portugal ........... 159
2.6.4 Real Estate Investment Funds .................................................................................. 160 2.7 SECURITISATION FUNDS ............................................................................................ 164 2.8 VENTURE CAPITAL ....................................................................................................... 165 3. SUPERVISION AND REGULATION .................................................................................. 169 3.1. INTEGRITY, RELIABILITY AND PROTECTION OF THE SECURITIES MARKET 169
3.1.1 Supervision of the Markets, Management Entities of the Markets and Settlement
and Clearing Systems ............................................................................................... 169
3.1.1.1 Supervision of Trading Structures ...................................................................... 169
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
6
CMVM
3.1.1.2 Supervision of Trading........................................................................................ 170
3.1.2 Supervision of Financial Intermediation .................................................................. 172 3.1.3 Supervision of Asset Management........................................................................... 180 3.1.4 Supervision of External Auditors ............................................................................. 184 3.1.5 Corporate Governance ............................................................................................. 185 3.1.6.2 Submission of Financial Reports ........................................................................ 188
3.1.6.3 Qualifying Holdings ............................................................................................ 190 3.1.6.4 Rebuttable Presumption ...................................................................................... 191 3.1.7 Registration and Authorisation ................................................................................ 191 3.1.7.1 Financial Intermediation ..................................................................................... 191
3.1.7.2 Asset Management .............................................................................................. 193 3.1.7.3 Real Estate Appraisers ........................................................................................ 197 3.1.7.4 External Auditors ................................................................................................ 197 3.1.8 Litigation .................................................................................................................. 199
3.1.9 Investigation and Market Crimes ............................................................................. 203 3.2. PROTECTION OF INVESTORS AS SAVERS AND CONSUMERS OF FINANCIAL
SERVICES ........................................................................................................................ 208
3.2.1 Complaints and Mediation ....................................................................................... 208 3.2.2 Information ............................................................................................................... 212 3.2.3 Information Disclosure System ................................................................................ 214
3.2.4 Supervision of Advertising and Marketing of Products in Banking and Insurance
Sectors ...................................................................................................................... 215
3.2.5 Financial Literacy ..................................................................................................... 219 3.3. COMPETITIVE AND DYNAMIC PORTUGUESE FINANCIAL MARKET ............... 220
3.3.1 Completed Law Reform and Key Implications ....................................................... 220 3.3.2 Consultation Papers .................................................................................................. 229
3.3.3 National Coordination for Supervising and Promoting Financial Stability ............. 230 3.4. INTERNATIONAL ACTIVITY ....................................................................................... 232 3.4.1. NYSE Euronext College of Regulators ............................................................................. 232 3.4.2 LCH.Clearnet ..................................................................................................................... 233
3.4.3 MIBEL ............................................................................................................................... 234 3.4.4 Credit Rating Agencies ...................................................................................................... 235 3.4.5 Participation in International Organisations ...................................................................... 236 3.4.5.1 European Systemic Risk Board ................................................................................ 236
3.4.5.2 IOSCO ...................................................................................................................... 238 3.4.5.3 ESMA ....................................................................................................................... 240 3.4.6 Other International Cooperation ........................................................................................ 245
3.5 FUTURE DEVELOPMENTS ........................................................................................... 246 ANNEXES .................................................................................................................................. 249
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
7
CMVM
LIST OF TABLES
Table 1 – MSCI International Share Indices ........................................................................................... 14 Table 2 – Market Capitalisation of European Share Markets ................................................................. 42 Table 3 – Public Offers for Sale and Initial Public Offers ...................................................................... 44 Table 4 – Trading Volume of Futures and Options Contracts per Region ............................................. 52
Table 5 – Number of Futures and Options Traded Contracts ................................................................. 57 Table 6 – Trading Volume of the Main Futures and Options Contracts per Type of Underlying Asset 59
Table 7 – Ranking of the Ten Key Derivatives Exchanges .................................................................... 60 Table 8 – Trading Volume of Futures and Options on the NYSE Euronext .......................................... 61 Table 9 – Assets under Management for Harmonised and Non-Harmonised CIUs in Europe .............. 62 Table 10 – Assets under Management of Harmonised CIUs in Europe ................................................. 65 Table 11 – Assets under Management of Non-Harmonised CIUs in Europe ......................................... 67
Table 12 – Net Subscription for Harmonised Collective Investment Undertakings per Fund Type in
2011 ................................................................................................................................................. 69
Table 13 – Comparative Weighting of Assets under Management by UCITS ....................................... 73 Table 14 - Average Bid-Ask Spread of Securities Listed on PSI20 ....................................................... 76
Table 15 – Yeild and Risk of Different Types of Financial Instruments ................................................ 85 Table 16 – Share Capital Yield, Dividend Distribution and Retention .................................................. 87 Table 17 – Dividend Distribution as a Percentage of Own capital of the Previous End-Year ............... 88
Table 18 - Variation of Assets per Financial Instrument Type (Total of Economy and Individual) ...... 89
Table 19 - Comparative Weighting of the Securities Market apropos Term Deposits and Savings
Certificates ...................................................................................................................................... 91 Table 20 – Liabilities Variation per Financial Instrument (Total Economy and Non-Financial
Companies) ..................................................................................................................................... 94 Table 21 - Investment Financing Source per Staff Ranking ................................................................... 96
Table 22 - Factors Limiting Investment in 2011 ..................................................................................... 96 Table 23 – Financing Structure of Asset Variation of Listed Companies .............................................. 99 Table 24 – Weighted Trend in Market Capitalisation ........................................................................... 100
Table 25 – Treasury Bonds ................................................................................................................... 112 Table 26 – Maturities and Weighted Rates of Treasury Bonds ............................................................ 113
Table 27 – Complex Financial Products Issued in 2011 ....................................................................... 114 Table 28 – Complex Financial Products Issued with or without Capital and remuneration Guarantee
....................................................................................................................................................... 115 Table 29 – Market Share per Issuer and Supplier of Complex Financial Products .............................. 119 Table 30 – Market Capitalisation .......................................................................................................... 121 Table 31 – Securities Trading in Secondary Markets ........................................................................... 122 Table 32 – Trading Volume of Euronext Lisbon .................................................................................. 123
Table 33 – Liquidity Benchmarks Trend in Shares Listed on Euronext Lisbon ................................... 124 Table 34 - Turnover per Market Sector ................................................................................................ 125 Table 35 – Trading on Futures Contracts.............................................................................................. 128 Table 36 – Takeover Bids ..................................................................................................................... 133 Table 37 – Public Offers for Sale.......................................................................................................... 136
Table 38 – Approval of Publicity Campaigns ....................................................................................... 137 Table 39 - Reception of Orders per Security ........................................................................................ 138
Table 40 – Volume of Orders Received per Derivative ........................................................................ 140 Table 41 – Volume of Orders Received on Behalf of Third Parties and Per Type of Investor ............ 142
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
8
CMVM
Table 42 - Spot Market Trading per Type of Security .......................................................................... 149
Table 43 – Orders Executed per Derivative .......................................................................................... 149 Table 44 - Trading per Type of Market ................................................................................................ 150 Table 45 - Trading for Own Account per Security ............................................................................... 151 Table 46 - Trading for Own Account per Derivative ............................................................................ 152 Table 47 - Aggregate Data on Day-Trading ......................................................................................... 153
Table 48 - Day-Trading Distribution per Channel and Type of Investor ............................................. 153 Table 49 - Type of Security per Holder ................................................................................................ 154 Table 50 - Amount under Management per Type of Entity .................................................................. 155 Table 51 - Amount under Management per Type of Security .............................................................. 156
Table 52 - Investment per Country ....................................................................................................... 157 Table 53 - Aggregate Benchmarks of Foreign UCITS ......................................................................... 160 Table 54 – Portfolio Structure of Real Estate Investment Funds .......................................................... 161 Table 55 - Portfolio Structure of Securitisation Funds ......................................................................... 165
Table 56 – Venture Capital Companies Investment Portfolio .............................................................. 166 Table 57 – Venture Capital Funds Investment Portfolio ...................................................................... 167 Table 58 – Investment Stages of VCF & VCC ..................................................................................... 168
Table 59 - Auditors Reports concerning Securities and Real Estate Investment Funds ....................... 176 Table 60 – Winding up of Investment Funds per Reason ..................................................................... 181 Table 61 - Half-Yearly Information to be published ............................................................................ 190
Table 62 – Offers for Distribution of Closed-End Investment Funds................................................... 195 Table 63 – Securitisation Registration .................................................................................................. 196
Table 64 – Issuance of Securitised Bonds ............................................................................................ 196 Table 65 – Registration of Real Estate Appraisers ............................................................................... 197
Table 66 – Registration of External Auditors ....................................................................................... 198 Table 67 – Registration of Transactions ............................................................................................... 199
Table 68 – Administrative Infraction Proceedings ............................................................................... 200 Table 69 – Cases on Transactions Analyses and Investigation Completed in 2011 ............................. 204 Table 70 – Complaints and Infractions Instituted ................................................................................. 205 Table 71 – Complaints filed per Entity ................................................................................... 208
Table 72 – Total Complaints brought against Financial Intermediaries ............................................... 208 Table 73 - Resolution of Complaints against Financial Intermediaries Concluded in 2011 per Type . 209 Table 74 - Complaints Concluded in 2011 per Type of Financial Instrument ..................................... 211 Table 75 – Number of Announcements per Issuer via the CMVM Website ........................................ 214
Table 76 - Analysis of Advertising Campaigns of Products in Banking and Insurance Sectors
(including Complex Financial Products) ...................................................................................... 216
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
9
CMVM
LIST OF CHARTS
Chart 1 – Gross Domestic Product (GDP) .............................................. Error! Bookmark not defined. Chart 2 – Euro Exchange Rate Trend (End-Year) .................................. Error! Bookmark not defined. Chart 3 – Historic Volatility of the Morgan Stanley Capital International Indices in 2011 ........... Error!
Bookmark not defined. Chart 4 - Trend of the Implied Volatility of Share Indices (30-day) in 2011 ........Error! Bookmark not
defined. Chart 5 – Trend in the Implied Volatility VSTOXX Index Before (Left) and After (Right) the Financial
Crisis ............................................................................................... Error! Bookmark not defined. Chart 6 – Trend in the CDS Spread on 5-year European Public in USD Error! Bookmark not defined. Chart 7 – Correlation Coefficients of the Sovereign CDS Spread Variations apropos the Relevant Main
Primary Component and the iTraxx Europe Senior Financials Variation (2009-2011) ........ Error!
Bookmark not defined. Chart 8 – Correlation Coefficients of the Sovereign CDS Spread Variations apropos the Relevant Main
Primary Component (Left) and the iTraxx Europe Senior Financials Variation (Right) – 1-year
Moving Average ............................................................................. Error! Bookmark not defined. Chart 9 – Correlation between Price Difference Sovereign CDS, the Main Primary Component and the
iTraxx Europe Senior Financials Variation (Portugal and Germany) ...........Error! Bookmark not
defined. Chart 10 - Correlation between the CDS Spread Difference and the 5-year Treasury Bond Yield
Difference ........................................................................................ Error! Bookmark not defined. Chart 11 – Trend in the CDS Base and Loan Spreads ............................ Error! Bookmark not defined.
Chart 12 – Trend in the MSCI Europe and iTraxx Sovx Western Europe Indexes (left) and the
Correlation among the Relevant Differences (right)....................... Error! Bookmark not defined.
Chart 13 - PER in the Major World Indices (End of Period Values) ...... Error! Bookmark not defined. Chart 14 - PER of PSI 20 Companies (10-year Average versus
2011)………………………………..Error! Bookmark not defined.27
Chart 15 – EPS in Major World Indices ................................................. Error! Bookmark not defined. Chart 16 - Dividend Yield in Key World Indices (End of Period Values) ............Error! Bookmark not
defined. Chart 17 – Trend of Short-Term Interest Rate (3-Month) ...................... Error! Bookmark not defined.
Chart 18 - Internal Yield Rate of the 10-Year Public Debt Bond Index . Error! Bookmark not defined. Chart 19 – Annual Variation of Share Indices of European Securities Markets ...Error! Bookmark not
defined. Chart 20 - Share Trading Volume in the EU Securities Markets (Market Share) .Error! Bookmark not
defined. Chart 21 – PER of European Indexes ..................................................... Error! Bookmark not defined. Chart 22 – Trend in the European Index PBR ....................................... Error! Bookmark not defined. Chart 23 – Bond Trading Volume on EU Stock Exchanges (Market Share) ........Error! Bookmark not
defined. Chart 24 - Interest Rate Structure (Yield Curve) of Public Debt Securities in the Eurozone (10-Year)
......................................................................................................... Error! Bookmark not defined. Chart 25 – Trend in the Number of Traded Contracts ............................ Error! Bookmark not defined.
Chart 26 – Net Balance of UCITS and Special Investment Funds in Portugal (2011)……………… 52
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
10
CMVM
Chart 27 – Net Investment Balance of Investment per Type of Fund (2011) ........Error! Bookmark not
defined. Chart 28 – Number of Participants in Investment Funds in Portugal ..... Error! Bookmark not defined. Chart 29 - PSI20 Trend in 2011 ............................................................. Error! Bookmark not defined. Chart 30 – Trend in the Value, Volatility and Transactions of the PSI20 .............Error! Bookmark not
defined. Chart 31 – Trend of the PSI-20 Transaction Costs and the Value of the Main Primary Component
(Standardised Values) ..................................................................... Error! Bookmark not defined. Chart 32 – Average Correlation Coefficient and Annual Average Volatility of the PSI20 Index . Error!
Bookmark not defined. Chart 33 – Value-at-Risk of 10-day PSI20 – Historical Simulation Method ........Error! Bookmark not
defined. Chart 34 – Annual Difference of the PSI20 Company Pricing ............... Error! Bookmark not defined. Chart 35 – PSI20 Company PER (Average of Last 10 years apropos 2011).........Error! Bookmark not
defined. Chart 36 - PER MM5 (left) and Adjusted PER (right) of PSI20 securities (non-financial) ........... Error!
Bookmark not defined. Chart 37 - PER MM5 (left) and Adjusted PER (right) of PSI20 securities (financial) Error! Bookmark
not defined. Chart 38 - PBR PSI20 Companies .......................................................... Error! Bookmark not defined.
Chart 39 - Remuneração Acumulada de Diversas Aplicações Financeiras ...........Error! Bookmark not
defined. Chart 40 – Trend of the Weighting of Different Financial Instruments in the Total Amount of Financial
Assets held by the Total of Economu and by Individuals............... Error! Bookmark not defined.
Chart 41 – Trend in the Net Subscription of UCITS versus Term Bank Deposits and Savings
Certificates ...................................................................................... Error! Bookmark not defined.
Chart 42 - Investment Funding in Portugal ............................................. Error! Bookmark not defined. Chart 43 – Remuneration per Capital Factor in the Non-Financial Sector in Portugal Error! Bookmark
not defined. Chart 44 – Bank Loans (Other Monetary Financial Institutions) to Non-Financial Companies .... Error!
Bookmark not defined. Chart 45 – Short-term Debt and EBITDA Debt Ratios of Non-Financial Companies Error! Bookmark
not defined. Chart 46 – Ratio between Interest Paid and the Total Value of Loaning by Non-Financial Companies
......................................................................................................... Error! Bookmark not defined. Chart 47 - Ratio Trend between the Cash on Hand and the Book Value of Company Assets ....... Error!
Bookmark not defined. Chart 48 – Book Debt to Market Equity Ratio ....................................... Error! Bookmark not defined. Chart 49 – Book Debt to Book Equity Ratio .......................................... Error! Bookmark not defined. Chart 50 – Annual Trend of Interest Coverage (Non-Financial Companies) ........Error! Bookmark not
defined. Chart 51 - Value Trend of Share Issuance .............................................. Error! Bookmark not defined.
Chart 52 - Value Trend of Bond Issuance ............................................... Error! Bookmark not defined. Chart 53 - Bond Issuance per Type ......................................................... Error! Bookmark not defined. Chart 54 - Weighted Average Rate of 1st Coupon and 6-Month Euribor .............Error! Bookmark not
defined. Chart 55 – Monthly Trend of Trading Volume on Secondary Markets .. Error! Bookmark not defined. Chart 56 - Monthly Trading Volume Trend on the MEDIP ................... Error! Bookmark not defined.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
11
CMVM
Chart 57 – Monthly Trading Volume Trend on the PEX ....................... Error! Bookmark not defined.
Chart 58 – Trading Trend in the MIBEL Futures Market....................... Error! Bookmark not defined. Chart 59 – Trading Trends in Several Futures Markets .......................... Error! Bookmark not defined.
Chart 60 – PTEL and SPEL Trend (€/MWh) ......................................... Error! Bookmark not defined. Chart 61 – Types of Investment Recommendations ............................... Error! Bookmark not defined. Chart 62 – Supervision of Financial Information – Number of Adopted Actions .Error! Bookmark not
defined. Chart 63 - Financial Statement Analysis – Number of Issuers ............... Error! Bookmark not defined. Chart 64 – Auditors Opinion ................................................................... Error! Bookmark not defined. Chart 65 - Requests for Information to the CMVM and the appropriate Access Means Used ...... Error!
Bookmark not defined. Chart 66 – Consultation Papers ............................................................... Error! Bookmark not defined.
LIST OF TEXTBOXES
TEXTBOX 1 – ADJUSTED PER USING THE STATE-SPACE MODEL 30 TEXTBOX 2 – TRADING OF SHARES IN THE EURONEXT REGULATED MARKET 143 TEXTBOX 3 – OPEN-END REAL ESTATE INVESTMENT FUNDS 162
TEXTBOX 4 – ON-SITE SUPERVISION AT THE PREMISES OF THE SUPERVISED ENTITIES
173
TEXTBOX 5 – MODELS FOR RISK SUPERVISION 179 TEXTBOX 6 – STREAMLINING PROCEDURES FOR REGISTRATION AT THE CMVM 192
TEXTBOX 7 – COURT DECISIONS IN 2011: ADMINISTRATIVE INFRACTIONS 200 TEXTBOX 8 – COURT JUDGEMENTS IN 2011: CRIMES OF INSIDER TRADING AND
MARKET ABUSE 206 TEXTBOX 9 – INVESTOR PROTECTION IN COMPLEX FINANCIAL PRODUCTS 217 TEXTBOX 10 – EUROPEAN REGULATION OF THE OTC DERIVATIVES MARKET 223
TEXTBOX 11 – TRANSPOSITION OF UCITS IV DIRECTIVE 227 TEXTBOX 12 – EUROPEAN SYSTEMIC RISK BOARD 236 TEXTBOX 13 – IOSCO RESTRUCTURING 238
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
12
CMVM
LIST OF ANNEXED TABLES
Annexed Table 1 – Details of the Analysed Auditors Reports per Type of Financial Intermediary .... 269 Annexed Table 2 – Distribution per Type of Financial Intermediary on the Opinion Issued by Auditors
in the Report Certifying the Safekeeping of Clients Assets .......................................................... 269 Annexed Table 3 – The Distribution of Auditors that Issued Report Certifying the Safekeeping of
Clients Assets ................................................................................................................................ 269 Annexed Table 4 – Issuers Required to Provide Annual Information .................................................. 270 Annexed Table 5 – Entities providing Quarterly & Half-Yearly Financial Statements ....................... 270
Annexed Table 6 – Share Issuance per Public Company per Type of Share ........................................ 270 Annexed Table 7 – Share Issuance per Public Company and per Type of Offer ................................. 271 Annexed Table 8 – Primary Bond Market, per Type of Offer .............................................................. 272 Annexed Table 9 – Share Indices ......................................................................................................... 272 Annexed Table 10 – Share Sector Indices ............................................................................................ 273 Annexed Table 11 – Trading Volume on Euronext Lisbon per Type of Security ................................ 274
Annexed Table 12 – Distribution per Sector of Trading and Market Capitalisation of Shares ............ 275
Annexed Table 13 – Trading Volume on European Union Stock Exchanges (Shares) ....................... 276
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
13
CMVM
Annexed Table 14 – Trading Volume on European Union Stock Exchanges (Bonds) ........................ 277
Annexed Table 15 – Securities Admitted to Trading on Euronext Lisbon ........................................... 278 Annexed Table 16 - Securities De-Listed from Euronext Lisbon ....................................................... 278 Annexed Table 17 - Securities Suspended from Trading ..................................................................... 279 Annexed Table 18 - Trading in Futures Contracts ................................................................................ 281 Annexed Table 19 - Securities Deposited with the Central Securities Depository ............................. 282
Annexed Table 20 - Settlement via the Central Securities Depository ................................................ 283 Annexed Table 21 - Futures Trading on OMIP - Futures Contracts .................................................. 284 Annexed Table 22 - Volume of Orders Received per Reception Channel ......................................... 284 Annexed Table 23 - Order Turnover on the Spot Market on behalf of Third Parties, per Asset Type
....................................................................................................................................................... 285 Annexed Table 24 - Online Brokerage Turnover ............................................................................... 285 Annexed Table 25 - Share Trading Turnover ..................................................................................... 286 Annexed Table 26 - Futures Trading – Market Share .......................................................................... 286
Annexed Table 27 - Day-Trading Weight on Euronext Lisbon ............................................................ 287 Annexed Table 28 - Custodians of Securities ....................................................................................... 288 Annexed Table 29 - Value of UCITS and SIF Assets Managed per Management Entity .................... 289
Annexed Table 30 – UCITS and SIF: Weighting per Type of Asset in the Respective Capitalisation of
Euronext Lisbon ............................................................................................................................ 289 Annexed Table 31 – Products in the Banking and Insurance Sector .................................................... 290
Annexed Table 32 – Marketing of Foreign UCITS in Portugal ........................................................... 290 Annexed Table 33 - Value of Foreign UCITS per Entity in Portugal .................................................. 290
Annexed Table 34 - Value of Assets Managed per Real Estate Investment Fund Management Entity
....................................................................................................................................................... 291
Annexed Table 35 – Aggregate Benchmarks of Securitisation Funds ................................................. 292 Annexed Table 36 – Management Entities of Venture Capital Funds and Venture Capital Companies
....................................................................................................................................................... 293 Annexed Table 37 – Value Managed per Management Entity of Venture Capital Funds and Venture
Capital Companies ........................................................................................................................ 294 Annexed Table 38 – Investment by Venture Capital Companies per Economic Activity Classification
....................................................................................................................................................... 295 Annexed Table 39 – Investment by Venture Capital Funds per Economic Activity Classification ..... 295 Annexed Table 40 – Financial Intermediaries Registered with the CMVM ........................................ 296 Annexed Table 41 – Active Portfolio Management Companies Acting on Behalf of Third Parties .... 296
Annexed Table 42 – Financial Intermediation Activities registered at the CMVM ............................. 298 Annexed Table 43 – Administrative Procedures for Investment Funds in 2011 .................................. 299 Annexed Table 44 – On-Line Reception of Orders .............................................................................. 299
Annexed Table 45 – On-Line Marketing of Investment Funds ............................................................ 300 Annexed Table 46 – Investment Recommendations per Financial Intermediary ................................. 300 Annexed Table 47 – Five Major Issuers Subject to Investment Recommendations ............................ 302 Annexed Table 48 – Number of Communications carried out via the CMVM Website per Issuer – 20
Largest ........................................................................................................................................... 302
Annexed Table 49 – Number of Communications carried out via the CMVM Website per Investment
Fund Management Company – 20 Largest ................................................................................. 303 Annexed Table 50 – Consultation Papers ............................................................................................. 304 Annexed Table 51 – Summary of Major Issues covered in Complaint Proceedings ........................ 304
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
14
CMVM
1. SECURITIES MARKETS IN 2011
1.1. INTERNATIONAL SHARE AND BOND MARKETS
1.1.1. International Financial Markets
Contrariwise to 2010, the world share index, Morgan Stanley Capital International (MSCI) closed
with a negative variation. The 4.7% depreciation apropos the closing value of 2010 was essentially
due on the loss witnessed during the first half of the year (-4.2%) since in the second half, the drop was
less (-0.5%). The first half-year losses were due on the depreciation of the Pacific and Far East
regional indexes registering -11.0% and -30.8%, respectively. Less marked were the North American
(-3.4%) and the European (-1.7%) indexes. The depreciation of the second half-year resulted mainly
in the steep drop in Europe (-9.6%), since in the Pacific region, the loss was a mere -3.0% and the
other regional indexes witnessed a positive development.
Table 1 – MSCI International Share Indices
(Percentage Variation Index)
The Eurozone index was the one to display a steeper downturn in 2011 (-6.9%), albeit the Pacific and
Far East indexes also experienced negative variations.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
15
CMVM
In a long-term perspective, the evolution of the MSCI benchmarks show that apart from North
America, the international markets have further strayed from the levels prior to the financial crisis
following the Lehman Brothers downfall. The North American index is the closest to the pre-crisis
values, since for each invested Euro at end 2007 investors had managed 86 Euro cents in the last four
years. The Eurozone index is the farthest from cutting back on losses since for each invested Euro at
end 2007 investors managed only 59 cents at end 2011.
Given the Euro depreciation apropos the North-American dollar in 2011, the variation of the indexes in
dollars is more negative than that of those in Euro (in Table 1). If one uses the dollar as the calculus,
the Eurozone index devalues by 20.1% (in place of 17.6% showed by the index based on Euro prices).
The world index decreased 7.6% instead of the 4.7%.
The development of the financial markets is allied to the 2011 world economic slow-down which was
witnessed regionally in Europe, Unites States of America (USA) the main emerging countries of BRIC
(Brazil, Russia, India and China) and in Japan. The GDP growth slowed down in all the regions albeit
with a positive growth overall (only Japan’s slowdown expressed a negative GDP growth). The
emerging and developing countries registered a lower slowdown than Europe and the USA. The
overall EU economies registered an increase in the GDP except for Greece, Portugal and Slovenia.
Chart 1 – GDP Growth
Source: Eurostat, IMF, INE
Note: *Estimate; p-provisional
- 8.0%
- 6.0%
- 4.0%
- 2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2007 2008 2009 2010 2011 2012* Portugal Eurozone EU - 27 USA Japan Emerging and Developing Global
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
16
CMVM
The sovereign debt crisis in certain countries of the Eurozone caused monetary concern. Said is one of
the factors explaining the devaluation of the Euro apropos the main international currencies. The
selling pressure that increased in 2011 for public debt instruments in some Eurozone countries is
somewhat explained by the risk perception as regards public finance sustainability and the
macroeconomic reasons of said countries.
Said pressure was felt during critical times particularly in May when international political debates
took place concerning the Second International Financial Plan for Greece by the EU and the IMF, the
Financial Plan for Portugal and due to the instability registered in the Italian and Spanish debt markets
during the months of July and August.
Chart 2 – Euro Exchange Rate Trend (End-Year)
(Index 100 = 2008)
Source: Bloomberg
The end-year price of EUR/USD was 1.296, 3.0% less than in the corresponding time period in 2010.
This end-year price was the lowest since 2006. The Swiss Franc strengthened strongly in comparison
to the main foreign currencies including the Euro. This was due to the strong demand of said currency
amidst instability in the European and North-American markets. The Swiss Central Bank had to
actually take additional measures beginning September in order to restrain its currency appreciation so
as to avoid the negative consequences on the Swiss economy. The average daily value of the
EUR/CHF was 1.2329 in 2011 compared to a 1.381 value of the previous year.
As regards the volatility registered in the financial markets, the historic volatility of Europe and the
Eurozone in particular, registered higher figures than the rest of the other geographic areas, except for
60
70
80
90
100
110
120
130
140
2005 2006 2007 2008 2009 2010 2011
EUR/GBP EUR/USD EUR/CHF EUR/JPY
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
17
CMVM
March which was surpassed by the Pacific region and the Far East. These two regions registered
exceptionally high volatility values during March due to the upheaval caused the earthquake and the
tsunami in Tohoky, Japan. The chart of historic volatility (30 days), this tail event is seen as a peak
while in the 60-day volatility chart, the effect extends through to May.
The volatility peak in the North-American index is reasoned by the political crisis witnessed during
July which is linked to the political negotiation of the nation’s debt limit and consequently in the
decline in credit rating of USA public debt. In the beginning of August, for the first time ever, one of
the key rating agencies classified the USA below triple-A rating as regards public debt. Also in
August, due to market turbulence and aimed at decreasing financial companies’ price volatility, several
European countries banned any type of short selling.
In all, the average volatility (30-day monthly volatility value at end-period) in 2011 was higher than
during the previous year with an increase of 3.0 pp. on the North American index and 4.3. pp. in the
European index. The highest volatility intensified in the Euro zone during 2011.
Chart 3 –Historic Volatility of the Morgan Stanley Capital International Indices in 2011
Source: Bloomberg
Note: No data available for the MSCI Pacific on the 60-day volatility- Index excluded
0%
10%
20%
30%
40%
50%
60%
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
30-day Volatility
World Index North America
Europe Euro-Zone
Pacific BRIC
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
18
CMVM
The 30-day volatility at end period (month)1 that reached the highest levels in September, October and
November crossed the 50% barrier in the Euro area due to the imminent noncompliance by Greece.
Due to the pressure of a macroeconomic setting and an unfavourable public finance situation, the rapid
yield increase in Spanish and Italian public debt markets that began in July/August, also contributed
towards the volatility increase. During these three months, the volatility spread was patent in the Euro
and World zones which denoted that the problems linked to the state debt crisis were far from being
resolved. Similarly to the previous year, 2011 was market by an overall atmosphere of uncertainty as
to world economic perspectives with fears of a double-dip, i.e. of a new economic recession soon after
an economic recovery stage.
The volatility's behaviour in the European EuroStoxx50 and S&P500 Indexes displayed in the
following chart shows the relation between the implied volatility (recorded in the month at hand) and
the historical volatility (recorded in the following month).
Chart 4 - Trend of the Implied Volatility versus Historic Volatility of Eurostoxx50 and S&P500
(30-day) in 2011
Source: Bloomberg and CMVM data.
1 The values shown in the Chart refer to the daily implied volatility on the last day of each month of the year, determined by the standard
deviation pattern of the underlying index variation against daily index variations during the 30 preceding days. The 60-day volatility is
calculated in the same way except for daily variation. Thus, the data does not correspond to the monthly average volatility
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
19
CMVM
Eurostoxx50 implied volatility2 was higher than the historical volatility (real) during nine months (end-
month value), except for July, August and October. Thus, during these months, the market turbulence
linked to the devaluation of the Italian and Spanish state debt was not anticipated by the market since
the implied volatility in the options traded on Eurostoxx50 did not include a volatility level as high as
what really occurred. As to the S&P500, a similar pattern occurred – a higher implied volatility than
the customary historical volatility albeit exception to this did occur at a different time. Said moment
was unsurprisingly the month of August due to the decrease in the USA risk rating down to triple A
and also following the previously mentioned USA debt-ceiling crisis.
Chart 5 - Trend in the Implied Volatility VSTOXX Index Before (Left) and After (Right) the Financial Crisis
Source: STOXX.COM
2 Data refers to the daily implied volatility at the last day of the month via the standard deviation of the variation pattern. The 60-day
volatility is calculated in the same way except for daily variation. Thus, the data does not correspond to the underlying index apropos the
daily variation of the index during the last 30 days.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
20
CMVM
The VSTOXX volatility indexes allow for conclusion as to investor expectation. Prior to the subprime
crisis, the volatility period was consistent with a higher level of uncertainty for longer timeframes.
The occurrence of the financial crisis and the sovereign debt crisis in Europe were linked to a change
in the volatility structure. Thus, at the time of the Lehman Brothers bankruptcy and the Greek, Irish
and Portuguese requests for assistance, the shorter volatility timeframes (one month) were far higher
than the longer timeframes (one to two years) which show a higher level of short-term uncertainty than
at medium term. During the second half of 2011, a similar occurrence took place which was due on
the decrease in investor exposure to Italian and Spanish debt since fears of a possible default by
Greece were present, the drop in the public debt market liquidity and further yet to the sovereign
public debt issuance with shorter maturities (reflecting greater difficulties for financing at the time and
brought on additional difficulties for the rollover of said financing). Albeit reaching levels as high as
those witnessed during the period after the Lehman Brothers’ bankruptcy, the perceived volatility level
by investors also increased drastically during the second half of 2011. Said situation reversed at the
beginning of 2012 indicating a certain degree of foreseeable market composure – a prediction that
obviously requires validation.
Notwithstanding the volatility in the North-American and European markets, the USA and German
public debt witnessed a peak demand with the yields3 of these securities registering historic lows. The
same occurred with the public debt of Switzerland and Australia with historic low securities. Said
was due on the fact that these securities were perceived by investors as a safe haven asset during a
period of relatively high economic uncertainty as 2011 was as a whole. Said made investors, from a
certain point of view, more risk-wary and thereby opting for fixed-return assets albeit lower in
comparative terms.
The volatility increase in the Euro area also reflects an increase in sovereign risk, since the countries
with economic and financial support (Greece and Ireland) extended to include Portugal too. Overall,
the worse than expected behaviour of public finance of a set of EU member states and the United
Kingdom together with the economic growth slowdown of some of these countries underwrote the
increase in European public debt risk. Said risk contributed prominently towards market risk due to
spreading between the debt and share markets.
3 Yield - the income return rate of a bond (implied income return rate)
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
21
CMVM
As with the previous year, in 2011 the CDS market showed yet again abnormal patterns apropos prior
to the financial crisis. Between 2010 and 2011, all countries registered steep increases in the credit
default swap (CDS) spreads, particularly Italy and France, registering increases on 264.7 and 121.3
base points, respectively. The Portuguese CDS five-year US dollar spreads increased 593.1 base
points – the highest variation of the analysed countries4.
Chart 6 – Trend in the CDS Spread on 5-year European Public in USD
Source: Bloomberg; CMVM Data.
There is a strong link between the CDS spread variation of public debt of several countries. During
the period of early 2009 to end 2011, the first main component of the CDS spread variation for the
countries analysed explained 67.5% of the total variation which shows high links between several
countries, i.e. a high risk non-compliance association for several countries.
On the other hand, there also seems to be a strong correlation between the iTraxx Europe Senior
Financials index variation (global index that shows the non-compliance risk by European financial
sector companies) and the sovereign CDS spread variation which clearly reflects the sovereign risk
impact that it has in the financial sector.
4 The chart scales are different due to the CDS price magnitude of the set of two countries (albeit not entirely visible, the CDS prices of
the countries in Southern Europe are higher than those countries in the right side of the chart)
0
1000
2000
3000
4000
5000
6000
01-01-2009 01-01-2010 01-01-2011
Spain Greece Italy
Portugal Ireland
0
50
100
150
200
250
300
350
400
450
01-01-2009 01-01-2010 01-01-2011
Austria Belgium Germany
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
22
CMVM
One is thus able to conclude that the sovereign risk of several Euro countries show the same
behavioural tendency (the correlation of the CDS spread variation with the relevant first main
component is similar in several countries). This may suggest that systemic risk due to non-compliance
by states in this economic area may affect the remainder of the countries.
Chart 7 – Correlation Coefficients of the Sovereign CDS Spread Variations apropos the Relevant Main Primary
Component and the iTraxx Europe Senior Financials Variation (2009-2011)
Source: Bloomberg; Cálculos CMVM.
Note: Greece is not included since as from mid September 2011, CDS have not been traded.
However, the evolution of said correlations was dissimilar among countries (see Chart below). The
correlation for Greece, Ireland and Portugal are lower and have also dropped particularly during the
second half of the year due to the international economic and financial assistance programmes.5
Contrariwise, France witnessed an increase in the correlation as from the second quarter which then
intensified during the summer period.
5 In Greece’s case, the data ended 16 September 2011 since as from said date, CDS Greek Debt CDS were no longer traded.
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1
Au
stri
a
bel
giu
m
Ger
man
y
Spai
n
Fin
lan
d
Fra
nce
Irel
and
Ital
y
Ho
llan
d
Port
ugal
1st Main Component iTraxx Financials
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
23
CMVM
Chart 8 – Correlation Coefficients of the Sovereign CDS Spread Variations apropos the Relevant Main Primary
Component (Left) and the iTraxx Europe Senior Financials Variation (Right) – 1-year Moving Average
Source: Bloomberg; CMVM data.
Nota: Correlations calculated by daily moving averages for one year.
The evolution of non-compliance risk in the financial sector exemplifies the contagious effect of the
sovereign debt crisis. In early 2010, the correlation between the sovereign CDS price variation and the
iTraxx Europe Senior Financials index was minimum in all the cases and increased gradually
particularly during the second quarter after the request for assistance by Greece. In 2011 after the
summer period, said correlation increased again in all the countries due to the high turbulence in the
Spanish and Italian markets. In both cases, the contribution given by the Greek and Portuguese
international requests for assistance, are clearly evident.
Said spreadable effect actually extended to the major countries in the Euro zone such as Germany.
The German public debt kept relatively immune at the time of the international requests for assistance
but said was not witnessed in the financial sector.
0,45
0,55
0,65
0,75
0,85
0,95
29
-01
-20
10
29
-03
-20
10
29
-05
-20
10
29
-07
-20
10
29
-09
-20
10
29
-11
-20
10
29
-01
-20
11
29
-03
-20
11
29
-05
-20
11
29
-07
-20
11
29
-09
-20
11
29
-11
-20
11
29
-01
-20
12
29
-03
-20
12
Germany Spain France Greece
Ireland Italy Portugal
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
29-01-2010 29-01-2011 29-01-2012
Germany Spain France
Greece Ireland Italy
Portugal
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
24
CMVM
Chart 9 - Correlation between Price Difference Sovereign CDS, the Main Primary Component and the iTraxx
Europe Senior Financials Variation (Portugal and Germany)
Source: Bloomberg; CMVM data.
Note: Correlations calculated by daily moving averages for one year.
As regards the correlation among the CDS spreads and the 5-year Treasury bond yields, some worthy
changes also took place. Until end 2009, said correlation (among the different series, since the original
series are variable) was low and even negative in some cases. During the last quarter of 2009, the first
signs of worry were evident in the financial markets due to the Greek situation and a dramatic increase
occurred in the correlation between the two series for Greece as well as for Portugal, Spain and Italy.
A different situation occurred in France and Germany. Germany showed a drop in the series
(differentiated) correlation for CDS spreads and 5-year Treasury bond yields. The risk spreads of
German debt did not increase as much as the Euro countries. Simultaneously a drop in risk-free
interest rates occurred in the Euro area due to the ECB’s intervention which justifies the negative
correlation among the two series. France’s correlation between the two series followed close to
Germany until the last quarter of the year when the situation back-tracked following the drop rating
outlook for France which came to be in early 2012 when it lost its triple A rating.
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
jan
-10
mar
-10
mai
-10
jul-
10
set-
10
no
v-1
0
jan
-11
mar
-11
mai
-11
jul-
11
set-
11
no
v-1
1
jan
-12
mar
-12
Germany (CDS vs 1st Factor)Portugal (CDS vs 1st Factor)Germany (CDS vs iTraxx Fin. [Sub])Portugal (CDS vs iTraxx Fin. [Sub])
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
25
CMVM
Chart 10 – Correlation between the CDS Price and the 5-Year Treasury Bond Yield Variations
Source: Bloomberg and CMVM data
Note: Correlation using daily moving averages for a year
The ‘base’ reflects the difference between the CDS contract sprices and the bond credit spread. In
theory, if markets are efficient and default-risk free, transaction costs and liquidity asymmetries
between the two markets, the base value will be close to zero since the CDS prices and the credit
spreads show a credit risk price of the reference entity. With the exception of Greece and Portugal, the
CDS sovereign contract base kept positive during the last four years, varying from zero to two
percentage points which show that the default risk of CDS prices, their liquidity and transactions costs
contribute to the fact that CDS prices are a tad higher than treasury bond credit spreads.
-1
-0,8
-0,6
-0,4
-0,2
0
0,2
0,4
0,6
0,8
1D
ec-0
8
Feb
-09
Ap
r-0
9
Jun
-09
Au
g-0
9
Oct
-09
Dec
-09
Feb
-10
Ap
r-1
0
Jun
-10
Au
g-1
0
Oct
-10
Dec
-10
Feb
-11
Ap
r-1
1
Jun
-11
Au
g-1
1
Oct
-11
Dec
-11
Feb
-12
Belgium France Germany Greece
Italy Portugal Spain
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
26
CMVM
Chart 11 – Trend in CDS Base and Credit Spreads
Source: Bloomberg and CMVM data
In Portugal’s case, the base showed negative value as from the second quarter of 2011which coincided
with the implementation of the EU and IMF financial and economic assistance programme. During
the last quarter of 2011, the base was -3 percentage points when the remainder of the countries showed
values betwenn 0.8 and 1.9 percentage points. Said is due of the significant drop in liquidity of the
special public debt market (MEDIP) and to the increase of the relevant costs during a period wherein
the CDS market was growing more important. As to Greece, the CDS contract base registered its
lowest value in the first quarter of 2011 (negative and lower than one percentage point) and increased
considerably during the year when a possible restricting of sovereign debt in this country was under
discussion.
Several measures were taken internationally in order to solve the Euro debt crisis. These included
additional financial support for Greece and financial assistance programme for Portugal by the EU and
the IMF, financial stability tools and measures related to the economic governance of the European
Union.
-3,00
-2,00
-1,00
0,00
1,00
2,00
3,00
4,00
20
08
1º
T
20
08
2º
T
20
08
3º
T
20
08
4º
T
20
09
1º
T
20
09
2º
T
20
09
3º
T
20
09
4º
T
20
10
1º
T
20
10
2º
T
20
10
3º
T
20
10
4º
T
20
11
1º
T
20
11
2º
T
20
11
3º
T
20
11
4º
T
Pe
rce
nta
ge P
oin
ts Belgium
France
Germany
Greece
Italy
Portugal
Spain
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
27
CMVM
Additional measures included ECB action aimed at stabilising public debt markets in certain Member-
States and increasing the liquidity of the financial system. Financial institutions in the Euro zone were
faced with difficulties in obtaining liquidity and concurrently with adopting rules for improving
solvency via increasing own capital. The complex relation between financial problems in certain
European economies and the frailty of the banking systems (confirmed by numerous support assistance
programmes for States) explain the set of adopted measures.
Besides the effect from the non-compliance risk of the financial sector and considering the share
market at this time, the sovereign debt crisis did have a certain degree of impact on the price at which
the shares were traded overall of European listed companies. Since January 2009 one has witnessed a
back-track trend in the MSCI Europe and iTraxx Sovx Western Europe indices. These two indices
demonstrate a -0.688 correlation for the timeframe as from the beginning of 2009 and the end of 2011.
The profitability correlation of the two indices changed significantly from the first to the second half of
2011. Said period reached the highest value of the last three years which indicated a higher link
between the shares and sovereign debt markets during a period of high uncertainty in Europe.
Chart 12 – Trend in the MSCI Europe and iTraxx Sovx Western Europe (left) and Correlation between the
Relevant Variations (right)
Source: Bloomberg and CMVM data
0
100
200
300
400
500
600
700
0
200
400
600
800
1000
iTra
xx S
ov
WE
MS
CI
Eu
rop
e
MSCI Europe iTraxx Sov WE 1st H
2009
2nd H
2009
1st H
2010
2nd H
2010
1st H
2011
2nd H
2011
-0,9
-0,8
-0,7
-0,6
-0,5
-0,4
-0,3
-0,2
-0,1
0
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
28
CMVM
As to the weighted prices practiced in the shares market, the PER of the main world indices (S&P500,
FTSE100, MSCI ME and Nikkei225) maintained the descent trend witnessed during the previous year.
Between the last day of 2010 and that of 2011, the PER of the FTSE100 and the Nikkei225 dropped
27% and 20%, respectively. The PER drop was not the evident in the USA and in the emerging
markets.
The steepest negative variations of the PER were seen in the third quarter and were mostly due to the
drop in share prices of the relevant indices (negative variations over two number, between 11% and
14%) since the results (per share) of the companies during the third quarter showed a certain degree of
stability (variations between -4% and 3%).
Chart 13 - PER in the Major World Indices (End of Period Values)
The trend observed during the entire year shows a decrease in the deadline that is required for
recovering investment in the analysed indices’ shares which improves investment outlook in the those
share markets. Despite the world and European economy slowdown in 2011, companies registered
positive results which contributed towards the PER decrease.
Chart 14 illustrated the average 2011 PER trend apropos the average PER for the last decade. The
indices’ annual PER are lower than the relevant historic average. In other words, in relative terms and
in comparison to previous years, the values of this class of assets are lower than during the last 10
years.
Source : Bloomberg
0
5
10
15
20
25
30
35
2009 2010 Mar-11 Jun-11 Sept-11 Dec-11
PER
S&P 500 NASDAQ FTSE 100 NIKKEI 225 MSCI ME
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
29
CMVM
Chart 14 – Average 2011 PER versus the average PER during the last 10 Years (End-period Values)
Source: Bloomberg (CMVM data)
The high difference in the values of the average PER for 2011 (23) and the last ten years (52)
registered on Nasdaq is greatly due to the events of the beginning of the millennium at the time of the
corporate technology crisis.6 The distance between the recent PER and the average PER of the last
years narrowed in 2011 since the effect that the crisis had on the first years of the decade (in 2001,
2002 and the major part of 2003 and the EPS, were negative) fades and this decreases the historic
average PER value. Similarly to Nasdaq, Nikkei225 also registered a rather high difference between
the year PER (18) and the historical PER (63), albeit for difference reasons. In said case, the PER
value in 2011 for the Japanese market suggests that after several years of ongoing depreciation of
market prices and economy inertia that limited corporate profit (in some cases with notorious results in
the high 10-year historical PER value), the value for said benchmark returned to a certain degree or
normalcy.
6 PER ratio is the ratio of the share price and the results thereof, when the results are negative and the ratio is not calculated. Therefore,
the PER was not calculated for NASDAQ in 2001, 2002 and part of 2003. The same occurred for Nikkei during part of 2009 and 2010.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
10
20
30
40
50
60
70
S&
P 5
00
NA
SD
AQ
FT
SE
100
NIK
KE
I 2
25
MS
CI
ME
PE
R
Last 10 years (a) Average 2011 (b) (b)/(a)
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
30
CMVM
TEXTBOX 1 – ADJUSTED PER USING THE STATE-SPACE MODEL
The price-earnings ratio adjusted to the (PER*) cycle, known in financial literature as Cyclically
Adjusted Price-Earnings (CAPE), is obtained by dividing the stock price of a particular company and
the earnings per share adjusted to the economic cycle, namely:
where is the price of each share at the time of t and of the adjusted results. One of the methods
proposed in the literature, and probably the best known for making results adjustment is calculating
moving averages for each year of the results of the previous ten years.7 This method, although simple
and practical, does have certain drawbacks.
Above all, it is hard to picture that for the calculation of adjusted results of the current period, results
attained ten years ago have the same importance as the immediately preceding year. What one aims to
obtain by adjusting the results adjustment to the economic cycle is to isolate certain information from
the series of results in order to remove short-term variability and obtains a series with a trend that is
less volatile, evener and more consistent with the principles of the results.
An alternative to moving averages is the use an unobservable components model (also called state-
space model) for the breakdown of the results into two components: tendency (or long-term
outcomes/balance), and cycle (representing the excess apropos the equilibrium value, related to
cyclical developments). According to the traditional trend-cycle decomposition state-space model8, the
results (logarithm) at t may be broken down to reflect a long-term trend (adjusted earnings)
and a component that reflects a short-term trend (or cyclical) :-
7 Introduced by Campbell, J. Y. e Shiller, R. J. (1988), Stock Prices, Earnings, and Expected Dividends, The Journal of Finance, Vol. 43
(3), pp. 661-676. 8 Refer to Watson, M. W. (1986), Univariate detrending methods with stochastic trends, Journal of Monetary Economics, Vol. 18 (1),
pp. 49-75; Clark, P. K. (1987), The Cyclical Component of U.S. Economic Activity, Vol. 102 (4), pp. 797-814; Campbell, J. Y., e
Mankiw, N. G. (1987), Permanent and transitory components in macroeconomic fluctuations, American Economic Review, Vol. 77 (2),
pp. 111-117; Montagné, F. (2007), Are Stockmarkets overvalued?, Trésor Economics nº 22; e Basistha, A e Kurov, A. (2010), Estimating
earnings trend using unobserved components framework, Economics Letters, Vol. 107 (1), pp. 55-57.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
31
CMVM
Since e are unobservable, it is necessary to specify a law of motion that describes its behavior.
It is assumed that the results adjusted at t depend on the results adjusted at t-1 as well as its growth
rate:
where represents the growth rate of the adjusted earnings.
Similarly, it is assumed that the growth rate follows a random path, as so:
where is a residue which is seen as normally distributed with 0 average and a .
It is assumed also that the short-term component (cyclic) of the results follows a first-order
autoregressive stationery process and follows a first order stationary:
where is a residue which is seen as normally distributed with 0 average and a .
If , then is the percentage deviation of the results compared to its trend.
The model may be redefined by the following state-space format:
Measurement Equation: [ ] [
]
Transition Equation: [
] [
] [
] [
]
Distribution of Innovations: (
) ([ ] [
])
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
32
CMVM
The parameters estimate {
} is performed by Maximum Likelihood, resorting to the Kalman
Filter for forecasting the unobservable components [ ] , as well as the construction of the
likelihood function (via decomposition of the forecast error) for maximization.9
The model was applied to PSI 20 earnings and to certain world share indices (DAX, CAC40, IBEX 35,
FTSE 100 and S & P500). For the purpose of greater forecasting efficiency the maximum possible
historic series were used despite the fact that resulting in inconsistencies in the beginning dates of the
data series.
The estimate was performed with monthly data (end of month) for each of the indices and the results
are shown in the chart that follows. It also shows the results of using five-year moving averages10 for
comparison purposes.
The results indicate that the adjusted PER via the moving average shows a higher variability than the
adjusted PER via the state-space model. In order to test whether the largest amplitude of the results
(former case) is due to the use of only five years on the moving average calculation, the adjusted PER
of each index was recalculated using a moving average of the last ten years. The unreported results
show a reduction in the variability and amplitude of the PER and there is a better comparison with the
adjusted PER by using the state-space model. Albeit, there is a significant drop in the number of
adjusted PER observations for the PSI20, DAX and CAC40 since it was necessary to use additional
observations for calculating the ten-year moving average.
9 See Hamilton, J. (1994), Time Series Analysis, Princeton University Press for a thorough description of the Kalman filter. In the
estimation of the model the parameter was calibrated so as to ensure an appropriate adjustment level of the earnings series. The
adjusted earnings series that was used is obtained by the used corresponds to the adjusted results obtained by the Kalman smoother
recursions i.e. all the information in the sample was used. 10
Five-year moving averages are used instead of 10.year as is common procedure due to the minute size of certain historic time series.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
33
CMVM
Adjusted PER via the Moving Average and the State-Space Model
Overall, based on the two methods, the PER’s evolution based is consistent. Note the significant
correction of the valuation of the equity markets over the years of 2007 and 2008, following the
financial crisis. The year 2009 was characterized by a reversal of the downward trend, with the
exception of the FTSE100 PER adjusted via the model state space. The sovereign debt crisis in Europe
started in 2010 and worsened during the year resulting in a new, albeit less intense, drop in the
adjusted PER, with the PER dropping below its historical average that showed some market
underrating. In the case of the Portuguese market, the correction was more pronounced since the
adjusted PER of PSI 20 showed in 2006 and 2007, the highest among the analysed markets, something
did not occur by end 2011.
Except for the emerging markets index, the earnings per share (EPS) increased during the year. The
FTSE100 registered the highest growth apropos the share gains (28.4%) followed by S&P500 and
NASDAQ (circa 10% each). The EPS of the Japanese market gained a mere 2.4% which may be
explained by the specific circumstance surrounding the earthquake that hit the country causing huge
economic damage. Only the MSCI Emerging Markets (MSCI EM) registered a negative variation (-
2.7%) in the EPS.
Within a context of economic growth like the one experienced in the main emerging countries in 2011
(namely the BRIC that registered growths of 2.9% (Brazil), 4.1.% (Russia), 7.4% (India) and 9.2%
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
34
CMVM
(China) 11, one would expect growth in the corporate results of these countries and consequently a
positive variation in the EPS value. Such was not the case though – a possible explanation would be
that of an increase in the corporate capital base instead of debt usage which led to the reduction of
gains per share.
Chart 15 – EPS in the Main World Indices (Index 100=2009)
The other price benchmark for shares is the dividend yield derived from the ratio between the dividend
and share price. Said benchmark may increase due to the augment of the dividends or via the drop in
prices. In 2011, the dividend yields increased overall due mainly to the price variation in the indexes
between end 2010 and end 2011 which was null (S&P500) or negative (MSCI ME, -20,4%,
Nikkei225, -17,3%, FTSE100, -5,6%, e Nasdaq, -1,8%). The FTSE100 showed the highed dividend
yield and finished the year with 4% - an additional pp. apropos 2010.
11
IMF - World Economic Outlook (WEO) database, January 2012.
-300
-200
-100
0
100
200
300
400
500
2009 2010 mar-11 jun-11 set-11 dez-11
EP
S
S&P 500 NASDAQ FTSE 100
NIKKEI 225 MIB 30 DAX 40
CAC 40 IBEX 35 PSI 20
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
35
CMVM
Chart 16 - Dividend Yield in the Main World Indices (Values at the End Period)
The debt market is an alternative path for company financing. The interest rates in interbanking
markets limit the remuneration rates of the instruments issued by companies that finance themselves in
the debt market. The short-term interest rates (three months) had different types of growths during the
year, albeit demonstrating lower levels at the end of the year. In the regions shown on the chart that
follows, Switzerland had a lower rate at the end of 2011 which is certainly due on the monetary policy
adopted by the Central Bank of Switzerland which inclined to position 3-month LIBOR at an interval
between 0% and 0.25%.
Source : Bloomberg.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2009 2010 Mar-11 Jun-11 Sept-11 Dec-11
Div
iden
d Y
ield
S&P500 NASDAQ FTSE100 NIKKEI225 MSCI ME
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
36
CMVM
Chart 17– Trend of Short-Term Interest Rates (3-month)
Source Bloomberg.
Note: End of Period Values. LIBOR Rates as per the British Bankers Association.
The internal yield rate of public debt in major developed economies recorded decreases compared to
the previous year’s figures. The U.S. and UK were the countries whose rates of return of public debt
declined most (decrease of 1.42 percentage points each), followed by Germany (decrease of 1.13
percentage points). The resource investment in debt advanced countries worked alternatively perceived
as safer in an environment of relatively high volatility in international equity markets and the debt
markets of some countries in the Euro zone hit by budgetary and financial crises more acute. The
demand for German government bonds was so high that the internal rate of return (IYR) of shorter-
term debt, three and six months, came to losses in December.
0%
1%
2%
3%
4%
5%
6%
7%
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
Mar-
11
Ju
n-1
1
Sep
t-1
1
Dec
-11
Euro USD GBP JPY CHF
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
37
CMVM
Chart 18 – Internal Yield Rate of the 10-Year Public Debt Bond Index
Source: Bloomberg.
The Euro-zone monetary policy underwent to distinct stages during the year. During the first half
(roughly) emphasis was given to the combat against inflationary pressures that were felt in several
European countries, which led to two increases in fixed interest rate for the main refinancing
operations12
by the ECB - began the year at 1% and ended the first-half at 1.5%. During the second
stage as from mid-July, due to symptoms of slowdown in the economic activity in Europe, the ECB’s
intervention was directed at increasing liquidity and held two drops in the mentioned primary rate,
ending the year at 1%. The rate of return on deposits began and ended the year at 0.25%, after reaching
a peak of 0.75% in mid-July, at which time it gave the inflection of the monetary policy stance. The
marginal lending rate reflected the described policies, ending the year at 1.75%.
Besides the usual liquidity management operations, the ECB used special measures for monetary
policy, called non-standard measures, which to date had not been taken, namely: i) the granting of
loans without limit allocation of funds and for a period of three years (before the deadline was one
year) to financial institutions of the Economic and Monetary Union (EMU) - Long-Term Refinancing
Operations (LTRO) for three years, beginning in December - which aimed to allow access funds by
institutions, aiming in particular at those faced with liquidity problems and financing in general, ii)
under the policy of collateral accepted by the ECB as collateral in Eurosystem credit operations, the
range was extended to include assets accepted as collateral to include credit portfolios of clients (and
mortgage companies) by fulfilling requirements that ensure a preset standard quality that might be
12
Main Refinancing Operations (MRO)
0%
1%
2%
3%
4%
5%
mar-10 jun-10 set-10 dez-10 mar-11 jun-11 set-11 dez-11
Euro-zone USA United Kingdom Japan
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
38
CMVM
"reduced" directly in refinancing operations13
, iii) a new stage of the program of purchases of covered
bonds was launched in November (including bonds), the Covered Bond Purchase Programme (CBPP)
2 with a limit of 40 million Euros, to run in the primary or secondary market, until October 2012, to
facilitate the conditions of access to finance for financial institutions and businesses, iv) the program to
purchase securities in the secondary market was maintained (Securities Market Programme) which
allowed the purchase by the ECB's of government debt instruments of countries that were subject to
strong selling pressure, with the aim of containing the disparities between sovereign CDS and yields
within the Euro area, promoting financial stability. In late 2011, the Eurosystem had acquired bonds
under the program with a total amount paid of circa 211 400 million.
1.1.2. Share and Bond Markets in the European Union
Share Markets
Apart from Iceland and Ireland that registered slightly positive variations in the indices, none of the
other major European market indices was considered in 2011. The most significant losses were
registered in Cyprus and Greece with -72% and -60%, respectively. Said were followed by the most
penalised markets with respect to price drops as with the Austrian market (-35%) and those countries
that were most affected by the sovereign debt crisis, like Portugal and Italy. The market indices of
Lithuania, Luxembourg, Finland and the Czech Republic registered price variations similar to the
Portuguese and Italian indices. Even those markets whose economies had a positive performance in
2011 both in terms of product growth and in the efforts to consolidate public finance, witnessed slight
depreciation in the relevant indices.
The price decrease in the share markets was largely due to the turbulence of the sovereign debt crisis in
several Euro countries. The effects therefrom spread not only to European markets but to international
markets too. The market depreciation was mainly motivated by the price drop in the financial and
construction and materials sector companies.
13 The credits must have an acceptable credit rating to investment level high (but not necessarily the highest rating), cannot be entered in
default, cannot result from transactions structuring and syndication of loans and credits cannot be leveraged.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
39
CMVM
Investors increased their risk wariness as to share public debt markets in countries with lower credit
quality standing and opted to invest in treasury bills of issuers of certain economies considered as ‘safe
havens’ (Germany, United Kingdom, Switzerland, Australia and the EUA despite its high government
deficit and debt), as well as in assets that were less linked to the share markets.
Chart 19 – Annual Variation of Share Indices of European Securities Markets
(2009 a 2011)
Source Bloomberg.
A decrease in liquidity was also in tune with falling prices. The value of shares traded on the main
markets of 27 countries of the European Union fell 3.1% apropos the previous year. Collectively, the
Group LSE (London Stock Exchange and Borsa Italiana) continued to be the platform with the largest
value traded in all 27 EU equity markets (share 30.6%). However, this value was 3.0% less than in
2010.
-80
-60
-40
-20
0
20
40
60
80
Ger
man
y
Au
stria
Belg
ium
Bu
lga
ria
Cyp
rus
Den
ma
rk
Slo
va
kia
Slo
ven
ia
Sp
ain
Est
on
ia
Fin
lan
d
Fra
nce
Gre
ece
Holl
an
d
Hu
nga
ry
Irel
an
d
Icel
an
d
Ita
ly
Leto
nia
Lit
hu
an
ia
Lu
xem
bou
rg
Malt
a
Norw
ay
Pola
nd
Portu
ga
l
Un
ited
Kin
gd
om
Czec
h R
epu
bli
c
Rom
an
ia
Sw
ed
en
Sw
itzer
lan
d
Per
cen
tage
2009 2010 2011
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
40
CMVM
The NYSE Euronext, the second largest group of European trading platform markets, showed 24.9%
of the value traded in equities and displayed a smaller decrease in liquidity (-0.1%). The Nasdaq OMX,
formed by six stock markets in the Nordic region of Europe14
, is the third largest group of European
equity markets and was responsible for 9.7% of the value traded in 2011 (+1.0% during the previous
year).
The CEESEG15
, another group comprised of several European trading platforms, recorded only 0.9%
of the traded value and a reduction of liquidity of 18.2% during 2010. Together, these four groups
totalled a market share of almost two-thirds of the value of shares traded in the 27 EU Member States.
Individually, the top five European markets - UK, Germany, France, Spain and Italy - totaled 79.9% of
the value traded in shares in 2011, a percentage that has remained unchanged apropos 2010. On
Euronext Lisbon, the value traded in shares declined 29.1% and represented only 0.4% of total traded
volume in 2011 in the share markets in the 27 countries of the EU (0.6% in 2010). As with previous
years, the trading conducted outside the central order book (OTC) on PSI 20 index companies was
quite significant in 2011. According to Thomson Reuters, the value of the shares traded on PSI 20
shares on Euronext Lisbon, accounted for only 47.1% (33.600 billion Euro) of the total traded amount
on these shares in 2011 (71.4 billion euros). On the Markit BOAT, OTC platform for transaction
reporting that allows MTFs and investment companies to fulfill transparency rules imposed by
Markets in Financial Instruments Directive (MiFID), 38.1% (27.2 billion euro) was registered of the
total shares traded on the PSI 20 in 2011.
14The NASDAQ OMX is formed by a set of seven different stock markets, Helsinki (Finland), Copenhagen (Denmark), Stockholm
(Sweden), Iceland (Iceland), Tallinn (Estonia), Riga (Latvia) and Vilnius (Lithuania). However, Iceland is integrated in the 27-European
markets, and therefore is not considered in the analysis. 15 The CEE Stock Exchange Group is formed by a set of exchanges from four EU countries: Austria, Slovenia, Hungary and the Czech
Republic.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
41
CMVM
Chart 20 - Share Trading Volume in the EU Securities Markets (Market Share)
Sources: FESE, NYSE Euronext, NASDAQ OMX and Borsa Italiana.
Note: "Others" includes the amount transacted in the 11 principal exchanges in the EU (Ireland, Romenia, Slovenia, Cyprus, Bulgaria,
Estonia, Lithuania, Luxembourg, Slovakia, Latvia and Malta).
The market value of the companies admitted to trading (market capitalisation) in the exchanges of the
27 member states fell 8.0%. However, in five of these markets there was an increase in market
capitalisation in part as a result of the listing of new companies as a result of the privatisations (via
IPOs).
-50,0
-40,0
-30,0
-20,0
-10,0
0,0
10,0
20,0
30,0
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
18,0
20,0
22,0
LS
E (
UK
)
DB
& B
S (
Ger
man
y)
NY
X P
aris
(F
rance
)
BM
E (
Spai
n)
Bors
a It
alia
na
(Ita
ly)
NY
X A
mst
erdam
(H
oll
and)
NA
SD
AQ
OM
X -
Sto
ckho
lm…
NA
SD
AQ
OM
X -
Hel
sink
i…
NA
SD
AQ
OM
X -
Co
pen
hag
en…
NY
X B
rux
elas
(B
elg
ium
)
WS
E (
Po
land
)
CE
ES
EG
- V
ienn
a (A
ust
ria)
NY
X L
isb
oa
(Po
rtug
al)
AE
(G
reec
e)
CE
ES
EG
- P
rag
ue
(Cze
ch R
ep.)
CE
ES
EG
- B
udap
est
(Hu
ngar
y)
Oth
er
Va
ria
tio
n o
f th
e A
nn
ua
l T
urn
ov
er
Ma
rket
Sh
are
2010 Share 2011 Share
% %
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
42
CMVM
Amid those countries whose exchanges have a higher shareholder capitalisation - UK, Germany,
France and Spain - only the London Stock Exchange registered a positive growth apropos the previous
year, contributed by the fact that there were public offerings of companies (new and others already
admitted to the market) in the amount of 14.1 billion Euro. The French and German market places, the
second and third largest, respectively, in Europe in terms of shareholder capitalisation, registered a
decline for this benchmark in the double-digit rate (-16.1% and
-14.4%, respectively).
In 2011, market capitalisation was more pronounced in the Greek equity market. Despite the fact that
there were public offerings of companies admitted to the market (worth 3.3 billion euros), the
shareholder capitalisation of the Greek market place dropped 48.4% (-35.8% in 2010), due to the steep
decline in share prices (the most representative market index depreciated 60% in 2011).
Table 2 – Market Capitalisation of European Share Markets
Unit: 10^6 Euro
Exchange (Country) Amount on 31-12-
2010
Amount on 31-12-
2011
Athens Exchange (Greece) 50.378,9 26.019,9 -48,4%
BME - Spanish Exchanges (Spain) 873.329,3 794.169,7 -9,1%
Borsa Italiana (Italy) 425.098,9 331.762,7 -22,0%
Bratislava Stock Exchange (Slovakia) 3.379,5 4.183,4 23,8%
Bucharest Stock Exchange (Romania) 9.776,3 10.817,7 10,7%
Bulgarian Stock Exchange (Bulgaria) 5.498,5 6.358,4 15,6%
CEESEG - Budapest (Hungary) 20.624,4 14.630,3 -29,1%
CEESEG - Ljubljana (Slovenia) 6.994,4 4.872,8 -30,3%
CEESEG - Praue (Czech Rep.) 31.922,2 29.203,2 -8,5%
CEESEG - Vienna (Austria) 93.944,2 65.683,1 -30,1%
Cyprus Stock Exchange (Cyprus) 5.094,3 2.197,9 -56,9%
Deutsche Börse & Boerse Stuttgart (Germany) 1.065.712,6 912.420,5 -14,4%
Irish Stock Exchange (Ireland) 44.998,5 83.495,3 85,6%
London Stock Exchange (UK) 2.268.022,1 2.527.936,6 11,5%
Luxembourg Stock Exchange (Luxembourg) 75.381,2 52.093,4 -30,9%
Malta Stock Exchange (Malta) 3.125,9 2.641,3 -15,5%
NASDAQ OMX - Copenhagen (Denmark) 177.574,0 142.277,5 -19,9%
NASDAQ OMX - Stockholm (Sweden) 471.764,6 392.320,0 -16,8%
NASDAQ OMX - Helsinki (Finland) 166.954,2 117.140,6 -29,8%
NASDAQ OMX - Riga (Latvia) 941,6 825,5 -12,3%
NASDAQ OMX - Tallin (Estonia) 1.684,7 1.241,2 -26,3%
NASDAQ OMX - Vilnius (Lithuania) 4.219,8 3.139,3 -25,6%
NYX Amsterdam (Holland) 356.982,7 302.781,9 -15,2%
NYX Brussels (Belgium) 201.740,6 177.162,4 -12,2%
NYX Lisbon (Portugal) 65.744,0 51.123,7 -22,2%
NYX Paris (France) 1.396.985,0 1.171.680,4 -16,1%
Warsaw Stock Exchange (Poland) 141.918,4 107.483,0 -24,3%
TOTAL 7.969.790,7 7.335.661,5 -8,0% Source FESE, EURONEXT, NASDAQ OMXn and Borsa Italiana.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
43
CMVM
The total value of public share offerings (public sale offerings - OPV - and Initial Public Offerings -
IPOs) admitted to trading on the markets of 27 EU countries, increased by 25.5% in 2011 (a total of 86
600 million Euros). The initial public offerings (new companies to be admitted to the market), were
only carried out in ten markets and amounted to 25.4 billion Euros (+7.9% than in 2010). The Spanish,
Italian, Irish and UK markets, were the main contributors to the admission of new issues of shares
already admitted to trading companies (OPV), with a total of 61,194,100,000 euros (+34.6% than in
the previous year).
The Spanish market was the most dynamic in both public offerings. The total amount involved in these
deals was circa 37.7 billion euros (equally divided between OPV and OPI) and represented 43.6% of
the total public offerings in 2011 admitted to trading on EU markets. During a year when the European
banking was heavily penalised on the exchanges due to fears surrounding the sovereign debt crisis,
Madrid's main market was the subject of an important set of new admissions, examples of which are
banks Bankia and Banca Civica, as well as IAG (airline which resulted from the merger of Iberia and
British Airways, and was also listed in London).
In aggregate terms, NYSE Euronext recorded a significant reduction of the offers listed for trading, as
only on Euronext Paris held an initial public offering with a value of 56.5 million Euros. There were
no IPO or IPS in the other three European trading platforms of this group.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
44
CMVM
Table 3 – Public Offers for Sale and Initial Public Offers
Unit: 10^6
Euro
Exchange (Country) 2010 2011 %
OPV OPI Total OPV OPI Total (2010-11)
Athens Exchange (Greece) 3.880,0 1,0 3.881,0 3.316,0 0,0 3.316,0 -14,6
BME - Spanish Exchanges (Spain) 14.164,0 13.780,0 27.944,0 18.901,0 18.838,0 37.739,0 35,1
Borsa Italiana (Italy) 6.809,5 2.328,3 9.137,8 12.544,2 588,9 13.133,1 43,7
Bratislava Stock Exchange (Slovakia) 26,0 7,0 33,0 17,0 0,0 17,0 -48,5
Bucharest Stock Exchange (Romania) 113,0 0,0 113,0 642,0 0,0 642,0 468,1
Bulgarian Stock Exchange (Bulgaria) 90,0 0,0 90,0 101,0 0,0 101,0 12,2
CEESEG - Budapeste (Hungary) 36,0 245,0 281,0 59,0 29,0 88,0 -68,7
CEESEG - Ljubljana (Slovenia) 1,0 0,0 1,0 138,0 10,0 148,0 14.700,0
CEESEG - Prague (Czech Rep.) 0,0 0,0 0,0 0,0 0,0 0,0 -
CEESEG - Vienna (Austria) 754,0 19,0 773,0 894,0 366,0 1.260,0 63,0
Cyprus Stock Exchange (Cyprus) 346,0 0,0 346,0 488,0 0,0 488,0 41,0
Deutsche Börse (Germany) 0,0 636,0 636,0 888,0 1.482,0 2.370,0 272,6
Euronext Amsterdam (Holland) 0,0 0,0 0,0 0,0 0,0 0,0 -
Euronext Brussels (Brussels) 0,0 0,0 0,0 0,0 0,0 0,0 -
Euronext Lisbon (Portugal) 250,0 0,0 250,0 0,0 0,0 0,0 -100,0
Euronext Paris (France) 0,0 515,7 515,7 0,0 56,5 56,5 -89,0
Irish Stock Exchange (Ireland) 5.326,0 0,0 5.326,0 10.124,0 5,0 10.129,0 90,2
London Stock Exchange (UK) 7.990,6 2.204,4 10.194,9 12.213,9 1.878,9 14.092,8 38,2
Luxembourg Stock Exchange
(Luxemourg) 0,0 0,0 0,0 0,0 0,0 0,0 -
Malta Stock Exchange (Malta) 1,0 30,0 31,0 4,0 0,0 4,0 -87,1
NASDAQ OMX - Copenhagen
(Denmark) n.a. n.a. - n.a. n.a. - -
NASDAQ OMX - Stockholm (Sweden) n.a. n.a. - n.a. n.a. - -
NASDAQ OMX - Helsinki (Finland) n.a. n.a. - n.a. n.a. - -
NASDAQ OMX - Riga (Latvia) n.a. n.a. - n.a. n.a. - -
NASDAQ OMX - Tallin (Estonia) n.a. n.a. - n.a. n.a. - -
NASDAQ OMX - Vilnius (Lithuania) n.a. n.a. - n.a. n.a. - -
Warsaw Stock Exchange (Poland) 5.682,0 3.784,0 9.466,0 864,0 2.168,0 3.032,0 -68,0
Source: FESE, EURONEXT, Borsa Italiana and
London Stock Exchange.
Notes: OPV - Public Offer for Sale; OPI - Initial Public Offer.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
45
CMVM
Concerning the price earnings ratio, the average PER of the main European indices16 showed a general
trend of decline, with some exceptions (Belgium, Luxembourg and the Czech Republic). The largest
falls in the average annual PER were registered in Romania (72%), Greece (54%), Denmark (41%),
Poland (35%), Finland (35%) and Germany (33%). The general decline of PER in Europe is explained,
in most cases, by the combined effect of negative changes in stock prices and increases - more than
two digits17 – of company results (including Germany, Austria, France, Spain, the Netherlands, Poland,
Romania, the United Kingdom and the Nordic countries except for Iceland). In Portugal, the PER daily
average increased from 12.5 in 2010 to 11.4 in 2011, with the drop due mainly to the fall in the
average price of the shares of the PSI 20 (higher than the decrease in EPS of companies).
Chart 21 – PER of European Indices
Source: Bloomberg (CMVM data)
Note: The PER for the Irish market has not been determined as of September 2009 fsince results were negative.
16 This section does not include cycle-adjusted PER values since the times series data is of a reduced size. 17 Under Chart 21’s analysis, ‘results’ refer to the daily average value of the EPS registered during each year and calculated by
Bloomberg as the moving average of the EPS during the latest 12 months.
0
10
20
30
40
50
Ger
man
yA
ust
ria
Be
lgiu
mD
en
mar
kSp
ain
Fin
lan
dFr
ance
Gre
ece
Ho
llan
dH
un
gary
Ire
lan
dIt
aly
Luxe
mb
ou
rgN
orw
ayP
ola
nd
Po
rtu
gal
Un
ite
d K
ingd
om
Cze
ch R
epu
blic
Ro
man
iaSw
ede
n
Yearly Average Values
2009 2010 2011
0
10
20
30
40
50
Ger
man
yA
ust
ria
Be
lgiu
mD
en
mar
kSp
ain
Fin
lan
dFr
ance
Gre
ece
Ho
llan
dH
un
gary
Ital
yLu
xem
bo
urg
No
rway
Po
lan
dP
ort
uga
lU
nit
ed
…C
zech
Rep
ub
licR
om
ania
Quarter Average Values
mar-11 jun-11 set-11 dez-11
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
46
CMVM
The Price-to-Book Ratio (PBR) is a measure of the relationship between the market value of a listed
company and its net asset in accounting terms. A greater PBR indicates that the market assigns the
company a valuation higher than that which arises from accounting of own equity. However, a value
far removed from the PBR unit may reflect macroeconomic and specific market conditions that are
reflected in the valuation of securities listed on the market, but cannot find a direct or immediate
reason in the companies reasoning.
Chart 14 – Trend in the European Index PBR
Source: Bloomberg (CMVM data).
0,00
0,50
1,00
1,50
2,00
2,50
Ger
man
y
Bel
giu
m
Sp
ain
Fra
nce
Ho
llan
d
Irel
and
Lu
xem
bou
rg
Po
lan
d
UK
Rom
ania
Quarter Average Values
mar-11 jun-11 set-11 dez-11
0,00
0,50
1,00
1,50
2,00
2,50
Ger
man
y
Au
stri
a
Bel
giu
m
Den
mar
k
Sp
ain
Fin
lan
d
Fra
nce
Gre
ece
Ho
llan
d
Hu
ngar
y
Irel
and
Ital
y
Lu
xem
bou
rg
No
rway
Po
lan
d
Po
rtu
gal
UK
Cze
ch R
ep.
Rom
ania
Sw
eden
Yearly Average Values
2009 2010 2011
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
47
CMVM
In 2011, with the exception of Greece, Italy, Luxembourg and Romania, the indices of other European
markets had a higher PBR. Nearly all markets decreased their annual PBR (except Denmark and
Ireland). However, the PBR decreased progressively throughout the year for all indices, so that the
higher annual average values for Denmark and Ireland are due to the better performance of share
prices during the first half-year. In the second half of the year, the confirmation of uncertainty levels
and a more marked slowdown in European economies, combined with greater risk aversion by
investors, contributed to the gradual decline of the PBR in the equity share of most countries.
Bond Markets
Similarly to the shares market, the value traded in the bond markets (public and private debt) of the
major regulated markets of 27 EU countries decreased (-34.7%) in 201118
. The concentration in market
trading remained similar to previous years, with the Italian market place representing 57.3% of the
amount transacted in debt. Moreover, the value traded in the Italian, German and Spanish market
places (94.1%) reveals that debt trading on regulated markets is somewhat scattered.
However, the increase in market share that occurred in the Italian market place was not associated with
an increased volume of transactions but only to a lower decrease in the drop of the total number of
debt transactions.
On the regulated markets of Germany, Bulgaria, Cyprus, Slovakia, Hungary and Luxembourg, the
transacted amount in debt securities increased in 2011. Albeit irrelevant to European share, the value
of debt securities traded on the Luxembourg Stock Exchange increased by 162.5% (+89.4 million
euros). Note, however, that the trading of debt securities is traditionally performed in specialised
platforms, at times without the qualification of regulated markets, and increasingly on OTC.
In the case of the Portuguese market, the value of traded debt securities fell significantly on Euronext
Lisbon (see chart below) and the main domestic bond market (MEDIP a regulated market wherein
solely debt is traded) recorded historic lows in trading (see section 2.4.1.2.2).
18
Wholesale market transactions on MEDIP in Portugal have not been taken into account.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
48
CMVM
In addition, traded debt (public and private) and other related instruments (e.g. CDS) stepped up as
regards over-the-counter market.
Chart 23 – Bond Trading Volume on EU Stock Exchanges (Market Share)
Source: FESE, EURONEXT, NASDAQ OMX and Borsa Italiana
Note: For the other 20 trading venues (Other) we used information from the FESE, EURONEXT, NASDAQ OMX and the Irish Stock Exchange. The data for the LSE was not available.
Note: MEDIP and wholesale markets are not included.
The public debt market recorded a high turbulence given the pressure placed on countries with weaker
public finances and envisaged as having greater credit risk. Alongside the prevalence of investors for
safer securities, such as German government debt, this situation led to a greater dispersion of yields of
the major public debt indices of Euro countries.
0,11 0,08
0,0
10,0
20,0
30,0
40,0
50,0
60,0
2010 2011
%
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
49
CMVM
At end 2011, Greece (35%), Portugal (14%) and Italy (7%) recorded historic the 10-year public debt
indices since the creation of the EMU, and the debt spreads of these countries as regards German debt
(the benchmark) increased considerably.
In the shorter maturities, namely two and five years, return rates recorded during the year were higher,
particularly in respect to the Greek and Portuguese debt with residual maturity of two years, exceeded
90% and 20%, respectively (in the first case, as a clear reflection of the agreed restructuring for Greek
debt).
Chart 24 - Interest Rate Structure (Yield Curve) of Public Debt Bond Indices
in the Eurozone (10-Year)
Fonte: Bloomberg.
60
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
Portugal Spain Germany France Italy Greece Ireland
%
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
50
CMVM
Since the risk premium required by investors in public debt of countries that are economically and
financially weaker continued to increase significantly (with the exception of Ireland that managed to
reverse its public debt yield rates as from the second half of the year), the implicit financing costs in
the bond market prices of these countries increased significantly, in some cases resorting to markets
became unsustainable and consequently, leading to the need for international financial aid for
Portugal, as had happened with Greece and Ireland in 2010.
Unlike the German market, the debt markets of the economies of southern Europe (Portugal, Greece,
Spain and Italy) and credit default swaps (CDS) was generally unfavourable, since public and private
debt spreads apropos German reference rates increased. In terms of liquidity, as with 2010, the
markets for some of these countries performed poorly, forcing local banks to resort to financing
transactions with the ECB, under the special measures for financial stabilisation of the euro area that
have been implemented during the year.
1.2. THE DERIVATIVES MARKETS
The number of traded futures and options contracts increased by 11.4% in 2011. According to the
Futures Industry Association, the circa 25 billion contracts traded around the world (a new historical
maximum) does not result from the sudden rise of the emerging derivatives markets or from a new
wave of interest in the commodity market, but rather the result the trend consolidation that had already
been observed in previous years, fueled by the gradual recovery of market liquidity of fixed income
(after significant turmoil and illiquidity recorded in 2008 and 2009).
The increasing importance of Asian Latin America markets accompanied the increase in the number of
contracts traded in the major regulated markets worldwide, as well as the structural change in 2010,
wherein the number of futures contracts currently outweighs the number of options contracts.
Overall, and from a longer term analysis perspective, the number of traded derivative contracts
increased significantly compared to 2002 (+301.7%) and 2007 (+64.4%). Most part of this rise was
caused by increased trading in the emerging derivatives markets (especially in BRIC).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
51
CMVM
In these markets, the number of contracts traded has been increasing since 2002, and trading was
hardly affected by the crisis in 2008 and 2009. The total number of contracts traded in futures and
options in the U.S. markets increased by 33.3% over the past five years.
Chart 25 – Trend in the Number of Traded Contracts
The gradual increase in the number in the Asia-Pacific number of derivatives contracts traded
worldwide, largely upholding the contract Kospi 200 Options traded on the Korean market and the
dynamics of futures contracts having the U.S. dollar / Indian rupee admitted for trading in the Indian
market as the underlying cause, suffered a slight decrease in 2011. This was due to a significant
reduction in the number of contracts on agricultural commodities and precious metals verified in three
trading platforms in China. However, the share of this continental block remains the largest world
market for derivatives.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
52
CMVM
The Latin-American derivatives markets also saw its amount decrease slightly due to gain in the
derivatives markets in North America and Europe. The BM & FBovespa - main trading venue in that
region - grew by 6.1% in the total number of contracts traded in 2011, remaining in sixth place in the
ranking of the main structures of derivatives trading worldwide. The BM & FBovespa was also the
main trading venue in the segment of stock options (single stock).
Table 4 – Trading Volume of Futures and Options Contracts per Region
Unit: No. of
Contracts
Região 2010 Market
Share 2011
Market
Share
2011/2010
Asia-Pacific 8.990.583.917 40,1 9.815.764.742 39,3 9,2
North America 7.169.695.107 32,0 8.185.544.285 32,8 14,2
Europe 4.422.009.307 19,7 5.017.124.930 20,1 13,5
Latin America 1.518.883.227 6,8 1.603.203.726 6,4 5,6
Other* 323.517.719 1,4 350.764.885 1,4 8,4
Total 22.424.689.277 100,0 24.972.402.568 100,0 11,4
Source Futures Industry Association.
* Consist of Exchanges from Sourth Africa, Turkey, Israel and Dubai.
Note: Location of the Exchange is determined by the country of registration.
An analysis focusing on the underlying assets of these contracts reveals that the number of derivatives
traded increased for most underlying assets, except for contracts on agricultural commodities and
precious metals. In both cases, this was due to the significant reduction in the number of contracts
traded in three Chinese markets.
The number of futures contracts traded on the white sugar (the second most traded commodity in the
segment in 2011), traded on the Zhengzhou Commodity Exchange (ZCE) was lower by 58% than
during the previous year. Alsom the third most traded contract on goods and rubber futures traded on
the Shanghai Futures Exchange (SHFE), decreased 37.7%. Futures contracts traded on soybean oil in
the Dalian Commodity Exchange (DCE), that had been the third most traded contract in this segment
in the previous year, recorded yet a drop in 2011 (-36.5%).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
53
CMVM
In three other contracts among the twenty most traded agricultural commodities, the number of traded
contracts also declined significantly. This is the case of futures contracts on soybean meal (-60.0%) on
corn (-25.4%) and on palm oil (-45.9%), all admitted to trading on the DCE. However, the steepest
drop in the number of contracts in this segment occurred in rice futures, traded on ZCE, whereof the
number of contracts fell by 77.9% (26.85 million to 5.93 million). Instead, futures trading and
commodity options on the Chicago Board of Trade (CBOT) - particularly on corn and soybeans –
registered a slight increase in the number of traded contracts.
Regarding metal derivatives, the contracts whose underlying non-precious metals (industrial) - zinc,
copper, steel - continued to be among the most traded in 2011, although the major segment of this
contract, the futures contract on "shaped steel" (rebar), traded less 63.7%. Also, the number of futures
contracts on zinc, the second most traded in the previous year, was reduced significantly.
Globally, the number of contracts traded in this segment of the non-precious metals industry declined
32.4% in 2011. Said is obviously explained by the slowdown in the global economic activity, which
led to a decrease in production and demand in construction, automotive and other heavy industries.
In contrast to the decline in trading commodity derivatives and non-precious metals industry, the
number of derivative contracts whose underlying precious metals are particularly gold and silver - rose
by about 95.1%. This situation reflects the standing of investors due to the sovereign debt crisis and
rising credit risk in many countries, with the diffusion effect to the equity and derivatives markets. In
2011, the gold price (spot) value reached 33.8% (September), ending the year with an 11.0% gain. The
silver price (spot) also experienced a significant adjustment in the first months of 2011; reaching
56.6% value (in April) but, unlike gold, ended the year with a decline of about 9.1%. Albeit, gold and
silver were regarded by investors as a haven assets, compared to investment alternatives in the
financial share and bond markets.
The segment of derivatives on interest rates - the second most important behind the derivatives on
shares and share indices - kept the pace of recovery that had begun last year after significant reductions
witnessed in 2008 and 2009 (-14.4% and - 23.0%, respectively). Yet, the total number of contracts
traded in 2011 remained below the figures registered in 2007.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
54
CMVM
Energy derivative Contracts grew by 12.6%, which is slightly above the average (+11.5%) recorded in
the previous three years. The two main contracts in this segment, Light Sweet Crude Oil Futures and
Brent Crude Oil Futures, traded on the New York Mercantile Exchange (NYMEX) and the
Intercontinental Exchange (ICE), respectively and represented collectively, 37.7% of the total number
of energy contracts traded worldwide in 2011. The speculative price of the main product of the sector –
oil - was caused by the increase in consumption of so-called emerging economies in late 2010 and was
driven by political instability, the risk of armed conflict and speculation surrounding the possible
blockage in production and transportation of oil, resulting from political turmoil in several Middle
Eastern countries.
TEXTBOX 2 – EVOLUTION OF THE PRICE OF RAW MATERIALS, FOOD ITEMS
AND ENERGY
The prices of goods traded onderivative exchanges rely on international economic and global
aggregate demand. There are several underlying assets of these contracts, but in general special
importance is given to contracts on metals, agriculatural commodities, industry metals, agricultural
raw materials for industry and energy, largely due to the impact that these goods have on household
consumption and costs of production enterprises.
The evolution of some global commodity indices (S&P World Commodity Energy Index TR, S&P
World Commodity Metals Index TR, S&P World Commodity Agricultural Raw Materials Index TR,
S&P World Commodity Industrial Metals Index TR and S&P World Commodity Agriculture Index
TR) in the last five years show that, after the sharp fall in prices witnessed during the second half of
2008, showed a further decline in the price of energy goods, metals, industrial metals and agricultural
goods during 2011 (-11.1% , -16.9%, -26.3% and -37.2%, respectively), but did not go along with the
price of the goods in the agricultural sector for the industry (17.8% recovery).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
55
CMVM
Commodity Price Trend
Source: Bloomberg and CMVM data.
Although, in the last year, indices have had a different evolution, 2008 shows that the co-movement of
the five analysed series is more pronounced. Prior to the sub-prime crisis, the variance explained by
the first main component was 45%, which increased to about 65% in the second half of 2011,
reflecting a strong increase in the correlation of the price of these goods.
The financing of commodity markets provided greater interconnection between these and other
markets, with the consequent possibility that unexpected shocks in equity markets might have an
impact and be transmitted to commodity markets, which was consolidated in the increase of the
correlation between share prices and commodity prices.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
56
CMVM
In relation to currency derivatives, the number of contracts whose underlying asset is exchange rates
increased 24.6% in 2011, a growth that was supported in trading futures contracts on the exchange rate
between the U.S. dollar and Indian rupee.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
57
CMVM
These contracts were mostly traded in three different Indian platforms - Multi Commodity Exchange
of India (MCX), National Stock Exchange of India (NSE India) and United Stock Exchange of India
(USE) - and represented as a whole about 58.7% of the total number of contracts traded on currencies.
The fourth largest contract traded in 2011 in this segment was the U.S. Dollar / Indian Rupee Options,
traded on NSE India, which raises the concentration of the number of contracts, traded on this currency
pair, to 66.7%.
Table 5 – Number of Futures and Options Traded Contracts
The following table shows the total number of contracts traded and the relevant change apropos the
previous year for the five more active19
futures and options contracts in 2011, grouped by different
categories of underlying assets.
The Kospi 200 (Options) was again the most active derivative contract traded around the world, with
an increase of 4.1% in the number of contracts traded in 2011 (+20.7% in 2010). This contract
represented 43.4% of the number of contracts traded in the derivatives segment on share indices and
14.7% of the total number of derivative contracts.
19 Futures contracts and options presented in the table were taken from a universe of 20 major contracts by type of underlying asset.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
58
CMVM
In the segment of interest rates, the Eurodollar Futures (CME) remained the most traded contract, with
about 564.1 million traded contracts (+10.4% compared to 2010). With CBOT, the number of futures
contracts on 10-year U.S. Treasury bonds increased by 8.1%. If we consider all maturities of U.S.
Treasury bonds that are derived from underlying assets, this increase was even higher (14.4%).
At Eurex, the futures contract on German debt, Euro-Bund Futures, Euro-Schatz Futures and Euro-
Bobl Futures, respectively - used as a reference for sovereign debt in the euro zone - remained among
the ten most traded, totaling 544.3 million contracts (which represents an increase of 7.5% over the
year). Once again, after the significant increase in the number of contracts traded during the previous
year (+92.9%), the One Day Inter-Bank Deposit Future traded on the BM & FBovespa, increased 9.5%
in 2011, to a total of 320,8 million contracts, the second most traded derivative in this segment.
This general increase in trading derivatives on interest rates cannot be dissociated from the significant
volatility and instability in sovereign debt markets, so investors have used this segment as a tool for
hedging or arbitrage prices formed in the relevant spot market.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
59
CMVM
Table 6 – Trading Volume of the Main Futures and Options Contracts per Type of Underlying Asset
The level of trading venues registered yet again the prevalence of the Korea Exchange, with an
increase of 4.8% in the minimum number of traded contracts. The top ten trading structures
represented 83.7% of the total number of traded contracts in the derivatives market in 2011, which
indicates a high degree of concentration.
Unitde: Nº de contratos
2011/2010 Volume negociado 2011/2010
Ações e Índices de ações Kospi 200 (Options) KRX 3.525.898.562 3.671.662.258 4,1 RTS Index Futures (RTS,6ª) S&P CNX Nifty Index Options NSE 528.831.609 868.684.582 64,3 377.845.640 68,2 SPDR S&P 500 ETF Options * 456.863.881 729.478.419 59,7 E-Mini S&P 500 Index Futures CME 555.328.670 620.368.790 11,7 Dax Options (Eurex,20ª) Euro Stoxx 50 Futures Eurex 372.229.766 408.860.002 9,8 67.616.997 -10,0 Taxas de Juro Eurodollar Futures CME 510.955.113 564.086.746 10,4 5 Year Treasury Note Futures (CBOT,6ª) One Day Inter-Bank Deposit Futures BM&F 293.065.417 320.821.062 9,5 170.563.052 29,1 10 Year Treasury Note Futures CBOT 293.718.907 317.402.598 8,1 3 Month Euribor Futures Liffe 248.504.960 241.950.875 -2,6 3 Month Euribor Futures (Liffe, 4ª) Euro-Bund Futures Eurex 231.484.529 236.188.831 2,0 241.950.875 -2,6 Câmbio U.S. Dollar/India Rupee Futures MCX-SX 821.254.927 807.559.846 -1,7 U.S.Dollar/India Rupee Optionss (NSE, 4ª) U.S.Dollar/India Rupee Futures NSE 699.042.420 697.825.411 -0,2 252.807.126 3.927,4 U.S.Dollar/India Rupee Futures USE 1 124.766.134 340.576.642 173,0 U.S.Dollar/India Rupee Options NSE 2 6.277.165 252.807.126 3.927,4 Euro/Indian Rupee Futures (MCX-SX,14ª) U.S. Dollar / Russian Ruble Futures RTS 81.122.195 206.820.695 154,9 29.403.759 -36,6 Produtos Agricolas Cotton No.1 Futures ZCE 86.955.310 139.044.152 59,9 Cotton No.1 Futures (ZCE,1ª) White Sugar Futures ZCE 305.303.131 128.193.356 -58,0 139.044.152 59,9 Rubber Futures SHFE 167.414.912 104.286.399 -37,7 Corn Futures CBOT 69.841.420 79.004.801 13,1 Soy Meal Futures (DCE,6ª) Soy Oil Futures DCE 91.406.238 58.012.550 -36,5 50.170.334 -60,0 Energia Light Sweet Crude Oil Futures Nymex 168.652.141 175.036.216 3,8 U.S. Oil Fund ETF Options (*, 10ª) Brent Crude Oil Futures ICE 100.022.169 132.045.563 32,0 28.881.647 90,1 Natural Gas Options Nymex 64.323.068 76.864.334 19,5 Gasoil Futures ICE 52.296.582 65.774.151 25,8 U.S. Natural Gas Fund ETF Options (*, 14ª) Crude Oil Futures MCX 41.537.053 54.753.722 31,8 12.818.730 -33,2 Metais Steel Rebar Futures SHFE 225.612.417 81.884.789 -63,7 iShares Silver Trust ETF Options (*,2ª) iShares Silver Trust ETF Options * 21.187.121 79.433.438 274,9 79.433.438 274,9 SPDR Gold Shares ETF Options * 54.737.222 74.967.191 37,0 High Grade Primary Aluminium Futures LME 46.537.180 59.558.330 28,0 Steel Rebar Futures (SHFE, 1ª) Zinc Futures SHFE 146.589.373 53.663.483 -63,4 81.884.789 -63,7 Fonte : Futures Industry Association. Notas: * Transacionado em várias bolsas nos E.U.A. ; 1 -Início de negociação Setembro de 2010; 2 - Início de negociação, Outubro 2010.
Contratos c/ maior e menor variação Contracto Bolsa 2011 2010
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
60
CMVM
The hierarchy of derivatives markets changed slightly in 2011, with Nasdaq OMX swapping positions
with the CBOE Group. The other structures listed in the table below maintain their rank. Albeit worthy
of note is the growing importance of Indian trading platforms - National Stock Exchange of India and
Multi Commodity Exchange of India - which saw the total number of traded contracts increase,
respectively, to 36.2% (+24.6 % in 2010) and 10.6% (+ 180.7% in 2010) 20. Although not represented
in the following table, the United Stock Exchange of India traded about 225.4 million contracts
(+181.0%) which gave it the thirteenth ranking position in the main structures of derivatives trading
worldwide21.
Table 7 – Ranking of the Ten Key Derivatives Exchanges
As regards the different derivatives markets and trading platforms of the NYSE Euronext group, the
total number of traded contracts also increased (6.0%), although less than in global terms (11.4%).
NYSE Liffe Lisbon lists futures contracts on the share index (PSI 20) and on a set of shares of the
leading national companies.
20 In 2009, the number of derivatives contracts traded on these trading platforms increased 52.7% and 273.3%, respectively. When
analyzing the performance of these platforms during the period 2008-2011, it appears that the number of traded contracts increased
265.8% (NSE) and 1,060.9% (MCX-SX), respectively. 21 The United Stock Exchange of India (USE) commenced its activity in 2010.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
61
CMVM
This segment recorded a significant reduction (-53.9%) in the number of traded contracts, mainly due
to the decrease of traded contracts in share futures. NYSE Liffe U.S. and NYSE Liffe Amex were the
group members with the highest growth rates, largely due to futures on fixed income.
Table 8 – Trading Volume of Futures and Options on the NYSE Euronext
1.3. INVESTMENT FUNDS
European investment funds (harmonised and non-harmonised – broadly speaking, alternative and real
estate funds) registered a drop in the amount under management by 2.8%. The drop in the managed
amount by end 2011 occurred two years following the sector’s annual growth rates by circa 15%
(subsequent to the significant decrease in the amounts managed throughout 2008, particularly after the
Lehman Brothers’ collapse. As a result, between end 2007 and 2011, the global values under
management remained practically unaffected.
The analysis of the managed amount shows specific behavioural differences as regards the sectors for
each country and are worthy of emphasis. A number of countries including that were subject to
external economic assistance programmes, Greece and Portugal for example, or those countries that
due to the gradual climb in the sovereign debt yields, suffered a significant waning of state funding
(Italy, Spain and even France) saw a decrease in the assets under management that was much higher
than the European average (in the two-digit order). The Greek, Italian, Spanish and Portuguese
investment funds (excluding Bulgaria and Slovenia), saw an increase in the loss of the amount
managed between 2007 and 2011 (-72%, -46%, -44% and -37%, respectively).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
62
CMVM
This is not unrelated to a reallocation of savings in investment funds applied to other investment that
provided more attractive return rates or even in reducing the level of financial liabilities. Said is due to
the growth of private bank deposits as a result of the redirection of credit institution offer given their
liquidity needs and balance sheet deleverage. Conversely, investment funds in other countries showed
major resilience to the economic and financial turmoil that settled in the markets during the last four
years. Ireland, Germany, UK and Luxembourg held the largest market share in Europe as regards
investment funds.
These four countries held almost two-thirds of the European market share by the end-year and the
managed amount increased between 2007 and 2011 and was particularly salient in Ireland with 31%,
which mitigated the overall decrease in the amount managed by the European investment funds.
Table 9 – Assets under Management for Harmonised and Non-Harmonised CIUs in Europe
Unit: Euro 10^6
Countries End-period Values % Number of Funds
31-12-07 31-12-08 31-12-09 31-12-10 31-12-11 2008/07 2009/08 2010/09 2011/10 2011
Austria 165.584 127.729 138.603 147.245 137.487 -22,9 8,5 6,2 -6,6 2.167
Belgium 126.536 103.633 96.950 97.229 85.043 -18,1 -6,4 0,3 -12,5 1.898
Bulgaria 436 164 179 229 228 -62,4 9,1 28,1 -0,6 94
Czech Republic 6.471 4.495 4.426 4.883 4.198 -30,5 -1,5 10,3 -14,0 116
Slovakia 3.969 3.278 3.418 3.763 3.201 -17,4 4,3 10,1 -14,9 81
Slovenia 4.148 1.872 2.239 2.272 1.790 -54,9 19,6 1,5 -21,2 140
Denmark 131.424 97.788 109.612 135.442 139.007 -25,6 12,1 23,6 2,6 849
Finland 66.000 41.338 54.251 61.506 55.387 -37,4 31,2 13,4 -9,9 497
France 1.508.300 1.293.265 1.421.395 1.502.680 1.380.953 -14,3 9,9 5,7 -8,1 11.830
Germany 1.041.869 911.330 1.019.672 1.125.277 1.133.874 -12,5 11,9 10,4 0,8 5.877
Greece 22.912 10.324 10.279 9.128 6.304 -54,9 -0,4 -11,2 -30,9 231
Hungary 12.590 9.473 11.071 13.002 9.037 -24,8 16,9 17,4 -30,5 352
Ireland 805.989 647.054 748.629 962.503 1.055.268 -19,7 15,7 28,6 9,6 5.069
Italy 357.947 246.981 257.804 239.210 193.296 -31,0 4,4 -7,2 -19,2 1.006
Liechtenstein 20.399 19.292 24.592 29.478 29.979 -5,4 27,5 19,9 1,7 728
Luxembourg 2.059.395 1.559.653 1.840.993 2.198.988 2.096.512 -24,3 18,0 19,4 -4,7 13.294
Netherlands 90.951 71.689 79.020 78.066 64.515 -21,2 10,2 -1,2 -17,4 627
Norway 50.599 29.573 49.925 63.847 61.828 -41,6 68,8 27,9 -3,2 507
Poland 37.558 17.446 22.592 28.414 25.325 -53,5 29,5 25,8 -10,9 576
Portugal 36.213 25.040 29.087 26.456 22.830 -30,9 16,2 -9,0 -13,7 563
Romania 3.517 1.701 2.587 2.961 3.382 -51,6 52,1 14,5 14,2 131
Spain 278.796 203.498 194.520 170.624 156.412 -27,0 -4,4 -12,3 -8,3 2.536
Sweden 139.380 86.624 126.402 166.089 150.434 -37,9 45,9 31,4 -9,4 576
Switzerland 168.895 157.040 158.450 260.979 272.451 -7,0 0,9 64,7 4,4 864
Turkey 18.108 13.294 16.281 18.750 19.068 -26,6 22,5 15,2 1,7 395
United Kingdom 751.346 458.116 638.312 793.957 805.110 -39,0 39,3 24,4 1,4 2.861
TOTAL 7.909.332 6.141.690 7.061.289 8.142.978 7.912.919 -22,3 15,0 15,3 -2,8 53.865
Source: EFAMA and CMVM
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
63
CMVM
The disaggregated values managed by harmonized and non-harmonized investment funds harmonized
does however reveal that the behavior of these two sub-sectors have been quite different. The
following table shows the amount managed by harmonized investment funds (complies with UCITS
EC Directive No. EC/85/611) and may be freely marketed in the European Union via the ‘European
Passport’ mechanism. Said registered a more relevant drop in 2011 than for overall investment funds.
These conclusions are reinforced when one only takes into consideration values managed by
harmonized funds, particularly in countries that have been the target of external intervention and / or in
exacerbating the sovereign debt crisis, which added to the negative impact on the behavior of the
relevant capital markets (particularly the countries of southern Europe). Except for investment funds
domiciled in Ireland, Romania and Switzerland22, the remainder experienced a decrease in the value
managed over the previous year and only a percentage of less than two digits in ten cases. Four
countries (Greece, Hungary, Portugal and Turkey) experienced a decrease in assets under management
exceeding 30%, with Hungary, whose sector harmonized investment funds in 2007 not reaching half
the value of the Greek and Portuguese fund market, holding in the two most recent years, a market
share higher than those two countries (in 2011, Portugal and Greece registered the lowest European
market share of the current millennium). Italy also saw a significant decline in the market value of
harmonized funds, ranking only ninth in terms of market share in Europe (in 2007 it was the fifth
largest country with assets under management). The harmonized European fund market has a high and
steadily increasing degree of concentration, since the five countries (Luxembourg23, France, Ireland,
the UK and Germany) with higher values under management, held a combined market share of 80.3%
by the end of 2011 (up by 0.6 p.p. and 1.3 p.p. compared to 2010 and 2009, respectively).
The reduction in assets under management, together with the relative stability of the number of active
funds (less than 344 at end 2010 apropos 37 at end 2007), generates negative externalities for the
competitiveness of European investment funds and in particular for fringe countries.
22 In this country, despite it being a jurisdiction that is not part of the European Union, there are funds that follow the rules of the UCITS
Directive and as such, are eligible for recognition in their marketing within the EU. 23 Despite the relevance of this country’s market (and Ireland’s) is largely due to the specifics of the tax environment, with the relevant
funds being subsequently marketed in other EU countries by using passport 'granted' by the UCITS Directive.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
64
CMVM
The smaller the size of the fund, the lower the gains from scale and scope economies, making
operating costs of fund management heavier as regards fees charged by management companies
(forcing the latter to increase their fees or, alternatively, the liquidation or merger of funds). The
average size of European investment funds was 156.0 million Euros at end 2011 (164.2 and 170.8
million Euros, at the end of 2010 and 2007, respectively). This value is mainly due to the fact that circa
half of the active European funds were incepted in France and Luxembourg.
This means that in these two jurisdictions that have the largest share of the European market in terms
of values under management, there are a large number of funds, which means that they have a reduced
average size. In European Union area, only UK (with a global portfolio mainly composed of shares),
Ireland, Sweden and Italy funds show an average size that is substantially higher than the European
average. Note that in late 2011, North-American investment funds had an average size of 1.1761
billion euros (1,167.1 and 1.1058 billion Euros in late 2010 and 2007, respectively). It is concluded
that U.S. funds have a mid-cap that is about eight times that of their peers in Europe, and between late
2007 and 2011, despite the turmoil that has affected markets, the average size of U.S. funds increased
by about 7%24.
In the case of Portuguese harmonized investment funds, the average size was about a fifth of the EU
average, or about 31.7 million euros, at the end of 2011 - the lowest since this savings segment started
its activity in our market25. In the particular case of funds specialized in national share investment, the
average size (about 12 million) was further diminished during the same period, which means that,
assuming that the annual global average cost of such funds amounted to about 1.5%, a management
company could only allocate 180,000 Euros each year to cover management costs and other associated
costs of a Portuguese shares fund.
24 This was due to both the decrease in the number of funds, as well as to the increase in the amount under management, but the relative
decrease in the number of funds was lower than the percentage increase of the amount under management. 25 The highest value (124.8 million Euros) was registered on 31 December 2005.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
65
CMVM
Table 10 – Assets under Management of Harmonised CIUs in Europe
With regard to non-harmonized investment funds (roughly comprising special or alternative
investment funds - that is, funds whose investment policy is more flexible as to the type of assets that
can integrate portfolios, to the diversification asset rules and the liquidity of the held instruments26 -
and real estate funds) the trend over the last four years is different from that observed for harmonized
funds. The amount managed by non-harmonized funds increased in 2011, and the total amount under
management corresponded to approximately 40% of harmonised funds (28% in late 2007).
The increase in the amount under management in Europe was mainly driven by the positive
development of the Irish, British, French, German and Luxembourgish non-harmonised funds (these
26 Contrary to harmonized funds, these funds are not required to hold 90% of the portfolio invested in liquid assets, namely those
admitted to trading on a regulated market
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
66
CMVM
five countries held in late 2011 a market share of around 86%, higher than the percentage who held the
segment harmonized funds). In other countries, particularly those in which the market share in this
segment assumes some relevance, there were increases tenuous values managed or even a decrease of
the values given by this type of funds.
Despite the evolution of heterogeneous values have been managed in 2011, can still be concluded that
in recent years, during which the capital markets have been subject to significant price declines and
abnormally high levels of volatility, seems to have been consolidate replacement investment
harmonized funds by savings in non-harmonized funds (between 2007 and 2011 values managed by
non-harmonized funds increased 30%, while the harmonized funds witnessed a decline of about 9%).
This finding may also explain the nature of the assets comprising the portfolios of non-harmonized
funds. In addition, it will have witnessed a reorientation of supply for products that have a higher level
of commissioning and are often a form of indirect financing of credit institutions that dominate
management companies of investment funds.27
In the case of Portugal, the market share of this segment (0.7%) is much higher than on harmonized
funds (0.1%), which are due to the existence of real estate investment funds with a Europe-wide high
dimension and the continued creation and marketing of special funds as an alternative investment
funds face harmonized securities.
27 Since often these funds acquire, bonds issued by credit institutions with which the management company has a group relationship or is
affiliated.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
67
CMVM
Table 11 – Assets under Management of Non-Harmonised CIUs in Europe
In 2011 European harmonised investment funds was the subject of divestment of circa 89 billion Euros
(in contrast to a net investment of 94 billion Euros in 2010). Non-harmonised funds attracted a net
investment of approximately 100 billion Euros (whereof 90 billion euros came from German,
Luxembourgish and Irish funds) 28
.
28 Data is not shown by country; since only some jurisdictions report this information to EFAMA (thus the overall value for the European
market may be under or overestimated).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
68
CMVM
In the segment of harmonized funds, countries that experienced a greater net disinvestment were
France, Italy and Luxembourg. In the case of France and Italy, the divestment assumed a higher
relative weighting in funds that invest in debt and this related with the growing distrust of investors
about credit quality of the sovereign debt of these countries (which incorporates portfolio many funds
and treasury bonds) and caused the depreciation of these assets during 2011 and the connected exit of
these segments of harmonised funds. Contrariwise, Ireland and the United Kingdom were among nine
European countries that have experienced a positive net investment in harmonised funds in 2011. In
both cases there was a strong growth in savings mobilization in all fund categories, but particularly in
products with more emphasis on investment in debt (especially in Ireland). Opposing reasons cited for
the French and Italian fund cases, given the positive trend of consolidation of public finances and the
recovery of the Irish economy, may justify this development. If Irish and British funds were not
considered in the analysis, the net disinvestment in harmonised funds in other European markets would
amount to 163,500 million Euros.
Comparatively speaking, divestment was particularly salient in Portugal, Slovakia, Greece and Italy,
wherein negative net subscriptions amounted at the end year, to over 20% of the managed amount.
Portugal’s divestment is linked to financial sector’s configuration. In truth, the weighting of
independent managing entities (those that are not held by banking groups) is extremely low and during
the year, net investment increased (circa 27 million euro). Divestment in harmonized funds was strong
in those managing companies held by banking groups – redemptions outweighed subscriptions in circa
2.649 million euro – representing almost 18.8% of the value under management by the end of 2010).
Said may be seen as an additional commercial effort to entice savings by means of banking deposits
with the purpose of increasing liquidity and financing of the banking activity.
The type of fund with the highest net divestment was share funds and represented two thirds of the
divestment in harmonized funds. Said was in essence due to negative net subscriptions in
Luxemburgish and French funds which accounted for over 95% of European divestment.
The North-American and Japanese funds, contrariwise to the European markets, allured net
investments that amounted to circa 80 billion euro.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
69
CMVM
Table 12 – Net Subscription for Harmonised Collective Investment
Undertakings per Fund Type in 2011
Unit: Euro 10^6
Countries
Share
Funds
Bond
Funds
Mixed
Funds
Treasury
Bonds
Other
Funds Total
Austria -864 -3.296 -272 -271 -1.126 -5.829
Belgium n/a n/a n/a n/a n/a 0
Bulgaria 0 -5 -4 13 2 6
Czech Republic 33 -42 -41 -337 83 -304
Slovakia -19 -97 -30 -571 -110 -827
Slovenia -40 18 -65 13 -3 -77
Denmark -502 858 1.449 -1 -84 1.720
Finland -1.862 -841 298 1.147 11 -1.247
France -27.200 -9.400 -5.800 -50.000 1.500 -90.900
Germany 2.619 -2.958 -1.172 -217 -1.980 -3.708
Greece -104 -315 -82 -482 -230 -1.213
Hungary -372 -197 -23 -324 -89 -1.005
Ireland 3.756 19.095 4.545 17.655 16.599 61.650
Italy -1.948 -13.585 -6.430 -8.522 0 -30.485
Liechtenstein 76 313 171 -105 113 568
Luxembourg -28.393 -11.831 21.690 6.561 -11.741 -23.714
The Netherlands -1.104 527 949 0 -7.440 -7.068
Norway -306 2.489 202 888 101 3.374
Poland -686 342 -572 317 -600 -1.199
Portugal -268 -115 -1 -1.004 -1.370 -2.758
Romania 8 104 -9 80 65 248
Spain -3.917 -1.842 -2.034 -674 -110 -8.577
Sweden -2.859 931 2.531 3.867 -289 4.181
Switzerland 4.144 957 1.041 198 0 6.340
Turkey 55 -509 -388 -1.921 1.708 -1.055
UK 1.009 2.665 3.619 519 5.251 13.063
Total 1 -58.744 -16.734 19.572 -33.171 261 -88.816
Total 2 (excluding UK and Ireland) -63.509 -38.494 11.408 -51.345 -21.589 -163.529
USA n/a n/a n/a n/a n/a 56.485
Japan n/a n/a n/a n/a n/a 23.330
Source: EFAMA and ICI
As for Portugal, the net investment in harmonised funds registered negative results in 2011 and
represented 3.1% of the total amount of divestment in European investment funds whereas value of
managed assets managed a mere 0.1% of the European total. The largest net divestment in national
harmonised funds (apropos the importance of European managed assets) caused the Portuguese
investment funds sector to lag behind international levels. On the national front, the assets managed
by special investment funds were lower by only 200 million euros by end 2011 apropos harmonised
funds with amounts of the two types of funds quite similar to those of May 2012.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
70
CMVM
Despite registering during the first three quarter of the year a net divestment of 307 million euros,
special investment funds registered a positive annual net investment due to investment during the last
quarter. Often, these funds consist of complex financial products and provide the investors with return
on invested capital and/or possibility of high return rates but then again, are vague as to variables that
determine the value of investment units and a higher moderate startup level.
Chart 26 – Net Balance of UCITS and Special Investment Funds in Portugal (2011)
Source: APFIPP
The net divestment in harmonised funds was particularly salient in the treasury bills and more
pronounced during the first two quarters of the year which tallies with what was previously mentioned
as to the investment changeover effect beteen funds and deposits. The ‘Other Funds’ category also
witnessed concentrated net divestment, particularly flexible funds (investment policy is discretionary
at any given time depending on the managers’ awareness apropos the price trend perspective of the
different financial instruments) and in pension savings funds. On average, the flexible funds have
shown negative perfomances.
-468
-913 -998
-246
-2.626
-401
-799 -867 -691
-2.758
-67 -115 -130
445
132
-3.000
-2.000
-1.000
0
1st Q 2nd Q 3rd Q 4th Q 2011
Euro
Mill
ion
UCITS+SIFs
UCITS
SIFs
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
71
CMVM
As to pension savings funds due to tax burden, redemptions (in the legal conditions or via early
redemption in order to consumer demand) have not been sufficiently compensated with the injection of
new capital (be it via investment inject by holder of said funds or via new investors).
Chart 15 – Net Balance of Investment per Type of Fund (2011)
Source: APFIPP
In keeping with the previously mentioned net divestment, the number of participants in investment
funds descresed signficantly (-250 thousand apropos end of 2010 and in almost all the retail investors,
meaning that one out of every four participants in 2010 left the sector). The decrease in the number of
participants was gradual during the year and covered all types of funds (including special investment
funds albeit the net investment increase) but was particularly marked in the treasury bills since half of
the investos (circa 100 thousand) left the sector between the end of 2010 and 2011 – less 55 thousand
for share funds and less 40 thousand for pension saving funds.
-600
-500
-400
-300
-200
-100
0
100
200
300
1st Q 2nd Q 3rd Q 4th Q
Euro
Mill
ion
Bonds Treasury Bills Domestic Shares
International Shares Flexible Funds Other Funds
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
72
CMVM
Chart 16 – Number of Participants in Investment Funds in Portugal
Source: APFIPP
The following table shows the comparative weighting of harmonised funds in the economies of
countries and as a savings instrument that investors use. One is able to see the weighting of
harmonized funds in the GDP as well as the value applied per capita (for the residing population as a
potential investor in funds) and conclude that during the last year, the value of funds in the GDP for all
European countries has decreased by 4.2 p.p.. If one excludes Luxembourg and Ireland, the drop is a
stands at a mere 1.4 p.p.. In Europea, the comparative weighting of funds in the GDP is still lower than
that of the USA (circa double of the European average which has been on-going for the last four
years). In Portugal’s case, said benchmarks registered a similar trend to that of Europea (excluding
Luxembourg and Ireland) with a drop of 1.5 p.p. during the last year which stresses the notion that the
investment fund sector in Portugal is gradually losing its standing as an alternative for attracting
savings.
0
200.000
400.000
600.000
800.000
1.000.000
1.200.000D
ecem
ber
10
Mar
ch 1
1
Jun
e 1
1
Sep
tem
ber
11
Dec
emb
er 1
1
OTHER FUNDS
TREASURY ANDMONEY MARKETFUNDS
BOND FUNDS
SHARE FUNDS
FLEXIBLE FUNDS
SPECIAL FUNDS
RETIREMENT SAVINGSFUNDS
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
73
CMVM
Said situation is also conveyed by the descrease in investment per capita from circa 800 to 600 euro
which also occurred on average in Europe (whether one includes or excludes Luxembourg and
Ireland), albeit less strongly. In the USA, the amount of managed funds corresponds to circa 29 million
euro per citizen whilst in Europe, said value does not reach 6 thousand euro if one excludes
Luxembourg and Ireland and is close to 10 thousand euro if one does include the former coutnries.
Table 13 – Comparative Weighting of Assets under Management by UCITS
Countries
2010 2011
Assets UCITS/GDP (%)
UCITS Per
Capita (10^3
Euro)
Assets
(10^6 Euro) UCITS/GDP
(%) UCITS Per
capita (10^3
Euro)
(10^6 €) (10^3 €) (10^6 €) (10^3 €)
Austria 84.725 29,6% 10,1 74.329 24,7% 8,8
Belgium 91.086 25,7% 8,1 79.131 21,5% 7,2
Bulgaria 227 0,6% 0,0 226 0,6% 0,0
Czech Republic 4.806 3,2% 0,5 4.119 2,7% 0,4
Slovakia 3.542 5,4% 0,7 2.656 3,8% 0,5
Slovenia 2.050 5,8% 1,0 1.790 5,0% 0,9
Denmark 67.556 28,7% 12,2 65.856 27,5% 11,8
Finland 53.293 29,7% 10,0 48.066 25,1% 8,9
France 1.210.280 62,5% 18,7 1.068.141 53,5% 16,4
Germany 249.500 10,1% 3,1 226.456 8,8% 2,8
Greece 7.046 3,1% 0,6 4.417 2,1% 0,4
Hungary 9.327 9,6% 0,9 6.337 6,3% 0,6
Ireland 758.946 486,5% 169,8 820.041 524,2% 183,0
Italy 175.358 11,3% 2,9 139.697 8,8% 2,3
Liechtenstein 26.784 n.d. 746,2 25.467 n.d. 704,5
Luxembourg 1.880.612 4670,4% 3.745,7 1.760.155 4110,4% 3.438,9
The Netherlands 64.305 10,9% 3,9 53.448 8,9% 3,2
Norway 63.847 20,3% 13,0 61.828 17,7% 12,6
Poland 19.322 5,4% 0,5 14.414 3,9% 0,4
Portugal 8.760 5,1% 0,8 6.018 3,5% 0,6
Romania 1.280 1,0% 0,1 1.846 1,4% 0,1
Spain 164.500 15,6% 3,5 150.877 14,1% 3,3
Sweden 162.446 46,5% 17,4 147.042 38,0% 15,6
Switzerland 207.009 51,9% 25,2 211.037 46,0% 26,8
Turkey 15.900 2,9% 0,2 10.866 2,0% 0,1
United Kingdom 675.401 39,6% 10,9 648.406 37,3% 10,4
Total 1 6.007.907 44,7% 10,4 5.632.666 40,5% 9,7
Total 2 (excluding
Luxembourg and Ireland) 3.368.349 25,4% 5,9 3.052.470 24,0% 5,7
USA 8.846.468 80,7% 26,9 8.981.834 82,8% 28,8
Japan 587.864 14,2% 4,3 576.075 13,6% 4,5
Sources: EFAMA, ICI, Eurostat, US Census Bureau, World Bank and OCDE
Legend: UCITS - Undertakings for Collective Investment in Transferable Securities
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
74
CMVM
2. THE PORTUGUESE SECURITIES MARKET
2.1 GLOBAL TREND OF THE SECURITIES MARKET AS AN INVESTMENT
DESTINATION
2.1.1 Evolution of the Share Market
The financial instability scenario carried on during 2011, particularly in the European Union, which
reacted on the evolution of the equity markets.
Chart 29 – PSI20 Trend in 2011
Notes: 1) Speculation about possible default of Portuguese sovereign debt; 2) First syndicated issue of Portuguese government bonds since
February 2010, 3) Several rating agencies significantly cut the credit rating of the Portuguese Republic and seven domestic banks and foreign
aid requests Portugal; 4) Portugal signs memorandum of understanding with the EU, ECB and IMF on foreign assistance and is an approved aid package of 78 billion Euros; 5) Germany and France have expressed themselves politically conducive to private sector involvement in the
new aid package for Greece; 6) The yields of French and Italian sovereign debt reached record highs; 7) Prohibition, several European
countries (France, Italy, Belgium, Spain and Greece), the realization any operations on short-selling shares of financial companies; 8) The majority of domestic banks reporting a significant drop of the results for the first half of the year; 9) The Bank of Portugal publishes
information indicating that domestic banks reduced their reliance on funding relative to the ECB.
4.500
5.500
6.500
7.500
8.500
31
-12
-20
10
31
-01
-20
11
28
-02
-20
11
31
-03
-20
11
30
-04
-20
11
31
-05
-20
11
30
-06
-20
11
31
-07
-20
11
31
-08
-20
11
30
-09
-20
11
31
-10
-20
11
30
-11
-20
11
31
-12
-20
11
1
1
1
8
1 1
1
1
7
2
3
4
5
6
9
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
75
CMVM
Taking the variation of the PSI 20 index as a rough indicator of the profitability of Portuguese equity
market (since this index does not consider the effect of dividends paid), this was -27.6% in 2011, so
the last four years only in 2009 the equity market provided a positive return to investors.
Chart 30 – Trend in the Value, Volatility and Transactions of the PSI20
Source: Bloomberg, calculations CMVM.
Notes: The return of the PSI 20 and the value of transactions are expressed in terms of
annual variation. The value of volatility is annual. The volatility used here is the
annualized volatility - standard deviation of daily returns x √ 250. The value of
transactions results from the sum of the product of all the price of each share belonging to
the index and the number of shares transacted at the appropriate price. From the values
thus obtained are given the percentages of annual variation.
The value of stock transactions of the PSI 20 companies, the image of what happened in 2008 and
2009, again recorded a significant decrease (-30.9%), which was almost symmetrical increase in value
traded in 2010 (+31.2 %). The strong market volatility is often associated with reduced levels of
liquidity, although we cannot draw from this a relation of cause and effect. When the title of a liquid is
reduced, the probability of completing an investor (large) in a transaction acceptable period of time
without significantly reducing the price is low.
The bid-ask spread reflects the difference (percentage) between the prices associated with the best
offers for sale and purchase of a security and represents a transaction cost for the investor because if
this buy and sell a stock immediately at the best prices will lose an amount equal to the spread.
- 60%
- 50%
- 40%
- 30%
- 20%
- 10%
0%
10%
20%
30%
40%
2008 2009 2010 2011
Profitability Transactions Volatility
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
76
CMVM
The following table shows the evolution of the bid-ask spread (average) of the securities in the PSI 20
index, and allows to detect a substantial increase and widespread (though more pronounced than in
other companies) of the average value of this indicator in the second half 2011 (increase of 0.29
percentage points).
Table 14 - Average Bid-Ask Spread of Securities Listed on PSI20
Source: Bloomberg; CMVM data.
In this context of higher transaction costs, it is important to ascertain the existence of a co-movement
of the bid-ask spreads of various securities, ie, if the transaction cost of each security is explained by
the performance of the intrinsic attractiveness of this security or by systemic factors related to the
situation of the Portuguese market itself. The percentage of the variance of the bid-ask spread
explained by the first component (which reflects the co-movement of transaction costs) was below
14% in the last three and a half years, which means that the evolution of bid-ask spreads of Portuguese
bonds was primarily explained by factors of an individual nature pertaining to the securities
themselves and not by factors inherent in the Portuguese market situation. This would be a conclusion
that can be drawn through the analysis of co-variance matrix of bid-ask spreads. In the second half of
2011 there was an increase in the importance of the first principal component, which coincided with a
significant increase in the average bid-ask spread. At the end of the year, the first principal component
recorded values near those shown when the bankruptcy of Lehman Brothers occurred.
Períod 2º Sem. 2008 1º Sem. 2009 2º Sem. 2009 1º Sem. 2010 2º Sem. 2010 1º Sem. 2011 2º Sem. 2011 Total
AvMédia 0.55% 0.42% 0.28% 0.30% 0.33% 0.31% 0.60% 0.40%
Máximo 1.25% 1.30% 0.91% 1.10% 1.17% 0.98% 1.42% 1.16%
Mínimo 0.22% 0.22% 0.11% 0.13% 0.12% 0.11% 0.20% 0.17%
Desv. Padrão 0.23% 0.23% 0.17% 0.20% 0.23% 0.18% 0.34% 0.21%
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
77
CMVM
Chart 31 - Trend of the PSI-20 Transaction Costs and the Value of the Main Primary Component
(Standardised Values)
Source: Bloomberg; CMVM data.
Note: The analysis was conducted on a half-yearly basis and not jointly for the entire period.
Despite the more pronounced fall in prices over the previous year, market volatility of Portuguese
shareholder market (23.0%) remained at values almost identical to the previous year (23.3%).
However, in some periods the volatility reached particularly high values, between 1 July and 30
November.
Over the past five years the average correlation of the returns on securities that integrated the PSI 20
index evolved alongside the respective volatility. This means that the average correlation of the
securities in the PSI 20 index increased in periods of high market volatility. The correlation coefficient
of the returns on securities recorded the highest value in the first half of 2010 (0.56) and lower in the
first half of 2007 (0.19).
,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
0,00%
0,10%
0,20%
0,30%
0,40%
0,50%
0,60%
0,70%
2º Sem.2008
1º Sem.2009
2º Sem.2009
1º Sem.2010
2º Sem.2010
1º Sem.2011
2º Sem.2011
(%)
Var
ian
ce e
xpla
ine
d b
y 1
st C
om
po
ne
nt
Ave
rage
Bid
-ask
sp
read
(%) Variance explained by 1st Component Average Bid-ask spread
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
78
CMVM
Chart 32 – Average Correlation Coefficient and Annual Average Volatility of the PSI20 Index
Source: Reuters Knowledge, CMVM data.
The securities of the financial sector is a special case among the majority of listed securities, as this
sector has been hardest hit by the negative economic environment that has persisted since the
beginning of the financial crisis. In the first half of 2007, the correlation coefficient of the profitability
of financial stocks was 0.18, a value slightly lower than those recorded for all titles of the principal
shareholder of the Portuguese market index. With the advent of the financial crisis in the U.S. has
intensified the co-movement of prices: since the second half of 2008 that the correlation of returns is
above 0.5 and higher than those recorded for the other titles in the PSI 20.
In late 2011, the correlation of the securities in the financial sector was 0.68 and volatility reached
61.5%, the highest value found in the analyzed time series. The volatility of these securities was higher
than that of most securities index. In either case, the results clearly illustrate that financial companies
have been hardest hit by the financial crisis and face important challenges, as exemplified by the
increase in bad debts, depreciation of assets and the risk of sovereign default.
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
0,0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
0,8
0,9
Vo
lati
lity
Co
rre
lati
on
Correlation [PSI-20]
Correlation [Financial Companies of PSI-20]
Annual Volatility [PSI-20]
Annual Volatility [Financial Companies of the PSI-20]
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
79
CMVM
The Value-at-Risk (VaR) and 99% confidence that the PSI 20 TR patents during the year saw an
increase in market risk. During the first half of the year the risk was relatively contained, but a
significant increase from the July / August which lasted until the end of the year by contagion from the
turmoil in European markets during the strong selling pressure seen in debt instruments Italian and
Spanish public.29
Chart 33 – Value-at-Risk of 10-day PSI20 – Historical Simulation Method
Sources: Bloomberg; CMVM calculations CMVM.
Note: Last observation on March 21, 2012
In historical terms we note that the period between late 2008 and September 2010 was one in which
the market risk, as measured by this indicator was higher in the series analyzed. Between late April
and early September 2010, when the Greek sovereign debt crisis and Irish peaked, VaR ten days of an
investment that replicate the PSI 20 TR reached the historical maximum of 15.7%.
During the period of the sub-prime crisis, VaR was also higher, rising from an average of 8.2% in June
2008, to stand always above 14% since mid-October 2008 (following the bankruptcy of Lehman
Brothers) until September 2010.
The risk of the market that has lived since 2008, and particularly in the second and third quarters of
2010, in which the VaR of the PSI 20 stood always above 14.8%, appears to be comparable only two
times since 1995. The first, between October 1998 and September 1999, in which the VaR to ten days
29 Although VaR is a positive value, the option is to present the VaR values preceded by a minus sign to provide a better graphical
visualization of the idea of the loss that value expresses. For a better understanding of the methodology of the study refer to CMVM
"Value-at-Risk: An Application to the Principal Equity Index Market Portuguese", available at,
http://www.cmvm.pt/CMVM/Estudos/Em% 20Arquivo/Documents/EstudoCMVM012011Final.pdf .
2011 1995-2011
-20
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
%
99% 95%
-14
-12
-10
-8
-6
-4
-2
0
Jan
-11
Fev
-11
Mar-
11
Abr-
11
Mai-
11
Jun
-11
Jul-
11
Ago
-11
Set-
11
Out-
11
Nov
-11
Dez-
11
Jan
-12
Fev
-12
Mar-
12
%
VaR 10 D (95%) VaR 10 D (99%)
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
80
CMVM
of the PSI 20 TR stood at 13.8%, during the Russian financial crisis and the collapse of hedge fund
Long-Term Capital Management (LTCM) . The second, lived in 2000 at the outbreak of the bubble
technology companies, with VaR levels only slightly lower than the 13.8% mentioned. In short, in the
second half of the year the market risk increased shareholder Portuguese so important, and the titles of
the financial sector were penalized more than the generality of the securities constituting the PSI 20
index, due to the impact that the crisis has had on the industry and financial difficulties arising that
their companies faced.
Only three companies closed the year 2011 with the inverse variation of the PSI 20 (showing positive
returns). JMH was the company with the highest increase (12.2%), progress particularly significant
given that in 2010, an increase of 63.2%, had had the best performance of the Portuguese equity
market. EDP Renewables (9.0%) and Cimpor (4.9%) also experienced rising prices (and companies
that share with Jerónimo Martins a high degree of internationalization, but contrary to this, had
devalued 21.1% and 34 , 6% in 2010, respectively).
Chart 34 – Annual Difference of the PSI20 Company Pricing
Source: Bloomberg and CMVM data.
Note also the general fall in prices of the four banks included in the PSI 20. Among the telcos, the
progress was distinguished with the Portugal Telecom and Zon exacerbating the fall in the price of the
previous year and with Sonaecom experiencing a price change less negative.
-100%
-60%
-20%
20%
60%
100%
AL
TR
I
BA
NIF
BC
P
BE
S
BP
I
BR
ISA
CIM
PO
R
ED
P
ED
P…
GA
LP
J. M
AR
TIN
S
MO
TA
EN
GIL
P.T
EL
EC
OM
PO
RT
UC
EL
RE
N
SE
MA
PA
SO
NA
E
SO
NA
E I
ND
SO
NA
EC
OM
ZO
N
2009 2010 2011
End-year Values
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
81
CMVM
The PER of the PSI 20 fell to 11.4 in 2011 (12.5 last year). If the PER is interpreted as a measure of
the recovery period of the investment, the decrease would signal that the recovery period of a
hypothetical investment in a representative basket of PSI 20 was shortened by about a year. However,
made the calculation of cost of capital implicit PSI 20 and Eurostoxx 50 based on the Gordon model, it
is concluded that the cost of capital is higher than the national rate in Eurostoxx50 (about double),
which means that investors demand a rate of return that reflects the greater perceived risk of the
economy and domestic enterprises face the major European companies.
Chart 35- PER of PSI 20 Companies (Average of Last 10 Years apropos 2011)
Source: Bloomberg, calculations CMVM.
Note: For the purposes of analysis the average PER of the 10 years were determined after eliminating the influence of extreme
observations recorded in Sonaecom (30/12/2005-29/6/2006 period), in determining the average PER of the last 10 years each
company were considered the available observations, which in most cases does not correspond to the complete time series of 10
years; When the EPS is negative, the PER is not calculated. The PER is calculated without purging the non-recurring income of
companies, such as the cases of the sale of the EN VIVO by Brisa and CCR in 2010.
Only two companies (and Banif Portugal Telecom) recorded an average annual PER above the average
of the last 10 years. Remember that in 2010 there were six companies where this indicator signaled
some potential overvaluation.30
30 It should be noted that for eight companies there is no 10-year information and thus the maximum extent of available data in the
calculation of historical PER was used. (annual averages)
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
82
CMVM
An alternative method for calculating the PER is obtained by dividing the current price of each asset in
the amount of income generated by these assets adjusted by a model unobservable components
("Adjusted PER", estimated by maximum likelihood using the Kalman filter) 31. Another possibility is
the use of moving average of the results generated by companies within the PSI 2032. It is useful,
however, to compare the PER thus obtained which results in an adjustment of the results of companies
in order to better differentiate structural behaviors of the term.
The results underlying the two methods suggest the existence of a significant and synchronized
correction PER of PSI 20 titles throughout 2008. In the moments prior to this patch there was some
overvaluation of shares given the higher value of the PER set against its historical average.
The year 2009 was characterized by a correction of opposite sign , as investors show are available to
increase the amount paid for each euro of profits generated by companies. Nevertheless, the recent
sovereign debt crisis was associated with a further decrease of the PER, whose outlines were not
homogeneous for all titles. The financial sector appears to have been generally more penalized. The
Jerónimo Martins remained above the historical average (unlike other non-financial securities), in line
with the positive trend in the price of its shares in the last two years.
Chart 36 - PER MM5 (left) and Adjusted PER (right) of PSI20 securities (non-financial)
Source: Bloomberg (CMVM data). Note : MM5 corresponds to PER calculated based on adjusted results through moving average of the previous five years , while the adjusted PER
corresponds to adjustment by model unobservable components . The value obtained for each company is divided by the respective historical
31 Refer to Textbox 1. 32 For estimation of the model unobservable components were considered monthly data of each of the titles. Additionally, for reasons of
applicability of this model (in particular the lack of sufficient observations and the existence of net losses during the relevant period
estimation) were not included in the analysis titles: Altri, Brisa, Galp, EDP Renewables, Sonae Indústria and Sonaecom. Given the
scarcity of data, a moving average of the past five years was used (MM5) instead of the previously used 10 years.
0.00
0.50
1.00
1.50
2.00
2.50
3.00
SEM CPR PTI PTC EDP
EGL ZON JMT SON PSI20
0.00
0.50
1.00
1.50
2.00
2.50
3.00
SEM CPR PTI PTC EDP
EGL ZON JMT SON PSI20
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
83
CMVM
average. The estimation period historical information includes the maximum available for each index, it is therefore not the same in all cases. The
longest series has 145 observations and 97 shorter. Last observation is included in December 2011.
Chart 37 - PER MM5 (left) and Adjusted PER (right) of PSI20 securities (financial)
Source: Bloomberg (CMVM data). Note: MM5 corresponds to PER calculated based on adjusted results through moving average of the previous five years, while the adjusted
PER corresponds to adjustment by model unobservable components. The value obtained for each company is divided by the respective
historical average. The estimation period includes the maximum historice available information for each index and is thus not the same in all cases. The longest series has 144 observations and 106 shorter ones. In the left pane, the last observation is included in November 2011. For
Banif the first observation corresponds to December 2007 and the last September 2011. In the right pane the last observation is included in November 2011 and for Banif September 2011.
Only three of the PSI 20 companies showed an increasing trend of PBR: BPI, Cimpor and EDP. At the
end of the year half of the PSI 20 companies were valued at their respective market shares below book
value of equity, two more than in the previous year end.
Historically only two companies registered a PBR above the respective average ten years: Jerónimo
Martins and GALP. However, the ten-year historical average in all cases exceeds the book value with
the exception of EDP Renewables (0.91), a company that should be remembered, is one that is listed
on the market for less than 10 years.
0.00
0.50
1.00
1.50
2.00
2.50
3.00
BCP BES BPI BNF PSI20
0.00
0.50
1.00
1.50
2.00
2.50
3.00
BCP BES BPI BNF PSI20
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
84
CMVM
Chart 38 - PBR PSI20 Companies
Source: Bloomberg.
Note: In determining the average PBR of the last 10 years of each company only observations available were
considered, which in most cases does not correspond to the complete time series of 10 years.
0%
50%
100%
150%
0
2
4
6
8
10
AL
TR
I
BA
NIF
BC
P
BE
S
BP
I
BR
ISA
CIM
PO
R
ED
P
ED
P…
EN
GIL
GA
LP
J. M
AR
TIN
S
P.T
EL
EC
OM
PO
RT
UC
EL
RE
N
SE
MA
PA
SO
NA
E
SO
NA
E I
ND
SO
NA
EC
OM
ZO
N
(a)/
(b)
PB
R
Average of the last 10 years apropos 2011
0
2
4
6
8
10
AL
TR
I
BA
NIF
BC
P
BE
S
BP
I
BR
ISA
CIM
PO
R
ED
P
ED
P…
GA
LP
J. M
AR
TIN
S
MO
TA
EN
GIL
P.T
EL
EC
OM
PO
RT
UC
EL
RE
N
SE
MA
PA
SO
NA
E
SO
NA
E I
ND
SO
NA
EC
OM
ZO
N
2009 2010
End-Year Final Values
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
85
CMVM
2.1.1 Profitability and attractiveness of the Securities Market
In 2011 Portugal resorted, as stated above, to the external economic and financial assistance
programme. This programme led to the adoption of various austerity measures aimed at fiscal
consolidation that could not fail to have recessionary effects on the economy.
The performance of the domestic equity market, as measured by its most representative index (PSI 20),
was negative and reflected the difficulties experienced by businesses. Between the beginning of the
financial crisis in the summer of 2007 and the end of 2011, the fall of stock prices has meant that
investment in domestic equity market, in a historical perspective and 10 years, had become less
attractive relative to other investment alternatives. Only the PSI General (who is a total return index)
presented an average annual rate of return positive over the past 10 years. Still, this profitability not
only was not sufficient to compensate for the impairment in the period due to the general increase in
prices, but also not passed to other investment alternatives, perceived as being less risky, such as
certificates of savings (those with a yearly average rate of return to 10 years virtually identical to the
average inflation over the same period).
Among the financial instruments presented in the following table, Treasury bonds (with residual
maturity of 10 years) would have been revealed as the most rewarding investment for an investor who
had acquired such financial instrument in late 2001.
Table 15 – Yeild and Risk of Different Types of Financial Instruments
2011 Dez-2001-Dez-2011
Rentability Rentability Index
Index Annual Average Standard Deviation
PSI Geral -20.4% 0.4% 27.4%
PSI20 TR (total return) -24.1% -0.4% 28.3%
PSI20 -27.6% -3.8% 27.3%
Treasury Bills 6.7% 4.4% 0.9%
Savings Certificates 1.1% 2.2% 0.6%
Consumer Price Index 3.7% 2.3% 1.3%
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
86
CMVM
Sources: Euronext Lisbon, IGCP, Banco de Portugal and INE (CMVM data).
For every euro invested in Treasury bonds in late 2001, an investor would have obtained a cumulative
return of 54 cents during the subsequent 10 years.33 Albeit, were the investment have been made in
shares of the domestic market, the profitability achieved in the same period, for PSI General and the
PSI 20 TR, respectively (indexes that include the effect of dividends) would be only 4 cents in the first
case and, for the second index, a value symmetrical, i.e, one euro invested in 2001 worth only 96 cents
in late 2011. In the same line of analysis, an investment in savings certificates would have provided a
return of 25 cents for each euro invested, while the purchasing power of one euro at the end of 2011
would be 74 cents considering the inflation rate of the past 10 years. Thus, the purchasing power of
one euro invested in late 2001 in savings certificates would be only 99 cents in late 2011. In short, not
considering the effects of taxation, in the last 10 years only investment in government bonds would
have provided a cumulative return higher than the impairment caused by the increase in the general
price level.
Chart 39 – Accumulated Remuneration from Financial Investment
Source: Euronext Lisbon, IGCP, INE and Banco de Portugal (CMVM data).
The number of companies that paid dividends for the year 2011 decreased by 41.4% compared to that
made for the year 2010, which is a reflection of the difficulties of Portuguese firms: some chose to
build up equity instead of distributing the results for shareholders, while others were negative and
33 Taxes and other fees are not included in this analysis.
0,4
0,6
0,8
1
1,2
1,4
1,6
1,8
2
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
Eu
ro
PSI Geral
PSI20 TR
PSI20
Treasury
Bills
Savings
Certificates
Consumer
Price Index
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
87
CMVM
therefore not carried out any dividend to stockholders. The amount of dividends fell; this reduction
was more evident among financial companies (which together had losses in 2011). The reduction in
dividends was also notorious among the companies that are not part of the benchmark index.
Corporate earnings also decreased. The decline was more pronounced among financial firms and
between smaller and liquidity. In the case of financial firms, is to emphasize the impact of the
sovereign debt crisis and the partial forgiveness of debt issued by the Greek state in their results, as
well as impairments resulting from increases in bad debts.
The payout ratio corresponds to the ratio between dividends paid and profits. Financial firms, in
particular those included in the PSI 20, suffered losses. By consolidating the results for the PSI 20
companies, the profits of non-financial companies are absorbed by the poor results of financial firms,
by the denominator (earnings) is reduced and the ratio inflated. This explains the divergence of results
for companies that integrate financial and non-PSI 20. For companies that are not members of the PSI
20, the fact that profits are globally negative explains that the payout ratio is negative.
Table 16 – Share Capital Yield, Dividend Distribution and Retention
2011 % 2010 % (%)
Number of Companies that Distributed Dividends 17 36.2% 29 61.7% -41.4%
Number of Companies that did not Distribute
Dividends 30 63.8% 18 38.3% 66.7%
Amount of Distributed Dividends
PSI20 Companies 1,371 98.7% 4,319 98.2% -68.3%
Non-PSI20 Companies 18 1.3% 81 1.8% -77.8%
Non-Financial Companies 1,389 100.0% 4,057 92.2% -65.8%
Financial Companies 0 0.0% 342 7.8% -100.0%
TOTAL 1,389 100.0% 4,400 100.0% -68.4%
Total Amount of Profit
PSI20 Companies 1,867 123.7% 10,390 98.2% -82.0%
Non-Financial Companies -358 -23.7% 195 1.8% n.a.
Empresas Não Financeiras 2,791 185.0% 9,328 88.1% -70.1%
Financial Companies -1,282 -85.0% 1,257 11.9% n.a.
TOTAL 1,509 100.0% 10,585 100.0% -85.7%
Payout Ratio
PSI20 Companies 73.44% 41.6%
Non-PSI20 Companies -5.0% 41.5%
Non-Financial Companies 49.8% 43.5%
Financial Companies 0.0% 27.2%
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
88
CMVM
TOTAL 92.1% 41.6%
Dividend Yield
PSI20 Companies 2.9%
7.2%
Non-PSI20 Companies 0.8%
2.1%
Non-Financial Companies 3.1%
7.4%
Financial Companies 0.0%
3.8%
TOTAL 2.8%
6.9%
Own Capital Return
PSI20 Companies 4.2%
26.1%
Non-PSI20 Companies -7.6%
4.4%
Non-Financial Companies 8.2%
32.7%
Financial Companies -8.4%
8.0%
TOTAL 3.1% 23.9%
Source: Reuters Knowledge, CMVM data.
Obs.: F. Ramada, Orey, the Grand Para, Reditus, Salvador Caetano Estoril-Sol were not included in the analysis for the benchmarks of the
total amount of profits, payout ratio, dividend yield and return on equity, since at the time of this report, the financial information/accounting
was not available.
Note: Note: The profits were not eliminated from the non-recurring income of companies as were the cases for the sale of Vivo by PT and
CCR by Brisa in 2010.
Table 17 – Dividend Distribution as a Percentage of Own capital of the Previous End-Year
2011 2010
Non-Financial 8.2% 10.5%
Financial 0.0% 0.9%
PSI20 6.2% 7.7%
Non-PSI20 0.5% 1.7%
All 5.7% 7.1%
2.1.3 Evolution of the Relative Importance of the Securities Market
Over time, depending on the development of characteristics such as profitability, risk, or liquidity of
different financial instruments, or in the light of their preferences, the economic instruments vary in
applying their savings. The following table, constructed based on the National Financial Accounts34
,
shows the variation of assets by type of financial instrument35
, for the total of the Portuguese economy
and for individuals.
34 Financial accounts form a coherent and structured representation of statistical information relating to financial transactions and assets
of the economy, being produced according to the principles contained in the ESA 95 methodology. 35 Changes in assets correspond to the net acquisition of financial assets is equal to the sum of transactions that affect the financial assets
held by institutional sectors in a given period, tracing flows (prices recorded at the time they are made) when economic value or rights
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
89
CMVM
Table 18 - Variation of Assets per Financial Instrument Type (Total of Economy and Individual)
Source: Banco de Portugal (National Financial Accounts), CMVM data.
In total, the economy recorded a net reduction of financial assets of 14.8 billion Euros in 2011. This
reduction was not homogeneous for all financial instruments, since the cash and deposits, loans and
other debts and credits increased. The securities other than shares (which are integrated bonds) were
one of the instruments that met the greatest reduction in the order of 19 billion Euros, with the shares
and other equity to have a reduction of around 4.6 billion Euros explained by the decrease in the values
invested in units in investment funds.
In the case of individuals, there were positive net purchases of approximately 1.5 billion Euros in
2011, there has been a substantial increase in cash and deposits as securities other than shares, and
fundamentally units in investment funds and savings products insurance area, experienced a substantial
reduction.
Regarding the evolution of the structure of the stock of financial assets36
to the total of the Portuguese
economy, there was a tendency to reduce the weight of shares and other equity (essentially units in
and obligations are created. The values shown correspond to the consolidated amounts, by eliminating transactions between entities
within the same institutional sector. 36 This analysis is performed based on the balance sheet, in which are recorded the values of the stock of assets and liabilities held by
each institutional sector at a given time. The variations in the values of stocks between two moments reflect beyond the financial
transactions that occur in this period the other changes in volume and gains or losses.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
90
CMVM
investment funds), but also, in 2011 a substantial reduction in the weight of titles that do not share
(probably associated with significant reductions in emissions of Treasury bonds) and insurance
technical reserves. In the case of individuals, there has been a substantial increase in the weight of cash
and deposits, offset by reductions in the weight of stocks and other equity excluding investment funds
and units in investment funds and also with special degree in 2011, the insurance technical reserves.
Chart 40 – Trend of the Weighting of Different Financial Instruments in the Total Amount of Financial Assets held
by the Total Economy and Individually
Source: Banco de Portugal (National Financial Accounts), CMVM data.
The analysis of the figures shows, on one hand, that there was a tendency to reduction of financial
assets as a way to reduce passive and, on the other hand, an adjustment pattern of portfolios of
instrument output with higher risk and tendency to retreat into instruments such as deposits.
Consolidating the stock of financial assets in the economy with financial liabilities, it is concluded that
in 2011 the net position to the outside was negative at about 170 billion euros, i.e. an amount equal to
the national GDP.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
91
CMVM
The significant drop in share prices of the domestic market in the last four years, the pair continued
growth, as previously mentioned, the applications in bank deposits, especially from individuals,
originated the loss relative importance compared to the equity market deposits and certificates savings
and Treasury. At the end of the year the market capitalization weight of the main market of Euronext
Lisbon against a set of investments mentioned earlier was about a third than at the end of 2006.
The economic and financial crisis and the fall of most financial asset prices had a profound effect on
asset management. Except for the real estate segment, other activities included in the asset
management lost weight very significantly compared to the investments made in bank deposits,
certificates of indebtedness and Treasury. This was much more pronounced in investment funds
(domestic and foreign traded in Portugal), since in 2006 this segment accounted for 21 % of
investments in bank deposits, certificates of indebtedness and Treasury in late 2011 and its weight
girded up to 6 %. i.e., at the end of the year for every euro applied by households and non- financial
deposits and savings certificates and Treasury, investments in mutual funds were only six cents, the
lowest figure since at least 2003.
Table 19 - Comparative Weighting of the Securities Market apropos Term Deposits and Savings Certificates
However, it was not just falling financial asset prices which led to severe erosion of values managed
by asset management and, in particular, the investment funds. The decrease of the amount invested in
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
92
CMVM
mutual funds, but also has the special investment funds, was also due to capital outflows (volume
effect, translated, in the case of both types of funds referred to above, for a net disinvestment of 5700
million and a reduction of 407 000 participants). Rather, in deposits, especially in the made by
individuals, there has been an influx of around 14 billion Euros in the two most recent years.
This is explained not only by the negative performance of many investment funds, which have caused
the reallocation of savings alternatives considered lower risk, but also the practice of policies on
deposits by credit institutions that were especially aggressive and had as objectives meet liquidity
needs of these entities and reduce the ratio of transformation of deposits into loans.
Chart 41 - Trend in the Net Subscription of UCITS versus Term Bank Deposits and Savings Certificates
Sources: CMVM, IGCP and Banco de Portugal, CMVM data.
Savings certificates, since they were changed, more harmful to investors, their rates of pay, have also
been the object of a strong disinvestment. In the two most recent years capital outflows were
approximately 5.5 billion Euros, but if the review period is extended until the end of 2007 the total
-3.009
73
-1.400
652
2.312
5.637
7.949
-2.758
132
-4.087
623
11.608
-3.088
8.520
-6.000
-4.000
-2.000
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
Eu
ro M
Illi
on
2010 2011
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
93
CMVM
amount divested amounted to nearly 7 billion Euros. This means that the amount invested in savings
certificates at the end of 2011 accounted for just over 70% of existing in late 2007.
Regarding treasury certificates, after the accession of investors after the release of this type of financial
instrument in July 2010, there was some contention on new subscriptions.
The deterioration of the macroeconomic framework, which introduced a perspective increased risk
investments in debt and the introduction, in 2011, the maximum compensation ceilings to provide for
treasury certificates have been the source of his more moderate growth. Indeed, while in the last
months of 2010 were raised 652 million Euros investment in treasury certificates; subscriptions
throughout the year 2011 were lower than that value.
2.2 OVERALL TREND IN THE SECURITIES MARKET AS A SOURCE OF FINANCING
2.2.1 Domestic Market
As with the evolution of the securities market as an investment destination, one is able to analyse the
source of the Portuguese economy financing based on the National Financial Accounts, which allow
for assessing which instruments exist with greater weight change in financial liabilities. The table
below shows the change in liabilities per type of financial instrument, in aggregate form, for the total
amount of the Portuguese economy and for non-financial companies.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
94
CMVM
Table 20 – Liabilities Variation per Financial Instrument (Total Economy and Non-Financial Companies)
Source: Banco de Portugal (National Financial Accounts), CMVM data.
For the economy as a whole, it appears that in 2011, the financial liabilities were reduced by about 5.9
billion euro, and has witnessed a drop in monies and deposits, in securities other than shares and in
shares and other equity, registering an increase in loans associated with loans granted to the Portuguese
economy in the framework of the Economic and Financial Assistance Programme.
The decreases in monies and cash deposits, bonds, including shares and other equity are associated
with the output of non-resident investors in the domestic market. In the case of currency and deposits,
together with the previous asset variation, it appears that non-residents reduced, in net terms, currency
and deposits in Portugal around 25 billion Euro.
The variation of the liabilities of non-financial corporations experienced a rise of circa 9.4 billion euro,
with loans, according to the process of deleveraging and retrenchment of bank credit, dropped by more
than 3.1 billion Euros. Shares and other equity and non-share equity recorded significant increases,
signaling that companies have resorted to other financial instruments to offset the reduction in bank
credit.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
95
CMVM
Analysing the structure of investment financing of Portuguese companies in more detail, based on
Qualitative Investment Survey, one can see that throughout the year, difficulties in of obtaining credit
from domestic companies within the banking system have increased. These difficulties have resulted in
a reduction in the relative weighting of bank credit as a means of financing business investment. In
2010, the weighting of bank loans in the total financing of Portuguese companies accounted for 28.6%,
which likens with the 25.7% apropos 2011. The decrease in the relative weighting of bank credit was
partially offset by an increase in EU Funds and the item 'Other'. On the other hand, financing for
shares and bonds was identical to the previous year (i.e., covering only 0.3% of the total funding of
Portuguese companies), so the capitals market remained a residual source for financing our companies.
Chart 42 – Investment Funding in Portugal
Source: Investment Survey (INE).
The Portuguese business, however, is very uneven. The largest companies (over 250 employees) have
a lower relying rate on the banking sector since same have greater financing capacity and access to the
capital market. According to the Survey of Investment for 2011, larger companies (over 500
employees) the weight of the cash flows is 63.1 %, while in companies with a number of workers
employed between 50 and 249 decreases to 46.5 %. Funding for stocks and bonds was 0.7 % among
larger firms and nonexistent in firms with fewer than 500 employees. It is thus confirmed that the
financing of small and medium enterprises through the capital market is very minute. Since the
0% 20% 40% 60% 80% 100%
2011
2010
2009
2008
2007
2006
2005
2004
SELF-FINANCING BANK LOANS
SHARES AND BONDS GOVERNMENT LOANS
EU FUNDS OTHER TYPES OF LOANS
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
96
CMVM
economic structure and Portuguese business consists mainly of small and medium-sized family-
oriented companies, it is thus increasingly relevant to have initiatives that promote the entry of these
companies to the capital market. Both the equity and the bonds markets may make a significant
contribution to meet the financing needs of domestic enterprises.
Table 21 - Investment Financing Source per Staff Ranking
NUMBER OF STAFF
FINANCING SOURCES (a)
SELF
FINANCING
BANK
LOANS
SHARES
AND BONDS
GOVERNMENT
LOANS
EU
FUNDING OTHER
1º (≤49) 59.6 31.0 0.0 0.7 3.0 5.7
2º (50-249)
46.5 27.1 0.0 0.6 8.7 17.0
3º (250-499)
70.7 16.4 0.0 0.7 6.1 6.2
4º (≥500) 63.1 25.7 0.7 0.2 2.8 7.6
TOTAL 59.1 25.7 0.3 0.4 4.9 9.6
Source: Investment Survey (INE).
The deteriorating corporate outlook according to the Survey of Investment, was the main curb to
investment. This is certainly associated with the macroeconomic environment that crosses the
Portuguese economy and the outlook is not very optimistic for next year. Said was followed by issues
such as such return on investment and the difficulty in obtaining bank loans. The capital market was
not identified as being a factor relevant to the limitation of investment in Portugal.
Table 22 - Factors Limiting Investment in 2011
TOTAL
INSUFFICIENT PRODUCTIVITY CAPACITY 8.6
DROP IN SALES 72.4
DIFFICULTY IN HIRING QUALIFIED PERSONNEL 2.9
LEVEL OF INTEREST RATES 23.8
INVESTMENT PROFITABILITY 42.6
SELF-FINANCING CAPABILITY 27.5
DIFFICULTY IN OBTAINING BANK LOANS 29.2
CAPITAL MARKET 1.5
OTHER 9.8
Source: Investment Survey (INE).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
97
CMVM
Regarding the return on equity in Portugal, this showed a sharp drop in 2011 in the non-financial
sector companies. The clash between the months of December 2011 and 2010 indicates a reduction of
6.9 percentage points for this indicator.
The cost of debt capital exceeded the return on equity and therefore the profitability of invested
capital, which suggests a weak adequacy of the capital structure of Portuguese companies. Despite
repeated descents of the indexing interest rate in the Euro area, there was however an increase of 1.1
percentage points in the cost of debt, which suggests an increase in risk premiums on loans for the
non-financial sector.
Chart 43 - Remuneration per Capital Factor in the Non-Financial Sector in Portugal
Source: Banco de Portugal (Central Balance Sheet).
As for financing the Non-Financial Corporations (NFCs) , there was a reduction of 0.65 % of the stock
of bank credit to these entities between the months of December 2010 and 2011 . However, a more
detailed analysis also shows some heterogeneity associated with the maturities of the loans. Indeed,
this reduction was 9.81 % among loans with a maturity of between one and five years and 3.60 % for
loans exceeding five years, which reflects the efforts of companies to secure financing at longer
intervals in order to avoid difficulties in terms of roll-over debt in the coming years .
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
01
-03
-20
06
01
-06
-20
06
01
-09
-20
06
01
-12
-20
06
01
-03
-20
07
01
-06
-20
07
01
-09
-20
07
01
-12
-20
07
01
-03
-20
08
01
-06
-20
08
01
-09
-20
08
01
-12
-20
08
01
-03
-20
09
01
-06
-20
09
01
-09
-20
09
01
-12
-20
09
01
-03
-20
10
01
-06
-20
10
01
-09
-20
10
01
-12
-20
10
01
-03
-20
11
01
-06
-20
11
01
-09
-20
11
01
-12
-20
11
Capital Invested Profitability Debt Cost Own Capital Profitability
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
98
CMVM
Chart 44 – Bank Loans (Other Monetary Financial Institutions) to Non-Financial Companies
Source: Banco de Portugal.
In the particular case of the larger companies that already have their shareholder capital open to public
investment and admitted to trading on the market, they have a higher propensity to resort to the
issuance of financial instruments as a way of financing. As discussed in Section 2.3, the amount of
shares issued in the Portuguese market in 2011 amounted to 2.1 billion euros, mainly for financial
companies. In the bond market, the amounts issued by public companies were lower than in the
previous year, which deserves special consideration due to the contraction of the supply of bank
financing, requiring a stronger role of alternative sources of funding.
The net investment of non-financial listed companies increased by 97 % compared to 2010 (see table
below). However, the amount reported is inflated by the investment made by Portugal Telecom in
Brazil, in particular the accounting treatment given to this investment. Excludes values of this
company, there is a reduction of 39 % of the variation in net assets of non-financial Portuguese
companies.
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
jul-
07
ou
t-0
7
jan
-08
abr-
08
jul-
08
ou
t-0
8
jan
-09
abr-
09
jul-
09
ou
t-0
9
jan
-10
abr-
10
jul-
10
ou
t-1
0
jan
-11
abr-
11
jul-
11
ou
t-1
1
Euro
Mill
ion
OIFM to SNF Loans - Up to 1 Year OIFM to SNF Loans - Ufrom 1 to 5 Years
OIFM to SNF Loans - Over 5 Years OIFM to SNF Loans
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
99
CMVM
About 61 % of the variation in net assets of non-financial corporations was due to financial funding (of
which 6 % variation relates to equity and 55 % to debt capital), it is concluded by the predominance of
foreign capital financing these companies in 2011, similar to what happened with the universe of
Portuguese companies. In 2010 funding for capital assumed greater importance that financing by debt
capital, so this situation seems a reversal of the funding strategy of companies, is not unrelated to the
significant drop in corporate earnings, limiting self-financing.
Table 23 – Financing Structure of Asset Variation of Listed Companies
2011 % 2010 % Var (%)
Non-Financial Companies
Net Asset Variation 10.962 100% 5.562 100% 97%
Financial Financing 5.468 50% 6.999 126% -22%
Own Capital Financing -1.362 -12% 5.609 101% n.a.
Financing via Financial Debt 6.829 62% 1.389 25% 392%
Other Type of Financing 5.495 50% -1.436 -26% n.a.
Financial Companies
Net Asset Variation -12.925 100% 6.899 100% n.a.
Financial Financing -10.254 79% -5.768 -84% n.a.
Own Capital Financing -3.229 25% -555 -8% n.a.
Financing via Financial Debt -7.025 54% -5.213 -76% n.a.
Other Type of Financing -2.671 21% 12.667 184% n.a.
Non-Financial Companies (excluding PT)
Net Asset Variation 3.188 100% 5.233 100% -39%
Financial Financing 1.957 61% 3.764 72% -48%
Own Capital Financing 203 6% 2.535 48% -92%
Financing via Financial Debt 1.755 55% 1.229 23% 43%
Other Type of Financing 1.231 39% 1.469 28% -16%
Source Reuters Knowledge.
In the financial sector there was a substantial reduction of the aggregate net assets. Firms in this sector
experienced a substantial depreciation of the value of its assets in 2011, resulting from impairments
related to partial forgiveness of sovereign debt to the Greek state and provisions associated with bad
loans. Funding for capital decreased as a result of losses recorded in the year and despite the capital
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
100
CMVM
increases that occurred in some cases. Funding for debt capital financial firms also decreased in 2011
due to higher difficulties in obtaining bank credit and the conversion of some debt into equity.
The ratio of market capitalization and total net assets decreased by 3.1 percentage points compared to
2010, when considered aggregates for companies listed on Euronext Lisbon. In absolute terms, this
reduction was more pronounced among the set of non-financial companies (-9.7 pp.) since they show a
higher values for that benchmark. A possible explanation lies in the sharp reduction in market
capitalization of Portuguese companies, the result of falling share prices, since, as mentioned, the net
assets of non-financial corporations increased .
Market capitalization as a percentage of equity exhibited similar behavior to the ratio between the
market capitalization and total net assets. The decline involved all clusters, without prejudice to be
most pronounced among the smaller and liquidity. The drop of of 23.9 percentage points also deserves
attention pertaining to this ratio between financial firms, with a price-to-book ratio aggregated by
34.7% in late 2011, with only one financial company having a price-to-book ratio greater than one.
This means that at the end of the year, the market price of the shares of the financial sector represented
on average only 34.7 % of their book value.
Table 24 – Weighted Trend in Market Capitalisation
2011 2010
Non-Financial Companies
Market Cap/Net Asset Total 31,4% 41,1%
Market Cap./Own Capital 138,0% 160,2%
Financial Companies
Market Cap/Net Asset Total 1,3% 2,7%
Market Cap./Own Capital 34,7% 58,6%
PSI20 Companies
Market Cap/Net Asset Total 13,5% 17,1%
Market Cap./Own Capital 115,8% 133,6%
Non-PSI20 Companies
Market Cap/Net Asset Total 2,0% 3,5%
Market Cap./Own Capital 55,8% 83,9%
TOTAL
Market Cap/Net Asset Total 10,7% 13,8%
Market Cap./Own Capital 110,3% 128,8%
Source: Reuters Knowledge.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
101
CMVM
The following graph shows the ratios of short-term debt compared to total debt of non-financial
enterprises and total debt as a proportion of EBITDA37
. The majority of companies experienced a
reduction of this indicator of short-term liquidity in the last year, which was more pronounced in non-
financial firms smaller.
The second indicator reflects the company's ability to generate operating cash flows to pay your debt to
creditors. The companies comprising the PSI 20 have a ratio lower than the others, indicating a greater
ability to meet the obligations in the long term. The ability to meet these obligations to creditors
increased among companies not included in the benchmark Portuguese, despite the indicator stand at
levels much higher than those of larger companies and liquidity
Chart 45 - Short-Term Debt and EBITDA Debt Ratios of Non-Financial Companies
Short-Term Debt Ratio EBITDA and Debt Ratio
Source: Reuters Knowledge, CMVM data.
Note: F. Ramada, Ore, Grão-Pará, Reditus, Salvador Caetano and Estoril -Sol have not been included in the analysis since the
information on the date of this report was not available as to the required financial/accounting information.
37 The EBITDA corresponds to the results generated by the activity of a company before interest, tax depreciation and repayments.
0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
PSI-20 Non PSI-20 Total
2009
2010
2011
-
5,00
10,00
15,00
20,00
PSI-20 Non PSI-20 Total
2011
2010
2009
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
102
CMVM
The implicit interest rate in the credit facilities may be obtained from the ratio between the balances
and interest paid on borrowings and was 4.25% in 2011 for all non-financial companies listed on a
regulated market. The generality of these companies experienced a rise in interest rates associated with
the remuneration of debt capital, which was more pronounced among lower liquidity and size.
However, during the year saw the general decline in interbank interest rates that are benchmarks for
these loans (Euribor), so that increase was due largely to the significant increase in the risk premium
demanded by the financial sector and the majority of investors in this group of companies and also to
increase the relative indebtedness of medium and long term.
Chart 46 - Ratio between Interest Paid and the Total Value of Loaning
by Non-Financial Companiesl
Source: Reuters Knowledge, CMVM data.
Note: F. Ramada, Ore, Grão-Pará, Reditus, Salvador Caetano and Estoril -Sol have not been included in the analysis
since the information on the date of this report was not available as to the required financial/accounting information.
0,00%
1,00%
2,00%
3,00%
4,00%
5,00%
6,00%
7,00%
8,00%
9,00%
PSI-20 Non PSI-20 Total
2009
2010
2011
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
103
CMVM
2.2.2 Comparison between the National Market and Other European Markets
The economic and financial crisis that occurred in the Eurozone had lopsided effects on business
performance and the relevant capital structures. Even before the beginning of financial crisis some
peculiarities of the companies in the Euro area were already present, which was particularly noticeable
in the capital structures and debt levels, particularly among southern Europe countries. Nominal
convergence of macroeconomic indicators such as interest rates and inflation rates was not
accompanied by a convergence in terms of other relevant benchmarks at the micro level, especially at
enterprise level.
During 2010 and 2011, implementation of budget adjustment plans took place in the public sectors of
some countries in the Eurozone, with retrenchment effects on demand for private agents.
Simultaneously, there was an effort to deleverage the private and public sectors in countries like
Portugal, Ireland, Greece and even Italy and Spain, which resulted from the shortage of bank loans and
a substantial increase in the required risk premiums.
The ratio38
between the cash and book value of assets of listed companies is an indicator of immediate
company liquidity. The values recorded for each country are influenced by situational factors such as
the economic crisis that most European countries are going through, but also by structural factors
related to the development of their financial systems and the type of relationships between companies
and the banking sector. This indicator experienced a substantial increase between 2009 and 2011 for
non-financial companies based in Portugal. On average, 10.3% of the assets of these companies were
invested in liquid assets such as bank deposits and cash on demand, the highest among the countries
under analysis.
38 The ratios presented in this section were obtained using the following mathematical expression:
∑
∑
, where
(
) is the value of variable 1 (2) for company k in country i in period t and is the value of the benchmark
analysed for country i at time t.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
104
CMVM
A possible reason for this development is the increased difficulty of Portuguese companies in
obtaining short-term financing to meet cash requirements, which may have resulted in greater demand
for currency precaution. In contrast, the listed companies in Greece show the lowest value and are
certainly associated with the prolonged recession facing the country since 2009.
Chart 47 - Evolution of the Ratio between Cash and Book Value of Assets
Source: Reuters Knowledge, CMVM calculations.
With regard to listed financial companies, there is a significant increase of said benchmark for Ireland
and Spain in 2011 (1.9 pp. and 0.6 pp. respectively. Italy and Germany continue to show very low
values, while Spain, Greece and France recorded values greater than or equal to 4 %.
The ratios between the debt book value39
and own-capital market value and between the debt book
value and the own-capital book value allows for the analysis of corporate leveraging. Non-financial
companies based in Ireland show the lowest level of debt (which decreased 3.1 percentage points in
2011).
39
Excludes bank deposits as regards financial companies.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
105
CMVM
In turn, Greece increased the debt book value as a percentage of own-capital market value by 68.9
percentage points, similar to the situation of Portuguese companies (an increase of 55.3 percentage
points).
Companies in these two countries have the highest levels of debt, a situation which has worsened in
the last year. At least in theory, companies have a greater preference for debt capital during periods
wherein they consider that the equity is undervalued and for equity when they understand that said is
overvalued.
Thus, the preference of Greek and Portuguese companies for investment financing and liquidity
requirements by using debt capital can be explained by this theory, in that because of the strong
devaluation of the market equity value to current prices cannot be seen as attractive for new issues.
However, in the current context, it is also important to consider that many companies may not be able
to place new share issues (even at low prices). With regard to financial companies, only Ireland (in
2011) witnessed a decrease of this benchmark. This situation results from the progressive reduction of
the debt of the banking sector due to the nationalization of several financial institutions and the slight
appreciation of the stock market value of bank equity. Financial companies headquartered in France
show a strong increase of this benchmark, however, is influenced by two heavily leveraged banks, with
a leading position in terms of assets.
Chart 48 - Book Debt to Market Equity Ratio
Source: Reuters Knowledge, CMVM data.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
106
CMVM
The debt book value as a percentage of equity book value is not influenced by the volatility of the
equity markets. Portuguese non-financial companies show the highest leverage level (236.2 %), with
an increase of 53.1 percentage points between 2010 and 2011, Irish companies show the lowest.
Companies from Germany, France and Ireland have a lower debt book value than the equity book
value.
Chart 49 - Book Debt to Book Equity Ratio
Source: Reuters Knowledge, CMVM data.
Regarding the financial sector, the exponential growth of this benchmark of leverage between
companies based in Greece is worthy of note. This is certainly related to unmatched economic
reduction that the country is going through and the forecasts created as to the restructuring of Greek
sovereign debt throughout 2011, with the subsequent recognition of deficiency of bank balance sheets,
resulting in a greatly reduced aggregate value for equity greatly40
. In contrast, companies in the
financial sector based in Portugal experienced a drop in the debt book value as a percentage of equity
book value of 9 percentage points, and are among the countries where the financial sector is less
leveraged according to this benchmark.
40 Between 2010 and 2011, the equity book value of listed Greek banks dropped 97.3%.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
107
CMVM
The interest coverage is a benchmark of the effort that companies make to pay the creditors. It is
measured by the ratio of earnings before interest and taxes and interest paid. In absolute terms,
companies based in France have higher values for this benchmark, followed by companies based in
Ireland and Germany. These results are in line with expectations, because French and Irish financial
companies have lower leverage levels than other companies. Moreover, the interest rates charged are
generally indexed to the Euribor reference rate and this was reduced substantially during 2011, which
certainly reflected on interest paid. It should also be noted that these three countries show a positive
trend in the benchmark over the last three years.
Chart 50 – Annual Trend of Interest Coverage (Non-Financial Companies)
Source: Reuters Knowledge and CMVM data.
Instead, companies based in Greece, Spain and Portugal show an increase in their effort to pay the debt
capital. Portugal is among the countries with the lowest values for this benchmark, which means that
domestic non-financial listed companies had to make an effort in 2011 to pay the higher debt capital.
Thus, for every six Euros of earnings before interest and taxes, circa one Euro was applied to the
payment of remuneration for the debt capital. This effort is associated with highly leveraged capital
structure of domestic companies and risk premium increase demanded by creditors when refinancing
debt.
0,0
2,0
4,0
6,0
8,0
10,0
12,0
Ger
man
y
Spai
n
Fran
ce
Gre
ece
Ire
lan
d
Ital
y
Po
rtu
gal
2009
2010
2011
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
108
CMVM
2.3 SECURITIES ISSUANCE
2.3.1 Shares
The amount issued in the primary shares market increased to 2,113,000 million Euros, which is largely
justified by the public exchange offers conducted by BCP and BES. Out of a total of 29 transactions,
18 were carried out for employees and three offers through incorporation of reserves. As for the other
eight offerings, three capital increase operations with ordinary share issuance were the greatest
contributors. Said pertained to BCP (990 million Euros) and to BES (530 million Euros), both via
exchange offers and BCP, via an issue reserved for shareholders (260 million Euros). An issuance of
preferred shares without voting rights was issued by the Inapa offer that was limited to the collected
subscriptions (54 million shares). The amount involved in the 18 offers made for employees in the
domestic market by resident and non-resident issuers amounted to only two million Euros.
Chart 51 – Value Trend of Share Issuance
Note: The value of issues is the subscription value. (amount issued times the subscription price) of the issues of capital increase completed via public
subscriptions for public companies as well as private offerings made by public companies and subsequently communicated to the CMVM by said entities.
0
500
1.000
1.500
2.000
2.500
2009 2010 2011
Eu
ro M
illi
on
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
109
CMVM
2.3.2 Bonds
2.3.2.1 Private Debt
Given the particularly difficult context of business financing with the intensification of the systemic
impact of the European sovereign debt crisis, there was a slight decrease in the overall amount of debt
in the domestic market (-4.7), which reached 43.7 billion Euros. The way private placements was
carried out increased in importance and accounted for 86 % of the amount placed (78 % in 2010).
Chart 52 – Value Trend of Bond Issuance
Source: CMVM and BdP.
Debt issuance was led by offerings of residing issuers. Issues made by non-residents lost relevance
apropos the previous year (public offerings decreased from 7% to 2%). The weighting of public
offerings via the European passport prospectus decreased (92 % in 2010 to 55 % in 2011) and
concurrently, the weighting of the offers via the prospectuses approved by the CMVM, increased.
The financial sector issuers accounted for almost 97% of the amount issued and the energy sector by
1.7%. The state was absent from this market, which must have been due to the adverse context of
Portuguese state funding and the implementation of the Economic and Financial Assistance to
Portugal Programme, agreed between the Government, the European Union, the European Central
Bank and the International Monetary Fund.
0
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
45.000
50.000
2009 2010 2011
Eu
ro M
illi
on
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
110
CMVM
The deb distribution issued per type of security showed a different behavior from that of the previous
year, given the exceptional circumstances for strengthening financial stability and providing liquidity
to the financial system. The increasing importance of the so-called classic bonds is largely explained
by the extraordinary use by some domestic financial institutions of debt issues with private guarantee
by the State under the Portuguese Law 60-A/2008 of 20 October 2008, and Ministerial Order No.
1219-A/2008 of 23 October 2008. These issues, amounting to 10.8 billion euros, represented circa
60% of total classic debt issued.
Chart 53 – Bond Issuance per Type
Source: CMVM and BdP.
Securitised bonds and mortgages once again played an important role in obtaining liquidity by some
domestic financial institutions, since they are usually used as collateral at the Eurosystem credit
operations system. As for the assets (loans) that underlie securitised bonds, loans for small and
medium-sized companies, consumer credit and mortgages, stand out and accounted for 67%, 19% and
14%, respectively of the total amount issued under the securitised form. The decrease in the
importance of structured debt, where often the coupon payment and/or reimbursement relies on the
behaviour of other financial assets, and may even be non-existent, shows increased aversion to risk
associated with the financial instability in the Eurozone .
The 6-month Euribor (average interest rates on interbank loans in Euros for 57 European banks for a
period of 6 months) maintained a slight upward trend in the first seven months of the year, a period
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011
Per
cen
tage
of
the
Tota
l A
mou
nt
Classic Cash Securitised Structured / Zero Coupon Mortgage Other (perpetual / exchangeable)
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
111
CMVM
that witnessed an increase of 56.5 basis points. As from July there was a slight downward trend in
Euribor, which amounted to 1.67 % in December.
The weighted average rate of Coupon 1 for debt issuance suffered the impact of the national sovereign
debt crisis which was more pronounced in July and December, when debt issues occurred in several
national financial institutions by resorting to the Portuguese State guarantee (4.95% spreads in July
and 1% in December as regards the specific case of these issues). The months wherein the smallest
spreads apropos the reference rate occurred with the highest issues of securitized bonds or mortgage,
especially in February. Coupon rates, whether securitized or mortgage bonds, are less related to the
risk of the relevant issuers than to the risk profile of the assets underlying said. These assets, including
portfolios of mortgages and loans to small and medium enterprises have registered much lower risk
levels than those that investors perceive in relation to the respective originators/assignors.
Chart 54 – Weighted Average Rate of 1st Coupon and 6-Month Euribor
Source: Reuters (CMVM data).
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
9,0%
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Euribor 6 Meses 1st Coupon Average Rate
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
112
CMVM
2.3.2.2 Public Debt
Following the Economic and Financial Assistance Programme agreed during the 2nd Quarter of 2011,
the issuance of government bonds was discontinued, and the financing needs of the State fulfilled,
either by the use of the programme funds or by shorter maturity loans. The total value of Treasury
bonds issued reached its lowest in recent years, while during the previous year it managed a historical
high of 21.7 billion Euros.
Table 25 – Treasury Bonds
Unit: 10^6 Euro
Month
Value
2009 2010 2011
January 0 1.000 1.249
February 770 3.000 3.500
March 4.000 2.003 1.000
April 1.000 2.000 1.645
May 835 2.116 -
June 4.347 2.704 -
July 1.765 1.680 -
August 1.000 2.669 -
September - 2.075 -
October 811 0 -
November 1.067 2.467 -
December - - -
TOTAL 15.595 21.714 7.394
Source IGCP.
Given the fluctuations of the market for sovereign debt, a single long-term issue (10 years) and
reduced amount was held during the first months of the year. The remaining issues were distributed for
shorter periods of two, four and five years. As a result of the difficult conditions of access to credit by
the State, the weighted average allotment rate ranged between a minimum of 5.396% (issued in
January with a maturity of four years) and a maximum of 6.716% (also issued in January but with a
period of 10 years).
These rates reflect a significant increase in the cost of financing of the Portugal over the previous year.
As regards two and five-year maturities, the weighted average rates of placements increased by 340
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
113
CMVM
and 250 basis points, respectively. Albeit 10-year maturity, the increase of said rate stood at 170 basis
points. This is due to the deterioration of the economic and financial conditions of the country, which
led to a request for foreign aid, and increased the perception of risk by investors (now demanding a
higher risk premium on investment in domestic public debt).
Table 26 – Maturities and Weighted Rates of Treasury Bonds
2.3.3 Complex Financial Products
The marketing of complex financial products has intensified in the domestic market. The maximum
total amount of issues in the form of bonds or notes that occurred in 2011 exceeded six billion Euros -
an amount higher than that managed by harmonised investment funds at the end of the year.
Nevertheless, it is the maximum value of the offers and not necessarily the amount that was actually
placed (no data is available) and this market segment is of increasing relevance.
The main assets underlying these complex financial products41
were shares and shares indices. Indeed,
62.6 % and 65.7 % of the products issued regard the number and the maximum value, respectively of
the issuance of complex financial products with two underlying types. With respect to commodities,
although the number of products issued with this underlying type is less than 10% of the total amount
41 Throughout this section reference to complex financial products only includes of bonds and notes.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
114
CMVM
and the maximum total value represented an eight part of the market. It is this fact that explains that
the maximum average value of issues is the highest for complex financial products that have
commodities as the underlying type.
Table 27 – Complex Financial Products Issued in 2011
Underlying Assets N.º
PFCs
Market
Share
Maximum Amount of the
Issue (10^6 €)
Market
Share
Average Value of the
Maximum of Issues (10^6
€)
Shares Indices 85 43,6% 3.234,8 53,0% 38,1
Shares 37 19,0% 775,4 12,7% 21,0
Commodities 17 8,7% 760,5 12,5% 44,7
Other 19 9,7% 611,9 10,0% 32,2
Funds 10 5,1% 267,0 4,4% 26,7
Exchange Rates 13 6,7% 232,4 3,8% 17,9
Bonds 14 7,2% 222,0 3,6% 15,9
TOTAL 195 100,0% 6.104,2 100,0% 31,3
Source: CMVM.
Products with guaranteed capital accounted for just over half (52.9 %) of the maximum amount of
emissions put the marketing in 2011 and more than two thirds of this amount is not provided investors
a guaranteed return. In this field, the financial products that have their underlying type as shares,
commodities, exchange rates and other indices (in this case, combinations of two or more underlying
assets) because there is a significant preponderance of products without warranty of profitability (in
the case of actions and the category ' other ' underlying assets were not issued products, with
guaranteed capital, provide a guaranteed return to investors) 42
.
42
The concepts of guaranteed remuneration and guaranteed return should not be confused. Thus, a product is guaranteed compensation
when there is payment of a periodic amount that is not conditioned on the occurrence of any event that may or may not be guaranteed
capital, so their profitability can be negative. A product has a guaranteed return when you have associated a remuneration right, at least
partly fixed, and where the capital is guaranteed.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
115
CMVM
Table 28 – Complex Financial Products Issued with or without Capital and remuneration Guarantee
Unit: 10^6 €
Underlying Asset
Guaranteed Capital Market
Share
Market
Share Minimum Guaranteed
Remuneration
Unguaranteed
Remuneration
Shares Indices 621,0 750,9 1.371,9 42,5%
Shares 200,0 560,5 760,5 23,5%
Commodities 0,0 329,2 329,2 10,2%
Other 0,0 305,0 305,0 9,4%
Funds 221,0 30,0 251,0 7,8%
Exchange Rates 25,0 187,4 212,4 6,6%
Bonds 0,0 0,0 0,0 0,0%
Sub-Total 1.067,0 2.163,0 3.230,0 100,0%
Underlying Asset
Unguaranteed Capital
Total Market
Share Minimum Guaranteed
Remuneration
Unguaranteed
Remuneration
Shares Indices 16,0 1.847,0 1.863,0 64,8%
Shares 120,6 349,8 470,4 16,4%
Commodities 62,7 220,0 282,7 9,8%
Other 0,0 222,0 222,0 7,7%
Funds 0,0 20,0 20,0 0,7%
Exchange Rates 0,0 16,0 16,0 0,6%
Bonds 0,0 0,0 0,0 0,0%
Sub-Total 199,3 2.674,8 2.874,1 100,0%
Total 1.266,3 4.837,8 6.104,2
Source: CMVM.
Unsecured capital products represented 47.1 % of the maximum issues that were marketed 2011.
Nearly this entire amount issued (93 %) did not provide investors with a guaranteed return. The
combination of these two percentages shows that investors purchasing these products took a high level
of risk, which is particularly exacerbated by the fact that it appears that in general these products are
often issued at a price below its intrinsic value.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
116
CMVM
TEXTBOX 3 – ASSESSMENT OF COMPLEX FINANCIAL PRODUCTS MARKETED IN
PORTUGAL
The CMVM assessed the value ex-ante, i.e. prior to its issuance (hereinafter 'value'), a set of PFC
whose underlying assets are shares, commodities, currencies and/or composite indexes for those assets.
The date of issue 108 PFC analyzed is between 22-09-2009 and 30-06-2011. Nineteen of these PFC
were issued in 2009, 57 in 2010 and the other in 2011. PFCs were issued by 14 financial institutions,
but marketed by just eight. In 88% of cases, the issuer belonging to the same group (or is included
within the same financial group) of the supplier. In all cases the issuer and the calculation agent were
the same and in 9.3% of cases the issuer has ownership rights to the underlying asset reference of PFC.
Regarding the characteristics of PFC, 35.2 % had an underlying asset, 6.5 % had two underlying and
58.3 % had three or more. On the other hand, 70.4 % of PFC afforded guarantee the capital invested.
The maximum average maturity of PFC was three years and only 10 % had a maturity up to two or less
than five years. As regards the nature of the underlying, 33.3 % had reference to a basket of shares,
12.0% of the cases were a basket of indices and in 11.1 % of cases was a structured index. Finally,
84.3 % of PFC analyzed had foreseen the possibility of admission to trading on the secondary market.
The estimated value of each PFC was determined based on three different methods. The first was
based on the Black and Scholes (1973) and Merton (1973), according to which, under the assumption
of risk neutral probability, the underlying asset follows a Geometric Brownian Motion. The ANOVA
model and the model of Gamma Heston were also used to assess the robustness of the results.
The results show that, on average, the value of PFC issued was less than the initial subscription price
and the implicit costs (hidden costs) amounted to 4.9% per year. Considering the credit risk of the
issuers of these products, the value obtained was on average 85.6 % of the issue price. But there is a
high variability in the values obtained in this exercise, and the minimum value equaled 53.8 % of the
issue price for a product with no guaranteed capital stock as underlying. Even when credit risk is
neglected, the respective figure was lower than the issue price in about 80 % of PFC analyzed.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
117
CMVM
In addition, the econometric analysis carried out and presented in the following table, which shows the
value as a percentage of the issue price of the PFC is not positively influenced by conflicts of interest
between the issuer and the seller of the product. On the other hand, the PFC whose underlying stocks
and commodities, and PFCs with capital guarantee, have a higher value as a percentage of the issue
price. Rather, this value decreases with the number of underlying assets of PFC (which means that the
greater the complexity of the product, the lower its value), the credit risk of the issuer and the existence
of a secondary market for product.
Fair Value Fair Value Hidden Cost
Constante 0,9307 *** 0,9309 *** 0,0688 ***
Issuer/Comercializador 0,0379 * 0,0215 -0,0155 **
Guaranteed Capital 0,0709 *** 0,066 *** -0,0234 ***
Maturity -0,0029 -0,0093 -0,0131 ***
ln(No. of Underlying Assets)
-0,0338 *** -0,0227 ** 0,0089 *
CDS price -0,733 *** 0,1776 ** 0,2423 ***
Sec. Market -0,0374 ** -0,0176 0,0127
Early Redemption -0,0272 * -0,0244 * 0,0102 *
Shares 0,0708 *** 0,0556 *** -0,0204 ***
Currency 0,0499 ** 0,0449 ** -0,0155
Commodities 0,0953 *** 0,0943 *** -0,0293 ***
R 2 0,524 0,511 0,507
F Statistics 10,46 *** 9,93 *** 9,76 ***
No. obs. 106 106 106
***. Significant at 1% significance (2-tailed).
**. Significant at 5% significance (2-tailed).
*. Significant at 10% significance (2-tailed).
Note: Maturity: maximumduration possibel for investment in PFC; Price CDS: counterparty risk of the issuer, as measured by the probability of default implied by the price of the CDS on the date of issue; Market Sec: dummy variable that equals one if secondary market for PFC; early Redemption: equals one if there is a possibility kock-out with early repayment; Ln (number of underlying): logarithm of the number of underlying assets; - Issuer / retailer: conflicts of interest between the issuer and the supplier, 1 if the issuer is a separate entity from the supplier and 0 otherwise; Guaranteed Capital: dummy variable equal to 1 if the PFC is guaranteed capital, type of reference asset (1 - Stocks and Indexes; 2 - Goods; 3 - Currency).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
118
CMVM
The results suggest that the annual costs are higher implicit in products with lower maturity, but no
evidence was found that potential conflicts of interest between the issuer and the fact that the
benchmark have a proprietary nature (i.e., are set by the issuer) has effect in recovery or implied
annual costs of PFC.
Regarding the presence of an “issuer effect " in (over) appreciation or the annual costs implied by the
PFC, the results indicate that this effect is irrelevant, since some issuers’ implied costs tend to charge
higher even after the removal of the effect other explanatory variables.
In about 80 % of the maximum total amount of financial products issued and marketed in 2011 there
was no guarantee of compensation. Complex financial products whose underlying obligations
(roughly, credit link notes) stand out because they do not at all be guaranteed the investor capital
initially applied, or be no guarantee of earnings.
Were 24 issuers of complex financial products subject to marketing in 2011 in the domestic market
and 17 traders. The market share of the top five issuers reaches about 69 %, while Deutsche Bank43
holds about a third of the maximum total emissions. However, the HHI, with a value of 1147.5,
denoting that there is leakage at the issuer (usually a market is considered to be concentrated when the
HHI is greater than 1800). CR5 and HHI indices relating to marketing entities are 69% and 1564.3,
respectively.
Fair
Value
Fair Value
Hidden
Cost
without
counterpart
risk
H0: Impact of the Issuer in the
dependent variable is negligible
26,12
(**) 22,47 (**)
22,94
(**)
Wooldridge heteroskedasticity-robust LM statistic
***. Significant at 1% significance (2-tailed).
**. Significant at 5% significance (2-tailed).
*. Significant at 10% significance (2-tailed).
43 This entity has changed its form of legal representation in Portugal in 2011, by the various denominations presented in table vary
depending on the date of issue of PFC, but should be taken as referring to the same entity.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
119
CMVM
In about 80 % of the maximum total amount of financial products issued and marketed in 2011 there
was no guarantee of compensation. Complex financial products whose underlying obligations
(roughly, credit link notes) stand out because they do not at all be guaranteed the investor capital
initially applied, or be no guarantee of earnings.
Were 24 issuers of complex financial products subject to marketing in 2011 in the domestic market
and 17 traders. The market share of the top five issuers reaches about 69 %, while Deutsche Bank44
holds about a third of the maximum total emissions. However, the HHI, with a value of 1147.5,
denoting that there is leakage at the issuer (usually a market is considered to be concentrated when the
HHI is greater than 1800). CR5 and HHI indices relating to marketing entities are 69% and 1564.3,
respectively.
Table 29 – Market Share per Issuer and Supplier of Complex Financial Products
Issuer
Maximum
Issuance
Amount
(10^6 €)
Market
Share Marketing Entity
Maximum
Issuance
Amount
(10^6 €)
Market
Share
dbInvestor Solutions plc 1.284,32 21,0% Deutsche Bank Portugal, SA 1.480,02 24,2%
Banco Santander Totta, S.A. 875,00 14,3%
Barclays Bank PLC (Sucursal em
Portugal) 1.404,06 23,0%
Espírito Santo Investment p.l.c. 725,25 11,9% Banco Santander Totta, S.A. 875,00 14,3%
Deutsche Bank AG, London
branch 710,58 11,6% Banco BPI, S.A. 612,42 10,0%
Banco BPI, S.A. 602,42 9,9%
Deutsche Bank Europe GmbH - Sucursal
em Portugal 450,00 7,4%
Barclays Bank PLC 410,50 6,7%
Banco Espírito Santo, S.A. e Banco
Espírito Santo dos Açores, S.A. 425,00 7,0%
SGA Société Générale Acceptance
N.V. 372,50 6,1% BEST 255,25 4,2%
Citigroup Funding Inc 270,00 4,4%
Deutsche Bank AG – Sucursal em
Portugal 177,16 2,9%
BBVA Global Markets B.V. 160,86 2,6% Banco Espírito Santo, S.A. 165,00 2,7%
Morgan Stanley B.V. 150,00 2,5% Banco Comercial Português, S.A. 123,44 2,0%
Banco Comercial Português, S.A. 123,44 2,0%
Deutsche Bank Aktiengesellshaft –
Sucursal em Portugal 38,58 0,6%
Banco Espírito Santo, S.A. 100,00 1,6% Banco Português de Investimento, S.A. 37,72 0,6%
Morgan Stanley & Co.
International plc 60,00 1,0%
Banco Espírito Santo, S.A., Banco
Espírito Santo dos Açores, S.A. e Banco
BEST 30,00 0,5%
BES Finance Ltd. 50,00 0,8% Banco Invest 13,00 0,2%
44 This entity has changed its form of legal representation in Portugal in 2011, by the various denominations presented in table vary
depending on the date of issue of PFC, but should be taken as referring to the same entity.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
120
CMVM
Coöperatieve Centrale Raiffeisen-
Borenleenbank B.A. 50,00 0,8% BBVA 10,00 0,2%
Morgan Stanley 50,00 0,8% Caixa Económica Montepio Geral 7,00 0,1%
Société Générale 30,00 0,5% Sartorial 0,50 0,0%
Banco BPI Cayman Ltd 17,72 0,3% TOTAL 6.104,15 100,0%
UBS AG, London Branch 15,00 0,2%
Banco Invest 13,00 0,2%
UBS AG, Jersey Branch 13,00 0,2%
Crédit Agricole CIB Financial
Products (Guernsey) Limited 10,86 0,2%
Caixa Económica Montepio Geral 7,00 0,1%
HSBC Bank PLC 2,70 0,0%
TOTAL 6.104,15 100,0%
Source: CMVM.
Marketing entities in the group Deutsche Bank holds a market share of 35.2 % of the maximum total
issues of complex financial products in 2011, but its share in marketing products without capital
guarantee or unpaid guaranteed amounts to 55, 2 % and 46.7 %, respectively. This means that this
entity has a more aggressive trade policy in the supply of complex financial products which may
involve loss of capital initially applied by investors. It should also be noted that the branch of Barclays
Bank in Portugal, despite having a small market share in terms of PFC45 issue, has a share -level
marketing that is nearly quadruple that of the issue.
2.4 SECONDARY MARKET
2.4.1 Spot Market
2.4.1.1 Market Capitalisation
The market capitalisation of the financial instruments admitted to trading on Euronext Lisbon declined
in the last two years. This decrease was due to two effects in opposite directions. Thus, the market
capitalization of public debt and private debt increased shareholder but the segment recorded a decline
caused in particular by the falling share prices of financial companies.
45 18 PFCs (protection contracts on interest rates) are considered in this analysis that were issued and sold by Barclays’ group entities
whose information documents do not mention a maximum issue.
.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
121
CMVM
The combination of these two effects resulted in a reduction of the overall market capitalization of
12.1 % in 2011 (-16.5 % in the last two years). The market capitalization of shares, which in 2010
accounted for about two-thirds of the total market capitalisation, saw its share fall back on.
The year 2011 was marked by the strengthening of the market capitalization of two types of financial
instruments - warrants and certificates. These were issued and marketed by financial intermediaries to
retail investors and institutional information documents contemplated subsequent admission to the
market. During the year were admitted on Easynext Lisbon warrants 3,931 (1,409 more than in 2010)
and 126 certificates (39 more than in 2010).
Table 30 – Market Capitalisation
Unit: 10^6 Euro
2009 2010 2011 Var.%
Valor % Valor % Valor % (2010-11)
Bonds 31.432,6 15,4 57.426,2 29,6 65.453,4 38,4 14,0
Public Debt 26.753,1 13,1 52.942,7 27,3 59.247,5 34,7 11,9
Government & Similar Funds 23,0 0,0 35,6 0,0 0,0 0,0 -100,0
Misc. 4.656,4 2,3 4.447,9 2,3 6.205,9 3,6 39,5
Shares 172.431,1 84,4 135.383,0 69,8 102.752,0 60,2 -24,1
PSI 20 62.814,1 30,8 58.252,4 30,0 45.929,3 26,9 -21,2
Other 109.617,0 53,7 77.130,6 39,7 56.822,8 33,3 -26,3
Investment Certicates and Investmetn Units 164,4 0,1 217,0 0,1 187,3 0,1 -13,7
Rights 0,0 0,0 0,0 0,0 0,0 0,0 -
Warrants 195,4 0,1 151,2 0,1 781,5 0,5 416,7
Certificates 0,0 0,0 887,7 0,5 1.360,4 0,8 53,3
Convertíbles 0,0 0,0 0,0 0,0 0,0 0,0 -
ETF 0,0 0,0 25,9 0,0 16,9 0,0 -34,7
TOTAL 204.223,5 100,0 194.091,1 100,0 170.551,6 100,0 -12,1
Euronext Lisbon 202.402,8 99,1 191.666,7 98,8 167.660,7 98,3 -12,5
EasyNext Lisbon 1.820,7 0,9 2.424,3 1,2 2.890,9 1,7 19,2
Source: Euronext Lisbon.
Note: Inlcui a capitalização bolsista de emitentes de direito estrangeiro.Includes market capitalisation of foreign law issuers.
2.4.1.2 Trading
Spot trading of financial instruments admitted to regulated markets and national MTFs operate on
three platforms that generate four markets: two regulated markets and two MTFs. Regulated markets
are MEDIP managed by MTS Portugal and Euronext, run by NYSE Euronext. The MTFs are PEX and
Easynext Lisbon, managed by OPEX and NYSE Euronext, respectively.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
122
CMVM
Trading continued the downward trend of the previous year, although much more pronounced. The
total value traded in secondary markets decreased 58.9 %, while in 2010 registered a fall of 1.6 %.
Said fall contributed significantly by reducing the volume of transactions on MEDIP (-80.7%). The
volume of transactions in the markets managed by Euronext Lisbon also decreased about 27%. Market
activity of the PEX, which represents only 0.5 % of total trading in secondary markets supervised by
CMVM, the transacted amount recorded a further decline (-36.4 %), after a decrease of 18.6 % in the
previous year.
The decrease of the value traded on Euronext Lisbon occurred in a context of sharp decline in the
prices of their constituents, to the extent that there has been an increase in the number of traded shares
and issued by larger companies and with greater liquidity. On MEDIP, the decrease of the value
transacted is associated with increased difficulty in transacting public debt in the context of the
sovereign debt crisis, with bond yields of Portuguese Treasury reaching high values .
Table 31 – Securities Trading in Secondary Markets Unit: 10^6 Euro
Sectors 2009 2010 2011
Value % Value % Value %
Euronext Lisbon
Bonds 394,9 0,4 583,1 0,6 286,9 0,7
Shares 31.789,9 30,1 40.697,1 39,2 27.892,7 65,4
Investment Certificates 0,2 0,0 2,6 0,0 0,5 0,0
Investment Units 0,8 0,0 0,9 0,0 1,9 0,0
Rights 128,6 0,1 0,1 0,0 67,9 0,2
Warrants 603,8 0,6 242,6 0,2 280,5 0,7
Certificates 0,1 0,0 26,7 0,0 168,1 0,4
Convertibles 0,0 0,0 0,0 0,0 0,0 0,0
ETFs 0,0 0,0 23,9 0,0 106,9 0,3
1.Subtotal Normal Sessions 32.918,3 31,2 41.577,0 40,0 28.805,4 67,5
2.Transaction at Special Sessions 13,8 0,0 374,3 0,4 1.763,8 4,1
3.Subtotal including Special Sessions (1) + (2) 32.932,1 31,2 41.951,3 40,4 30.569,2 71,6
4. MEDIP (Public Debt) 72.241,0 68,4 61.607,0 59,3 11.879,0 27,8
5. PEX 418,8 0,4 340,8 0,3 216,6 0,5
7.Total Swecondary Market -VC (3)+(4)+(5) 105.591,8 100,0 103.899,1 100,0 42.664,8 100,0
Source: Euronext Lisbon, MTS-Portugal and OPEX.
The value traded in secondary markets fell steadily throughout the year in the markets managed by
Euronext Lisbon, MEDIP and PEX. Throughout the year there was a general trend of decreasing prices
of securities traded in these markets, particularly in the price of the listed shares and the price of
national public debt securities. This trend was also observed in other countries affected by the euro
area sovereign debt crisis.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
123
CMVM
Chart 55 – Monthly Trend of Trading Volume on Secondary Markets
Sources: Euronext Lisbon, MTS Portugal and OPEX.
2.4.1.2.1 Euronext Lisbon
The volume of transactions in the primary market of Euronext Lisbon decreased 31.0 % over the
previous year and represented 94.1% of total value of transactions on the regulated market of Euronext
Lisbon.
Table 32 – Trading Volume of Euronext Lisbon
Unit: 10^6 Euro
Sectors 2009 2010 2011
Value % Value % Value %
Eurolist by Euronext Lisbon 32.223,7 97,8 41.091,9 98,0 28.342,9 92,7
Special Exchange Sessions 13,8 0,0 374,3 0,9 1.763,8 5,8
Total Regulated Market 32.237,5 97,9 41.466,2 98,8 30.106,7 98,5
Unlisted Market (1)
0,5 0,0 0,0 0,0 0,0 0,0
EasyNext Lisbon 694,1 2,1 485,1 1,2 462,5 1,5
Total Unregulated Market 694,6 2,1 485,1 1,2 462,5 1,5
Overall Total 32.932,1 100,0 41.951,3 100,0 30.569,2 100,0
Source: Euronext Lisbon.
Legend: (1) The unlisted market is part of EasyNext Lisbon as from 01.10.2009.
0
10
20
30
40
50
0
500
1.000
1.500
2.000
2.500
3.000
3.500
Jan Fev Mar Abr Mai Jun Jul Ago Set Out Nov Dez
PE
X
Eu
ro M
illi
on
s
Euro
Mil
lio
ns
Euronext Lisbon MEDIP PEX
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
124
CMVM
In terms of sector activites, the banking sector was the most active, followed by the oil and gas
industries, represented exclusively by Galp Energia. Together, these two sectors accounted for 39.1%
of the value traded on Euronext Lisbon. Following the trend in previous years, the most traded liquid
shares increased significantly but not enough to prevent a decline in the volume of transactions in these
securities since there has been a marked decrease in the general prices of the most liquid shares, i.e.
Portugal Telecom and banking shares.
Table 33 – Liquidity Benchmarks Trend in Shares Listed on Euronext Lisbon
In the twenty most traded shares, the average daily turnover fell to 42.9%, which means that, on
average, the most liquid shares traded amount significantly less than the quantity admitted to trading.
Thus, throughout the year the amount transacted of the 20 most liquid shares was on average less than
half the amount admitted to trading. Since the beginning of this millennium, until 2003 there was an
average turnover (36.9 %) lower than in the year under review, which shows a decrease in liquidity
and therefore greater difficulty for investors to be able to undo their positions without causing
significant changes to share prices. Nevertheless, those securities were traded in 99.9% of sessions
wherein they were admitted to trading, which reveals a high frequency of daily trading.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
125
CMVM
The average frequency of trading of less liquid shares increased slightly to 50.6%. This value means
that less liquid shares admitted to the main market of Euronext Lisbon were only traded on average in
only one of two exchange session.
Continuing the trend of the previous year, the turnover index46 in the shares segment increased to
49.74%, the highest value of the last ten years. The turnover index for warrants reversed the downward
trend observed in previous years and climbed more than 10 percentage points. The turnover in public
debt remained very low, despite the increase. Transactions of this type of debt continued to be
uncommon and one can assume that the secondary market for retail debt is still residual, a situation
similar to those seen for private debt.
Table 34 - Turnover per Market Sector
2009 2010 2011
Var (2009-
10)
Var (2010-
11)
Public Debt 0,01% 0,06% 0,09% 0,051 p.p. 0,025 p.p.
Various Bonds 0,93% 0,85% 0,27% -0,078 p.p. -0,584 p.p.
Shares 42,01% 47,69% 49,74% 5,681 p.p. 2,049 p.p.
Investment Certificates 0,71% 9,40% 1,87% 8,689 p.p. -7,524 p.p.
Investmetn Units 0,03% 0,22% 0,57% 0,191 p.p. 0,348 p.p.
Warrants 109,49% 60,20% 70,88% -49,297 p.p. 10,685 p.p.
Certificates 0,22% 1,79% 17,34% 1,57 p.p. 15,55 p.p.
ETF's 0,25% 101,97% 417,93% 101,718 p.p. 315,957 p.p.
Source: Euronext Lisbon (CMVM data).
The turnover for exchange traded funds (ETF) exceeded 400% despite the low base, as a result of the
promotion of this market segment, through information sessions and public advertising, performed by
the respective fund manager. In late 2011 there were three ETF traded.
The increase in turnover for warrants, certificates and ETFs, financial instruments of greater
complexity and risk, suggests the existence of so-called "search for yield", which cannot be dissociated
from the difficult conditions that the national markets for financial instruments have crossed.
46 Ratio of the value traded on stock exchanges throughout the year and the market capitalisation calculated at the end of the year
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
126
CMVM
2.4.1.2.2 MEDIP
The amount traded in MEDIP decreased 80.7% compared to 2010, a drop that occurred in Treasury
bonds (-81.7 %) and treasury bills (-80.0 %). This reduction in the volume of transactions in the
secondary market coincides with a period of strong selling pressure in the secondary markets for
European sovereign debt that experienced sovereign debt crises (Portugal, Greece, Ireland, Spain and
Italy). The weighting of government bonds in total amount traded on MEDIP amounted to 38.8 %,
which is slightly lower than in the previous year (40.9%).
Chart 56 - Monthly Trading Volume Trend on MEDIP
Source: MTS Portugal.
The volume of transactions in MEDIP fell sharply from the second quarter onwards. One is remindes
of the fact that on 6 April the Portuguese government requested financial assistance from the
international community. The asymmetric behaviour observed between the first quarter and the other
quarters was similar in the trading of bonds and treasury bills. All Treasury bonds admitted on MEDIP
were also subject to trading on foreign MTFs (ICAP BrokerTec, Tradeweb, Tradegate Exchange
Freiverkehr, Frankfurter Wertpapierboerse Freiverkehr, Freiverkehr Borse Berlin and London Stock
Exchange AIM).
0
500
1.000
1.500
2.000
2.500
3.000
3.500
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Eu
ro M
illi
on
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
127
CMVM
2.4.1.2.3 PEX
Also in the PEX, the value traded fell significantly (-36.4 %). This market registered a tendency of
gradual reduction in the volume of transactions during the year, reaching its minimum in December
(one million Euros).
Similarly to the previous year, the certificates were the type of financial instrument traded over this
MTF, with approximately 61.7% of the total value traded. Said followed, in order of importance, by
the turbo warrants (25.5 %), the cash bonds (7.5 %) and mutual funds (3.2%) .
Chart 57 – Monthly Trading Volume Trend on the PEX
Source: OPEX.
2.4.1.2.4 Admissions and Exclusions of Exchange Trading
The number of new issues of securities listed on the main market of Euronext Lisbon amounted to 595,
higher than the previous year (407). This increase was due primarily to new admissions of commercial
paper (306 in 2010 versus 503 in 2011). There was no admission of shares. The number of exclusions
was also higher than the previous year, due to the short maturity of commercial paper.
0
5
10
15
20
25
30
35
40
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
128
CMVM
On EasyNext Lisbon, the market designed for structured products, 1,665 warrants, 2,266 structured
warrants, one bond, one right and 126 certificates were admitted to trading. These numbers represent
an overall increase in the number of admissions in this market of about 46% apropos the previous year.
3,992 warrants were excluded due to maturity or due to early maturity after reaching the knock –out
barrier.
2.4.2 Spot Market
2.4.2.1 Futures and Option Market
The volume of transactions in futures registered a sharp decline, reaching 531 million Euros. The
reduction was found either in futures contracts on the PSI 20 index or futures contracts on shares,
although futures on shares has been more significant in relative terms. The same 13 contracts on shares
have been admitted: BPI, BCP, BES, Brisa, EDP Renováveis, EDP, Galp, Jerónimo Martins, Portugal
Telecom, REN, Sonae SGPS, Sonaecom and Zon Multimedia. The most traded future on national
shares both in value and number of contracts was the contract on the shares of BCP, followed by the
contract on shares of Jerónimo Martins. As with the previous year, there were no options admitted to
trading.
Table 35 – Trading on Futures Contracts
Open
Positions Number Number of Traded
Futures Contract of Contracts Amount
(end year) Trades (10^6 Euro)
PSI-20
2009 2.085 1.579 61.225 458,1
2010 6.982 3.652 126.127 959,5
2011 4.389 2.008 77.939 528,0
Acções
2009 19.601 497 174.214 33,3
2010 6.406 125 93.398 11,4
2011 60 83 23.188 2,7
TOTAL
2009 21.686 2.076 235.439 491,4
2010 13.388 3.777 219.525 970,9
2011 4.449 2.091 101.127 530,8
Source: Euronext Lisbon.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
129
CMVM
2.4.2.2 MIBEL Derivatives Market
On the Iberian Electricity Market (MIBEL), futures contract on electricity are admitted to trading. At
the beginning of its activity there were only SPEL Base futures contract admitted to trading: contracts
whose reference price corresponds to the price of electricity for the Spanish zone (SPEL index) and are
physically settled or exclusively financially settled and its delivery period corresponds to 24 hours,
Monday to Sunday (baseload), every day of the delivery period. In terms of maturity, contract with a
weekly, quarterly and annual maturity were admitted. During 2010, were admitted to SPEL peak futres
contract: peak load contracts (whose delivery period corresponds to 12 hours, between 8:00 and 20:00,
Monday to Friday for all delivery period days), with physical and financial settlement based soley on
the electricity price in the Spanish zone, with reference to only the price of electricity to the Spanish
zone . These contracts were also available for existing maturities.
In 2011, in addition to the admission of futures contracts on the PTEL index, base load, with physical
settlement for the four existing maturities, daily maturity futures contracts were admitted to trading
(financial based SPEL futures contracts and financial peak SPEL futures contracts) and weekend
(financial based SPEL futures contracts), with reference prices of the Spanish zone. With the
admission of these contracts, the market has made available a wide range of futures contracts on
electricity, and is able trade contracts with the market reference price from the Portuguese and Spanish
zones, with peak load and load base and maturities that cover virtually the entire maturity curve, from
daily to annual. 660 futures contracts were admitted to trading: 341 SPEL Base futures contracts, 242
SPEL Peak forward contracts and 77 PTEL Base futures contracts.
The volume traded in the MIBEL derivatives market grew by 30 % over the previous year, with
32,869 GWh traded. In terms of auction trading, it is worth noting the achievement, in December of
the Special Regime Production (PRE) auction. The auction mechanism corresponds to a regulated sale
of PRE by EDP – Serviço Universal, SA (the last resort to a Portuguese distributor), by selling futures
contracts with delivery in Portugal (MIBEL, PTEL Físicos). The auction was determined by the
Regulatory Authority for Energy Services (ERSE), and OMIP - Iberian Energy Market Operator
(Portuguese branch), SGMR, SA has been appointed as the entity responsible for its organisation. 200
contracts were auctioned and delivered in Portugal during the the first quarter of 2012 and 100
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
130
CMVM
contracts with delivery in 2012. The volume traded in this type of contract amounted to 1,315 GWh
(593 GWh in the previous year). No auctions were held for the compulsory acquisitions on the MIBEL
derivatives market, as has happened in previous years.
Chart 58 – Trading Trend in the MIBEL Futures Market
Source: OMIP
Regarding the most traded maturities on the market, market trading of SPEL Base futures contracts
with weekly delivery increased and, less prompt, the SPEL Base futures contracts with monthly
delivery for both trading number and trading volume. No SPEL Peak on the market contracts was
traded.
OTC trading decreased by 8 % in energy volume and amounted to 27,085 GWh, which accounted for
17,139 recorded SPEL Base, SPEL Peak and PTEL Base futures contracts. There were no records of
forward contracts or swaps in 2011.
Considering the trend of international markets akin to MIBEL derivatives market, it is a fact that the
reference price of the futures contract delivery month in December 2011 that occurred in OMIP was
lower than in EEX (EPEX DE) and Powernext (EPEX FR) markets, but higher than the NordPool
market.
0
500
1.000
1.500
2.000
2.500
3.000
3.500
01.000.0002.000.0003.000.0004.000.0005.000.0006.000.0007.000.0008.000.0009.000.000
10.000.00011.000.00012.000.000
jan-11 fev-11 mar-11 abr-11 mai-11 jun-11 jul-11 ago-11 set-11 out-11 nov-11 dez-11
No
. o
f C
ontr
acts
MW
h
Continuous Auction OTC No. of OTC Contracts No of Market Contracts
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
131
CMVM
Chart 59 – Trading Trends in Several Futures Markets
Source: Bloomberg and OMIP.
The arithmetic average of the daily prices of the Portuguese zone (50.45 Euros / MWh) was higher
than that of the daily prices of the Spanish zone (49.92 Euros / MWh). Although the average price
differential between Portugal and Spain was slightly higher than the calculated differential during the
year 2010 (0.34 Euros / MWh), it was found that most of the session prices of the two zones are
equal, and the Portuguese area price was higher than the price of the Spanish zone in only one out of
four sessions. Price volatility was slightly higher than in Spain (13.9 % versus 13.4%).
Chart 60 –PTEL and SPEL Trend (€/MWh)
Source: OMEL.
30
35
40
45
50
55
60
65
70
75
80
30-Mai-11 14-Jun-11 29-Jun-11 14-Jul-11 29-Jul-11 13-Ago-11 28-Ago-11 12-Set-11 27-Set-11 12-Out-11 27-Out-11 11-Nov-11 26-Nov-11
€/M
Wh
OMIP EEX German EEX French NordPool
0,0
20,0
40,0
60,0
80,0
Jan-11 Fev-11 Mar-11 Abr-11 Mai-11 Jun-11 Jul-11 Ago-11 Set-11 Out-11 Nov-11 Dez-11
SPEL PTEL
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
132
CMVM
2.4.3 Centralised Securities System
3,257 securities issues were registered in the Central Securities Depository (CVM) by the end of the
year – an increase of 5.8% e than in the previous year. 27.0% of these issues correspond to warrants,
46.7% to corporate bonds, 15.8% to shares and the remaining 10.5% to other securities.
The amount of securities at the CVM reached 10,812,566 million units, 1.5 % less than at the previous
end-year. More than 96.1 % were government debt bonds, 2.2% shares and only 1.7 % related to other
securities. Commercial paper was included into Interbolsa in December 2008, and by the end of 2011,
54 issues, corresponding to 40,000 million units, were registered at the CVM by end 2011.
The amount of securities for secured and unsecured transactions settled through the general settlement
system of Interbolsa increased 113.2% in the year to 31,866,389 thousand units. In secured
transactions there were very significant positive changes in the amount settled for all securities apart
from investment certificates (-80.1%) and transactions on unsecured bonds (-90.5%). Unsecured
transactions on shares increased +296.7%.
The number of setttlements via the SLrt (Settlement System real time) in Euros decreased 30.3%. The
SLrt processes transactions related to the settlement of purchase and sale transactions outside the
market. There were no settlements through SLrt dollar, which had happened in the previous year.
During the year, 111,230 thousands of securities were redenominated giving rise to 208,275 thousands
of securities included in the CVM (pertaining to three securities).
2.4.4 Public Offers
2.4.4.1 Takeover Bids
Ten takeover bids were launched in 2011, whereof eight were completed and finalized. Highlighted is
the idiosyncrasies arising from the fact that, on the one hand, in some cases the offeror is the issuer of
the securities whose purchase is targeted by the offer, the fact that the object of some of the offers has
been made up of debt securities - rather than the typical case wherein the shares represent the equity of
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
133
CMVM
a public company - and also the fact that, in some cases, the consideration offered under a takeover
bid, in the form of the exchange offer, consists of a combination of different types of securities.
Table 36 – Takeover Bids
Offeror Target Company Type
Number of
Securities to
be Acquired
Price
(Euro)
Envisaged
Value
(10^3 Euro)
Final Value
(10^3 Euro)
Successful
Outcome(%)
Banco
Comercial
Português, SA
Banco Comercial
Português, SA
General and
Voluntary(1) 1.000.000 (2) 1.000.000 990.147 99,0%
Sociedade
Comercial Orey
Antunes, SA
Sociedade
Comercial Orey
Antunes, SA
Partial and
Voluntary 1.232.310 2,17 2.674 2.674 100,0%
Banco Espírito
Santo, SA
Banco Espírito
Santo, SA
General and
Voluntary
(1)
(4) (5) 1.002.674 1.040.062
(3) 64,3%
Source CMVM.
Legend: * Completed and completed in 2011. (1) Offer in the consideration consisted of securities, (2) 1,600 shares without nominal value and issue price
of 0.625 euro for each value whose nominal value is 1,000 euros, (3) The amounts were converted to USD EUR exchange rate EUR / USD of 1.3776, (4) Securities subject of an offer corresponding to 6 separate issues, (5) the consideration offered consisted of securities of a different nature (stocks and cash
bonds).
2.4.4.1.1 Share representing the equity of public companies
The takeover bid of Traffic Sport Europe Ltd on Estoril Praia - Futebol SAD began the previous year,
with the preliminary announcement disclosed on 12 October, 2010. Its purpose comprised of 55,000
shares issued by the target company, corresponding to 11% of its capital. After the release of three
reports of the board of the offeree company, as well as the auditor's report on the offer price during
2011, the prospectus and the launch announcement was approved and the offer period ran from 28
December 2011 to 11 January 2012. The offer ended in 2012, and only 2,451 shares were acquired,
corresponding to a total value of 1348.05 Euros.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
134
CMVM
On 13 April 2011, via a purchase and sale of shares contract, the company TAEM – Processamento
Alimentar, SGPS, SA bought the majority of voting rights of the equity of Manuel Inácio & Filhos,
SGPS, SA, a management company of investment in several companies, inter alia Rações Progado
Centro Sul, SA, a public company. Due to this and since an indirect control acquisition was launched
on said company, it was required that a takeover bid be launched. On said date, a preliminary launch
announcement for a general and mandatory public offer was made on the 1994 shares that were still
held by the offeror – Manuel Inácio & Filhos, SGPS, SA,. The consideration bid was set at 30.46
euros per share as per article 188 of the Securities Code by an independent auditor. The shares were
held by a small number of shareholders that were clearly identified, and the offeror requested the
CMVM’s authorisation in order that the acquisition be carried out via private legal business deal. As
from the moment said terms were met, the transactions that allowed the offeror to purchase the all the
shares that were not held yet, was fulfilled albeit via a diferent route – the underlying purpose of the
duty to launch a takeover bid, and as such, it was impractical to maintain the acquiring procedure that
said wished to establish and consequently, the relevant administrative procedure was defunct. On 7
December 2011, the extinction of the administrative for the registration of a general and mandatory
takeover bid on the shares representing the equity of Rações Progado Centro Sul, SA that was
preliminarily announced by Manuel Inácio & Filhos, SGPS, SA was disclosed by the CMVM to the
market due to the the lack on need to proceed since the offeror had acquired out of market and the
consideration bid had been set by an independent auditor as regards the entire amount of shares at
hand.
On 24 June 2011, Sociedade Comercial Orey Antunes SA, published via a preliminary announcement,
a decision to launch a partial and voluntary takeover bid, on 1,232,310 shares of its own capital, with
the compensation set at 2.17 euros per share. The takeover bid in question was the procedure found, in
accordance with the terms decided by the company, to perform one of the steps of a complex
transaction involving a subsequent addition of a public offering and capital reduction. Given the
circumstances of this offer, particularly the fact that the objective was that of the shares issued by the
offeror, said limited by the acquisition, of a minimum number of shares. However since it is a partial
bid, it was limited to the acquisition of a maximum of 9.5 % of the shares.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
135
CMVM
The offer ran from 8 to 21 July 2011 and sale orders by shareholders totaled 11.805,049 shares
representing 90.8% of the equity of Sociedade Comercial Orey Antunes, SA, . The number of shares
was then allotted by the sale orders in order to provide equal treatment for the recipients of the offer.
2.4.4.1.2 Debt
For the first time in 2011, acquiring debt securities resorted to using the takeover bid mechanism. In
the transactions registered at the CMVM, the underlying reason for resorting to said mechanism was
the possibility of early redemption of issued bond loans or the possibility of allocating in exchange for
securities despite its distinctiveness. Said mechanism was used in in sequence, by Banco Comercial
Português, SA, Banco Espírito Santo, SA and Banif - Banco Internacional do Funchal, S.A that
launched general takeover bids for said purpose.
The launch announcement for the takeover bid (exchange) was released on 29 April by Banco
Comercial Português, SA.(BCP). BCP issued 1,000,000 undated deeply subordinated notes with a par
value of €1,000, representing each of the four series entirely which was previously issued by said
company. The consideration offered was new shares to be issued by Banco Comercial Português, SA.
Said offer ran from 2 to 13 May 2011 and have a 99.0% success rate. Only one of the series out of the
four was not totally purchased by the offeror.
On 11 November, the launch announcement and it prospectus for the takeover bid (exchange) was
disclosed and launched by Banco Espirito Santo, SA. The purpose was that of a total of six different
securities issuances (Perpetual Subordinated Debt Instruments with Conditional Interest issued by the
former and Banco Espírito Santo de Investimento, SA undated subordinated notes e non-cumulative
guaranteed step-up preference shares series A, issued by BES Finance, Ltd). The consideration that
was offered was comprised of securities following the issuance by Banco Espírito Santo, SA, of up to
437.192.751 ordinary shares with a par value of €1.80 and up to 639,758 cash bonds with a par value
of €100. Investors had two consideration options: consideration made up entirely of shares or 80%
shares and 20% cash bonds. The remaining fractions that did not entitle a security of those previously
mentioned were paid in cash.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
136
CMVM
The offer ran from 14 to 30 November 2011 and had an acceptance level of 64.3% and 294,573,418
new ordinary, book-entry, par and no-par value representing 20.2% of the equity of BES after the
capital increase as well as 81.736 subordinated cash bonds with a par value of £100 each.
On 21 December 2011, a launch announcement for the general and voluntary takeover bid (Exchange)
was announced and launched by Banif – Banco Internacional de Funchal, SA for 100,000 self-
subordinated bonds. The offer was registered and ran between 22 December 2011 and 5 January 2012
and the relevant consideration to be paid in cash – comprised of up to 100,000 subordinated bonds to
be issued by Banif - Banco Internacional do Funchal, S.A..
2.4.4.2 Public Offers for Sale
As per resolution of the general meeting, Sociedade Comercial Orey Antunes carried out a public offer
for sale, reserved for shareholder with a maximum of 1,300,000 own shares (representing 10% of the
equity) at a unit price of €0.01. Said operation was carried out after acquiring 1,232,310 shares
equivalent to 9.5% of the equity of the issuer at a unit price of €2.17. Additionally, the company
carried out a capital reduction and distributed earnings brought forward. The number of shares sold
within the scope of said offer was 1,126,894 which correspond to a 91.4% success rate.
Table 37 – Public Offers for Sale
2.4.4.3 Publicity for Public Offers
Approval of publicity by the CMVM aims to fulfil the legal requirements of information quality for publicity
advertisement, namely, completeness, accurancy, authenticity, clarity, objectivity and lawfulness of said
information and furthermore and if applicable, as to harmonizing it with the information disclosed in the
prospectus.
Unit: Euro 10^3
Offeror Company Offer Period Final Amount Sociedade Comercial Orey Antunes, SA Sociedade Comercial Orey Antunes, SA 27 July to 1 August
2011 11.3
TOTAL
Source: CMVM.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
137
CMVM
Most of the publicity approved by the CMVM concerned debt or derivative securities offers carried out by non-
residing issuers in Portugal. Concurrent with the prospectus disclosure, said issuers disclosed publicity
advertisements during the offer. However, the publicity concerning offers wherein its prospectus was approved
by the CMVM increased dramatically and even surpassed in number, the offers with prospectus passport.
.
Table 38 – Approval of Publicity Campaigns
2.4.4.4 European Prospectus Passport
The number of passport offers in Portugal received by counterpart authorities increased yet again. The CMVM
received 129 prospectus notices approved by other European authorities (98 in 2010). However, not all the
passports were actually used in Portugal.
Six of these passports pertained to Portuguese banking sector issuers:
: i) BCP and BCP Finance Bank, Ltd - 25,000,000,000 Euro Note Programme; ii) Banco BPI, SA/ Banco BPI
Cayman Ltd/ BPI Capital Finance, Ltd - Euro 10.000.000.000 Euro Medium Term Note Programme; iii) Banco
Espírito Santo, S.A./ BES Finance Ltd. – Euro 20,000,000,000 Euro Medium Term Note Programme; iv) Caixa
Geral de Depósitos Finance/Caixa Geral de Depósitos, SA - Euro 15,000,000,000 Euro Medium Term Note
Programme; v) Espirito Santo Investment p.l.c. & Banco Espirito Santo de Investimento, S.A. – euro
2.500.000.000 Euro Medium Term Note Programme; and vi) - Banif – Banco Internacional do Funchal, SA e
Banif Finance, Ltd – Euro 2,500,000,000 Euro Medium Term Note Programme.
Apropos the previous year, solely Banco Santander Totta, SA no longer had the prospectus approved by another
competent authority. EDP – Energias de Portugal, SA also had a prospectus approved based on a passport for
Portugal for the ‘Euro 12,500,000,000 Euro Programme for the Issuance of Debt Instruments’. Said prospectus
pertained to the bond offer worth 200 million Euro.
2009 2010 2011 Offers for Employees 8 8 12 Offers with Prospectus approved by CMVM 4 11 40 Offers with Prospectus Passport 30 83 39 Source : CMVM
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
138
CMVM
2.4.5 Loss of Public Company Status
The CMVM did not announce any loss of public company status, albeit Estoril-Praia – Futebol, SAD did
request loss of public company status as per and for the purposes of Article 27/1/b of the Securities Code by
Grupo Lagos. Said request was suspended based on the takeover bid by
Traffic Sports Europe, Lda. in accordance with the provided for in article 187 of the Securities Code which
derived from ascribing to the offeror, as per article 20/1 of the Securities code, over more than half the voting
rights that correspond to the equity of Estoril-Praia – Futebol SAD. The mentioned participation of the voting
rights of the target company resulted in a promissory contract, entered into by the offeror and Grupo Lagos on
the 11th of October 2010 for the acquisition of 370.000 shares at the total price of 200.000 Euro which
represents 74% of the equity of the target company and thus ascribing 74% of the voting rights. The result of
the takeover bid was disclosed on the 13th January 2012 and the loss of public company status was carried over
to 2012. Traffic Sports Europe, Lda took over from Grupo Lagos and is now the designated shareholder by the
company to acquire the shares in the loss of company status pursuant to article 27/3 of the Securities Code.
2.5 FINANCIAL INTERMEDIATION
2.5.1 Reception of Order on behalf of Third-Parties
2011 was denoted by a substantial drop in the value and number of orders submitted by investors to the
domestic financial intermediaries. There was also a reduction in the average size of orders (from €42,000 to
€36,900 overall). An increase in the number of orders and the corresponding value in the warrants and other
securities sectors were particularly salient in counteracting this trend.
Table 39 - Reception of Orders per Security
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
139
CMVM
The decline in the average amount of the orders was particularly due to the reduction of this indicator in the
public debt sector, from an amount close to €2.8 million down to less than €1 million. This potentially displays
a drop in institutional investment in securities sovereign debt following the recent debt crisis, but it may
likewise illustrate a greater role by individuals in this sector of the capital market. In particular, there was a
notable reduction recorded in the value of orders for public debt by non-resident investors (-46.3%), namely,
institutional. A significant increase in the amount of orders from resident investors, especially, insurance
companies, pension funds and other institutional investors counteracted this decline. Implementing financial and
budgetary stabilization programs in addition to successive downgrading of credit ratings of certain European
states, has certainly contributed to withdrawal by non-resident investors from investing in the national sovereign
debt, despite the appeal of the yields highlighted in this market.
The shareholder sector was the largest contributor towards the decrease in the value of orders transmitted. The
uncertainties in the markets, the recessive impact that was perceived during the year and the effects thereof on
the performance of shares admitted to trading, led to the declining number of orders and value thereof. A drop,
in particular, was recorded in the value of orders issued by non-resident institutional investors, as the non-
institutional boosted by 35.8% in the overall value of orders aimed at financial intermediaries that were
authorised to carry out the activity in Portugal. The value of orders directed at Euronext Lisbon market was
significantly reduced to approximately €20.9 billion (as against €30.4 billion in 2010), along with a drop of
close to 10.5% in the respective average value (€1,400 less).47 Nonetheless, orders directed to Euronext Lisbon
accounted for around 40% of the total value of orders on shares. This is a percentage that is slightly higher than
that recorded in the previous year (approximately 38%). Furthermore, considering that the trading volume on
Euronext Lisbon reached €27,892.7 million, it was concluded that approximately 75% thereof was carried out
by domestic financial intermediaries.
Despite the substantial increase in the number of orders in private debt, the overall value declined by
approximately 20%. This contributed towards reducing the average value of orders by about €200 000 (-39.5%).
The abovementioned increase in the risk level of certain European States and successive rating cuts had some
contagion on the private debt and led to the departure of some investors from this market sector. The value of
orders issued by resident institutional investors fell significantly, particularly asset management companies (-
63.4%, with a prevailing effect on portfolio management activity) and insurance companies and pension funds (-
43.3%).
47
The increased volume of orders aimed at other markets such as Xetra, NYSE Arca, Euronext Paris and Deutsche Boerse
should be pointed out in this shareholder sector.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
140
CMVM
The non-institutional investors displayed a distinct behaviour, with a 137.5% increase in the value of orders on
these securities (up to €7.6697 billion). The resident non-institutional investors substantially increased their
investment in this sector, being responsible for 63.5% of orders' value. An increase in "off market" trading was
also recorded with a weighting of approximately 73% of total orders on private debt.
Countering the trend of previous years, there was an increased investor yearning for trading covered warrants,
with a rebound in the overall value of orders issued on said instrument to levels higher than that of 2009.
Together with the upsurge (although slight) in the number of orders, the average size of orders rose by about
€700 (+23% in comparison with 2010). The insurance companies and pension funds were responsible for this
domestic recovery. Nevertheless, the increase in value of orders for this financial instrument was only partially
aimed at the domestic market. Institutional investors, in total, demonstrated certain stability in the value of
orders issued on covered warrants. However, an upswing of approximately €43 million in the value of orders
issued by non-resident institutional investors (+10.8%) was noticeable. Said investors were responsible for
nearly 71.1% of orders issued on these securities.
A significant drop was recorded in the orders on financial derivatives that were directed at domestic financial
intermediaries. It countered the vigorous recovery trend experienced in the previous year. This trend was
especially denoted by the reduction in transmission of orders on futures and contracts for differences.
Table 40 – Volume of Orders Received per Derivative
The decline highlighted in the contracts for difference sector (CFD) is not entirely unexpected. These financial
instruments are primarily traded by retail investors, largely resident, via electronic platforms (which is classified
by being OTC trading). These investors accounted for 95% of total number of orders. The potential reasons for
the decline of orders in this sector are the uncertainty due to domestic macroeconomic and trends in markets,
and also the growing supply of alternative products with a more appealing risk-return combination (such as
deposits). Another possible explanation stems from a possible replacement effect between trading platforms,
with the CFD investors conveying their orders to platforms held by non-domestic financial intermediaries (that
are under no obligation to report data to the CMVM).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
141
CMVM
There was a substantial contraction in the futures sector, with particular emphasis on contracts that have
exchange rates as the underlying asset (-76.3% compared to 2010). The value of orders on futures, which have
long-term interest rates (-26.4%) and Indices (-25.7%) as underlying assets, also fell. These three kinds of
contracts contributed towards a €83,000 million downswing in the value of orders. A considerable increase in
the value of orders on futures contracts, which have short-term interest rates and commodities as underlying
assets, off-set this decline.
Futures are widely used by institutional investors that aim to cover risks arising from their activities and also for
speculation on future developments of the underlying assets. The sharp decline in orders on exchange rates
futures and long-term interest futures is not separable from the instability that was experienced in the forex
market (especially the EUR/USD exchange rate trend) and the uncertainty as to the monetary policy trend of the
ECB and the Federal Reserve Bank, against a backdrop of financial crisis and restricting credit market. The
increase in trading commodity futures (and contracts for differences with the same underlying asset)
demonstrates a natural outcome of the instability currently prevailing in the equity and debt markets, in
particular, investor demand for higher rates of return.
The trend in investing in commodity derivatives is not indicative of the domestic financial intermediaries'
specific features. As previously mentioned, this is a global trend and there is indication of an increase in
propensity of exposure to precious metals (gold and silver) and crude oil. In 2011, the spot price of gold reached
a 33.8% gain (until September) and closed the year with an 11.0% gain. The spot price of silver also
experienced a substantial correction in the first couple of months of 2011, reaching 56.6% gain (until April) but
ended the year with approximately a 9.1% decline. The price of crude oil also displayed a positive trend during
the year, with the futures of the two leading benchmarks (West Texas Intermediate and Brent) indicating an
average appreciation of 12%.
The value of derivative orders directed to the Euronext Lisbon market fell to nearly half (-54%) when compared
with 2010, as a result of a substantial reduction in the value of orders from resident institutional investors (asset
management companies). The resident non-institutional investors displayed distinctive behaviour, by recording
an increase of €38.5 million in the value of orders and somewhat offsetting the contraction in investment by the
institutional investors. While the value of orders transmitted by residents remained relatively stable in the spot
market, the value of orders derived from non-residents (both institutional and non-institutional), dropped by
approximately 50%. This is indicative of lower penchant from foreign investors for the Portuguese market,
which results from uncertainty concerning the development of the domestic economy. Overall, it is estimated
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
142
CMVM
that roughly 32.1% of orders received and executed on Euronext Lisbon are from domestic financial
intermediaries.
As in past years, investors went back to using the traditional channels (by telephone or fax, or in person at the
premises of financial intermediaries) for transmitting their orders. 84.4% of the orders in the spot market was
transmitted via these channels (83.9% in 2010), whereas in the forward market the same percentages were
68.5% and 67.5%.
Internet use was relatively stable in the forward market. The decline in transmission of orders on futures was
almost wholly offset by an increase in orders on contracts for differences transmitted via the Internet. The
stability recorded was also achieved by reducing the relative importance of other electronic means in the futures
market, due to the decrease in the value of contracts for difference orders transmitted via this route.
Table 41 – Volume of Orders Received on Behalf of Third Parties and Per Type of Investor
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
143
CMVM
TEXTBOX 2 – TRADING OF SHARES IN THE EURONEXT REGULATED MARKET
The technological development that took place during the last decade led to most structures in worldwide
trading embracing electronic trading systems. Sustained by super computers, the trading logic in its design is
reflected and embedded into a set of meaningful electronic programmes that make use of regulatory criteria
previously laid down. The promotion of competition among trading venues within the European context, that
was rendered possible by MiFID in late 2007, stepped up recourse to using advanced technology in trading. This
improved the quality both of trading venues and the access means (connection) to these structures. In either
case, this provided an incentive for implementing trading strategies supported by electronic platforms.
The domestic context is not an exception thereto. Within the universe of Euronext trading markets, financial
intermediaries (Members) authorised to operate on the Portuguese regulated market of Euronext Lisbon feature
fully electronic trading electronic algorithms that are capable of carrying out transactions at time intervals of
less than a millisecond (e.g. in microseconds, or 10-6
seconds).
Therefore, it is important to get to know the Portuguese regulated market in greater detail. This is in regard both
to registration and the execution of intentions to (dis) investment (offers) from clients of financial intermediaries
(FIs) and/or FIs' own portfolio. The share sector of Euronext Lisbon is analysed below, notably as regards
securities of PSI 20 Index.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
144
CMVM
Offers
An offer constitutes compliance with the intention to invest (order) by any investor or financial intermediary
before the trading system. The number of offers transmitted to the trading system of Euronext Lisbon in 2011
experienced a further increase (+5.4%). More than 48 million offers for the share sector were registered.48
As in preceding years, the securities comprising the PSI 20 Index were the most depicted, with about 91.5%
(44.1 million of offers) than that registered for the share segment. The 10 shares with the greatest number of
offers represent 79.4% of the total number of registered offers for this sector, with only one security
corresponding to 25.5% of this total. This means that there is a high concentration of intentions to invest that are
transmitted to the Euronext Lisbon trading system.
High Concentration of Offers – PSI20
Source: Euronext (CMVM Calculations).
Executed Offers
The level of execution of orders (i.e., orders that led to one or more trades for securities on the PSI 20 Index), on
average, was lower (-1.2%) that that recorded in 2010. Nevertheless, the total number of offers transmitted to
the share sector was higher (+3.1%) than that recorded in the same period, and the percentage of offers executed
fell, especially over the last 5 months.
48 On average, the shares sector is around 10.3% of the total number of offers registered each day on the Euronext Lisbon. The offers
registered for warrants and certificates account for the majority of said offers.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
145
CMVM
Source: Euronext (CMVM Calculations).
Round Lot
As regards the round lot, (i.e. the number of shares 'offered' to buy or to sell in each offer and for each security),
on average, 88.5% of buy orders recorded in the trading system of Euronext Lisbon in 2011 showed a number
between 100 and 10,000 shares. The same average percentage for offers for sales was 87.9%.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
146
CMVM
Source: Euronext (CMVM Calculations).
Round Lot versus Offer Status.
From the association between the round lot of offers registered by FIs and its actual status resulting from
processing by the trading system, it was possible to detect that only 9.7% were executed within the 88.9% of
offers to buy with amounts between 100 and 10,000 shares, only 9.7% were executed. This figure reached
10.0% in the offers to sell, amounting to 88.3%.
A very small percentage of execution of orders (12.0% on average) in the share sector of the Portuguese
regulated market, as opposed to the high percentage of cancellations and modifications of orders (86.2%)
similarly mirrors, to some degree that seen in main world markets, the intense use of electronic trading
algorithms that respond to market events in milliseconds. It should be noted that the PSI 20 Index depreciated
by 27.6% during the course of 2011, but the percentage of sessions with positive appreciation (47.9%) was
somewhat less than that of the negative sessions (52.1%). This indicates constant changes (and the opposite) in
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
147
CMVM
the pricing of securities that comprise the said Index, which is very often triggered by shifts of position
(buy/sell) over short time intervals. This is a setting that is conducive to the use of electronic algorithms.
Share Sector Total
Offers to Buy Offers to Sell
Note: The group "Others" includes the other states (situation) that an offer may display before the trading system: cancelled at the end of the trading
session due to deadline date or because it is an exclusive offer for the session; cancelled due to a corporate event (e.g., payment of dividends, redenomination of the nominal value, inter alia); cancelled by the supervision of trading.
Source: Euronext (CMVM Calculations).
Processing Time
The processing time (latency) of an offer is one of the key conditions for the successful implementing of
strategies for High Frequency Trading (HFT). This indicator is obtained from the sum of two parts - the
processing time of an offer in the trading system49
and the time obtained by the distance between the FI and
trading system.50
In this analysis, only processing time with the first component was estimated since it was not
possible to obtain information on the latter.
In 2011, around one in three offers registered in the share sector of the Portuguese market was processed in a
millisecond (ms) (10-3
s). Processing in microseconds (µs = 10-6
s) took place in 2.7% of the offers. Nonetheless,
only 5.9% of offers were executed in milliseconds, which demonstrate that the high rate of cancelled offers
results in the crucial performance of electronic algorithms to instantly react to small variations in the quotation
of securities.
49 The time interval where the trading system takes to receive (via the firewall), execute, if applicable, and send the response (via the
firewall) about an offer. Also designated as “round-trip latency”. 50 Also known as “proprietary latency”.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
148
CMVM
Offers Processed in Milliseconds
Note: (1) The executed offers only regard processing in millisecond. Source: Euronext (CMVM Calculations).
2.5.2 Execution of Orders on behalf of Third Parties
Orders executed on the spot market dropped 32.3%. This is a more significant downturn than that recorded in
the reception of orders for third parties (-25.0%). Nevertheless, the trend is similar in the reception and
execution due to the economy's slowdown and increasing instability in the markets.
The drop was largely determined by the execution of orders in the share and private debt sectors (-41.9% and -
30.6% compared to 2010). Shares continue to be the instrument with the greatest weighting in the execution of
orders with a 45.2% quota, despite the increased relative importance of the other sectors of the spot market,
especially public debt.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
149
CMVM
Table 42 - Spot Market Trading per Type of Security
The substantial increase in the execution of other securities is in line with the increased value of the orders
transmitted by investors in this sector. The ratio of order execution as a percentage of the transmitted value rose
from 31.7% to 62.9%.
Orders executed on the futures market fell 10.2% (buffering the impact of the decline recorded in the preceding
year). This was to a large extent due to a substantial reduction in orders executed on futures (-51.9%). More
dramatic reductions were recorded in futures contracts on Indices and long-term interest rates.
The executed contracts for differences (CFD) (+66.3%) became the derivative financial instrument with greater
weighting in the total number of orders executed in the forward market. This reaffirms the growing number of
investors in said financial instrument. An increase of approximately €3.7 billion in the value of orders executed
on exchange rates contributed towards this (despite the sharp decrease in value of orders transmitted mentioned
above).
Table 43 – Orders Executed per Derivative
Overall, the domestic markets were again more important in executing orders as against the international
markets, with a 22% weighting in the total number of orders executed. Separating the two types of markets (spot
and forward markets), the international markets is of the utmost importance in forward trading while it was the
opposite in the spot market.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
150
CMVM
Executing orders in the Futures Market experienced sweeping changes, with a steady reduction in the
importance of international markets offset by a substantial increase in the weighting of "off market" execution
(which currently accounts for 69.5% of the value of orders executed in the Futures Market compared to 29.6%
in 2009). This increase is largely due to the significant increase in the execution of orders on contracts for
differences, which is carried out entirely "off market".
Table 44 - Trading per Type of Market
The increased significance of OTC markets, both in the spot market and the futures market should be regarded
with particular concern since it contributes towards increased opaqueness of trading and reduced efficiency of
pricing and price signal systems resulting from a high level of market fragmentation and subsequent price
dispersion.
MiFID set up a regulatory framework for alternative forms of trading (already available) commonly referred to
as MTFs. Stepping up competition against the regulated markets contributed towards a decline in transaction
costs for investors. The adverse effects emanating from reducing trading transparency, the fragmentation of the
pricing system and liquidity in the markets cannot be excluded.
As stated above, the execution of orders OTC in the spot market accounted for 58.2% of the total number of
orders executed (slightly up from 2010.) Thus, the execution of market orders, regardless of type, is less than
half of the orders executed.
26.3% of the total number of orders was executed in Euronext Lisbon. This is a higher percentage than that of
last year (25.4%). This trend does not result from an increase in absolute terms of value of the orders aimed at
the Euronext market but it results from substantial decreases of orders executed by other means, particularly,
internalisation. By comparing execution on Euronext Lisbon with other regulated markets demonstrates that the
latter only represents 8% of the total value of orders executed in the spot market and therefore is negligible.
The execution of orders on Multi-Lateral Trading Systems (MTFs) by domestic financial intermediaries is
extremely low and recorded a drop in comparison to the preceding year. Only 0.31% (€263.7 million) of the
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
151
CMVM
total number of orders executed in the spot market was in the MTF (0.35% in 2010). The value of orders
executed in these systems represents 1.2% of the total executed in Euronext Lisbon (1.4% in 2010). PEX was
the most used MTF. This represented almost all the orders executed in these markets (97.1%). Unlike Portugal,
an impressive growth of trading on MTFs has been internationally recorded as opposed to regulated markets.
2.5.3 Trading for Own Account
Financial intermediaries may trade for own account on the spot market for the trading book, investment and
within the context of market making. The purpose of trading for own account on the futures
market may be for the trading book or hedging.
More than 80% of the value traded for own account in the spot market was directed at investment portfolio. As
for transactions on domestic shares, Portugal Telecom, EDP, Galp, REN and BCP corresponded to 71.5% of
total trading in shares for own account of domestic financial intermediaries. The trading book (85.3%) was the
key destination for transactions (almost entirely futures) in the futures market.
The securities traded for own account remained broadly the same as in the preceding year. Particularly salient
was some substitution of public debt for private debt on trading for own account. Since the value of trading for
own account involves price effect, this situation may have been due not only to the sharper devaluation of
sovereign debt than that recorded in private debt but also to the public offers carried out by domestic banks who
purchased debt already in circulation in exchange for new shares issued.
The value of trading for own account in other securities also remained fairly similar to that of 2010. However, it
should be pointed out that one financial intermediary was responsible for approximately three quarters of the
trading in this sector, basically due to trading in commercial paper.
Table 45 - Trading for Own Account per Security
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
152
CMVM
As regards trading for own account in derivatives, financial intermediaries have tended towards transactions in
futures. The relative weighting thereof has been steadily increasing. This type of trading in futures can mean
that for the last three years financial intermediaries have been opting for opening positions in instruments with
the purpose of covering the risk of spot positions held, especially within a market environment where a
substantial increase in volatility was recorded, or alternatively, use the futures for speculation and arbitrage in
the spot market. The value traded for own account in derivatives is nearly 16 times greater than that executed for
third parties.
Table 46 - Trading for Own Account per Derivative
2.5.4 Day-Trading
There was a drop in the average number of financial intermediaries carrying out day-trading during the year.
This decline follows on from a downward trend recorded over the last couple of years and hence the unusual
scope by being more substantial.
The total number of securities traded on day-trading climbed significantly, by moving closer to that recorded in
2008. However, the value51
traded fell 38.9% as it was affected by the general reduction in the price of traded
securities. The steady decline in share prices creates an atmosphere that is conducive to intraday transactions
wherein investors try to take advantage of the (anticipated) decreases in the securities price through short selling
that are offset, even within the same trading session, by transactions buying the same amount of securities.
51 The monetary values concerning day-trading result from one approximation exercise that regards as reference the closing figures in the
last session of each month for each security in the PSI 20 and therefore does not represent the actual value of transactions carried out in
in the market.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
153
CMVM
Table 47 - Aggregate Data on Day-Trading
The value of intraday transactions conducted by institutional investors accounted for 17.1% (16.8% in 2010),
thereby breaking the trend towards an increased participation by institutional investors in recent years. Between
institutional and non-institutional investors, the Internet substantially enhanced its role as the preferred channel
to issue intraday orders. This is possibly as a result of faster transmission of orders that the electronic means
deliver within a sharper market volatility, which as it is well known, propels intraday transactions.
Table 48 - Day-Trading Distribution per Channel and Type of Investor
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
154
CMVM
2.5.5 Registration and Deposit of Financial Instruments on behalf of Third Parties
The value of financial instruments on behalf of third parties amounted to approximately €321 million. The
reduced values recorded on behalf of third parties were particularly acute in public debt (-39.3%) and shares (-
18.0%). Reducing the amount recorded on behalf of non-residents in public debt, was more pronounced and
resulted from the overall decline in prices of sovereign debt and also the divestment by foreign investors in this
kind of financial instrument as a consequence from the substantial increase in credit risk of Portuguese
government debt.
The weighting of values under registration and deposit attributed to resident investors surpassed that of non-
residents. This was more sharply reflected than that in 2010.
Table 49 - Type of Security per Holder
Last year, the industry’s concentration level fell 2.6 pp. The market share of the five largest securities custodians
reached 83.8%, whereas the HHI Index fell from 2,334.7 down to 1,994.1 points. BCP continued to hold the
largest market share (slightly over one-third of the value under registration and deposit in the domestic market).
2.6 ASSET MANAGEMENT
2.6.1 Individual Portfolio Management on behalf of Third Parties
After showing certain resiliency to the impact of the financial crisis, the year was prominent for the substantial
decline in the assets managed under individual portfolio management. The fall in assets managed extended
across all kinds of management entities that were active in this sector, but was more dramatic in credit
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
155
CMVM
institutions. However, in absolute terms, the decline in amounts under management was more severe (greater
than six billion Euros, corresponding to more than 50% of the total drop in the amounts managed in this
activity) in asset management companies. The decline in the assets managed appears to have been due to the
price effect resulting from lowering prices in the debt and equity markets and also due to a significant investor
withdrawal (in 2011 the number of portfolios under management fell by more than 10,000 i.e., approximately
one third of all managed portfolios at the end of last year).
Table 50 - Amount under Management per Type of Entity
An analysis per type of financial instrument managed shows that the decline in amount under management was
due to devaluation and disinvestment in private bonds, particularly those issued by financial institutions. The
"Other securities" category, which broadly-speaking includes financial instruments with returns profiles
contingent to the performance of other assets (futures, options, warrants and other derivatives), although hardly
relevant in absolute terms, was the only category where the value under management increased (and quite
significantly). This could demonstrate that managers have stepped up hedging transactions in portfolios and/or
used this type of instruments as possible leverage for increasing the profitability of these portfolios.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
156
CMVM
Table 51 - Amount under Management per Type of Security
Regarding the distribution of investments per markets where financial instruments are admitted to trading,
excluding Portugal, the "Others" recorded a decline in amounts invested that were sharper in countries such as
Ireland (subject to an International Financial Assistance Programme) and Italy (which recorded a deterioration
of financing conditions in international markets).
The particular situation of increased investment in assets listed in the domestic market resulted from increased
investment in public debt. Notwithstanding a decline in the respective market value, increasing investment by
the managers enabled the amount invested in the Portuguese sovereign debt to reach €5.1 billion at the end of
the year (€600 million more than at the end of 2010).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
157
CMVM
Table 52 - Investment per Country
2.6.2 Undertakings for Collective Investment in Transferable Securities and Special Investment
Funds
Once again, the amounts under management in securities investment funds declined substantially. This
reduction was sharper in the harmonised funds (UCITS) than in special investment funds. The treasury funds
and domestic share funds were the most blacklisted in the harmonised funds. The drop in amounts under
management was brought about by the withdrawal of investors (the number of participants in harmonized funds
declined by about 240,000, of which approximately 98,000 related to the treasury funds and 10,000 to domestic
share funds) and by the fall in prices of financial instruments comprising the funds' portfolio.
However, the number of active funds increased due to the establishment of new special investment funds (there
were nine active funds by the end of the year). It should also be mentioned that there are no more guaranteed
harmonised funds.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
158
CMVM
Table 53 - Number of Funds and Amount under Management per Fund Category
A typical portfolio of harmonized funds and special investment funds underwent a few changes worth nothing.
On the one hand, and notwithstanding the adverse conditions that the debt markets suffered, there was increased
investment in domestic public debt and short-term debt instruments (which roughly include Treasury bills and
Commercial paper). On the other hand, there was a similar drop in the investment of domestic and foreign
shares. However, due to its magnitude, it was greater than the downswing in the PSI 20 Index, and postulating
that this Index's portfolio is typical of the average portfolio of investment funds in domestic shares, it appears
that besides the price effect there was also divestment by the fund managers in shares of Portuguese companies.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
159
CMVM
Table 54 - UCITS and SIFs Portfolio Structure per Asset and Market Type
2.6.3 Holdings in Foreign Collective Investment Schemes Marketed in Portugal
Foreign UCITS marketed in the Portuguese market experienced a sharp downswing in the amounts placed, after
recording an inverse trend in the preceding year to the domestic securities investment funds. The percentage
decline in the value placed was almost double than that recorded in the amount under management of domestic
securities investment funds and special investment funds. This was not only due to the price effect because of
the drop in prices of most equity markets, but also the volume effect, reflected in the decrease of the number of
UCITS with placed amounts (-9) and reduction in the number of participants (more than 20,000 participants,
which means that nearly one in four participants fully redeemed its investments in foreign UCITS).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
160
CMVM
Table 53 - Aggregate Benchmarks of Foreign UCITS
The number of marketing entities remained steady but the three key marketing entities had a very substantial
market share (65.4%) by the end of 2011. This is indicative of an increasing concentration in this sector.
2.6.4 Real Estate Investment Funds
The amounts under management in real estate investment funds fell 1.8% when compared to the end of last
year. In a value chain analysis of the amounts under management at the end of each year, it is the first time this
applies since real estate investment funds exist in Portugal.
The structure of the real estate portfolio remained fairly steady. The investment of funds in real estate outside
Portugal continued to be negligible but the value of immovable property in the EU Member States continued to
grow (particularly land and completed construction).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
161
CMVM
Table 54 – Portfolio Structure of Real Estate Investment Funds
Nonetheless, there are two facts that are particularly salient and interconnected. The first relates to the decline in
the power of liquidity (-3 percentage points between 2009 and 2011) and the second to more debt weighting
(around about 450 million more between 2009 and 2011, without the amounts under management recording any
perceptible changes). Both facts can be explained by the pressure experienced by the management entities
regarding applications for redemption that were submitted by participants (only last year the number of
participants in real estate investment funds fell - just over 10,000 and all were retail investors). However, in
light of the adverse market conditions, there was also inability in disposing the properties pursuant to the
conditions compatible with the value recorded in the portfolios.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
162
CMVM
TEXTBOX 3 – OPEN-END REAL ESTATE INVESTMENT FUNDS
The construction sector has been distinguished by a contraction in production since 2006. The output Index in
construction and public works by the Portuguese Statistics Institute stood at 52.6 points in December 2011 when
compared to 95.3 in September 2006 (corresponding only to output in the building construction). On the other
hand, real estate assets in Portugal have depreciated. A decline in mean Index of the banks' assessment of
accommodation, which began in the first quarter of 2010 and remains to this day, is indicative of the current
situation. For example, in the Lisbon metropolitan area, the value per square metre of accommodation was
€1,267 in December 2011 compared to a €1,447 in March 2010. In the Porto metropolitan area, there was a
similar scenario, with the average price per square metre falling from €1,126 recorded in February 2010 down to
€1,007 in December 2011. These figures point to price corrections of 12.4% and 10.6%, respectively, over a
period of less than one year. Although this serves as an example, for not encompassing the whole real estate
assets and in particular those normally comprising portfolios of open-end real estate investment funds
(services, commercial property and others), these price cuts are symptomatic of the difficulties encountered in
real estate in Portugal.
Real Estate Investment Funds Indebtedness
Source: CMVM.
Note: Including REAMF.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
163
CMVM
These difficulties are further magnified by the decreasing number of investors, and respective sum invested. O
The real estate funds sector recently recorded a decline in subscriptions from participants. The open-end real
estate investment funds lost participants for six quarters in a row between June 2010 and December 2011. The
value of assets under management recorded consecutive quarterly decreases from September 2010 until
December 2011. As with most sectors of the fund industry, the reduced inflow of investment in open-end real
estate investment funds can also be explained by the competition that the funds are subject to by alternative
financial products (e.g. bank deposits, classic or structured, complex financial products, etc.).
The combination of contracting activity with price decline and an increase in indebtedness (and even some
unwillingness to granting credit) made carrying out economically priced real estate transactions from the selling
perspective of the fund. This led to difficulties in producing liquidity from essentially illiquid investments.
The issues described above and hardship that the open-end real estate investment fund sector is facing comes
down to the difficulty of raising financing for the purchase of real estate and addressing redemptions from
participants. The economic and financial conditions in the sector and investor behaviour led to an increase in
resorting to borrowing by the open-end real estate investment funds. The upswing in the real estate investment
funds’ indebtedness was due to an increase in the debt burden of open-end funds, as the closed-end funds
suffered a slight tumble.
Real Estate Investment Funds Indebtedness –
Open-End Vs Closed-End
Source: CMVM.
Note: Including REAMF.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
164
CMVM
Open-End Real Estate Investment Funds Benchmarks
Though the number of open-end real estate investment funds is comparatively low against the total number of
real estate investment funds, the weighting of open-end real estate investment funds was 33.2% of the total
assets under management of real estate investment funds by the end of the year. Negative net subscriptions in
open-end real estate investment funds were recorded, around €395 million. This results in an 8.4% decline of the
net asset value of the funds from the previous year. The first edition of CMVM Risk Outlook CMVM shows a
detailed analysis of the real estate investment funds market.
2.7 SECURITISATION FUNDS
2011 continued with the strong trend with the banks resorting to securitisation and a substitution effect between
the establishment of funds for bond issuance by securitisation companies continues to prevail. These maintained
the number of issues, although there was also a drop in the amount of new transactions in comparison to the
preceding year. It is likely that in 2012 the banks' interest in securitisation will decline, (as a temporary
measure) as the ECB elected to allow the central banks of the countries in the Euro area to accept credit
portfolios without being securitized as collateral in Eurosystem credit transactions. This will be possible by
complying with specific requirements, including those related with the creditworthiness of the assets concerned.
The ECB's decision set a disincentive for banks to package securitisation transactions.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
165
CMVM
Table 55 - Portfolio Structure of Securitisation Funds
2.8 VENTURE CAPITAL
The total amount under management of domestic venture capital operators increased by 12.4% in 2011,
amounting to approximately €2.6 billion at the end of the year (includes 754.8 million for venture capital
companies - VCC; and 1,887.6 million for venture capital funds - VCF). The increase in the amount under
management was primarily due to the venture capital funds. There was a €280 million upswing in the amount
under management mainly due to 20 new funds starting activity and paid-up capital formerly subscribed in
previously active funds. The dynamics of venture capital over the last few years has been focused on increasing
the amounts managed by venture capital funds. Said value has stayed fairly steady in venture capital
companies.
Nevertheless, it should be noted that as a result of implementing the Accounting Standardisation System
(SNC)52
, the net asset value of the funds (NAV) now includes merely the portion of capital subscribed and
already paid-up. Thus, trends in amounts under management in venture capital funds also reflects the impact of
capital calls that took place in 2011.
52 The SNC was approved by Decree-Law No. 158/2009 of 13 July and was implemented as from 1 January 2010.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
166
CMVM
Table 56 – Venture Capital Companies Investment Portfolio
The increased number of funds is primarily due to the contribution of the Lisbon and Algarve Regional
Operational Programmes and the Financing Support System and Risk Sharing Innovation (SAFPRI) 53
within
the National Strategic Reference Framework (QREN), which subscribed to capital in 17 out of 20 funds
established in 2011. These support programs appear as a complementary mechanism for financing and risk
sharing of innovation within a context where the financial environment encourages the development of
strategies for innovation, growth and internationalisation of companies, particularly the most recent and smaller-
sized companies. Within this context, the increase in the amount managed by venture capital operators was due
mainly to two VCFs: ECS - SCR, SA (an increase of €296 million in amount under management) and Espírito
53 SAFPRI is implemented using as the preferred vehicle Support Fund for Financing Innovation (FINOV), which involved, among
others, the capital of Venture Capital Funds. The instruments of company financing are selected in the case of VCF by the following tenders:
a. No. 01/SAFPRI/2009 – Establishment or increase of Venture Capital Funds for Innovation and Internationalisation of SMEs;
b. No. 02/SAFPRI/2009 – Establishment or increase of Venture Capital Funds for Corporate Venture Capital;
c. No. 03/SAFPRI/2009 – Establishment or increase of Venture Capital Funds for supporting Early Stage projects; and
d. No. 04/SAFPRI/2009 – Establishment or increase of Venture Capital Funds for supporting Pre-Seed projects.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
167
CMVM
Santo Ventures - SCR, SA (an increase of €40 million in managed assets for venture capital). However, this
upswing in the amounts under management triggered a decline in the weighting of equity capital in the VCFs
global portfolio (which was already lower than 50% in 2010). Taking into account that venture capital activity is
generally viewed as an intervention in companies via acquisition of equity interests, the specific structure of the
Portuguese market for venture capital is of particular concern.
Table 57 – Venture Capital Funds Investment Portfolio
As regards investment stages favoured by venture capital investors, there were no major changes to the structure
of investments, with the stages of expansion and replacement capital continuing to be the most important.
Nevertheless, the turnaround transactions were particularly salient, i.e. strategic reorientation or recovery of
companies, in light of structural changes in the economy. This venture capital stage recorded an increase of
€224.5 million in the amounts invested. With less prominence in light of the value, but nonetheless important
due to the restrictions and tightening of bank loans to domestic companies, venture capital played a role in
refinancing the bank debt (€21.2 million more than in 2010). On the contrary, investment in the incubating of
entrepreneurial ideas (seed capital) continued to be small.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
168
CMVM
Table 58 – Investment Stages of VCF & VCC
Some changes were recorded in sectors that venture capital focused on. Financial activities continued to play a
crucial role in investments (approximately 25.5% of total investments). The manufacturing sector rose in
prominence as target for investment and now represents 18.7% of total investments. Finally, the sector relating
to technologies aimed at environmental areas (collection, treatment and distribution of water, sanitation and
waste management and clean-up system) accounted for 14.3% of venture capital investments. Nevertheless,
almost all investments in this sector were carried out by a large venture capital company that invests exclusively
in foreign companies' shares.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
169
CMVM
3. SUPERVISION AND REGULATION
3.1. INTEGRITY, RELIABILITY AND PROTECTION OF THE SECURITIES MARKET
3.1.1 Supervision of the Markets, Management Entities of the Markets and Settlement
and Clearing Systems
As usual, the CMVM continued to pay close attention to the supervision of markets and management entities of
markets and clearing and settlement systems. This includes the spot and derivatives markets managed by
Euronext Lisbon, the Special Public Debt Market (MEDIP) managed by MTS Portugal, the PEX Multilateral
Trading System managed by OPEX, the Electricity Derivatives Market managed by OMIP, the Central
Depository and the Settlement System managed by Interbolsa and the Clearing and Settlement System managed
by OMIClear.
3.1.1.1 Supervision of Trading Structures
The supervision of market infrastructures includes two components: the prudential monitoring of management
entities and the daily monitoring of activity and reliability of markets and systems. Compliance with the
prudential rules relating to the economic and financial situation of the entities and activity's trends were
confirmed. The CMVM focussed attention on the internal control systems implemented, the amounts under
custody within the scope of the guarantee fund promoted and managed by Euronext Lisbon and compliance with
disclosure requirements.
Monitoring the management entities' activity included analysing the several amendments made to the operating
rules of the markets and systems. As regards new projects, the Alternext Multilateral Trading System was
established by Euronext Lisbon. The respective registration was recorded with the CMVM and the process for
European harmonisation of the respective rules was started. This was completed in 2012. The following are
particularly salient within this context: the reformulation of the ETF concept and the addition of ETN
(Exchange-Traded Note) and ETV (Exchange-Traded Vehicle) definitions. Supplemental liquidity providers
were created on the regulated market. These are market members qualifying for a reduced price list in
consideration for assuming liabilities for access to the market at certain price levels, i.e., European Best Bid and
Offer. In light of concerns over the quality of rules in force, adjustments were carried out whenever
improvements were identified (the following were amended, inter alia, Regulation I, Trading Manual and
Annex, Trading Procedures and Corporate Action Policy).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
170
CMVM
OPEX rules for one of the mechanisms used for the settlement of transactions carried out on the PEX-MTF were
amended. The settlement system, PEXsettle, was terminated and mechanisms were established for the
settlement of transactions carried out thereon, including via bilateral settlement of transactions, with clearing
being possible, in accordance with the settlement option defined. Further adjustments were included that were
aimed at clarifying the rules or including new trading sectors.
Futures and swaps contracts with daily and weekend maturities were introduced in OMIP. The market started
offering the possibility of trading futures on a daily and weekend basis - SPEL base load, and also daily futures -
SPEL peak load. It also envisaged the possibility of recording off-market trades on swaps on a daily and
weekend basis - SPEL base load. All contracts permit only settlement. Modifications were also made for the
admission to trading of futures on the PTEL Index, with base load and settlement, as the market merely
envisages the trading of these contracts exclusively with settlement. Amendments to the operating rules of the
MIBEL derivatives market were also carried out so that auctions for sales under Special Regime Generation
could be accommodated. OMIClear, the clearinghouse with duties as central counterparty and management
entity for the settlement system of transactions carried out/registered on the MIBEL derivatives market was also
indicated as being responsible for ensuring said duties in respect of instruments placed in the auction sale of
Special Regime Generation. The necessary amendments were made to the applicable rules.
The rules of the settlement systems managed by Interbolsa were likewise amended. Improvements were
implemented in the automatic adjustment of interest payments and repayments in the transactions awaiting
settlement and amendments to the operating rules of the centralised systems deriving from procedures for
transferring the securities provided as collateral. The rules aimed at implementing the system applicable to the
registration, maintenance and settlement of investment units in investment funds were amended. New features
were developed in order to enable the registration and settlement of investment units to be automated. This
includes open-end funds and fractional amounts of investment units up to a maximum of eight decimal points.
3.1.1.2 Supervision of Trading
The procedures for supervising debt securities are undergoing an upgrade and also include financial instruments
relating thereto, such as the CDS. There are two investigation processes already linked to the sovereign debt
market: one aimed at performances in the equity market prior to the disclosure of declines in the credit rating of
sovereign debt, notably short selling strategies and the other had signs of debt market manipulation.
The Integrated Market Surveillance System (SIVAM) and transaction analysis continued to be decisive in
combating market abuse. Almost all the investigation cases opened came from analysing specific transactions
through SIVAM's operation. However, certain investigation processes arose from suspicious transaction reports
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
171
CMVM
undertaken by supervised entities subject to the analysis and reporting duty. A project was launched during 2011
to develop a new SIVAM module, envisaged on the establishment of said programme, so as to make it more
comprehensive and adapt same to new market conditions, especially algorithmic trading, including high
frequency trading.
The CMVM pursued real-time monitoring of trading in financial instruments with special attention being paid to
the share and bond markets managed by Euronext Lisbon. 1,022 potentially anomalous cases were detected and
recorded. These were analysed on a preliminary basis and discussed within the CMVM Supervision Committee.
The events examined corresponded in the vast majority of transactions carried out at prices considered to be
abnormal in light of the market having knowledge of the specific information, intervention quota in abnormal
trading and the disclosure of information through the mass media or other information sources, without prior
disclosure to the market via the information disclosure system.
Further progress was made in the supervising short selling in domestic regulated markets. Particular attention
was paid to the compliance of short positions reported to the CMVM and the market with the requirements of
Regulation No. 4/2010. 20 short positions were analysed on average per month. These were reported by 49
entities, including 18 issuers of domestic shares. Particularly salient at the European level are the measures
aimed at banning the holding of short positions in financial shares in five countries: Belgium, Spain, France,
Greece and Italy. These measures were taken during August 2011, which was a period depicted by high market
volatility, and in particular securities in the banking sector. The CMVM monitored developments in this field
nationally and paid special attention to the contagion effect that this ban might have within the Portuguese
market.
Failures in settling transactions carried out on the stock exchange were periodically analysed, focussing
particularly on the most volatile trading periods of the year.
Implementing the "General Procedures on Supervising Inside Information" enabled the time for identifying
information to be provided to the market by companies to be reduced. The continued implementation of these
procedures and knowledge and internalization thereof by companies resulted in a reduced response time when
compared to the past.
19 issuers were required to provide clarification in 54 cases. The procedures adopted led to the publication of 23
inside information communications to the market, whereof some were on the companies' initiative. In four
instances (involving six issuers) trading was suspended in order to ensure that same was due to circumstances
that were part of the information deemed relevant for a proper assessment of securities.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
172
CMVM
The number of days (211) wherein the suspension of trading in securities took place dropped in comparison to
2010 (373). This number was motivated by the suspension of the shares of Papelaria Fernandes on 26 March
26 2009 that lasted until 27 July 2011. The trading suspensions included another seven shares and 13 futures.
The futures suspensions were due solely to technical factors relating to this market's management entity. The
suspensions recorded on the share market were decided by the CMVM, especially if there is evidence of
including information not publicly disclosed in the corresponding prices or require including material
information to disclose at the trading session. The CMVM ordered suspension of the following shares: Galp
Energia, Grupo Media Capital, Sporting SAD, SL Benfica SAD, Banco Popular Español (after the suspension
ordered by the Spanish Regulator - CNMV), EDP and EDP Renováveis. Furthermore, the suspension of trading
of bonds issued by Parpública and trading of perpetual securities with conditional coupons issued by Finibanco
were also ordered.
3.1.2 Supervision of Financial Intermediation
The CMVM stepped up the supervision of financial intermediation activities, the implementation of specific
mechanisms and procedures, which enable financial intermediaries to comply with current regulations and the
verification of practices followed by financial intermediaries in business relationships established with its
clients.
15 on-site supervisory actions were carried out throughout the year and concluded at the premises of financial
intermediaries and fund management entities. As regards asset management, four were conducted in
management entities of real estate investment funds, five in management entities of securities investment funds
and one in an asset management company. Five on-site supervisory actions at the premises of domestic credit
institutions were conducted in the field of financial intermediaries. The supervisory actions conducted within the
asset management context included new issues as against past experiences. Examples of this are compliance
with Management Regulation, subscriptions and redemptions and debt ratio transactions, the disposal of real
estate transactions, client complaints, the costs allocated to investment funds and contracts concluded on behalf
of investment funds, inter alia.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
173
CMVM
TEXTBOX 4 – ON-SITE SUPERVISION AT THE PREMISES OF THE SUPERVISED ENTITIES
The activity of supervising financial intermediaries and investment fund management entities continued to be a
priority. Notwithstanding the prudent educational perspective of supervision, with the primary goal of
promoting compliance with regulations, there are areas of activity wherein the duration of the new rules (e.g.
MiFID) substantiates that full incorporation and compliance thereof by financial intermediaries is required. In
these circumstances, the educational component was followed by enforcement measures that are deemed
appropriate and proportional.
On-site Supervision
The supervisory actions that took place in the management companies of investment funds included seven
routine and two extraordinary actions. Five of the actions only covered the aspect of managing real estate
investment funds, only two related to the area of managing securities investment funds and the other two
covered both these areas. One of the extraordinary supervisory actions was aimed at the management entity of
an open-end real estate investment fund, and was prompted by successive breaches, for the cashflow situation
and other peculiarities. This action focused particularly on subscription and redemption transactions that took
place in this fund, the transactions carried out and the costs allocated by the fund (financial costs and
management fee). Although limited in scope, the other action was aimed at a management company of securities
investment funds and was prompted by continuous breaches of statutory requirements. This action especially
covered transactions carried out, validation of statutory and contractual requirements applicable (namely,
derivatives) and confirmation of enforcing the compliance with these requirements.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
174
CMVM
As regards financial intermediaries, 2011 was denoted for supervisory actions that particularly addressed the
following issues: i) the classification of clients and assessment of the type of transactions suitable for clients ii)
the marketing of financial instruments and similar instruments with special focus on complex financial products;
iii) the provision of information to clients, iv) compliance with the procedures established for detecting and
managing potential conflicts of interest and v) within the duty to safeguard clients' assets, asset segregation
between the client and the supervised entity. The matters under supervision relating to the marketing and
advertising of complex financial products are dealt with in detail later in this report (Textbox 11).
Issues covered at On-Site Supervisory Actions in 2011
From the supervisory actions carried out, it was concluded that financial intermediaries comply broadly with the
behavioural standards applicable. However, some breaches and shortcomings were detected, with particular
focus on the areas of organisation, resources, enforcement system, risk management mechanisms, compliance
with management rules and regulations, registration and accounting. Notifications were issued by the CMVM to
financial intermediaries requiring compliance with regulations breached, within deadlines laid down for this
purpose. This triggered infraction proceedings in the most serious cases.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
175
CMVM
Supervision of Reports from the Internal Control System and the External Auditor
The suitability and effective compliance with the policies and procedures implemented by financial
intermediaries was assessed by analysing the internal control reports. Said policies and procedures were
implemented for detecting and managing potential breaches of the duties to which said intermediaries are
subject. An analysis of the internal control system's reports included a critical review of the shortcomings
reported for the audit and risk management areas of financial intermediaries, together with their potential
impacts on the structure, organisation and financial soundness of these intermediaries. Whether there was any
specific plans for correcting such shortcomings and determine the reasonableness of the deadlines for
implementation thereof was checked. The main weaknesses identified in the internal control system's reports
were the following: i) inadequate IT developments and predominance of manual controls and mechanisms for
inserting information, ii) poor procedures for the marketing of complex financial products to clients; iii) lack of
procedures and inadequate controls for managing certain risks detected; iv) shortcomings in contracting with
entities responsible for the custody of securities, v) lack of or outdated business continuity plans and disaster
recovery plans, and vi) lack of independence and autonomy of the risk management role.
50 internal control reports were received and analysed. Said reports related to management companies for
securities and real estate investment funds (47) and management companies for securitization funds (three) for
the second half of 2010 and the first half of 2011. The analysis revealed a number of shortcomings, basically
concerning failure in the mandatory aspects and shortcomings in the fundamental aspects of the report.
Omissions were noted in i) identifying the persons responsible for the organisational unit and the presentation of
the correspondence between functional areas and structural units; ii) a description of the risks relating to each
financial intermediation activity carried out and the existing procedures and control systems; iii) show the
requirement of independence54 of the person responsible for compliance with the control system; iv)
demonstrate the development of procedures for enforcement by compliance; v) submitting the information,
separated per type and functional area, on the number and total amount of the transactions assessed in
accordance with Law on Money Laundering; vi) display information on the number and total amount of orders
and transactions in financial instruments assessed within the scope of market protection; and vii) calculation of
the number of complaints received, analysed per financial intermediation activity and subject matter and stating
the average response time to the complainant. Furthermore, there were also shortcomings in respect of
54
Proof of independence requirement of the compliance duty is based on checking compliance with the duties laid down in
Article 305-A of the Securities Code, and being required, particularly pursuant to paragraph 2 of the abovementioned
Article, the establishment of an independent enforcement system which covers at least the monitoring and assessment of
the suitability and effectiveness of measures and procedures adopted for detecting risks of failure to comply with legal
duties and regulations together with measures taken to address any shortcomings, by keeping a record of the infringements
and measures adopted (including the immediate submission to the Board of Directors of any sign of a breach) and also the
drawing up and submission of a report (at least on a yearly basis) on the system for monitoring compliance to the Board of
Directors and Supervisory Board.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
176
CMVM
omissions carried over from preceding internal control systems, which had not been rectified or for which no
acceptable reason was provided for postponing the resolution thereof.
Additional information was requested where insufficient information was provided by the internal control
reports. It was conveyed to securitisation companies that the legal framework and current regulatory
requirements relating to internal control for financial intermediaries are applicable to said companies and that
these entities are required to draw up and submit the internal control report to the CMVM.
Auditors Reports
Pursuant to Articles 306 - 306-D of the Securities Code, the auditors should submit to the CMVM a report with
an analysis on the adequacy of procedures adopted by the financial intermediary for safeguarding clients' assets.
56 reports were examined. The following were identified as the leading shortcomings listed by auditors: i) lack
of rules and internal procedure manuals and/or outdated; ii) failure to notify the CMVM of the differences
between the amount of securities registered in enforcement of custody and quantities submitted by the
custodians, and which continued for over a month; iii) poor/no formal evaluation of custodians; and iv)
improper validation and monitoring of documentation relating to clients’ instructions.
The four large international auditing firms continued to provide its services to the majority (63%) of analysed
financial intermediaries. The number of individual auditors providing audit services to financial intermediaries
increased from two to three.
The audit reports on the financial statements of securities investment funds and real estate investment funds as
at 31 December 2010 and 30 June 2011 were analysed.
Table 59 - Auditors Reports concerning Securities and Real Estate Investment Funds
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
177
CMVM
The qualifications pointed out related mainly to issues of inadequate provisions and asset evaluation. The
observations identified basically focus on: i) criteria or methods of asset valuation, ii) failure to comply with
investment restrictions; iii) continuity of transactions, tax on potential gains; iv) ongoing legal proceedings, v)
property valuations where the difference exceeds 20%; and vi) comparability issues in financial statements (due
to current restrictions in past years or due to new funds).
41 auditors’ reports for the certification of annual financial statements of securitisation funds were also
analysed. Four of these reports contained observations. Four auditors’ reports on the annual financial statements
of securitisation companies were also analysed, whereof one contained observations. The four observations
pointed out by auditors primarily focused on: (i) exceeding the restrictions of the investment policy as defined in
the Management Regulations; (ii) mention of qualifications identified in prior years; and (iii) the existence of
the merger process related to the transferring entity. An observation pointed out by auditors in the annual report
of securitisation company was prompted by the sole shareholder (Lehman Brothers UK RE Holdings Limited)
in the company being bankrupt since September 2008.
Supervision of Financial Analysis
Supervising the drafting and disclosure of investment recommendations ("research") continued in 2011 with the
purpose of preventing the disclosure of financial analysis that is not in accordance with current regulations.
There are three main aspects to supervising this activity: (i) a formal analysis, in order to check whether the
reports include all the required information, (ii) a brief analysis of the contents of investment recommendations,
especially as regards the evaluation model and the underlying assumptions, so as to assess its consistency with
the target price displayed. Particular attention is paid to reports at the beginning of coverage circumstances that
changes the recommendation's meaning and may undergo an in-depth analysis, where applicable; (iii) a detailed
analysis, where the context within which the investment recommendation was issued is examined in more detail.
Whenever necessary, the CMVM asks for additional information and explanations from the financial
intermediaries so that the contents and meaning of investment recommendations can be ascertained, notably the
valuation model utilised. Furthermore, the news reports involving the sector/company and other investment
recommendations concerning the same issuer were also analysed.
The in-depth significant analysis of several financial analysis reports were stepped up. Several computer models
underlying investment recommendations were requested and analysed. The sharp price drops that domestic
issuers' shares experienced in the market led to the financial intermediaries revising downwards the price target
and/or investment recommendations repeatedly during the year. This prompted several requests for clarification
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
178
CMVM
from the supervisor. Some detailed analysis derived from questions posed by investors, issuers and financial
intermediaries, inter alia.
The CMVM found websites containing investment recommendations where the research analysts were not
registered. The CMVM ordered the immediate suspension of the investment recommendations' disclosure by
requiring preliminary registration of the research analysts and the adaptation of contents pursuant to legal
framework in this regard.
The CMVM currently receives research reports from 31 financial intermediaries. This includes 11 domestic and
20 foreign. Last year, the number of financial intermediaries that submitted reports to CMVM amounted to 41
(11 domestic and 30 foreign). Several foreign financial intermediaries dropped coverage of domestic shares as a
result of sharp depreciation of Portuguese share prices and mostly due to the increase in risk aversion of the
country by foreign investors.
Chart 61 – Types of Investment Recommendations
676 investment recommendations were identified in 2011, whereof 41% were drawn up by domestic financial
intermediaries and 59% by foreign financial intermediaries. The CMVM carried out in-depth analysis in 15
cases concerning investment recommendations (this included 42 financial analysis reports, two evaluation
models and a disclaimer of an investment report). Six financial intermediaries were responsible for 57% of total
investment recommendations identified, with BPI, Millennium Investment Banking and Espírito Santo Equity
Research and foreign - Goldman Sachs, Santander and UBS being the most active in producing financial
analysis of listed companies. 51% of the total recommendations identified were recommendations to "buy", 15%
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
179
CMVM
"sell" and 34% "hold". The percentage of "buy" recommendations dropped by 8% from the previous year, but
remained relatively high compared to what could be expected following the falling share prices (in some
instances above 60%). Approximately 38% of the recommendations identified concerned five securities (Galp
Energia, Brisa, EDP Renováveis, Jerónimo Martins and Portugal Telecom). This was a lower percentage than
that in 2010 (44%).
TEXTBOX 5 – MODELS FOR RISK SUPERVISION
The CMVM's supervisory models were revised and redesigned throughout the year. The principle behind this
review was the standardisation of the models applicable specifically to each of the groups of entities supervised
by the CMVM, by guiding them back to common principles and rules. It is purported through these measures to
ensure that the CMVM supervises every entity covered by Article 359 of the Securities Code more effectively
and efficiently. The ultimate aim is to protect investors, ensure efficiency and orderly functioning of the markets
in financial instruments, monitor the quality of information related to these markets and prevent the risk
(systemic or not). Basically, this is defining a global model for supervision, which, in accordance with
international best practices, risk-based, enables an effective allocation of current resources and prevents failures
from taking place in the market for financial instruments. The model assigns a risk rating to entities subject to
the CMVM's supervision, classifying and select said entities for supervision based on the level of risk posed.
Likewise, seven specific models of supervision were developed for different groups of entities: financial
intermediaries in general (including the individual portfolio management activity), collective investment
schemes, financial statements, auditors, qualifying holdings, securitization and venture capital. Each model
includes details resulting from the particular characteristics of the groups of entities aimed at, in particular the
type of information for the purposes of classification according to the risk criterion.
The global model is based on two key variables: impact and probability. Impact concerns the relative size of the
entity in the market segment wherein it operates. Probability refers to the susceptibility of a fault occurring
within the entity. Quantifying risk according to this variable allows for subjective intervention and depends on a
number of specific factors for each group of entities, such as the complexity of activities and the quality of
organisational requirements particularly with regard to the functions of internal control and auditing. The model
measures specific risk of each entity and identifies internal areas of higher risk within the organization, thus
guiding the effort and determining the depth of supervision among different entities by optimising human and
financial resources. Although all entities continue to be subject to supervision, the ones with a higher risk will
be more closely supervised.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
180
CMVM
The risk model is a safeguard against occurrence of relevant failures in the market of financial instruments and
minimizes the likelihood that investors suffering asset losses or suffering threats to the security of their assets.
At least one supervisory action shall be carried out in each supervisory cycle on the premises of each entity with
head office or branch in Portugal, with the exception of securities issuers. The risk model requires the existence
and functioning of mechanisms for continuous monitoring of activities carried out by entities. There will be an
annual programme for supervision wherein are identified the entities to be supervised. Notwithstanding the
planning, entities not included in the annual programme may be subject to specific supervision whenever there
is a change in the respective risk during the course of continuous monitoring. The functioning of the model
assumes several security controls and an audit is scheduled for each supervisory cycle.
3.1.3 Supervision of Asset Management
Supervision of Collective Investment Management
The procedures for prudential supervision of securities and real estate investment funds were pursued in the
daily supervision of collective investment management, within the monitoring of periodic information (i.e.
daily, monthly or quarterly) reported by management entities, particularly as to the amounts disclosed for
investment units, eligibility and valuation of portfolio assets and the legal and contractual limits (by sampling)
which are binding on investment of the funds’ assets.
Instances of possible conflict of interests and procedures for error analysis of the appreciation of investment
units in investment funds were the priority areas under scrutiny. 126 errors in the appreciation of investment
units in investment funds were detected and corrected in the latter case. This included 97 relating to securities
investment funds and 29 to real estate investment funds.
Within the context of analysing possible conflict of interests, stress was placed on preventing such cases. The
portfolios of securities and real estate investment funds were analysed across the board, with the aim of
assessing the competitiveness of the remuneration of demand deposits and term deposits made on behalf of
funds and particular attention was paid to demand deposits with banking institutions within the same group as
the management company. This analysis resulted in the issuance of notices in order for management companies
to ensure competitive remuneration for such banking deposits. The performance of funds was also analysed
within asset exchange offers launched by banking institutions towards improving its own capital and
compliance with the minimum capital requirements as set out by the Portuguese Central Bank (Banco de
Portugal) in "Core Tier 1".
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
181
CMVM
The analysis measured whether, in light of the prevailing market conditions, the conduct of funds aimed at the
participants' sole interest. It was concluded that there were no signs of conflict of interests in the funds'
performance at time of sale, taking into account the conditions of the exchange offers analysed and prevailing
market conditions.
The CMVM closely monitored 22 cases of winding up funds, especially those involving structured funds that
were liquidated because said funds had reached the deadline envisaged in the respective constitution. The
mechanisms for examining cases of funds' liquidation was focused mainly on validating the correct calculation
of amounts to be paid to participants and compliance with the provisions, namely, based on the disclosure of
information.
Table 62 – Winding up of Investment Funds per Reason
As a result of the supervision carried out, management companies were notified in order for any irregularities
that were detected to be rectified. Cases were also drawn up aimed at establishing administrative infractional
liability. The number of shortcomings detected concerning securities investment funds was primarily concerned
with investment policy and included ineligible assets and exceeding the contractually established limits. The key
occurrences of non-compliance in real estate investment funds (REIF) pertained to shortcomings in the Reports
on real estate appraisal and the valuation of properties in the portfolio.
In view of the debt markets situation during 2011, particularly the high volatility in prices, instability of the
markets in financial instruments and declines in credit ratings of States, the valuation of assets comprising the
portfolios of investment funds was under close scrutiny, particularly concerning the bonds of securities
investment funds.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
182
CMVM
Shortcomings in the quality of information disclosure to the CMVM were detected and certain discrepancies
between the values of assets utilized in the portfolio's valuation and its corroborative documents. This caused
the management entities to be notified, the subsequent rectification of shortcomings detected and the
implementation of mechanisms that should avoid the incidence of similar situations in the future.
In light of a number of changes (decreases) to the credit rating of sovereign issuers and other debt issuers, the
securities investment funds' portfolios were also analysed so as to confirm the minimum requirements for credit
rating contractually envisaged for the bond portfolio of these funds. In the wake of analysis performed,
occurrences of non-compliance were detected in some funds. The solution hereto comprised of changes in the
composition of the respective portfolios or adaptation of incorporation documents (essentially changing
investment policy). In the latter case, individual communication of the changes was ensured to the participants
and the possibility of these participants redeeming the investment units without paying the respective fee (if
there was a fee).
The progress of the economic and financial benchmarks of management companies of securities and real estate
investment funds and respective managed funds continued to be subjected to verification and control. Periodic
reports were drawn up based on quarterly data concerning investment funds and half-yearly data from financial
statements of management companies. The reports considered a number of economic and financial benchmarks
of the management entities and fund activity on aspects such as the marketing volume of investment units, the
amount of transactions and number of participants.
The purpose of preventing and managing possible conflict of interests was particularly salient during 2011. In
light of rules for managing potential conflict of interests applicable to the transactions carried out on behalf of
real estate investment funds with related parties, ten cases for authorising transactions relating to acquisition or
disposal of property by real estate investment funds to related entities and seven leases were subject to CMVM's
appraisal. Five transactions without proper authorization by the CMVM were also detected and cases were
drawn up aimed at establishing administrative infractional liability.
Venture Capital
The reliability and consistency between reporting by the supervised entities and statutory financial statements
within the venture capital context was confirmed, focusing in particular on compliance with the amendments
introduced by the 2010 accounting framework.
The venture capital funds' activity was especially monitored by the CMVM this year, in terms of not only the
respective supervision but also the stimulus for the industry and the risks involved in establishing funds, the
assets of which are companies undergoing restructuring.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
183
CMVM
Thus, special attention was and will be paid to the management of conflict of interests and the valuation of
participating entities by venture capital funds. A model for mid-year analysis of economic and financial
benchmarks of venture capital companies was also implemented so as to enable an on-going monitoring of the
most significant financial ratios, the key balance sheet items and profit and loss statements and compliance with
the thresholds laid down by the Commercial Companies Act. The prudential supervision of venture capital
funds focused primarily in monitoring progress of the funds' net asset value and investment unit value, since the
industry was influenced by the country's economic and financial crisis and changes to accounting standards.
Securitisation
Nine transactions involving securitised bonds issuance were supervised (refer to Chapter 2). The structuring of
said transactions and the adequacy of the respective capital were monitored.
Supervision also focused on economic and financial analysis of securitisation companies. The report contains
information on the securitisation funds' activity and a detailed analysis of securitisation funds’ termination that
took place during the course of the year. Detailed analyses were carried out on six early redemption of funds
that took place during 2011. This involved checking the conditions for early redemption that was set out in the
management regulations, analysis of all available contract documents and analysis of the conditions relating to
credit retransfer. One of the early redemptions relied on the clean-up call55 and the others were based on the sole
holder's interests.
Real Estate Appraisers
166 evaluation reports drawn up by real estate appraisers were analysed. Its content, objectivity and
completeness, inter alia, were analysed. Mindful of the shortcomings detected in the analyses, requests for
clarification were sent to appraisers and rectifications were requested. This was carried out in order to safeguard
that future reports do not experience the same shortcomings. The shortcomings related overall to failure to state
reasons in the selection of assessment methods used and the rationale for the assumptions used.
55
This can be exercised when the securitization transaction's current value is significantly below its initial value (normally
below 10%).
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
184
CMVM
Supervising the Marketing of Investment Products in Tangible Assets
The marketing of this type of contract was not reported to the CMVM. Nevertheless, the CMVM will continue
to be attentive to the pursuit of this activity in Portugal.
3.1.4 Supervision of External Auditors
The CMVM intervened on-site with the auditors during the supervisory actions and was represented in
inspection teams appointed by the National Council for Audit Supervision (CNSA), pursuant to Article 14 of
Decree-Law N. 225/2008 of 20 November. The supervisory actions undertaken by the CMVM were carried out
under regular prudential activity and, essentially, were determined based on the risk model. The actions had the
following aims: i) check whether professional standards and audit guidelines, approved or recognized in the
accounts on audits of entities with securities admitted to trading on Euronext Lisbon and collective investment
schemes; ii) confirming suitability of the structure and functioning of the means used by the auditor concerning
the type and size of the work. This includes checking the requirements for independence requirements and
evaluation of internal quality auditor; and iii) contribute towards improving the quality of professional practices.
Participating in the CNSA inspections took place pursuant to Article 14 Decree-Law No. 225/2008 of 20
November. The CMVM may be represented in designated multifunctional teams, made up of representatives
from one or more of the entities that comprise it. Pursuant to the law, the inspection imply indications of
infringements and are intended to investigate, gather proof concerning the practice of irregularities and assess
suitability of the procedures, decisions and documents adopted by the auditor, especially on complying with
professional duties in the areas wherein there are suspicions of irregularity. The inspections that comprised of
CMVM representatives and carried over from 2010 were concluded. The final inspection reports were issued
after i) analysis and discussion with the auditors concerning respective processes; ii) hearings of entities
involved in providing audited financial statements; iii) the examination of communications submitted to the
CNSA by entities related to said processes; iv) assessment of specific legal issues by teams of legal advisors,
and finally, v) include in the report the adjustments deemed appropriate that resulted from analysing the
auditors' comments to the CNSA's preliminary reports. Bearing in mind the issues detected, the CNSA approved
the opening of an administrative case and a draft decision was sent to the auditor. The auditor's response to the
preliminary hearing is still being analysed. In another case, because circumstances were likely to lead to
disciplinary infractions within the jurisdiction of the Portuguese Institute of Statutory Auditors (OROC), the
CNSA communicated this to the professional association.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
185
CMVM
Within the context of monitoring the auditors on a regular basis, the measures taken to address the irregularities
detected in supervisory actions carried out in past years were examined closely. The reports drawn up by
auditors registered with the CMVM pursuant to Article 8 of the Securities Code were also analysed. Said reports
related to financial information included in financial statements, or prospectuses, and, where applicable,
clarification and/or amendments to the respective texts were requested. The CMVM has continued its
cooperation with the OROC within its annual program for quality control of auditors registered with this
Commission. This involved 20 auditors.
The CMVM was also involved in several other activities related to the supervision of auditors, some of
which are under the CNSA and are particularly salient: i) participation in the Permanent Secretariat of the
CNSA; ii) participation in various international technical meetings, particularly in meetings of the European
Group of Auditors' Oversight Bodies (EGAOB) and the European Audit Inspection Group (EAIG); iii)
supporting the litigation department in the cases related to this area; iv) participation in the supervision of
quality control of developed by OROC; v) participation in revising the translation of decisions on adequacy of
supervisors of auditors from third countries pursuant to Article 47 of Directive 2006/43/EC; and vi) drafting
responses to requests for clarifications on different subjects.
The CMVM continued to encourage dialogue with the auditors including meetings aimed at clearing up certain
aspects concerning audited financial information. The CMVM also issued circulars on the duty to provide
annual financial statements by auditors in light of complying with the deadlines of the CMVM Regulation No.
6/2000 and disclose information sent to the issuers on drafting and presentation of financial statements.
3.1.5 Corporate Governance
The key features of the shareholder structure in companies under domestic law that are listed on Euronext
Lisbon remained unchanged from the preceding year, even though a raised growing number of resident
investors were denoted. On average, the free float as measured by share capital was 22.5% and close to 30%
when measured in terms of market capitalization. There were no changes in the selection by companies
concerning the governance models. The prevalence for the option for setting up an Executive Committee among
companies in the Latin model remained and thereby coming closer in this way the companies that chose the
Anglo-Saxon model.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
186
CMVM
The average size of the management board was kept stable at around 10 members. The management boards
were predominantly made up of non-executive members (54.8%). The relative weighting of the independent
directors on the Boards of Directors rose to 30.0%, thus going beyond, on average, the CMVM recommendation
(minimum 25%) in this regard.
The average percentage of the share capital present or depicted in meetings held was 72.6%. There were seven
companies with ceilings for exercising voting rights, which ranged between 5% and 20%. Conversely, there
were 19 companies that stated there were resolutions by shareholders, required by bylaws, which could only be
taken with a qualified majority. The respective percentages oscillated between 50% (two companies) and 75%
(in three cases).
The CMVM closely followed information concerning the external auditors. Taking into consideration the
weighting for each listed company in the market capitalization, it was confirmed that there was a high degree of
concentration in this market. The three most important auditing firms according to this indicator (Deloitte,
KPMG and Price) accounted for 97.6% of the total. The HHI index was 3684.3 points by the end of 2010.56 The
external auditor rendered other services other than auditing to the company and/or the respective group in 33
companies. On average, the amount of audits represented 52.7% of the overall fees paid by listed companies to
external auditing. Like the previous year, this percentage conceals very significant differences between the
different types of companies. Six companies were identified where audit services amounted to less than 50% of
the fees paid, and in one case the weighting of audit services in the broad sense (Audit and Assurance) was less
than 50%.
The average level of compliance with the CMVM Recommendations on Corporate Governance tumbled from
80% in 2009 to 74% in 2010. Nevertheless, owing to the entry into force of the new CMVM Corporate
Governance Code, the group of recommendations assessed during these two years differs not only in the number
of recommendations (which increased from 43 to 54), but also the content of certain recommendations already
available. In general, these were subject to greater concentration and the introduction of stricter requirements.
When comparing recommendations that in the 2009 and 2010 Corporate Governance Codes kept its entire
contents or were subject to semantic clarification and its substance was not altered, it was concluded that the
level of compliance was similar in both years (84%).
Concerning the implementation of the "comply or explain" principle, there were 320 cases wherein it was held
that there was an acceptable explanation for the non-adherence to the recommendations. Thus, only 35% of
cases wherein there was no compliance with the recommendations and the explanation put forward by the
companies were seen as acceptable by the CMVM. The cases wherein no reason was put forward when
companies did not acknowledge the non-adoption were approximately 63%. The others cases are divided
56
This suggests that it is far from being typical in a perfectly competitive market.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
187
CMVM
between lack of any explanation (54 cases) and the presence of an explanation that is not acceptable (63 cases).
These numbers do not differ that much from those of the preceding year. If only taking into consideration the
cases of failure to comply wherein there was no discrepancy between the self-assessment of companies and
CMVM as to non-compliance, then the level of explanations taken as being acceptable would have increased to
about 60%.
3.1.6 Control of Issuer Information
The issuers are subject to the duties of financial reporting in accordance with Articles 7 and 245 et seq. of the
Securities Code. This information was analysed under the continuous monitoring of these entities’ activities.
The CMVM may request publication of additional information pursuant to Article 250, within the powers
conferred in Article 360 et seq. of the Securities Code. This means that the disclosure of inside information and
information concerning qualifying holdings by the issuers was also required and confirmed.
3.1.6.1 Supervision of Financial Information
The model for supervising issuers' information utilised by the CMVM is based on risk and follows the ESMA
Guidelines.57
The proper implementation of the International Financial Reporting Standards (IAS/IFRS) was
checked and the comparability of information made available by different entities was ensured. In the final
analysis, a greater quality and transparency of the information used by investors when making decisions was
attained.
The supervision of issuers pays a great deal of attention to the clear and objective financial reporting on the risks
to which it is exposed, and also the policies implemented by the company for managing these risks (including
the acknowledgment of impairment losses attached to sovereign debt of Euro countries, accounts receivable and
appreciation of intangible assets, particularly goodwill). The financial statements' content of eight issuers was
closely examined and that of 13 issuers were partially reviewed.58 Two issuers were requested by the CMVM to
disclose supplementary information to the financial statements (approval thereof by the general meeting was not
required) and four others were requested to carry out the corrections in future financial statements. In four minor
cases, the issuers published other missing data, whereof one was an additional statement by the auditor to the
audit report. Five issuers republished its corporate governance report or addenda thereto, so as to comply with
the legal rules in force.
57
The supervision model in force at the CMVM is extensively outlined in the 2010 Annual Report. 58
The high number of partial analyses carried out in 2009 was the result of an external study on the risk areas in the
financial statements of listed companies.
Relatório Anual 2011 sobre a Atividade da CMVM e sobre os Mercados de Valores Mobiliários
188
CMVM
Chart 63 – Supervision of Financial Information –
Number of Adopted Actions
Chart 64 - Financial Statement Analysis – Number of
Issuers
There are certain areas concerning the quality of information available to the market that need to be improved,
for instance those relating to disclosures required by IFRS 7 (Financial Instruments: Disclosures), IFRS 3
(Corporate Activities) and IAS 36 (Assets Impairment). A CMVM circular was also issued, specifying the
situations that require further attention by the issuers when drawing up the annual financial statements. This has
enabled the CMVM to alert the companies of new rules issued, and also to draw attention to the areas where
shortcomings have been detected in implementing the current rules. Special attention continues to be paid to
deferred taxes acknowledged by the issuers, including those relating to tax losses carried forward. This is an
issue that will continue to be closely monitored.
3.1.6.2 Submission of Financial Reports
Entities with securities admitted to trading on a regulated market drew up their Consolidated Annual Financial
Statements in accordance with IAS/IFRS. When drawing up the individual financial statements, the companies
(at their option), could adopt the local GAAP (which became the National Accounting System - CNS) or the
international standards. Where only individual financial statements are drawn up, the entities should follow the
international standards.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
189
CMVM
All issuers disclosed the annual financial statements for 2010 on the CMVM's website on the Internet. However
there were a couple of delays recorded. The number of delays (nine) recorded in submitting and/or disclosure of
annual financial statements remained unchanged in comparison the preceding year. The number of issuers
(three) with qualifications in the audit reports on the consolidated financial statements remained the same. The
qualifications noted (seven) by auditors refer in 75% of cases to the scope of the qualification, i.e. cases where
the auditor came across restrictions to work and dealing with situations mentioned, was unable to assess about
the financial situation of entity. As for individual financial statements, the number of issuers (four) remained
unchanged; 67% of qualifications identified by the auditors were due to scope of qualification and only 33% to
qualified opinions.
Chart 65 – Auditors Opinion
Source: CMVM
There were 58 issuers that reported annual financial statements, reflecting two less than the year before
(Papelaria Fernandes and Finibanco). Following the outcome of insolvency proceedings, Papelaria Fernandes
was excluded from the regulated market. In the case of Finibanco and as a result of Takeover Bid launched by
Montepio Geral over Finibanco Holding and subsequent compulsory acquisition, the shares representing the
capital of said company were no longer admitted to trading on a regulated market. The entities with other listed
securities that, pursuant to Article 245-A of the Securities Code, provided annual financial information for the
2010 financial year were the same 11 from last year.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
190
CMVM
As for the half-yearly financial statements, 56 issuers of securities admitted to trading were required to disclose
financial information concerning the first six months of the year, whereof nine had only admitted to trading
bonds, warrants and/or certificates.
Table 60 - Half-Yearly Information to be published
Entities with shares admitted to trading on a regulated market are still required to disclose quarterly financial
information drawn up in accordance with IAS 34. Excluded from the scope of this standard are companies
which do not exceed the limits laid down in Article 246-A of the Securities Code and that report quarterly
information pursuant to the model approved by the CMVM. In 2011, only two delays were recorded in the
submission and disclosure of information for the first quarter. There was no delay in the submission and
disclosure of information for the third quarter.
3.1.6.3 Qualifying Holdings
Supervising the monitoring of the shareholder structure of corporate control and compliance with the disclosure
requirements of qualifying holdings in issuers led to two investigations. These were aimed at clarifying the
control chain and allocation of qualifying holdings. Three analyses that began in 2012 were finalised.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
191
CMVM
3.1.6.4 Rebuttable Presumption
The CMVM received five applications for rebuttable presumption pursuant to Article 20/5 of the Securities
Code. The applications were submitted by parties who entered into agreements concerning the transfer of
shares, which are assumed to be instruments for concerted influence referred to in Article 20/4, for the purposes
of paragraph 1/h) thereof.
There are two types of agreements on the transferability of shares. The first group, with only one case, relates to
a clause on the (non)-transferability of shares. The second group contains four collateral loan agreements. In the
first type, the presumption was rebutted by an unavailability clause in the contract resulting from legal
requirement and does not correspond to the parties' contractual agreement. In the second type, it was considered
that a mere collateral loan agreement with no right of use was not covered by subparagraph h). Thus, it was
concluded by not allocating qualifying holdings. The three remaining loan agreements were backed by financial
pledges with right of use, pursuant to Decree-Law No. 105/2004 of 8 May. In these instances, it was considered
that Article 29/1/h) was complied with insofar as a right of use granted to the pledgee represents an agreement
on the transfer of shares. The applicants succeeded in rebutting the presumption of Article 20/4, having proved
that the relationship established with the participant is independent from the actual or potential influence on the
investee company. In all cases examined, the right of use aims to create liquidity for the pledgee, by avoiding
the restraint of financial instruments provided as collateral. Following the assessment of these applications, a
statement changing the allocation by the shareholder, as pledgor, was issued. Furthermore a statement disclosing
the acquisition of qualifying holdings, covering a long position, by a third party buyer that entered into swaps
contracts (with cash settlement) with the pledgee.
3.1.7 Registration and Authorisation
3.1.7.1 Financial Intermediation
By the end of the year, the number of financial intermediaries registered with the CMVM was 69 (less three
than in the preceding year). The following registrations were cancelled: Royal Bank of Scotland PLC – Branch
in Portugal; Lisbon Brokers Sociedade Corretora, SA and Fortune – Sociedade Gestora de Patrimónios, SA.
Regarding investment advice firms, there was one cancellation, C2i – Sociedade de Consultoria para
Investimento, Lda, and one registration of a new company, Reap – Family Office, Unipessoal, Lda. The legal
status of Deutsche Bank underwent changes. The name changed from Deutsche Bank (Portugal), SA to
Deutsche Bank Europe GmbH - Branch in Portugal and finally to Deutsche Bank Aktiengesellschaft - Branch in
Portugal.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
192
CMVM
The number of investment firms under the freedom to provide services rose by 171 entities, reaching a total of
2,344 at year end.
The registration of the following was cancelled: two management companies of real estate investment funds -
(Azimuth Funds - SGFII, SA and Take Off - SGFII, SA), one management company of the securities investment
fund (Orey Gestão de Activos - SGFIM, SA) and one management company of the securitisation fund (Oceanus
- SGFTC, SA). No registration of new management companies for funds were recorded, but there was a new
registration in the CMVM for the financial management activities of collective securities and real estate
investment institutions - Orey IFC, SA. As a result of these changes, there were 20 Real Estate Investment Fund
Management Companies (SGFIM), 28 Securities Investment Fund Management Companies (SGFII) and three
Securitisation Fund Management Companies (SGFTC).
The cancellations of said companies led to the termination of only one Securities Investment Fund (FIM)
managed by Orey Gestão de Activos - SGFIM, SA. The other funds managed by this Real Estate Investment
Fund Management Company (SGFIM) (all Real Estate Investment Funds) were transferred to Orey IFC, SA, the
Securitisation funds (FTC) managed by Oceanus - SGFTC, SA were transferred to the Navigator - SGFTC, SA
and the two Securities Investment Fund Management Companies (SGFII) whereof the registration was
cancelled never managed any funds.
As regards the portfolio management on behalf of others, the registration of Fortune - Sociedade Gestora de
Patrimónios, S.A. was cancelled, and two restructurings at the Deutsche Bank financial group and the Orey
group were recorded. By the end of the year, the number of companies authorised to pursue this activity was 54.
TEXTBOX 6 – STREAMLINING PROCEDURES FOR REGISTRATION AT THE CMVM
The process for reworking and simplifying the authorisation proceedings by the CMVM was finalized at the end
of 2011. The internal procedures related to these were revised, updated and rectified, and the rules relating
thereto were harmonised, either directly or indirectly, with the authorisation processes so as to ensure the overall
consistency of the processes carried out by the CMVM. The revision focussed on the principles of speed, clarity,
transparency and efficiency in relation to the supervised entities.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
193
CMVM
As regards revising internal rules, the internal manuals of the supervisory organisational units on the procedures
relating to authorisation, on the procedures for remote and on-site supervision, and on other internal procedures
were revised. Although the latter is externally low-profile, it contributes towards an increased efficiency of the
CMVM in carrying out its task.
As to external effectiveness of the rules, there are on-going procedures related to legislative and regulatory
amendments linked thereto, which will enable (in order to protect the interests of supervised entities and also the
effective functioning of the CMVM) implementing the principle of tacit approval in the absence of an express
decision by the CMVM and restrict the possibility of disrupting the deadlines to once only.
Following the redrafting and simplification process, 68 information dossiers replacing the previous dossiers will
be made available on the CMVM website in 2012. The new dossiers will be just as clear and complete where
possible, and include the identification of documents (checklist) required for investigating each application and
also the breakdown of the respective minimum contents (which derive from laws, regulations and CMVM
Understandings). The availability of these dossiers shall contribute towards attaining simultaneously two goals:
(i) speed up the thorough investigation of the application by supervised entities so that from now on applications
will only be accepted where documentation is formally complete and in accordance with the respective dossier,
and (ii) reduce the implementation deadlines for authorisation and thus streamline the functioning of the market
and its supervised entities.
Finally, a Green line (Support telephone number) will be installed in order to provide additional clarification to
the information in the dossiers and the implementation of an IT solution will be employed that will enable the
investigation of cases and respective online tracking by supervised entities to be carried out.
3.1.7.2 Asset Management
Securities and Real Estate Investment Funds
The decline in bank financing and increase in raising finance via deposits from clients by banks did not foster
the asset management activity in Portugal. As regards the establishment of investment funds, there was a
considerable decrease in the number of new securities and real estate investment funds authorised by the
CMVM (44), compared with 78 authorised last year. The slowdown in the appearance of new funds was
2011 Annual Report on the Activity of the CMVM and the Securities Markets
194
CMVM
primarily recorded in authorisations of Real Estate Investment Funds, in light of the adverse economic climate
for the property market in Portugal that exacerbated throughout the year.
36 new securities investment funds were authorised by the CMVM (35% less than the year before), including 33
Special Investment Funds and three harmonised funds. Seven authorisations for the establishment of Special
Investment Funds lapsed. Thus, only 26 funds were actually constituted, including 14 open-end, two closed-end
private offers and 10 closed-end public offers.
The CMVM granted authorisation for the formation of eight real estate investment funds. This includes three
Closed-End Special Real Estate Investment Funds, three Closed-End Real Estate Investment Funds for
Residential Letting, one Open-End Real estate Investment Fund and one Closed-End Real Estate Investment
Fund. Three authorisations lapsed as the funds were not constituted. Another three await the start of activity and
only two were established (one closed-end Special real estate Investment Fund with public offer and one
Closed-End Real Estate Investment Funds for Residential Letting with private placement).
During the year, 18 investment funds were paid (15 Special Investment Funds, two guaranteed funds and one
Equity Fund) due to end of the maturity period initially envisaged. Five securities investment funds at the
discretion of management entities were settled in light of the reduced amount under management and flow of
redemptions recorded. Two real estate investment funds were also settled. One was due to end of the maturity
period initially envisaged and the other due to early settlement by the management company's decision, mindful
of the principle for market protection.
Termination of other securities investment funds took place via mergers of funds. This was for the most part
driven by the small size and aimed at achieving economies of scale in the management of the respective assets.
There were also mergers on grounds of reorganising the financial group's management entity, as is the case of
the Montepio Group (due to a Takeover Bid launched in 2010 by Montepio Geral – Associação Mutualista
sobre o Finibanco – Holdings, SGPS, SA). Within this context, there were mergers by incorporation of
securities investment funds previously managed by Finivalor - SGFIM, SA, and the same type of funds managed
by Montepio Gestão de Activos - SGFI, S.A. At the end of the year, the other five securities investment funds
managed by Finivalor - SGFIM, SA were also transferred to Montepio Gestão de Activos - SGFI, S.A, with said
entity managing only real estate investment funds. In addition to these authorisations replacing the management
entity, the CMVM granted similar authorisations concerning six other real estate investment funds.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
195
CMVM
214 cases of amendments to incorporation documents of investment funds did not face opposition from the
CMVM, whereof 132 was by tacit approval (54 UCITS five SIFs and 73 REIF) and 82 by express approval
(UCITS 46, 18 SIFs and 18 REIF). Particularly salient were changes to the funds' investment policies. For the
most part, this was due to the need to adapt the investment strategy to market conditions and future
developments.
Other analyses conducted by the CMVM within its administrative powers over investment funds related to the
conversion of funds. Two cases of converting REIFs were authorised in 2011. One of these referred to
converting the subscription system from private to public and the other to converting from REIF to SREIFs and
keeping the private placement system.
Public offers were of particular significance within the establishment of closed-end investment funds, thereby
reversing the trend seen in prior years of the private offers prevailing. This was due to decline in the
establishment of real estate investment funds, which is related both to the adverse conditions of the property
market or the removal of tax benefits formerly applicable to real estate investment funds with private placement.
Table 61 – Offers for Distribution of Closed-End Investment Funds
Securitisation
No authorisation for the establishment of securitisation funds was granted, however six funds were terminated
whereof one relied on the clean-up call59 and the other early redemptions were based on sole holder's interests.
The underlying credits in three cases were transferred to a new securitised bond issuance and covered bond
issuance. One of the early redemptions based on sole holder interests emanated from the securitization units
being held by a Special Purpose Vehicle that repaid all the issued Notes.
59 An option in securitization transactions wherein the issuer has the possibility of buying back the current remaining issue (usually small
amount, less than 10% of the original issue) in order to reduce the administrative expenses of the issuance. This option is often exercised
for mortgage-backed securities.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
196
CMVM
Concerning administrative acts within the securitization context, there were also 34 cases relating to changes in
incorporation documents of securitization funds. This related mostly to the name of the holder of the
management company and the depositary, replacement of the management company and the agent bank, the
frequency of interest payments and the series of payments and the type of credit to be acquired on each
revolving date.
Table 62 – Securitisation Registration
Nine securitized bond issues took place in 2011. These basically related to consumer credit and other loans
(corporate loans, including term loans, credit lines, current accounts and commercial paper).
Table 63 – Issuance of Securitised Bonds
Venture Capital
The CMVM registered the following three new venture capital companies: Bem Comum, SCR, SA; Capital
Criativo, SCR, SA and Capital Growth, SCR, SA. Said companies are only authorised for the sole pursuit of
managing venture capital funds.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
197
CMVM
As for venture capital funds (VCF), 20 VCF commenced activity commenced during the year, whereof 11
applied for respective simplified prior registration and nine benefited from the system of mere prior notice.
These new funds represent subscription placement of approximately €340 million, mostly from qualified
investors. In keeping with that recorded in the preceding year, this increase is largely due to the state financial
incentives, particularly the contribution of the Regional Operational Programmes of Lisbon and the Algarve and
the Support System Financing and Risk Sharing Innovation (SAFPRI ) entered in the National Strategic
Reference Framework (NSRF). Approximately €96 million were subscribed in those funds via these means.
One Venture Capital Investor (VCI) was registered. An application for the cancellation of the registration of a
VCI and a Venture Capital Company (VCC) was recorded.
3.1.7.3 Real Estate Appraisers
The trend towards an increase in the number of real estate appraisers continued. Nevertheless, such growth does
not mirror the actual assessment of properties activity in real estate investment funds. As the experts identified
in the REIF's management regulation and therefore eligible for evaluating properties held or for investment by
the REIFs are less than the total number of appraisers registered with the CMVM.
Table 64 – Registration of Real Estate Appraisers
3.1.7.4 External Auditors
At the beginning of this year there were 39 auditors registered with the CMVM. This included one individual
auditor. Registration was granted to a new auditing firm in April 2011. This firm is based in the Oporto area.
Twenty-six firms are based in Lisbon, 13 between Coimbra and Porto and one in Funchal. The auditors
registered with the CMVM employ a total of 327 statutory auditors, whereof 215 are partners and 112 are
employees. Only five companies employ more than ten statutory auditors (representing 177 auditors). The
average number of statutory auditors in the employ of other audit firms is 4.4. Nineteen companies have a single
partner who is not an auditor, with the participation of persons with other expertise being particularly salient.
This shows how the teams comprising auditing are multidisciplinary.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
198
CMVM
Pursuant to Article 8 of the CMVM Regulation No. 6/2000, 33 applications for subsequent registration in the
record of auditors registered at the CMVM were submitted. This resulted in 65 entries being recorded.
Table 65 – Registration of External Auditors
3.1.7.5 Transactions
Five takeover bids were subject to registration. All three cases aimed at debt securities, in the form of exchange,
related to the capital restructuring of domestic financial institutions. Two cases were finalised in 2011. The
takeover bid over shares representing the share capital of Sociedade Comercial Orey Antunes SA was also
subject to registration. Coming from the previous year, the takeover bid over the shares representing the capital
of Estoril Praia - Futebol, SAD, which was brought forward from the preceding year, was registered. The
takeover bids on Interhotel and Fisipe that were also from prior years were carried over to 2012. The takeover
bid on Rações Progado Centro Sul, SA launched by Manuel Inácio e Filhos, SGPS, SA was withdrawn due to
there being no need to adjudicate on the application submitted.
There was a substantial increase in the number of approval processes for prospectuses of public offer of debt
securities, related to the offers addressed to the public by Banif SGPS, SA, Banco Santander Totta and two
sports public limited companies - Porto and Sporting. There was also a slight increase in the approval of base
prospectuses (for issuance and/or admission to trading on a regulated market) with five base prospectuses being
subject to approval. These base prospectuses were pursuant to programmes for debt issued by Banif - Banco
Internacional do Funchal, SA, Banco Comercial Português, SA, Banco Popular Portugal, SA, Banco Santander
Totta and Caixa Económica Montepio Geral. The approval processes for admission prospectuses was mostly
2011 Annual Report on the Activity of the CMVM and the Securities Markets
199
CMVM
aimed at trading on a regulated market of securitized bonds which had been privately placed. There was one
exception which was the single admission of classic bonds of Zon Multimedia SA.
The two processes for approval of the prospectus for public offer of shares submitted in 2011 concern the offer
reserved for shareholders of 1,300,000 own shares in Sociedade Comercial Orey Antunes SA and an offer that a
resident entity purports to carry out in another country in the Euro zone (the latter process was carried forward
to 2012). Three said approval of prospectus for public offer of subscription for shares are related to the above
mentioned transactions for public acquisition of debt. Said transactions, which, in enabling the exchange of debt
for new shares to be subscribed, embody the capital increases by public subscription of financial institutions that
launched same. The other two public offers for subscription of shares refer to the capital increase of Inapa, SA
and Reditus, SGPS, SA.
Table 66 – Registration of Transactions
3.1.8 Litigation
There were 126 administrative infraction cases at the CMVM during 2011. The Executive Board of the CMVM
imposed a total of 14 fines amounting to €500,000. In nine of the cases decided in 2011 there was scope for
applying the disclosure of sanction envisaged in Article 422 of Securities Code.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
200
CMVM
Table 67 – Administrative Infraction Proceedings
As regards the cases brought to a close, the number of cases involving collective management of savings and
market integrity and fairness increased, whereas the number of cases relating to the quality and timeliness of
information, provision of regular information and financial intermediation slumped.
The number of court cases dropped from 32 in 2010 down to 26 in 2011 (in both cases, adding the cases
brought to a close together with those in progress at the end of each year). Particularly salient in administrative
litigation was the support provided to the Investors Compensation Scheme (SII) in six interlocutory proceedings
and four administrative proceedings wherein said Scheme is the litigant, adversary or defendant.
TEXTBOX 7 – COURT DECISIONS IN 2011: ADMINISTRATIVE INFRACTIONS
Decisions were rendered on the merits of ten appeals against administrative infractions cases by the Lisbon
Petty Criminal Court. Four confirmed the CMVM's decision, four changed the CMVM's decision by reducing
the amount of the fine imposed, and two rescinded the CMVM's decision. The CMVM appealed against the
latter to the Lisbon Court of Appeal. One of these features was decided in 2011, and the Lisbon Court of Appeal
hereby repealed the decision of the Lisbon Petty Criminal Court and determined to transfer the case for a new
trial. The other appeal is still waiting for a decision.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
201
CMVM
In addition to said judgement, the Lisbon Court of Appeal rendered eleven decisions, six appeals were filed in
2010 - one by the defendant sentenced in the lower court and five by the CMVM (three whereof the Public
Prosecutor's Office also filed appeals) - and five appeals filed in 2011 - three by the defendants sentenced in the
lower court and two by the CMVM and the Public Prosecutor's Office. As regards the judgements handed down
on the four appeals filed by defendants sentenced in the lower courts, the Court upheld the condemnatory
sentences by the lower courts. In the judgments on the seven appeals filed by the CMVM, the Court upheld the
lower courts' sentences in three appeals, rescinded the sentences and ordered new trials for three appeals and
partially upheld the lower court's sentence and ordered a new trial for part of the process that was subject to
appeal.
The Constitutional Court also delivered three decisions. In an appeal against an administrative infraction, the
Court delivered a ruling that upheld the summary decision, rendered in 2010, of not hearing the appeal filed
against the judgment of the Lisbon Court of Appeal that had ordered the imposition of a fine on the defendant.
In another appeal against an administrative infraction, the defendant appealed to the Constitutional Court
judgment of the Court of Appeal of Lisbon delivered in 2011 that upheld the lower court's the condemnatory
sentences of 2010 (which in turn confirmed the CMVM's decision), a summary decision was rendered wherein
the Constitutional Court ruled that it could not hear the appeal. However, a complaint was lodged against this
summary judgment and the Court decided to hear the appeal on two constitutional issues posed by the appellant.
The appeal was still pending a decision at the end of 2011. The appeal raised several legality issues relating to
applicable types and compliance with the principles of blame and proportionality of penalties. In February 2012,
the Constitutional Court concurred with the CMVM on all the points, by concluding that there were
unconstitutional issues.
Furthermore, there were three decisions handed down by the Petty Criminal Court in appeals against CMVM
interlocutory acts that was carried out during the administrative stage of the infraction processes. Two rulings
upheld the CMVM's decisions relating to access to cases (one of those rulings is still under appeal) and the other
upheld the CMVM's decision concerning the absence of nullity for not referring in the allegations of the
administrative infraction process of the evidence that underpins the indictment of the facts described in the
allegation. An appeal against the last ruling was filed with the Constitutional Court, which upheld the decision.
The following summarises the key points of a judgment by the Lisbon Court of Appeal in 2011 that upheld the
condemnatory sentence against the defendant that was rendered by the lower court, and a ruling by the
Constitutional Court handed down in the appeal against an interlocutory decision by the CMVM, rendered in
administrative stage of an administrative infraction process.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
202
CMVM
Judgment by the Lisbon Court of Appeal on 25 October 2011
In the appeal, the Lisbon Court of Appeal ruled on the sentence that convicted the appellant for the
administrative infraction involving the negligent breach of the duty to disclose inside information (Articles
248/1/a) and /2, 388/1/a) and /3, 394/1i), 401 and 402 of the Securities Code and Article 17/4 of the Legal
Framework for Administrative Infractions (RGCO). The court held that the information in question was likely
to have a substantial effect on the price, namely, because at issue was the announcement of a partnership that
would have a large impact on the appellant’s global economic activity, with a possible sharp increase in its
turnover in a market with a strategic role worldwide, regarding a product with an increasing global demand, in
an activity creating very large profits and high liquidity. The court held that the appellant was aware of his
duties and cannot ignore the importance of the specific duties in question. Said appellant was required to have a
manner of detecting these situations when it takes place and be prepared for this with the necessary means for
the timely compliance with its duties.
Furthermore the Court held that Article 248/1 is not in the throes of unconstitutional issues as it resorts to
concepts having an unambiguous meaning, and likely to be extended to specific facts that do not allow for
punitive arbitrary intervention. Finally, the court held that the high severity of the infraction and the legal
interests undermined preclude suspending the sanctions, or opting for warning, which the applicant had
requested. This would prove to be insufficient for a proper admonishment of conduct.
Judgment by the Constitutional Court on 15 November 2011
In the appeal against the sentence of the Petty Criminal Court that ruled the judicial review of an interlocutory
decision rendered by the CMVM during an administrative infraction case, the Constitutional Court ruled on
whether the interpretation of Article 50 of RGCO, as meaning that this provision allows the defendant's
notification to comment on the alleged administrative infraction alleged does not involve any
statement/identification of factual evidence on which is founded the adjudication on the merits of the case,
infringes Articles 32/10 and 267/5 of the Portuguese Constitution.
The Constitutional Court firstly pointed out its own jurisprudence to the effect that there is no close comparison
between the administrative infraction and criminal offence, as against a lower ethical effect than the first, which
draws on the strictest requirements from valid definition of a criminal offence, and that the administrative
infraction legislation has its own rules, that could allow input from criminal regulations, and is not restricted to
an indiscriminate transfer of frameworks and provisions.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
203
CMVM
Addressing the issue, the Court stated that Article 50 RGCO only requires that the alleged facts, the respective
legal status and penalties that this may entail be communicated to the defendants, and does not impose that such
notification includes a reference to the evidence taken into account by the administrative authority and that
underpins the allegation addressed to them, Furthermore, the Record 1/2003 of the Supreme Court of Justice,
which held that the notification issued pursuant to the aforementioned Article 50 should provide the necessary
information so that the defendant finds out all the relevant aspects for the decision, does not remove the
requirement that said notification should be accompanied with a statement of evidence supporting the
administrative authority's decision.
The Court pointed out that the defendants were not denied access to the file, by consulting it, having exercised
their right to be heard and defend themselves, thus concluded respect for their right of defence, as they had the
opportunity to find out the material evidence collected by the CMVM, to present new evidence or request due
diligence reports and, of course, involved in the decision that concern them, with the constitutional guarantees
being safeguarded. The Constitutional Court concluded that any legal provisions stipulating the requirement, at
the time of notifying the defendant pursuant to Article 50 RGCO, that the administrative authority should carry
out statement/identification of factual evidence that underpins the adjudication on the merits of the case does not
follow from applicable constitutional parameters, particularly, Articles 32/10 and 267/5 of the Constitution of
the Portuguese Republic.
3.1.9 Investigation and Market Crimes
During the course of the year 44 cases of market transaction analysis were concluded and 50 cases were opened.
Irregularities were reported to the Public Prosecutor when there were indications of a crime, particularly against
the market, or led to administrative infraction cases being instituted. The finalised analyses included 27 cases of
possible market abuse or breach of the duty to protect the market, 16 possible insider trading and one of earning
seasons (trading close to the release of financial information). Irregularities were detected in 17 transactions
analyses, which led to investigation proceedings being opened. Five other cases resulted in written notices to
financial intermediaries or notices to foreign competent authorities for further investigation. The remaining
cases were filed away.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
204
CMVM
Table 68 – Cases on Transactions Analyses and Investigation Completed in 2011
23 investigation cases were closed in 2011: 15 for possible market abuse, five for possible insider trading and
three involved other types of irregularities concerning the behaviour of entities subject to supervision by the
CMVM in the financial instruments market. It was concluded that there were irregularities in nine of these
cases. Irregularities were reported to the Public Prosecutor when there were indications of a crime, particularly
against the market, or led to administrative infraction cases being instituted.
Following investigation processes, nine were reported to the Public Prosecutor: three for the crime of insider
trading (Article 378 of the Securities Code), two for the crime of market abuse (Article 379 of the Securities
Code); two for fraud, one for suspected money laundering and one for unlawful receipt of funds (Article 200 of
the RGICSF). Furthermore, two statements of facts that could indicate other crimes were drawn up.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
205
CMVM
Table 69 – Complaints and Infractions Instituted
Reducing the period for completing investigation processes continues to be an objective for the CMVM. It is
purported that this swiftness operates as a deterrent for unlawful conduct causing damage to the market in
general and any other investors in particular. It was possible in 2011 to complete the investigation proceedings
in less than one year following the date of the facts. Most of the investigated cases that were concluded were
due to irregularities in the supervision of the market and in the mechanisms for monitoring and detecting
irregularities of the CMVM.
The objective of reducing the backlog of outstanding investigations was met. These dropped to just five by the
end of the year. However, the outstanding cases were all under investigation, with four cases nearing
completion. The other case deals with automated trading and due to its complexity require appropriate
technological tools for its analysis, which are still being developed.
16 cases were concluded on unauthorised financial intermediation. After finding out indications of unauthorized
intermediation, the CMVM's quick response lessened the negative impact of this practice for investors. Due to
the illicitness of the unauthorized activities, difficulties continued to be encountered in gathering information
required for obtaining accurate information on the activities. Nevertheless, four administrative infraction cases
were instituted: three for carrying out unauthorized financial intermediation and one for advertising investment
services.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
206
CMVM
Three were reported to the Public Prosecutor as the investigations of unauthorized intermediation identified
indications of criminal offenses. Furthermore, an overall survey of websites was also carried out. Only three of
the cases investigated were filed away.
Most of the cases investigated emanated from or were related to providing - or trying to provide - services by
residents in Portugal. There were also some instances of international origin, designated as cold calling, where
investors resident in Portugal are contacted by supposedly foreign investment firms with very attractive
investment proposals, and asked to transfer money to international bank accounts. Three notifications were
issued for removing unlawful advertising or information content from the Internet websites. An order was
issued for the removal of illegal contents in one of these cases.
The CMVM cooperated with competent foreign supervisory authorities in three cases of possible insider trading
relating to financial instruments admitted to trading on international regulated markets by investors resident in
Portugal or foreign investors that use the domestic intermediaries' services. In every case the indications were
identified in Portugal. Some communications by financial intermediaries and market's management entity fund
managers conveyed to the CMVM concerning suspect transactions proved useful for detecting market abuse.
TEXTBOX 8 – COURT JUDGEMENTS IN 2011: CRIMES OF INSIDER TRADING
AND MARKET ABUSE
Three judgments were handed down in two cases. Said cases derived from complaints submitted to the CMVM.
Insider Trading
In an insider trading case that was reported by the CMVM in September 2001, the Lisbon Court of Appeal
(Judgment of 21 September 2010 or the second judgment) annulled the sentence of the first instance of 25
March 2010 due to the imposition of additional penalties pursuant to Article 380 of the Securities Code
(publication of sentence for the three defendants and prohibition of professional activity for two years), without
the defendants having been notified of the possibility of these penalties being implemented, in accordance with
the abovementioned judgment. This ruling dismissed the defendants' appeal to the extent that said defendants
sought a new debate of the facts and aspects pertaining to whether or not same are crimes because it was
considered a final judgment on the facts that a previous judgment by the Lisbon Appeal Court (of 3 June 2009
or first judgment) considered already proved and also the question of the defendants' guilt.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
207
CMVM
The second judgment considered (resulting from the aforementioned annulment of the lower court's decision)
the assessment of the prosecution's appeal to be futile, confined to the fact that the lower court's decision had not
been implemented pursuant to Article 111 of the Criminal Code, the loss of the pecuniary benefits obtained by
committing the crime which in the Public Prosecutor's opinion amounted to EUR 343,600.
Having referred the case back to the lower court, a ruling was issued on 18 February 2011, stating the criminal
proceedings to be closed as a result of checking the prescription period of the criminal proceedings on 30
September 2010 (10 days after the Lisbon Court of Appeal handed down the second judgment). The Public
Prosecutor filed an appeal against this ruling.
In the judgement handed down on 16 June 2011 (third judgment), the Lisbon Court of Appeal, dismissed the
appeal and confirmed the lower court's order. This judgment finds that the first judgment is res judicata with
regard to the decision convicting the defendants, i.e., in the matter relating to the judgment imputing the crime
on the agents: in convicting the three defendants for committing insider trading crimes, having been clearly
specified the facts regarded as proven that supported said convictions. Yet, this third judgment held that in the
absence of a decision as to the sentence imposed on the defendants (the lower court's decision imposing the
sentences was overturned by the Appeal Court's second judgment) the res judicata was only partial, and cannot
therefore establish the moment for calculating the prescription period of the criminal proceedings. The Lisbon
Court of Appeal's judgement handed down on 10 September 2010 is final and not subject to further appeal, and
thus the court ruling deeming the criminal proceedings as prescribed is res judicata.
Market Abuse
In another case which the CMVM reported, judgment was handed down relating to the crime dealing with
market abuse, as a result of the Public Prosecutor in 2009 charging the defendant with the actual crime of
market abuse on shares. The defendant was charged with having posted an offer to sell large scale at very low
price, cancelled moments before the close. This was aimed at attracting demand on the market and raises the
price in order to run a further offer to sell small at a higher price and thus artificially conditioning the pricing of
those shares and the regular functioning of the securities market.
The trial ended with an acquittal that was delivered on 16 September 2011, where the lower Court held that the
fictitiousness of transactions carried out and the purported manipulative performance by the defendant were not
proved. The Public Prosecutor lodged an appeal against the sentence by alleging several errors. For this reason,
the decision is not yet res judicata.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
208
CMVM
3.2.PROTECTION OF INVESTORS AS SAVERS AND CONSUMERS OF FINANCIAL
SERVICES
3.2.1 Complaints and Mediation
In 2011 the CMVM received 598 complaints, 28 denouncements, 1,613 requests for information and 1,699
requests for certificates for tax purposes. Financial intermediaries continued to be the entities against which the
highest number of complaints is filed. Particularly salient were banks that market financial instruments.
Table 70 – Complaints filed per Entity
Table 71 – Total Complaints brought against Financial Intermediaries
2011 Annual Report on the Activity of the CMVM and the Securities Markets
209
CMVM
1,023 complaints against financial intermediaries were analysed, most of which were carried over from
preceding years. Over half (584) revealed potential irregularities in the financial intermediaries' behaviour. In
these cases, the nature of the situations identified in order to ascertain whether it was sporadic cases or repeated
practices (which could flag a pattern of conduct). The survey carried out formed the basis of the risk model for
planning on-site supervision. Fourteen cases resulted in establishing administrative infraction liability.
The analyses of 535 complaints were concluded. In approximately 70% of said complaints, the CMVM
considered that there was an appropriate response by the financial intermediary and in 37% of these the
financial intermediary reimbursed some or all of the losses incurred by the complainant. In the concluded cases
of justifiable complaints 60 where the investor presented facts that disputed the carrying out of the financial
intermediary's duties, an opinion in favour of the investor was given in 54% of the cases. This indicates that in
most cases and the CMVM's opinion, the financial intermediary should have taken a different approach. The
financial intermediary accepted the CMVM's opinion in 80% of these cases.
Table 72 - Resolution of Complaints against Financial Intermediaries Concluded in 2011 per Type
Within the context of activating the Investors Compensation Scheme (SII) and pursuant to the legal duty of
ensuring the technical and administrative services essential to the proper functioning of the Scheme, the CMVM
replied to 598 applications and complaints from clients of Banco Privado Português relating to compensation
payments. Most of the contacts focussed on the payment date and the criteria adopted by SII in considering how
not to rebut the legal presumption of exclusion from the Scheme's coverage as to the holders that were added.
60
Justifiable complaints exclude withdrawals, outside the CMVM's competence, mere clarification and en route to mediation.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
210
CMVM
The handling of complaints has shown the significance of strict compliance with the duty of safekeeping
documents by financial intermediaries as the client registration and storage of documents protects the proof of
the legal capacity and justification of financial intermediary intervention with the client. Many cases where the
opinion of the CMVM considered the financial intermediary's response as adequate although opposite to the
complainant’s intentions, were those wherein the arguments presented by financial intermediaries were proven,
namely, by showing the documents signed by investors. In defense of their own interests as consumers of
financial services, investors have been warned of the importance of carefully reading all documents before
signing same. Nevertheless, there are investors who can not read. Further to receiving a number of complaints
from illiterate investors concerning the subscription of investment units of a special investment fund, whereof
the subscription forms showed signed by request or with the investor's digital signature affixed theretoestor, the
CMVM assessed the procedures adopted by marketing entities in the marketing of financial instruments to
illiterate persons. This measure aimed at ensuring the reliability and authenticity of the request and safeguard
strict compliance with disclosure requirements to the client and suitability thereof , taking into account that
presumably illiterate investors do not have the basic skills enabling them to understand the features and risks
linked to the products, and the financial intermediaries are required to take greater care and due diligence with
those investors.
As in the preceding two years, the financial instruments most targeted in complaints were collective investment
schemes. Failure to provide information on the terms for redemption, investment risk and expected return, inter
alia, and the defaulting on the compulsory delivery of simplified prospectus to investors prior to subscribing to
the funds were the key shortcomings identified by the complainants. The duties to disclose in general and the
duty of delivering the required written information particularly aim to protect the investor's with regard to the
access to information needed to make an informed and justified investment decision. These duties are especially
important in correcting informative asymmetries where retail investors (unqualified) before market players
(financial intermediaries) with high professional level and expertise are concerned. Similar to what happened
last year, financial instruments and complex financial products were the second type of financial instrument to
be the target for the greatest number of complaints. Particularly salient were the complaints regarding marketing
of bonds and structured products, interest rate swaps and unit-linked.
As for complaints on the marketing of interest rate swaps, it was noted that most contracts complained against
was signed between late 2007 and 2009. Taking into account the complexity of the interest rate swaps, the
complaints revealed that the features and risks overall were not properly explained to clients. In many of the
complaints, the product did not appear to be appropriate to the complainants' expertise and experience. In some
cases the complainants had educational qualifications below the fourth grade and had no experience whatsoever
of investing in this type of product or similar risk.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
211
CMVM
Table 73 - Complaints Concluded in 2011 per Type of Financial Instrument
The common issues raised within complaints were the following: i) reception, transmission and execution of
orders; ii) marketing of collective investment undertakings (CIU) and complex financial instruments; iii)
registration and deposit of securities; iv) disclosure requirements; e v) statements, costs and fees. As an
example, these issues include the following: i) investing without the client's (complainant) express consent and
knowledge; ii) marketing products with no capital guarantee in terms similar to that of marketing a term deposit;
iii) failure to provide information on capital guarantee and the possibility of early redemption /termination
without any penalty, especially as to the risks of investing in funds, unit-linked or swaps; iv) marketing complex
financial products (notably unit-linked) to investors with little or no schooling (including emigrants) and
products with long maturities to elderly investors; v) failure to follow the complainants' instructions as to the
execution of orders for subscription, redemption or transfer between accounts; vi) inadequate marketing of
preferred shares and Undated Subordinated Notes; vii) failure to issue statements and change the statement's
frequency without the client's consent; viii) send statements on unit-linked that did not reflect the product's
valuation on the statement date and/or improper billing or exorbitant fees; ix) irregularities in pricing applicable
to the transactions; and x) unsuitability of products to complainants' expertise and experience.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
212
CMVM
The reception, transmission and execution of orders on behalf of third parties accounts for 72% of the total
number of complaints by financial intermediation's type of service. Most of these complaints were caused by the
lack of or poor execution of orders. The financial intermediary is required to execute an order to buy or sell a
financial instrument promptly, pursuant to the market rules and seek the best possible outcome for the client
according to the best execution policy. The financial intermediary should inform the client if it encounters
problems that prevent the order to be executed on these conditions. The registration and deposit of securities
was the second most complained about service, followed by the management of CIU and portfolio management.
The processing of information concerning the complaints examined above led to the establishment of
administrative infraction liability and other supervisory measures.
3.2.2 Information
1,613 requests for information were received from investors, the general public and professionals in the sector.
The most substantial increase in the number of requests when compared to last year took place with students and
focused on data related to academic projects. 2.75 days was the average response time. More than 97% of
requests were conducted by telephone via the Toll-free Number (Green Line) of Investor Assistance and via the
form provided on the CMVM website.
Chart 17 - Requests for Information to the CMVM and the appropriate Access Means Used
2011 Annual Report on the Activity of the CMVM and the Securities Markets
213
CMVM
The most common matters that featured in the requests for information were:
– The duty of providing information to clients by financial intermediaries, prior to the subscription or
purchase of complex financial instruments and holding corporate events for listed issuers;
– Fees charged by financial intermediaries to investors concerning securities transactions;
– Payment of dividends by listed issuers, which included questions on dividend policy, dates set for
payment thereof, net amount of dividend per share, sum of IRS/IRC deducted at source, proper
implementation of fees and other charges and the date from when the shares are be traded on the market
without conferring a right to dividends;
– The real estate appraisers of real estate investment funds and certification entities, especially
information that real estate appraisers should notify the CMVM before beginning carrying out the
activity;
– Entities authorised to provide financial intermediation services in Portugal, particularly confirm
registration with the CMVM of entities providing financial intermediation services (including the
foreign exchange markets).
As for the prevention plan, nine notifications were published announcing the lack of authorised persons,
companies and Internet websites for provision of intermediary services (international publication in two cases).
The number of documents disclosed in 2011 on the website recorded a 23.5% upsurge. Communications
disclosed by issuers, investment funds, financial intermediaries and marketing entities of the complex financial
products represented 70% of the total number of communications.
The number of documents and number of consultations by addressees becomes more prevalent in non-periodic
information. 155 announcements were published in 2011 concerning the CMVM decisions, research and the key
areas of its expertise, 31 decisions relating to fines imposed in cases of administrative infraction proceedings
and the court decisions on appeals against sanctions imposed by the CMVM, 598 warning alerts on
unauthorised financial intermediation, over 4,200 events in the "Investors' Calendar" and several documents
relating to regulation and public consultations.
Particularly salient among the new areas created on the CMVM website are complex financial products and
investor protection associations. The new area on complex financial products now covers not just the technical
datasheets and information documents of bonds, structured warrants and other complex products, but also
includes the prospectuses of unit-linked and special investment funds. Several documents encouraging financial
literacy for making responsible choices concerning complex financial products were disclosed in this area of the
website. The number of users of the CMVM website amounted to 2,367,923.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
214
CMVM
3.2.3 Information Disclosure System
The disclosure by the CMVM of information provided to the market by the supervised entities in compliance
with its legal duties, the information contained in its records and also other relevant data is in accordance with
Article 367 of the Securities Code. The Information Disclosure System is utilized by issuers, investment funds,
financial intermediaries and other marketing entities of complex financial products, including unit-linked and
private pension funds, thereby, complying with their reporting duties to investors. 14,511 documents were
published by said entities. This corresponds to 33.8% more than the year before.
Table 74 – Number of Announcements per Issuer via the CMVM Website
The number of issuing entities of shares, bonds and other securities that disclosed announcements via the
Information Disclosure System reached 116. Issuers of PSI 20 shares accounted for 56% of announcements. The
announcements on material information and the payment of interest on debenture loans corresponded to 40% of
total announcements. The number of announcements issued by investment funds fell due to a decrease in the
number of prospectuses (which points to a downswing in this market - see paragraph 2.10) and management
regulations.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
215
CMVM
3.2.4 Supervision of Advertising and Marketing of Products in Banking and
Insurance Sectors
The CMVM has been setting up the mechanisms required for supervising complex financial products pursuant
to the powers envisaged in Decree-Law No. 211-A/2008 of 3 November, relating to disclosure duties on
complex financial products. Progress was made in 2011 as regards supervising the distribution and advertising
of these products. The development of a specific information system is underway so as to enable the public to
effectively understand the characteristics and risks of said complex financial product.
Setting up the Committee for Financial Innovation (CIF) in February 2011 complies with the plan for a more
systematic, comprehensive and uniform intervention in the marketing of complex financial instruments in
Portugal and, more broadly, provide a systematically and internally coordinated response in matters relating to
the financial innovation requiring the CMVM's intervention. The CIF's endeavour was notably reflected in
analysing the information documents and advertising concerning complex financial instruments and the trading
platforms supporting the respective transaction. Close monitoring of key international developments in the
marketing of financial instruments was carried out.
Among other initiatives, supervision of the marketing network of such products was stepped up. The
appropriateness of the respective sales teams' knowledge and the presence or absence of conflicts of interest in
the marketing of complex financial products was closely examined. The effective compliance with the
disclosure requirements imposed on traders of these products was also increased.
At year-end the financial products in insurance and banking sector that are subject to conduct supervision by the
CMVM comprised of transactions and assurances linked to investment funds, commonly known as unit-linked,
dual products (investing funds together with independent financial instrument), private pension funds, structured
bonds, debt securities with possible capital loss (Notes), certificates, covered warrants, interest rate protection
solutions, currency derivatives, ETF, CFD, inter alia.
The CMVM examined 222 advertisements concerning products in the banking and insurance sector (classified
as complex financial products). It was necessary to request changes in 211 of said advertisements. This
represented 95% of cases. During 2011 the number of advertisements on complex financial products approved
by the CMVM increased as regards trading platforms. As the marketing through trading platforms already
accounts for a substantial proportion of the market, the CMVM stepped up supervision on these platforms,
thereby monitoring the trends of the market for complex financial products. There were also developments of
2011 Annual Report on the Activity of the CMVM and the Securities Markets
216
CMVM
the advertising means that favours Internet usage, either through the website of the issuer itself or marketing
entity on the Internet, or sites of third party entities on the Internet, such as national online newspapers.
The number of advertisements approved without requiring any changes still corresponds to a very small
percentage of the total number of advertisements that were analysed. This is related mainly to compliance with
the rules concerning the warning alerts that should appear in the advertisements. This situation is expected to
turn around after the forthcoming legislation on complex financial products comes into force.
Table 75 - Analysis of Advertising Campaigns of Products in Banking and Insurance Sectors (including
Complex Financial Products)
Countless recommendations were issued as a result of the analysis on the marketing documents of complex
financial products, simplified prospectuses and information documents. This was carried out in order to
safeguard investor interests, by ensuring that the above mentioned documents display the information clearly,
concisely and in easily comprehensible language describing the products’ key features and risks. Particularly
salient from the most common recommendations made by the CMVM when examining simplified prospectuses
and information documents of complex financial products is the requirement for the following: i) the respective
classification as a complex financial product; ii) to highlight the product's key risks, especially identifying the
risk of conflicts of interest where the product implies investment in the group's assets; iii) the objectivity and
clarity of the information provided; iv) to render investment policy clearly and objectively; and v) the clear
identification of direct and/or indirect costs related to complex financial product and resoluteness concerning the
product's characteristics.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
217
CMVM
In light of the increasing trend of marketing complex financial products to retail clients and the complexity of
the vast majority of said financial products, the CMVM placed for public consultation a draft Regulation on this
matter wherein a number of remedial measures on information asymmetry between investors and entities that
market these products are envisaged. This topic is dealt with in the Textbox below. Nevertheless, a set of
documents on complex financial products directed at investors was published on the CMVM website.
Particularly salient were the Glossary of Financial Instruments, a Guide on Complex Financial Products
(describing the key features of certain products), a set of Recommendations for investors and also the CMVM
Policy on Complex Financial Products. These measures actually formed part of a broader effort to promote
financial literacy among retail investors.
TEXTBOX 9 – INVESTOR PROTECTION IN COMPLEX FINANCIAL PRODUCTS
The key task of the CMVM is to protect investors. The Portuguese financial market has been characterized by
the offer of financial instruments whereof the complexity, operation and type of cash flows undertaken to pay
investors differ widely. The financial instrument's complexities do not necessarily have a direct and positive
relation with the degree of risk and/or return that the instrument provides. A factor that investors need to take
into consideration in their investment decision is the link between risk and expected return on the financial
instrument and the suitability of the instrument to their profile. It is vital in this analysis that the information,
which forms the basis for the investor's decision making process, is complete, true, current, clear, objective and
existent, particularly when the financial instrument is a complex one.
It was found through supervision and complaint processing that in a large number of cases, the conditions that
would enable investors to have a clear and thorough perception of risks and remuneration terms of complex
financial instruments were not complied with. It was found, inter alia, that i) the expected return of a substantial
number of complex financial instruments was lower than that of substitute traditional instruments; ii) omitting
information to retail investors on the risk and the fair value of financial instruments; iii) difficulty in
understanding the contractual terms and mathematical formulas that defined the financial flows and yield of the
financial instrument; iv) the presentation of high yield targets for which the likelihood of it taking place was
very low; v) there being considerable potential for conflicts of interest between the investor and the issuer,
marketing entity and calculation agent, which almost invariably are from the same financial group; and vi)
contractual uncertainty relating to date of redemption or repayment of the capital invested in the complex
financial instrument.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
218
CMVM
The number of complaints submitted on complex financial products showed that many investors were surprised
by the low yield of their investments against the expectations or the finding that the investments displayed
unexpected characteristics and confirmation of circumstances that they truly were not aware of the likelihood of
it taking place. A large number of complaints concerning the marketing of complex financial products were
submitted by investors who showed that they did not have the suitable profile in order to have been advised to
subscribe to this type of product. Furthermore, these investors claimed to be unaware that the product carried
capital risk and did not guarantee minimum yields. There was no lack of cases wherein the complainant's
profile, particularly aged 70-80 years at the time of subscription and without any know-how and expertise
therein, had subscribed to complex financial products. This often included maturity of 10 years or more and
accounted for almost all of these clients' investments.
The emergence and development of new products led to the need for a more vigilant approach and specific
action for the financial products concerned. Establishing the Committee of Financial Innovation (Comité de
Inovação Financeira - CIF) at the beginning of 2011 was the solution. Said Committee centralises and
coordinates the involvement of the CMVM in matters related to financial innovation, notably within the
complex financial products context. The CIF also anticipates the implementation of the measures envisaged in
European legislation that is being drawn up by ESMA. The CIF examined the information documents and
advertising concerning complex financial instruments and the trading platforms wherein said instruments are
traded. The close monitoring of key international developments in the marketing of financial instruments was
also carried out in order for its goals to be achieved. The measures implemented during 2011 also included but
were not confined to the following: stepping up the supervision of marketing networks; determining
appropriateness of the respective teams of salespeople and the absence of conflicts of interests; increasing the
initial and periodical disclosure duties by issuers or marketing entities of complex financial instruments
concerning its expected performance; remodel the CMVM website so as to increase visibility and information
content; and disclosure of educational recommendations to investors with a clear description of the kinds of
financial instruments and risks related thereto.
In 2012, the CMVM has already placed for public consultation a draft regulation on this matter. The scope of
the draft regulation includes any contract or asset for raising savings or financial risk management that despite
adopting the legal form of an existing instrument or product has characteristics that are not directly identifiable
with said product or instrument, because it has other products or instruments that are linked thereto and the
performance of which of which totally or partially depends on its yield. The draft regulation classifies certain
products that are subject to said regulation, especially: i) financial derivatives,
2011 Annual Report on the Activity of the CMVM and the Securities Markets
219
CMVM
ii) structured bonds and other debt securities with possible redemption below par value, iii) certificates; iv)
insurance contracts linked to investment funds (unit-linked), including insurance linked to investment funds and
capitalisation transactions linked to investment funds; v) dual products; and vi) certain holdings in non-
harmonised collective investment undertakings that are not real estate investment funds or venture capital funds
according to the composition of the respective investment portfolio with regard to including complex financial
products.
Amid remedial measures of information asymmetry, the draft clarifies concepts and lays down the requirement
for including a warning symbol on the product's risks in the information document that is crucial for the investor
and also in the advertising. This is to ensure that the subscribers to these products are appropriately cautioned as
to the risks they may incur. The range of warnings was broadened and defined in order not only to streamline
the process of drawing up the documents, but also to make it easier to understand the possible that might result
from subscribing to the financial product. It also intends to regulate the display of scenarios, requiring that the
information on the best and worst possible outcome will approximate, in certain cases, a worst case scenario, an
average scenario and an optimistic scenario.
3.2.5 Financial Literacy
The national financial supervisors, including the CMVM, have taken a number of steps in terms of financial
literacy. Particularly salient within the CNSF context is the drawing up of a draft National Plan for Financial
Education (Plano Nacional de Formação Financeira - PNPP). This was submitted for public consultation in
May and approved in September. The PNFF's implementation period is from 2011 till 2015 and includes key
activities such as establishing the Gateway for the National Plan for Financial Education, implementing bilateral
contacts with partners in the Plan in order to carry out financial education initiatives and the celebrations for
World Savings Day (in 2012). Interest in this subject has been a constant factor in the CMVM's activity with the
surveys and studies carried out in the past on investor profile corroborating this.
The growing complexity of financial products, the increasing number of complex financial products issued and
subjected to close examination by the CMVM and the escalation of complaints submitted to the CMVM as to
the marketing of said products, exacerbated the need to better understand the profile of the financial services
consumer and thereby providing investors with more information so that a better informed decision can be
reached. In light of this, the CMVM published the following documents (instructional and recommendatory) in
July 2011.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
220
CMVM
Said documents were drafted in clear language and accessible to the majority of investors: i) "Guide to Complex
Financial Products", which includes a simple description of the operation and the major risks linked to certain
products, ii) "Recommendations for Investors in Financial Instruments", iii) "Recommendations for Investors in
Financial Instruments" iv)" Glossary of Terms relating to Financial Instruments" and v) "CMVM Policy on
Complex Financial Products" which describes the main lines for action by the CMVM in this regard,
particularly as to approving the advertising of such products.
Particularly salient within financial education is the CMVM's cooperation within the ESMA Consumer Network
towards developing Investor's Corner area on the Internet website of this institution. This is described in more
detail under the section of this report covering international activities.
3.3. COMPETITIVE AND DYNAMIC PORTUGUESE FINANCIAL MARKET
3.3.1 Completed Law Reform and Key Implications
The CMVM actively took part in the negotiation of EU legislation, especially in projects resulting from EU
initiatives emanating from the European Commission, providing professional expertise to the Ministry of
Finance within the context of national delegations in the Council of the European Union. At national level the
CMVM also directly or indirectly encouraged amendments to national legislation.
The CMVM took part in the negotiations of four EU Directives and three Regulations. It also provided input for
the transposition of an EU Directive into the national legal system and drafted two public consultations at the
national level. Particularly salient within the finalised legislative and regulatory measures (or on-going) are the
following:
Review of the Markets in Financial Instruments Directive 2004/39/EC
In October 2011, the European Commission presented proposals for a review of the Markets in Financial
Instruments Directive that were embodied in a Directive and a Regulation, in order to make financial markets
more efficient, robust, and transparent and step up the protection of investors. The approval of proposals to
amend the MiFID is envisaged for 2012. The proposals were aimed at providing answers to the changes
recorded on the financial markets since the implementation of MiFID in 2004 and distinguished, namely, the
development of new trading platforms such as broker crossing networks, new products and technological
developments that enable high frequency trading (HFT).
2011 Annual Report on the Activity of the CMVM and the Securities Markets
221
CMVM
The measures proposed by the European Commission include i) establishing a new kind of organized trading
(Organised Trading Facilities or OTF), aiming to give a framework to the unregulated alternative trading forms;
ii) extending the disclosure rules for pre and post-trade, and also stepping up and harmonising rules for reporting
information to the competent authorities, so as to increase the financial markets' transparency and the quality of
information provided to competent supervisory authorities; and iii) increasing the internal organisational
requirements and standards of conduct for financial intermediaries and operators of regulated markets, including
new organisational duties and conduct in response to the risks of high-frequency or algorithmic trading.
The marketing of greenhouse gas emission allowances is classified as placing financial instruments aimed at
subjecting the trading thereof to financial markets' regulation.
It is also envisaged that the mandatory trading of eligible derivatives (standardised) in organised trading
structures is to be regulated and powers for intervention over the holding of derivative positions to be increased.
Particularly salient are the proposals for extending the MiFID rules to the marketing of complex bank deposits,
the creation of mechanisms aimed at consolidating post-trade information; expanding the powers of national
authorities and ESMA so as to enable said authorities to ban or restrict the marketing of financial instruments or
pursuit of certain financial activities, particularly in cases involving investor protection or financial markets'
stability; harmonised rules for access to investment firms in third countries; and harmonising administrative
sanctions and measures applied by the competent authorities.
Review of Directive 2003/6/EC on Insider Trading and Market Manipulation
The European Commission's proposal to review the Directive 2003/6/EC on insider trading and market
manipulation was submitted in October 2011. The draft Regulation aims to replace the rules that are currently
envisaged in the Directive and will become the key instrument for regulating the market abuse framework in the
European Union. Key proposed amendments include the following: i) broadening the scope of rules envisaged
Directive 2003/6/EC to financial instruments traded solely on MTFs or OTFs; ii) implementation of rules on
market abuse to specific derivatives, notably credit default swaps; iii) extending the concepts of insider trading
and market manipulation with regard to derivatives of raw materials; iv) measures designed to cope with market
manipulation strategies resorting to high-frequency or algorithmic trading; v) the duty of issuers to report the
decision deferring disclosure of inside information to the competent authorities; vi) establish an authorisation
system to defer the disclosure of inside information on the grounds of systemic risk; and vii) harmonisation of
rules on drawing up lists of insiders and disclosure of managers' transactions.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
222
CMVM
The following are envisaged: greater powers for competent authorities, minimum rules on administrative
sanctions by these authorities and the establishment of a system for protection and incentive to report breaches
of bans and duties envisaged in the Regulation (whistleblowing). The proposal establishes the duty of Member
States to impose criminal sanctions for crimes on insider trading and market manipulation with the aim of
harmonising criminal sanctions for this kind of crime within the European Union.
Review of the Investor Compensation Scheme Directive, 97/9/EC
In July 2010, the European Commission submitted a proposal for a Directive amending Directive 97/9/EC of the
European Parliament and of the Council on Investor Compensation Schemes. The European Commission's
original proposal included a number of significant changes to harmonise the SII's financing rules and increase
investor confidence in financial markets. These include raising the minimum compensation, rules for anticipated
funding of the system and extend the scope of systems' coverage. The common position adopted focused mainly
on the following: i) setting a compensation range of between €30,000 and €100,000; ii) the requirement
for Member States to implement appropriate systems to fund the compensation mechanisms so as to ensure
adequate cover for the complaints from investors; iii) exclude third party entities (especially custodians) where
the investor has deposited financial instruments from the SII's scope; and iv) exclude participants of harmonized
investment funds from the SII's scope.
Proposal to revise the Transparency Directive
The European Commission tabled a proposal for the revision of Directive 2004/109/EC of the European
Parliament and of the Council on the harmonisation of transparency requirements. The proposal is designed to
make the capital markets more attractive for the small and medium companies and as an alternative source for
funding. Furthermore, it purports to ensure greater transparency in acquiring the economic rights in companies,
notably, by extending the concept of eligible financial instrument for the purposes of determining the voting
rights and harmonising the aggregation of all the voting rights, irrespective of the underlying financial
instrument, by reducing the possibility of hidden qualifying holdings. It is also proposed that the requirement of
reporting interim or quarterly information should be ended, especially in the case of small and medium-sized
issuers. Finally, it acknowledges that access to regulated information at the European level should be improved
upon by proposing an increase in the functional integration of European capital markets and the cross-border
visibility of small and medium-sized issuers. In accordance with the latest guideline from the European
Commission on the harmonisation of the sanctions framework in Europe, a set of sanctions and administrative
measures is envisaged in order to punish the failure to comply with the requirements that are imposed. It is
expected that the regulation is likely to be approved by the third quarter of 2012.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
223
CMVM
Proposal for Regulation on OTC Derivatives, Central Counterparties and the Trade Repositories
The European Market Infrastructure Regulation (EMIR) proposal purports to promote greater transparency in
the derivatives markets and grant additional and harmonised powers to Regulators. Inter alia, it envisages
compensation of standard derivative contracts through central counterparties to reduce the risk in case of default
by a party and the reporting of information on all derivative transactions to trade repositories (centralised
databases). Same should be made available to the supervisory authorities. The procedure for The negotiation of
the proposed EMIR took place during the course of 2011, with the CMVM, the Ministry of Finance and the
Portuguese Central Bank (Banco de Portugal) taking part therein. Approval of the EMIR proposal should take
place during the first quarter of 2012.
TEXTBOX 10 – EUROPEAN REGULATION OF THE OTC DERIVATIVES MARKET
Background
The opacity of the OTC markets was brought to the fore with the collapse of Lehman Brothers and AIG in 2008.
Lack of transparency in these markets is linked to the absence of reporting requirements and with the manner
same is cleared. Lack of transparency in these markets is linked to the absence of reporting requirements and
with the manner same is cleared. Against this background, the G20 leaders at the summit held in Pittsburgh in
2009 agreed that all standardardised OTC derivative contracts should be subject to mandatory clearing through
CCPs (Central Counterparties - CCPs) by the end of 2012 and the OTC derivative contracts should be reported
to centralized database - the Trade Repositories (Trade Repositories - TR). At the Toronto summit in 2010, the
leaders agreed to intensify the commitments laid down and undertook to further speed up the implementation of
measures for improving the transparency and monitoring of OTC derivatives in line with non-discriminatory
global standards.
In its conclusions of December 2009, the European Council agreed that there is a need to implement measures
designed to mitigate the counterparty credit risk and increase transparency, efficiency and integrity for
derivative transactions. Along the same lines, particularly salient is the European Parliament's guidelines of 15
June 2010 that called for mandatory clearing and reporting of OTC derivatives in the resolution on "Derivatives
Markets: Future Measures".
The European Commission submitted on 15 September 2010 a proposal for a Regulation of the European
Parliament and of the Council on OTC derivatives, central counterparties and trade repositories (European
Market Infrastructure Regulation - EMIR). This should be approved in the first six months of 2012.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
224
CMVM
General Guidelines of the EMIR Proposal
The following are the key points of the EMIR proposal: (i) mandatory clearing for all standardised OTC
derivatives through CCPs; (ii) setting objective and subjective conditions for central clearing requirement; (iii)
rules on risk mitigation for non-centrally cleared trade; (iv) prudential and operational requirements applicable
to CCPs and aspects relating to the authorisation and supervision of CCPs; (v) duty to report derivative contracts
to TR, the TR being subject to registration, supervision and aspects relating to harmonising the respective
operating rules; (vi) the framework applicable to CCPs and TRs in third countries; and (vii) interoperability for
CCPs.
Mandatory Clearing
The proposed EMIR sets out criteria for establishing the requirement of subjecting certain categories of OTC
derivatives to clearing. Based on the draft rules for implementation that are to be drawn up by ESMA, the
European Commission shall be responsible for deciding whether a certain category of OTC derivatives should
be subject to the clearing requirement and also the date from which said clearing becomes compulsory.
In order to ensure a uniform and consistent implementation of the clearing framework and level playing field for
market participants when a category of OTC derivatives is declared to be subject to the clearing requirement,
this requirement should be extended to all contracts falling within this category of OTC derivatives that were
concluded as from this Regulation's date of entry into force.
The proposed EMIR requires counterparties to introduce internal procedures aimed at mitigating operational
risk and credit risk for the OTC derivatives that are not eligible for clearing through CCPs. This will be subject
to specific regulations that are to be approved by ESMA/European Commission.
Mandatory Reporting
The draft EMIR envisages that both derivative contracts subject to clearing through CCPs and others are
required to report to the TR. The TRs are entities that aim to centrally store information on derivative
transactions. The TR shall be responsible for making the information available to the authorities that require
said information in order to carry out their activities. The counterparties and the CCP should submit information
to ESMA when it is not possible to register certain derivatives with the TR.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
225
CMVM
Subjective Scope
As defined in the proposal for the EMIR, the duties of mandatory clearing apply to all financial entities that
include, inter alia, investment firms, credit institutions, insurance and reinsurance firms, pension funds and
collective investment institutions.
If the added value of OTC derivative transactions from non-financial entities exceed the threshold laid down by
the European Commission (acting on ESMA's proposal), these will also fall under the EMIR Regulation. For the
purpose of this assessment, the OTC derivatives that objectively cover risks directly related to the commercial
activity of such entities are not included.
The EMIR proposal envisages that, inter alia, the following are excluded from its scope: the members of the
European System of Central Banks (ESCB), the EU public bodies responsible for the management of public
debt or participating in the management thereof, and certain Multilateral Development Banks (MDB), the
European Financial Stability Facility (EFSF), the European Stability Mechanism (ESM) and the European
Company for the Financing of Railroad Rolling Stock (EUROFIMA).
Pension funds are temporarily exempt from the clearing obligation through CCPs. As a general rule, these funds
require the kind of assets required by the CCP to meet daily margins. Therefore the EMIR proposal introduced a
temporary defined exemption in order to enable the market to find suitable solutions.
Prudential and Behavioural Requirements for CCPs and TRs
The EMIR proposal envisages that the CCPs may be established in any EU Member State and it is up to the
authority of the Member State where the CCP purports to provide clearing service to grant the authorisation
thereof. The authorisation is subject to the opinion issued by colleges set up for this purpose. The following,
inter alia, take part in the colleges: ESMA, the competent authority of the Member State where the CCP is
established; the competent authorities responsible for supervising the clearing members of the CCP established
within the three Member States with the highest contributions (aggregate value during the course of one year)
for the fund against the default of the CCP and the issuing central banks of the more significant EU currencies.
Capital and liquidity requirements are envisaged as a precondition in order to obtain the authorisation for CCPs
to provide clearing services.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
226
CMVM
Having obtained the authorisation, the CCPs are subject to comply with organisational duties (e.g. record
keeping, the existence and operation of boards for management and risk control), prudential duties (e.g. risk
management, maintenance of fund for cases of default, investment policy, guarantees and stress testing) and
behavioural duties (e.g. non-discrimination, transparency, accessibility and asset segregation).
TRs are subject to registration with ESMA and also subject to organisational, operational and behavioural
requirements (eg transparency, data and record keeping, protecting the confidentiality and integrity thereof).
Review of the Regulation on Credit Rating Agencies
Regulation No. 513/2011 of 11 May amended Regulation No. 1060/2009, in order to assign ESMA with the
sole responsibility for registration and supervision of credit rating agencies across the European Union as from 1
July 2011. Nevertheless, this new Regulation provided that the registration procedures already started were to be
finalised by the competent national authorities and only transferred to ESMA after registration. The new
Regulation also laid down that ESMA should carry out at least one supervisory action within two years
concerning each of the credit rating agencies under its supervision. This is to be decided based on an internal
risk assessment model, on the contribution made by national authorities regarding registration procedures, in the
exchange of information between these authorities on the information to be reported periodically by the credit
rating agencies to ESMA and the information included in the central database operated by ESMA.
Short-Selling and certain aspects of Credit Default Swaps
The proposal for a Regulation on Short-Selling and Credit Default Swaps (CDS) was under discussion with the
EU authorities throughout 2011. This proposal purports to set limits on naked short-selling and subject investors
to duties of transparency regarding short net positions, inter alia requirements that lead to market stability and
investor protection. The proposal also lays down mechanisms to regulate the sovereign debt market. Thereby,
said proposal aims to establish a common legal framework as regards the requirements and powers relating to
short selling and CDS. It also aims to ensure greater coordination and convergence among competent
authorities.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
227
CMVM
Other Legislative and Regulatory Measures
The CMVM took part in transposing an EU Directive No. 2009/65/EC of the European Parliament and of the
Council, of 13 July 2009, on the coordination of laws, regulations and administrative provisions relating to
Undertakings for Collective Investment in Transferable Securities (UCITS).
Two public consultations (see 3.3.2) were carried out at the national level. Amendments to update 11 CMVM
Instructions were put forward whereof the majority related to the reporting of information on financial
intermediation activities.
TEXTBOX 11 – TRANSPOSITION OF UCITS IV DIRECTIVE
The Directive 2009/65/EC of the European Parliament and of the Council, of 13 July 2009, on the coordination
of laws, regulations and administrative provisions relating to Undertakings for Collective Investment in
Transferable Securities (UCITS IV Directive) entered into force in December 2009. The UCITS IV Directive
brings about substantial amendments to the existing law.
Key Amendments to Directive
It became clear over the years that the UCITS system did not provide for the full monitoring at the pace of
financial innovation. Two initiatives are the basis for the set of proposals for particular amendments to the
UCITS IV Directive. Firstly, the European Commission's Green Paper sought to enhance the Framework for
Investment Funds that started the public debate in 2005 over the need for action in the European Union.
Secondly, the White Paper on enhancing the Framework that governs Investment Funds within the single
market, that submitted measures amending Directive 85/611/EEC.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
228
CMVM
There were two types of key measures for the proposed legislative amendments: those aimed at improving
current legislation towards clarifying or rendering said legislation more effective; and those aiming to improve
the scope of new single market freedoms. Particularly salient in the first group of measures are: i) introducing
the management company passport aimed at ensuring greater flexibility in carrying out activities and enable
further integration of the single market and the competitiveness of the fund industry; ii) simplifying procedures
for notification that , although already available, suffered from issues relating to the different interpretations by
Member States as to the discretionary implementation of requirements that thwarted swift crossborder
marketing; iii) replacing the simplified prospectus by a document containing the key investor information aimed
at harmonising the format and content of pre-contractual information required to be made available to investors;
and iv) introducing cooperation procedures in line with those proposed in other EU legislative initiatives. The
second group of measures includes establishing a framework for cross border mergers that simplifies the
procedure for merging UCITS authorised in different Member States (and that seeks to increase the size and
flexibility of investment fund management and thereby achieve increased productivity through this route); and
create master-feeder structures (that consist of mechanisms whereof the investment is similar to a "Fund of
Funds" but concentration limits per fund to which it is subject are not applicable thereto and would increase the
size of the funds and extend its offer).
Implementation Measures
The following legislation was approved in July 2010: i) Commission Directive No. 2010/43/EU of 1 July 2010
implementing Directive 2009/65/EC of the European Parliament and of the Council as regards organisational
requirements, conflicts of interest, conduct of business, risk management and content of the agreement between
a depositary and a management company; ii) Commission Directive 2010/42/EU of 1 July 2010, implementing
Directive 2009/65/EC of the European Parliament and of the Council as regards certain provisions concerning
fund mergers, master-feeder structures and faster notification procedure; iii) Commission Regulation (EU) No.
583/2010 of 1 July 2010, implementing Directive 2009/65/EC of the European Parliament and of the Council,
as regards key investor information and conditions to be met when providing key investor information or the
prospectus in a durable medium other than paper or by means of a website; iv) Commission Regulation (EU)
No. 584/2010 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the
Council as regards the form and content of the standard notification letter and UCITS attestation, the use of
electronic communication between competent authorities for the purpose of notification, and procedures for on-
the-spot verifications and investigations and the exchange of information between competent authorities.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
229
CMVM
Transposition into National Law
Transposing the UCITS IV Directive into national law requires amendments to the laws on investment funds
and the format on how the entities responsible for supervising said implementation are organised. The CMVM
and the Portuguese Central Bank (BdP) were involved in the discussions relating to the implementation thereof.
The amendments envisaged in the UCITS IV Directive and those resulting from the implementing Directives
and Regulations are considerable and therefore the current Legal Framework for Collective Investment
Undertakings was repealed and a new legal system was created. The transposition took place during the course
of 2011 and the preliminary draft legislation is expected to be placed on public consultation during the first
quarter of 2012 with the entry into force also taking place in 2012.
3.3.2 Consultation Papers
Two public consultations were carried out in 2011 at the national level. The first concerned the Draft
Understanding aimed at improving the quality of disclosure of Financial Information in Summary Form by
issuers pursuant to Article 7 of the Securities Code. The second related to the Proposed Draft Amendment to
Article 182-A of the Securities Code that aims to review the rules concerning restrictions on the transfer of
shares and the exercise of voting rights in public companies.
Chart 66 – Consultation Papers
2011 Annual Report on the Activity of the CMVM and the Securities Markets
230
CMVM
3.3.3 National Coordination for Supervising and Promoting Financial Stability
National Council of Financial Supervisors
The National Council of Financial Supervisors (Conselho Nacional de Supervisores Financeiros - CNSF) has
been regularly contributing towards the analysis of risks in the domestic financial system, in the form of
drawing up a quarterly report. The CNSF has also regularly carried out the networking of matters relevant to
the supervision of the domestic financial system.
Via the CNSF, the CMVM took part in the European Systemic Risk Board (ESRB), an institution set up with
the coming into operation of the European System of Financial Supervisors, and the Joint Committee of
European Supervisory Authorities (as described in Section 3.4.5.1).
Under the CNSF’s auspices, many initiatives were undertaken in terms of financial literacy, including the
drawing up of a proposal for the National Plan of Financial Education. This was submitted for public
consultation in May and approved in September (see 3.2.5).
The CNSF proposed a number of legislative and regulatory initiatives, which include the transposition of the
UCITS IV Directive and a draft Ministerial Order for the list of countries or jurisdictions that make up the
concept of "third country equivalent" for the purposes of implementing the current Community framework on
the prevention and control of money laundering and terrorist financing. In matters relating to issuing warnings
and disclosure of information, the CNSF fostered the link of the three supervisory authorities that comprise
same.
National Committee for Financial Stability
The National Committee for Financial Stability (CNEF) was established in 2007 and is designed to promote
financial stability through close cooperation among the respective supervisors and the Ministry of Finance. In a
period denoted by obvious difficulties in the financial markets, the CNEF has been a key element for
exchanging information, by ensuring the consistency of the response of the national authorities to the
crisis. This consistency has been pursued not just domestically but also externally, under the
coordination of the activities of the various entities that comprise the CNEF in international decision
centres where same is represented.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
231
CMVM
National Council for Audit Supervision
Inspections consisting of CMVM representatives and carried forward from 2010 were finalised. The final
inspection reports were issued after i) the respective processes were analysed and discussed with the auditors,
which included some targeted interventions, ii) hearings held with entities involved in providing audited
financial statements, iii) reviewing the notifications submitted to the CNSA by entities related to said processes,
iv) the appraisal of particular issues by teams of legal advisors, and v) incorporating adjustments due to reviews
by the auditors to the CNSA preliminary reports, within the context of a right to a fair hearing. The CNSA ruled
the opening of an administrative process, currently in progress, and in another case notified the OROC of cases
prone to disciplinary offences.
Within the annual programme of quality control to the work of auditors registered with the CMVM, close
contacts with OROC covering 20 auditors were pursued. The CMVM was also involved in many other activities
relating to the supervision of national and international auditors. Particularly salient as an example, is the
participation in the European Group of Auditors' Oversight Bodies and the European Audit Inspection Group.
Other Institutional Cooperation
The CMVM cooperated with the Office for Planning, Strategy, Assessment and International Affairs at the
Ministry of Finance in response to a European Commission Survey on the implementation of Directive
2005/29/EC on unfair commercial practices. Furthermore, the CMVM also cooperated with the Directorate-
General for Consumer on issues relating to investor complaints and enforcement of consumer economic
interests.
54 international assistance requests were made, six requests for assistance were received from counterparts and
replies were sent to 15 requests for the institutional cooperation from legal authorities. Cooperation with the
Public Prosecutor was redoubled as regards particular requests for cooperation and current criminal proceedings
resulting from reports submitted by the CMVM.
The CMVM is on the Executive Board of the Commission of Accounting Standards, as the representative of
financial information users and thereby contributes to aligning the CNC with IFRS. A smoother vertical
integration (notably in the case of consolidated financial statements) is ensured and easier access to the
financial markets, thereby enabling a comparison across different applicable rules, based on similar principles
for recognition and measurement.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
232
CMVM
3.4. INTERNATIONAL ACTIVITY
3.4.1. NYSE Euronext College of Regulators
2011 was denoted for the process that aimed at the merger between NYSE Euronext and Deutsche Bӧrse group
(announcement on February 2011), which took place under the six-month rotating presidency of NYSE
Euronext College of Regulators by the CMVM (January to June 2011). The merger failed to take place owing to
the objection raised by the European Commission in February 2012, which was based on the competitive effects
considered to be averse to the regular functioning of the market. The merger process has significant implications
for the functioning of the College of Regulators, and in particular the need for analysing the proposed corporate
model and overriding reorganisation of the regulatory authorities' cooperation model in the event of the merger
taking place. In addition to analysing the impact of the merger and the respective hearings with related parties to
the merger, formal contacts were established with the competent German authorities responsible for supervising
the Deutsche Bӧrse. Although the final outcome of the planned operation took place in February 2012, the
necessary requirements for analysing and the preliminary investigation of the process for authorising the merger
by the College of Regulators were complied with. This resulted in the Steering Committee holding 16 meetings
and the Committee Chairs holding four meetings.
The NYSE Euronext rules were amended by NYSE Euronext or regulatory authorities' initiative, and the
purpose thereof was to implement, update or clarify the meaning of the rules (eg on disruption of trading due to
share volatility, on the system of admission to trading or, in the case of ETFs, ETNs and ETVs, with the
removal of the legal term NextTrack). As stated in Section 3.1.1, the supplemental liquidity providers
framework was adopted and this enables market players to qualify for a reduction in the price list applicable in
contrast to the taking over of duties from continued presence on the market by introducing in the trading system
the bids to the European Best Bid and Offer (EBBO). In the last quarter of 2011, a review of IOSCO
Recommendations and ESMA Guidelines on the issue of technological innovations in trading, and in particular,
Algorithmic Trading and High Frequency Trading was started.
The suitability of tools available to NYSE Euronext for market surveillance was analysed on a regular basis so
as to ensure the appropriate supervision thereof and also the projects developed by NYSE Euronext for
diversifying the provision of services (e.g. through the establishment and management of new trading
platforms). Furthermore, the following was also carried out: (i) the existence and effective implementation of
circuit breakers on trading in financial instruments (especially in cases that trade with a comparatively low
2011 Annual Report on the Activity of the CMVM and the Securities Markets
233
CMVM
price) was checked; (ii) the periodic provision of information by NYSE Euronext as regards market supervision
was analysed; and (iii) and the potential impact of high frequency trading on the efficient price formation in the
market was examined.
The projects led by NYSE Euronext for the migration, adaptation or upgrades of systems used in the markets
that it operates were likewise monitored. Concerning the means employed within the context of the markets'
functioning, the human resources in the markets managed by NYSE Euronext in each of the European
jurisdictions were checked in order to assess the capacity of the market operator ensuring quality and efficiency
standards required in managing the markets under their responsibility. The current internal procedures for
resolving any disturbances in the normal functioning of the markets, and the respective measures implemented
were checked.
Mechanisms for identifying and monitoring risks inherent to the performance of the activity and the
mechanisms that ensure compliance with applicable law were found within the internal control system.
Recommendations for improving or correcting the implemented procedures were issued.
The proposed NYSE Euronext migration of derivatives markets to a new trading platform, called Universal
Trading Platform (UTP) was carried out. The migration of the derivatives markets will be undertaken on a
phased basis with the first phase carried out at the end of 2011. The migration of the Portuguese derivatives
market - Futures and Options Market, managed by Euronext Lisbon is scheduled for 2012.
As a result of incidents with an impact across different markets, independent monitoring was initiated so as to
identify the causes that led to these occurrences and the steps taken to resolve same.
3.4.2 LCH.Clearnet
The CMVM continued to be involved in the supervisory college of LCH.Clearnet SA (clearing house for trades
carried out in the market managed by Euronext Lisbon) through the Co-ordination Committee on Clearing
(CCC), the Board where the supervision of this entity is jointly pursued by the Portuguese, French, Dutch and
Belgian authorities. Particularly salient in 2011 were the following matters that were dealt with by the CCC: i)
the close examination of the termination process for clearing agreements with NYSE Euronext that end on 30
June and 31 December 2013, respectively, for the derivatives and spot markets; ii) analysis of the
implementation of a project designed to increase the transparency of the bond market and the platforms which
consist of the NYSE BondMatch (Euronext Paris) and Galaxy MTF - and the impact thereof on the rules of
LCH.Clearnet SA; iii) review of the Clearing Rule Book concerning the change in the name from Clearing Fund
2011 Annual Report on the Activity of the CMVM and the Securities Markets
234
CMVM
to Default Fund as a result of harmonising the operating rules in the LCH.Clearnet Group Ltd ; iv) review of the
Clearing Rule Book and regulations (i.e. Instructions) for the clearance of transactions in Spanish sovereign debt
securities; v) the analysis of acceptance as collateral with the LCH.Clearnet SA, of securities issued by leading
multilateral international financial institutions, the European Union and the European Financial Stability Facility
(EFSF), for a minimum sum of €100,000, thereby extending the group of securities that clearing members could
guarantee to handle market trading; vi) review of the Clearing Rule Book on the possibility of "close-out
netting" by members of a clearing house against possible default by the clearing house; vii) analyse the
amendments to the regulations of LCH.Clearnet SA (i.e. Instructions) as to the principle of segregating
collateral in accounts opened with the clearing house and harmonisation of amounts paid as collateral to the
default fund; viii) analysis of the case involving the breach by clearing member from the LCH.Clearnet Group
Ltd, and ix) analyse the risk policies implemented by LCH.Clearnet SA.
Within the Joint Regulatory Authorities (JRA) group that comprises of the Financial Services Authority (FSA)
in the UK and the Bank of England in addition to the entities represented in the CCC, and insofar as the
LCH.Clearnet Group Ltd is based in UK. The respective financial progress and its policies and projects were
periodically examined.
3.4.3 MIBEL
The MIBEL Board of Regulators (CR MIBEL) is responsible for monitoring the Iberian Electricity Market and
coordinating the members' activities. The CR MIBEL followed the development of the spot market that is
managed by OMIE (OMI-Polo Español, SA, using the Portugal-Spain interconnection and also the development
of the futures market that is managed by OMIP. To this end, the attendance of market operators of the futures
and spot markets and also system operators (REN and REE) at the meetings of CR MIBEL was promoted. The
key international initiatives that impact on MIBEL’s functioning were also monitored.
Within the Regulatory Harmonisation Plan between Portugal and Spain for the energy sector, the CR MIBEL
submitted a proposal to harmonise the methodology for calculating the tariffs for access to the governments of
both countries. This proposal purports to establish mechanisms for coordinating and harmonising the tariffs for
access in order to ensure a uniform access cost in the Iberian Peninsula.
In order to ensure a more effective supervision of the market, a Memorandum of Understanding for cooperation
and exchange of information between the entities comprising the CR MIBEL was signed. The memorandum
lays down a principle of mutual cooperation and includes the exchange of information between regulators,
within its competence, in order to enable adequate supervision and regulation of MIBEL.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
235
CMVM
A document on regulatory harmonisation of Special Regime Producers (SRP) in MIBEL and the operation of
the respective electrical system was submitted for public consultation in the last quarter of the year. This
initiative is designed to develop the objectives established for consolidating MIBEL. This was likewise the
result of the reiteration between Iberian regulators and transportation operators. The document submitted for
public consultation addresses several aspects related to the SRP and integration thereof in the operation and
functioning of the systems and the market.
Within the scope of international developments on the term management of interconnections, worth noting is
the commitment made by CR MIBEL, in close cooperation with the Iberian Market Operator (IMO) and with
REN and REE in order to implement the necessary actions for ensuring that MIBEL meets the conditions for
coupling with the markets of the Northwest area in Europe (which includes the markets of France, Belgium, The
Netherlands, Germany, Luxembourg, UK, Norway, Denmark, Sweden and Finland) before the end of 2012. As
for term management of the interconnection capacity between Portugal and Spain, the CR MIBEL confirmed its
preference, in line with the work undertaken internationally, by using financial products, option, and considering
the possibility of auctioning financial products for term management of an interconnection on a European
harmonised platform (e.g. CASC.EU platform).
3.4.4 Credit Rating Agencies
ESMA has played the key role in developing the regulatory policy and supervision of credit rating agencies in
the European Union. Via the Standing Committee on Credit Rating Agencies, ESMA benefitted from the
cooperation of the national competent authorities, including the CMVM, for developing a broad range of
actions, including the registration of credit rating agencies operating in the EU, the issue of guidelines and
recommendations regarding the supervision activity, registration and the establishment and entry into force of a
central database concerning the performance of credit rating agencies as regards the ratings assigned. Until July
2011, the supervision of credit rating agencies continued to be carried out by national supervisory authorities
and after said date this was transferred to ESMA.
At the end of August 2011, Companhia Portuguesa de Rating was registered by the CMVM under the new
system. Although Moody's does not have a physical presence in Portugal, CMVM joined the college of this
credit rating agency and took part in the respective registration process, by availing of the power of the national
competent authorities envisaged in Article 29/3/b) of the said Regulation.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
236
CMVM
3.4.5 Participation in International Organisations
3.4.5.1 European Systemic Risk Board
Based in Frankfurt, the ESRB is responsible for the macro-prudential supervision of the financial system and
includes the supervisory authorities of the financial sector (banking, markets and insurance), the European
Commission and the ECB. Said Board contributes to the prevention and mitigation of systemic risks and
financial stability in the European Union. The CMVM Chairman is a member of the General Board. This
committee decides on, inter alia, issuing recommendations and warning alerts on risks in the financial system.
The CMVM also took part in the Advisory Technical Committee (ATC) of the ESRB. The ATC's role is to
closely examine and advise on issues that is relevant to the mission of the ESRB. The CMVM contributed
towards identifying the major risks in the financial system from the point of view of markets' supervisors using
its internal skills from market analysis and risk identification. The In 2011, the ESRB issued a recommendation
on the risks related to granting credit in foreign currencies.
TEXTBOX 12 – EUROPEAN SYSTEMIC RISK BOARD
Together with the three European Supervisory Authorities (one for each institutional sector: banking,
insurance and securities) and the national supervisory authorities of the financial sector, the European
Systemic Risk Board (ESRB) is one of the members of the new European System of Financial Supervisors
(ESFS). The ESRB is responsible for the macro monitoring of the European financial sector and contributes
towards identifying, preventing and mitigating the systemic risk. Insofar as said risks impact on financial
stability and the steady funding of the European economy, the ESRB's aim for the latter is to contribute to
the smooth functioning of the single market and ensure that the financial sector makes a positive
contribution towards economic growth in the European Union.
In carrying out its task, the ESRB i) gathers and analyses macroeconomic and microeconomic data, which,
inter alia, is provided by the other ESFS members ii) identifies systemic risks threatening the European
financial sector; iii) issues warning alerts and recommendations (that can be publicly available) aimed at
mitigating risks or correcting procedures liable to create systemic risks, iv) whenever there is a risk of an
emergency, issue confidential warnings addressed to the Council of the European Union, so that said
Council may, in accordance with the provisions in the regulations that established the European Supervisory
Authorities, declare an emergency situation aimed at said authorities; and
2011 Annual Report on the Activity of the CMVM and the Securities Markets
237
CMVM
v) closely cooperates both with the other institutions comprising the ESFS, and the international financial
organisations, such as the IMF or the Financial Stability Board (FSB).
During the first year of activity (2011), the ESRB drafted a package of seven recommendations that is
particularly important in order to contain the risk attached to growth of lending in foreign currency when
there is no currency risk hedging (see Recommendation of the European Systemic Risk Board of 21
September 2011 on lending in foreign currencies (CERS/2011/1)). Such recommendations are especially
aimed at ensuring the consistency of the domestic regulatory framework (so as to avoid the possibility of
arbitration), to restrict the exposure to credit risk and market risk and control the excessive growth of credit
in foreign currency. The ESRB Recommendations is overall addressed to the countries in Central and
Eastern Europe, where foreign currency lending to the non-financial private sector is more common and led
to an accumulation of significant currency discrepancies in the balance sheets of the respective non-
financial private sector. For instance, lending in foreign currency in Hungary (particularly the Swiss Franc)
to individuals whose income was denominated in a different currency (domestic currency) led to serious
problems of compliance by these borrowers during the appreciation of the Swiss Franc in the international
currency markets when compared to the Hungarian forint.
The ESRB comprises of three decision-making bodies (General Council, Secretariat and Steering
Committee) and two advisory bodies (the Advisory Scientific Committee and Advisory Technical
Committee). The General Board is the highest decision-making body. The following comprises the General
Board with voting rights, i) the President and Deputy-President of the ECB; ii) the Governors of the national
central banks of the EU Member States; iii) a member from the European Commission; iv) the Chairpersons
of the three European Supervisory Authorities; v) the Chair and the two Vice-chairs of the Scientific
Committee; and vi) the Chair of the Advisory Committee. One senior representative of the national
supervisory authorities from each Member State and the President of the Economic and Financial
Committee of the European Union are also members with no voting rights of the General Board.
The Steering Committee consists of members of the General Board and prepares the process for decision
making by the General Board. The Advisory Scientific Committee and Advisory Technical Committee are
comprised of experts that provide advice and assistance on matters deemed relevant to the ESRB work.
Advice may be sought from other sources, including market players, Consumer organizations and academic
experts.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
238
CMVM
The ESRB work may be opened so as to include senior representatives from interested authorities of third
countries particularly the countries from the European Economic Area (EEA), where issues of particular
importance to these countries are concerned.
3.4.5.2 IOSCO
IOSCO approved strategic guidelines for the 2011 to 2015 five-year term in 2011 and underwent substantial
internal restructuring. This was aimed at providing the organisation with more efficiency and powers of
intervention as a worldwide organisation in the securities field.
TEXTBOX 13 – IOSCO RESTRUCTURING
In 2008, IOSCO started a programme to reform its mission, operational objectives and priorities in order to
improve its performance as part of the international financial system in constant and growing progress (IOSCO
New Strategic Direction 2010-2015).
Its members have since then been discussing and approving a broad set of proposals concerning the governance
structure, increasing the IOSCO's role as regards the establishment of international standards relating to the
regulation of securities markets, focusing on implementing the goals and principles, both in emerging markets
and developed markets, improving cross-border cooperation on enforcement, identification and mitigation of
systemic risk so as to ensure that there is fair and efficient markets, and also on increasing cooperation with
other international organisations, including the G20 and the FSB.
The IOSCO principles were revised within this framework and a new methodological framework for assessing
these principles was adopted in 2011. Eight new principles for regulators were added and relate to the following:
(i) the function of monitoring, mitigating and managing systemic risks; (ii) the process of reviewing the
regulatory perimeter; and (iii) the management of conflicts of interest. The other new principles relate to
regulating hedge funds, credit rating agencies and the supervision of auditors, including their independence, and
other providers of information services.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
239
CMVM
As regards stepping up international cooperation on enforcement, IOSCO has been pursuing the effective
implementation, between its members, of the IOSCO Multilateral Memorandum of Understanding on
consultation, cooperation and exchange of information by virtue of which the international regulators that are
parties to the agreement shall provide mutual assistance in order to ensure compliance with the Laws and
Regulations applicable to the securities market. Same is regarded as the international standard for cooperation
on enforcement.
Approval of the IOSCO Committees' restructuring will simplify the decision-making process, streamline the
framework according to its key assignments through the merger of the governance roles and implementation of
standards within a single Committee (IOSCO Board). This Board will be responsible for the management,
strategy and representation of IOSCO and also for monitoring the organisation's activities. The Regional
Committees within this context will have greater importance as regards contributions to the work being carried
out by IOSCO.
Further to the restructuring and following on from consultations held with organisation members, the
restructuring of the IOSCO working committees was approved and implemented in the merger of the 'policy'
and 'standard setting' areas. The joining of standing committees and working groups of the Emerging Markets
Committee (formerly independent committees) will cause new Committees to be formally established in 2012.
The Standing Committee on Risk and Research (SCRR) was established at the beginning of 2011. Said
Committee brings together the chief economists of nearly 25 securities commissions from several global
regions. This group's aim is to detect, prevent and mitigate systemic risk in securities, thereby contributing
towards the guidance of some of the work carried out by the Research area set up in IOSCO.
Finally, as regards the organisation's financing, a differentiated quota to be paid by members from 2012
onwards, in terms of objective criteria was approved.
The CMVM Chairman held the position of Chairman of the IOSCO European Regional Committee and also the
Executive Committee and the Technical Committee. With the restructuring being concluded in May 2008, he
was re-elected to the Chair of European Regional Committee and a member of the organisation's new Board.
Furthermore, the CMVM took an active part in IOSCO's work, via some of its many committees and working
groups. The CMVM Chairman was elected Chair of the newly established Standing Committee on Risk and
Research at the beginning of 2011. The work of the Standing Committee on Risk and Research covered inter
2011 Annual Report on the Activity of the CMVM and the Securities Markets
240
CMVM
alia the following: i) the identification and/or development of a set of useful indicators for monitoring the
systemic risk by regulatory and supervisory entities of securities markets; ii) the identification of market risks,
iii) the development of a guiding tool for the regulatory Impact Assessments by IOSCO and iv) co-operation
with the FSB in gathering the information and assessment of shadow banking. As regards the latter, a definition
of shadow banking for IOSCO was drafted so that the Regulators for securities markets have access to
appropriate information on entities which fit that definition within supervision and the inherent potential risks
may be adequately assessed.
The Implementation Task Force (ITF) is the IOSCO's working group that reflects and acts on this organisation's
principles and how same is assessed across the jurisdictions of its members. After undertaking a thorough
revision of the said principles, which cover areas such as cooperation and exchange of information between
supervisors, its independence, the supervision of issuers of collective investment undertakings, credit rating
companies and auditors or organisation of secondary markets, this group revised the assessment methodology of
said principles. The IOSCO principles are a key component in the assessment conducted by the IMF, concerning
the adequacy of supervising the securities markets and the functioning thereof under conditions of stability and
security for the investors. The CMVM formed part of the working group that drafted a proposal for the
assessment methodology of IOSCO's principles. These were subsequently approved by the institution's
decision-making bodies. Within the reorganisation, the ITF's tasks were incorporated into the newly established
"Assessment Committee".
The IOSCO MMoU Screening Group is responsible for drawing up and validating the applications from
national supervisory authorities to the IOSCO Multilateral Memorandum of Understanding (MMoU) for
subsequent decision-making by the Committee of Presidents. The CMVM continued to form part of one of the
seven verification teams that comprise the Screening Group which is responsible for the detailed assessment of
the legal compliance by the applicant with signing the MMoU.
There were six standing committees reporting to the former IOSCO Technical Committee. The CMVM took
part in two of these committees: one related to the exchange of information and supervision between
supervisory authorities, the Standing Committee 4 on Enforcement and Exchange of Information (SC4), and the
committee responsible for revising and updating the assessment principles of collective investment
undertakings, established under the Standing Committee 5 on Investment Management. With the reorganization
came into existence Seven committees concerning regulatory were set up with the reorganisation.
3.4.5.3 ESMA
2011 Annual Report on the Activity of the CMVM and the Securities Markets
241
CMVM
ESMA commenced its activity on 1 January 2011 as a European Supervisory Authority (European Securities
and Markets Authority) as set up by Regulation (EU) No. 1095/2010 of the European Parliament and of the
Council of 24 November 2010, taking over from the former Committee of European Securities Regulators
(CESR). The new institution operates based on its own human resources and thematic working groups that pool
the expertise from the competent national authorities for the supervision and regulation of securities and
respective markets. ESMA takes on the exclusive role of supervising the credit rating agencies. As the
regulatory authority, it plays a key role in drawing up regulatory technical standards and implementing technical
standards (Technical Standards) that are linked to EU Directives and Regulations. These rules that determine the
functioning of European securities markets aim at creating a unified body of technical standards (Single Rule
Book) that fosters a genuine single European Securities Market. The Board of Supervisors is the strategic
decision-making body of ESMA. It consists of the Chairmen of the 27 national supervisory authorities. The
representatives of the European Commission, the European supervisory authority for Banking and Insurance
sector, the European Systemic Risk Board (ESRB) and the securities markets supervisory authorities of
Norway, Iceland and Liechtenstein also attend these meetings as observers. During 2011, the ESMA Board of
Supervisors held eight face-to-face meetings, and, in accordance with the provisions of Article 43 of Regulation
No. 1095/2010 of the European Parliament and of the Council guided ESMA's activity of ESMA and its several
working groups and approved all opinions, recommendations and decisions issued by ESMA in said year. The
CMVM Chairman was the last Chairman of CESR and was elected Vice-Chairman of ESMA in January 2011
and as such ensured the ESMA's Chair pending the election and taking of office of the first Chair in April 2011.
Furthermore, the Chair of the Committee on Economic and Market Analysis (CEMA) continued to be carried
out by Carlos Alves, a member of the CMVM Executive Board.
The CMVM also took part in many committees and working groups (for experts and directors) in the most
diverse areas of regulation and supervision of markets in financial instruments. The ESMA Committees and
Working Groups consist of representatives from competent national authorities of the EU Member States and
occasionally other European States and have a pivotal role in the convergence of regulation and supervision of
the capital markets in Europe. On its own initiative or the European Commission mandate, such groups provide
expert advisory services to the European Commission on the drafting of regulatory technical standards and
implementing technical standards concerning the markets and market players.
Set up in 2011 by ESMA Regulation,61
the task of the Financial Innovation Standing Committee is to advise the
ESMA Board of Supervisors on identifying emerging financial activities in the EU financial system that require
61 Article 9 of Regulation (EU) No. 1095/2010 of European Parliament and of the Council of 24 November 2010, that establishes a
European Supervisory Authority (European Securities and Markets Authority)
2011 Annual Report on the Activity of the CMVM and the Securities Markets
242
CMVM
a joint response on possible changes to European regulations or on ways of mitigating risks that may be linked
with the effects of financial innovation. A survey of operating procedures and performance of regulatory
authorities of the markets in financial instruments as regards financial innovation in the respective domestic
markets, especially, regarding the powers of supervision and intervention in the marketing of products targeted
at the retail investors.
The Committee on Economic and Market Analysis continued periodically to deliver a report analysing the
trends, risks and vulnerabilities in financial markets, developed analysis in the fields of CDS, short-selling,
securitisation, transactions based on algorithms, including high frequency, stress testing the financial markets
and the marketing of complex financial products to retail investors. Furthermore, the development of a risk
dashboard on a regular basis was commenced in order to enable the constant monitoring of the financial
markets' risks.
The Corporate Finance Standing Committee mostly paid close attention to the drafting of an opinion requested
by the European Commission from ESMA on Level 2 measures to be implemented by the Commission pursuant
to the Prospectus Directive, as revised by Directive 2010/73/EU amending Directive 2003/71/EC on the
prospectus to be published when securities are offered to the public or admitted to trading, and Directive
2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market. The European Commission mandate included issues
relating to the Final Terms, Summary and rules on proportional information for certain issuers, issues relating to
retail cascades and revision of certain rules of the Prospectus Regulation (which was subject to public
consultation at the end of 2011 for submission to the European Commission in the first quarter of 2012) and
issues on convertible bonds and liability systems of the prospectus within the European Union (which will be
addressed in 2012). The committee updated the FAQs on the implementation of the Prospectus Directive,
analysed and answered questions from the industry on the implementation of the Prospectus Directive to certain
Mineral Companies. As regards corporate governance, a document on proxy advisors was drafted, a call for
evidence on empty voting was launched and revision of the Transparency Directive was monitored.
The key task of the Post Trading Standing Committee included drawing up the regulatory and implementation
technical standards envisaged in the proposed EMIR Regulation. Notwithstanding there being no final
legislative text, provisional technical standards were drawn up in light of the scheduled date of 30 June 2012 for
ESMA to submit the proposals to the European Commission. Rules were proposed to be included in future
European legislation on settlement failures.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
243
CMVM
The ESMA-Pol deals with market abuse, supervision of markets and promotes technical and operational
cooperation between regulators. The ESMA-Pol promotes the exchange of information on cases investigated by
supervisors and mutual support in said investigations, an aspect that was thoroughly examined in 2011.
A subgroup was established in November to draw up expert opinion from ESMA to be submitted to the
European Commission by April 2012. Said opinion concerns the implementation of technical standards
envisaged in the draft Regulation on short selling and certain aspects of CDS. The Committee debated the
proposed EU laws on the revision of the Market Abuse Directive and MiFID. A task by another subgroup on
foreign exchange markets was concluded and ended with a warning notice being released to investors in
December. The Joint Sub-Group's task on the Transaction Reporting Exchange Mechanism (TREM) continued.
The CMVM took part in all the above mentioned groups.
The ESMA Secondary Markets Standing Committee provided assistance to the European Commission within
the MiFID review. A working group to study high frequency trading (HFT) and others relating to trading in
automated environments was set up. As a result of this study that involved CEMA's co-operation, guidelines on
systems and controls for trading platforms, investment firms and competent authorities in an automated trading
environment was implemented. The Protocol on suspension of trading pursuant to Article 41 of MiFID was
amended and an alternative model for compliance with the duties pursuant to this Article was outlined and
approved. Exemptions from the pre-trade transparency were closely examined, which consisted of the
following: i) the continuation of assessing and analysing new applications, ii) the drafting of an internal
procedure for dealing with these assessments or analyses and iii) gathering and analysing all exemptions to pre-
trade transparency in force and preceding the establishment of a uniform procedure for assessment and analysis.
The Investor Protection and Intermediaries Standing Committee addresses issues related to the provision of
investment services and activities by investment firms and credit institutions, paying special attention to investor
protection including the conduct of business rules for financial intermediaries, the marketing of financial
products and investment advice. The CMVM co-operated in drafting FAQs concerning MiFID on issues relating
to the protection of investors and financial intermediaries. This was released in April and aims to foster the
convergence of regulatory and supervisory practices in implementing the MiFID and respective implementation
rules and guides the activity of said entities. Also took part in drawing up two consultation papers, one
concerning the requirements of the compliance duty and the other on compliance with the capital adequacy
requirements as envisaged in MiFID.
The Investment Management Standing Committee and respective Operational Working Group's core task is to
provide support to the European Commission by drafting implementing and regulatory technical standards that
2011 Annual Report on the Activity of the CMVM and the Securities Markets
244
CMVM
implement the EU Directives on investment funds, inter alia. A set of recommendations and understandings was
drawn up under the management of collective investment undertakings regarding the management and
measurement of risk, the money market funds, ETFs and structured UCITS and mechanisms for liquidity
management. Procedures for dealing with the late transposition of the UCITS IV Directive by certain Member
States were debated and implemented. The Group began the compilation of the implementing measures
envisaged in the AIFM (Alternative Investment Fund Managers) Directive in respect of depositaries, the
calculation of the exposure to the leverage factor, transparency requirements and mechanisms for supervisory
cooperation to be established with third countries. The process for transposing the UCITS IV Directive into the
domestic legal system is subject to a detailed analysis in this report (Textbox 13).
The Review Panel analyses the convergence of regulations and supervisory practices of the EU securities
markets. It is through this group, where the CMVM has been actively represented, that ESMA makes a survey
of how the Directives and regulations of financial services are implemented by the Member States, either by
transposition or by the corresponding supervisory practices. The Review Panel mainly focused on three topics:
implementation of the Prospectus Directive and resources and supervisory methods used in the implementation
thereof; implementation of the Transparency Directive; and the actual use of administrative and criminal
sanctions in the case of market abuse, which goes beyond the activity of national supervisors, including also the
courts' activity and the degree of cooperation between same and national supervisors of securities. The decision
determining the establishment and scope of the Review Panel's activity was revised, and also the methodologies
used in the Working Group so as to adapt same to the European System of Financial Supervisors.
The supervision of credit rating agencies is currently a field of exclusive competence for the EU and is carried
out by ESMA. Thus complying with the mandate assigned to it by Regulation (EU) No. 1060/2009 of the
European Parliament and of the Council (in force since December 2009), ESMA also plays a pivotal role in
drafting regulatory policy relating to credit rating agencies within the European Union. ESMA benefitted from
the cooperation between the national competent authorities, including the CMVM, which operates via the
ESMA Credit Rating Agencies Standing Committee. Jointly, the Committee and ESMA registered credit rating
agencies operating in the EU, issued guidelines and recommendations concerning the supervision and
registration, established and put into operation the central database on the performance of credit rating agencies
relating to the credit ratings assigned.
The CMVM took part in the Corporate Reporting Standing Committee which is responsible for financial
reporting, audit and enforcement of IFRS implementation in the financial statements of the issuers of securities
admitted to trading on a regulated market. The revision of International Financial Reporting Standards linked to
the convergence project between the International Accounting Standards Board (IASB) and Financial
2011 Annual Report on the Activity of the CMVM and the Securities Markets
245
CMVM
Accounting Standards Board (FASB) was successfully completed and the debate launched by the IASB on the
review of its corporate governance structure was monitored. Three public statements drawn up by the Group
were issued. One expounded upon the requirement for appropriate disclosure of the issuers' exposure to
sovereign debt. Another pointed out the accounting treatment for impairment with reference to the need to
recognize the impairment on Greek sovereign debt by the end of the year. The third concerned the retrospective
implementation of the adjustments resulting from error detection and the document on materiality in financial
reporting open to public debate.
Furthermore, the CMVM attended eight meetings of the ESMA European Enforcement Coordination Sessions
(EECS), an international cooperation group on the supervision of financial statements published by issuers with
securities traded on a regulated market, drawn up in accordance with International Financial Reporting
Standards (IFRS). The key task of this group is to promote harmonisation and consistency in decisions taken by
its members by analysing and discussing the decisions taken by different regulators concerning financial
reporting, and also by identifying areas not covered by IAS/IFRS or where enforceability thereof can lead to
different interpretations. The EECS is also a preferred channel for debates with the IFRIC (IFRS Interpretation
Committee). Since 2006, this Group is chaired by the CMVM (Mário Freire).
3.4.6 Other International Cooperation
A number of securities market supervisors on both sides of the Mediterranean were brought together in the
Mediterranean Partnership - France, Spain, Greece, Italy and Portugal on the North side and Morocco, Algeria,
Tunisia and Egypt on the South side. In addition to facilitating cooperation among its members, this group's
primary task is to promote the convergence of regulations governing the securities markets of southern
Mediterranean to the EU regulatory framework. The activity of this supervisors' association increased through
the exchange of information on the respective regulatory frameworks and markets, by two seminars held in
Paris and Marrakech and a Chairmen meeting. The exchange of information was particularly active as regards
issues relating to collective investment undertakings, practices of supervising market abuse and equivalence
mechanisms relating to prospectuses. The CMVM presented papers at the two seminars held and took part in the
Chairmen meeting.
The Ibero-American Institute of Securities Markets (Instituto Ibero-Americano de Mercados de Valores - IIMV)
continued with the disclosure and professional training activities. This year's Annual Meeting of Chairmen, held
in Uruguay, paid particular attention to stock exchanges specialising in small and medium companies and issues
related to supervising the OTC derivatives markets. The new European regulatory framework for credit rating
agencies was the subject of an exhibition held by a member of the CMVM Executive Board.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
246
CMVM
The Company Law Expert Group is an EU advisory group on Company Law. In 2011 the group closely
examined the initiative launched by the European Commission "European Company Law: the way forward" and
monitored two other initiatives, one related to the disclosure of non-financial information by companies and the
other on the establishment of the legal concept of a European Foundation.
3.5 FUTURE DEVELOPMENTS
In supervision activities, the CMVM will continue to mobilise resources for monitoring, risk detection and
mitigation (systematic or otherwise) tasks. Thus, the analysis and timely detection of risks likely to undermine
the smooth functioning of markets will continue and also coordination with the European and international fora
wherein the CMVM takes part (e.g. IOSCO Standing Committee on Risk and Research, ESMA Committee on
Economic and Market Analysis and the ESRB).
Ensuring the integrity, credibility and protection of the markets in financial instruments will also continue to be
one of the key aims of the CMVM. This implies more investment in the SIVAM. This system, generating
warning alerts and the subsequent analysis, enables the detection and selection of potentially anomalous
situations of financial instruments trading. The analysis thereof has proved to be a vital source for the detection
of irregularities in the field of crimes against the market. New features will be introduced in the system that is
aimed at widening the generation of warning alerts based on the analysis of the orders entered by traders in the
Euronext trading system.
Improving supervisory practices and perfecting the supervision system for public and private debt implies a
more intense examination of the possibility of price manipulation as regards the supervision of sovereign debt,
and in analysing transactions, focus more on the monitoring of potential inter-market manipulation and perfect
the analysis and generation of warning alerts models for debt instruments. Under the monitoring of Euronext
Lisbon regulated markets, a plan for supervising the markets due to High Frequency Trading (HFT) (IOSCO
and ESMA Recommendations) will be designed and implemented. There will be more frequent and detailed on-
site supervision and aim at reducing the time for analysing the supervisory reviews.
The options relating to investor protection will be directed at the requirement, among the market players, for
providing enough and comprehensible information on investment in financial instruments; the continued use of
the CIF as a centralising and coordinating tool in the intervention by the CMVM on matters related to financial
2011 Annual Report on the Activity of the CMVM and the Securities Markets
247
CMVM
innovation and attention to the issue of lack of funding and the positive role of savings. Among other steps to be
undertaken in 2012, the following is included: i) regulating the marketing and information to be provided
concerning complex financial products and respective advertising; ii) the performance so as to attain a speedier
sanctioning case relating to breach of duty on the marketing of financial instrument; iii) increase the close
examination of best execution policies relating to orders; iv) improving the procedures for handling complaints
of investors including developing a platform for complaint management with access via the CMVM's website;
v) prepare periodic disclosure of information on complaints; vi) establish a voluntary Arbitration Centre aimed
at retail investors; and vii) undertaking several studies on market operation, especially on trading platforms,
trading, clearing and settlement, investment funds and financial intermediation.
The reformulation of authorisation/registration procedures and improvement of CMVM administrative practices
will continue with the following: i) create the possibility of recording activities records remotely via the
CMVM's website on the internet that will enable a complete management of the registration dossier; ii) setting
levels of most demanding service capable of shortening the duration of registration procedures with the
establishment of time limits and the adoption of the tacit approval principle if said limit is exceeded; iii) set up a
"Consumer Helpline" (Green line) to support the registration process; iv) implement a determined annual
internal audit; (v) set up a "Consumer Helpline" (Green line) for complaints and reports on the performance of
the CMVM and its staff; and vi) finalise the Strategic Plan for Information Systems for the next three to five
years.
Particularly salient in the regulatory plan is the continuing transposition of UCITS IV Directive and respective
implementation Directives and also the transposition of the Omnibus Directive in the section relating to UCITS.
The transposition of the UCITS IV Directive will lead to an almost total revision of the legal framework on
collective investment undertakings and all the CMVM regulations linked thereto.
The implementation of the CMVM Regulation on Complex Financial Products is envisaged. The revision of
several CMVM Regulations is also envisaged, including those concerning asset valuation and real estate
appraisers, auditors, the marketing of open-end pension funds with individual membership and unit-linked
insurance plans and accounting practices of collective investment undertakings.
The CMVM will take part in several international regulation and supervision fora, focusing especially on
European System of Financial Supervisors through the ESMA and the ESRB. The CMVM will continue to play
an essential role in certain fora and be represented in several international working groups on matters relating to
its task.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
248
CMVM
In light of debates and proposals for legislative and regulatory measures and developing actions that will
facilitate the access of small and medium sized enterprises (SMEs) to the capital markets and other sources of
financing alternatives to bank loans, the CMVM will promote the establishment of a CMVM/SMEs forum for
capital markets. Actions being developed by this forum include: identifying factors blocking the access of SMEs
to financial markets and examine ways of removing same; promoting extensive disclosure of financing tools
available and accessibility thereof to SMEs; raising awareness of the SMEs to the importance of adopting
structures and appropriate funding arrangements to its characteristics and different economic situations; and
raising awareness of the financial intermediaries to the need for ensuring structured financial support to SMEs
over its entire timespan.
The CMVM will continue to contribute with its expertise to the Portuguese delegations engaged in negotiating
the proposed EU laws presented by the European Commission. The European Union's regulatory agenda for
2012 in the field of financial services market includes finalising the EMIR Regulation and negotiating the
revision of several Directives and Regulations (e.g. MiFID, Market Abuse Directive, ICS Directive, start
revising the UCITS Directive, Transparency Directive, Accounting Directive and Audit Directive). Negotiating
proposals for regulations pertaining to venture capital funds and social enterprise funds is also envisaged and a
legislative proposal on central securities depositories is to be presented by the CMVM.
Moving the CMVM headquarters to new premises is scheduled for the last quarter of 2012. This will enable a
substantial reduction in operating costs to be made notwithstanding the operation and performance of the
CMVM tasks.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
249
CMVM
ANNEXES
2011 Annual Report on the Activity of the CMVM and the Securities Markets
250
CMVM
ANNEX 1
KEY LEGISLATION PUBLISHED IN 2011 CONCERNING THE SECURITIES MARKET
National
Laws
Law No. 22/2011, of 30 May – Amendment to the Budget Framework Law No. 91/2001, of 20 August.
Law No. 48/2011, of 26 August 2011 – Amendment to Law on the State Budget for 2011 No. 55-A/2010, of 31
December.
Law No. 50/2011, of 13 September 2011 – Amendment to the Framework Law on Privatisation, approved by
Law No. 11/90, of 5 April.
Law No. 52/2011, of 13 October 2011 - Amends the Budget Framework Law, approved by Law No. 91/2001, of
20 August.
Law No. 56/2011 of 15 November 2011 – Transposes the following EU Directives into national law: Directive
No. 2008/99/EC of the European Parliament and of the Council, of 19 November, Directive No. 2009/123/EC,
the European Parliament and of the Council, 21 October, introducing amendments to the Criminal Code.
Law No. 64-A/2011 of 30 December – Approve the Major Plan Options for 2012-2015.
Law No. 64-B/2011, of 30 December – State Budget for 2012.
Law No. 64-C/2011, of 30 December 2011 (Supplement) - Approves the strategy and procedures to be
introduced within the Budgetary Framework Law (Lei de Enquadramento Orçamental - LEO), approved by
Law No. 91/2001, of 20 August, and timing schedule for the respective implementation thereof until 2015.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
251
CMVM
Decree-Laws
Decree-Law No. 29-A/2011, of 1 March 2011 (Supplement): – Establishes Rules for implementation of the
State Budget for 2011, approved by Law No. 55-A/2010, of 31 December.
Decree-Law No. 33/2011, of 7 March 3011 – Amends the Commercial Companies Code, the Framework for the
Instant incorporation of Commercial and Civil companies, approved by Decree-Law No. 111/2005, of 8 July,
and Framework for Online Incorporation of Companies, approved by Decree-Law No. 124/2006, of 29 June.
Decree-Law No. 52/2011, of 13 April 2011 – Amends Regulation on Legal Fees and Civil Procedure Code, in
order to improve certain rules so as to ensure access to justice for persons with lesser means, regulate aspects
related to remuneration of incidental players, update the amounts of fines and encourage recourse to electronic
means.
Decree-Law No. 53/2011, of 13 April 2011 - Transposes into national law Directive No. 2009/109/EC of the
European Parliament and of the Council, of 16 September, on requirements for reporting and documentation in
the event of mergers and divisions. Amends the Commercial Companies Code.
Rectification No. 12/2011, of 29 April 2011 – Rectifies Decree-Law No. 29-A/2011, of 1 March, of Ministry of
Finance and Public Administration, setting out the rules for implementing the State Budget for 2011.
Decree-Law No. 65-A/2011, of 17 May (Supplement) – Formulates and enhances the duties of financial
reporting, envisaged in Decree-Law No. 29-A/2011, of 1 March that approved the rules for implementing State
Budget for 2011, so as to increase the monitoring of budget implementation.
Decree-Law No. 85/2011, of 29 June 2011 – Streamlines settlement system in the payment and securities
systems and includes credit claims in the assets that may be subject to financial collateral arrangements by the
transposition of Directive No. 2009/44/EC of the European Parliament and of the Council, of 6 May, to 1st
Amendment of Decree-Law No. 221/2000, of 9 September, to 15th amendment of the Securities Code, approved
by Decree-Law No. 486/99, of 13 November, and 1st amendment of Decree-Law No. 105/2004, of 8 May
Decree-Law No. 117/2011, of 15 December - Approves the Organic Law of the Ministry of Finance.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
252
CMVM
Ministerial Orders
Series I
Ministerial Order No. 111-A/2011, of 18 March 2011 (Supplement), the Ministry of Finance and
Public Administration - Ascertains the legal certification of accounts by the auditor, pursuant to Article
52/11 of the Corporate Income Tax Code, with regard to the deduction of tax losses, for companies
where the accounts are not subject to legal certification in accordance with the applicable law. It also
establishes that said certification is excluded from commercial companies that are classified as micro-
entities in accordance with the concept envisaged in Article 2 of Law No. 35/2010 of 2 September and
where the deducted tax losses over the last two financial years amounts to less than €150,000.00.
Ministerial Order No. 179/2011 of 2 May, the Ministry of Finance and Public Administration, Ministry
of Justice - Provides new wording for Article 44 of Ministerial Order No. 419-A/2009, 17 April, which
governs the means for drafting, accounting, settlement, payment, processing and allocation of litigation
costs, fines and other penalties, so as to maintain the system of paying the legal fees in two
instalments, that was established in 2009 as a transitional system.
Ministerial Order No. 200/2011 of 20 May 2011, Ministry of Finance and Public Administration,
Ministry of Justice - Indicates the commercial companies to which Tables I-C and II-B of the
Regulation on Legal Costs applies, approved by Decree-Law No. 34/2008 of 26 February and governs
the automated verification of the reverse charge for legal costs. Provides new wording for Article 7
and repeals Article 14 of the Ministerial Order No. 419-A/2009 of 17 April, which approved the
framework for the processing and payment of Legal Costs. Approves a transitional system aimed at
ascertaining the implementation of this Ministerial Order to proceedings instituted after the 30th day
following the publication of this Ministerial Order until 16 February 2012, notwithstanding the
adaptations envisaged therein.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
253
CMVM
CMVM Regulations (II Series – Section E)
CMVM Regulation No. 1/2011, of 30 March - Notification of qualifying holdings and appointment of
the Members of Boards of Directors and Supervisory Boards for Investment Advisory Companies and
Management Entities of Markets, Systems and Services.
CMVM Regulation No. 2/2011, of 30 March - Duty to report OTC transactions pertaining to
Derivative Financial Instruments, when the respective underlying asset is found to be admitted to
trading on a regulated market.
CMVM Instructions
Instruction No. 2/2011 - Statistics on Registration and Deposit of Financial Instruments.
Instruction No. 3/2011 - Statistics on Financial Intermediary.
Instruction No. 4/2011 - Statistics on Portfolio Management on behalf of others.
Instruction No. 5/2011 - Statistics on Reception of Orders on behalf of others.
Instruction No. 6/2011 - Statistics on Executing Orders on behalf of others.
Instruction No. 7/2011 - Statistics on Trading for Own Account.
Instruction No. 8/2011 - Statistics on Day-Trading Transactions.
Instruction No. 9/2011 - Price-Lists for Retail Investors.
Instruction No. 10/2011 - Information on Credit Lending for Transactions in Financial Instruments.
Instruction No. 11/2011 - Statistical Information on Managing Entities for Markets, Systems and
Services.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
254
CMVM
Instruction No. 12/2011 - Information on Financial Instruments and Transactions in Financial
Instruments admitted to Trading on a Regulated Market or when the Underlying Asset is admitted to
Trading on a Regulated Market (Repeals Instruction No. 2/2007).
Other Documents
Notice No. 2284/2011, of 3 January 2011, Official Government Gazette (Series II) of 21 Jan 2011 -
Ministry of Finance and Public Administration - Directorate General of Treasury and Finance -
Establishing the supplementary rate for interest on arrears at 8% relating to loans that are held by
commercial companies, individuals or legal persons, that comes into force in the 1st Half 2011,
pursuant to Article 102/3 of the Commercial Code.
Notice No. 14190/2011, of 4 July, Official Government Gazette (Series II) of 14 July - Ministry of
Finance and Public Administration - Directorate General of Treasury and Finance - Establishing the
supplementary rate for interest on arrears at 8.25% relating to loans that are held by commercial
companies, individuals or legal persons, that comes into force in the 2nd Half 2011, pursuant to Article
102/3 of the Commercial Code.
Notice of Banco de Portugal No. 10/2011 of 29 December 2011, Official Government Gazette (Series
II) of 9 January – Regulating the principles and rules which should govern the remuneration policy of
credit institutions, investment firms and branches set up in Portugal of credit institutions and
investment firms based outside the European Union. Further establishes the disclosure requirements as
regards the remuneration policy of the members of the Management and Supervisory Boards of the
institutions and also that of the respective employees' (although said employees are not Members of
said Boards) compliance with certain criteria. Repeals: a) Notice of Banco de Portugal No. 1/2010, of
26 January, Official Government Gazette (Series II) of 9 February; b) Circular Letter No. 2/2010/DSB,
published in the Official Bulletin of the Banco de Portugal No. 3/2010.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
255
CMVM
EU
EU Directives
Directive 2011/35/EU of the European Parliament and of the Council of 5 April 2011, Official Journal
L 110 of 24 April 2011 - concerning mergers of public limited companies
Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011, Official
Journal L 304 of 22 November 2011 on consumer rights, amending Council Directive 93/13/EEC and
Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive
85/577/EEC and Directive 97/7/EC of the European Parliament and the Council.
Directive 2011/89/EU of the European Parliament and of the Council of 16 November 2011, Official
Journal L 326, 8 December 2011 - amending Directives 98/78/EC, 2002/87/EC, 2006/48/EC and
2009/138/EC as regards the supplementary supervision of financial entities in a financial
conglomerate.
EU Regulations
Commission Regulation (EU) No. 149/2011 of 18 February 2011 [Official Journal L 46 of 19 February
2011] - that amends Regulation (EU) No. 1126/2008 adopting certain international accounting
standards in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the
Council regarding Improvements to International Financial Reporting Standards (IFRS).
Regulation (EU) No. 513/2011 of the European Parliament and of the Council on 11 May 2011,
Official Journal L 145 of 31 May 2011 - that amends Regulation (EC) No 1060/2009 on Credit Rating
Agencies.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
256
CMVM
Decisions
Decision by the European Central Bank on 27 December 2010 concerning the transmission of
confidential data under the common framework for business registers utilised for statistical purposes
(ECB/2010/33) Official Journal L 6 - 11 January 2011.
Commission Decision 2011/30/EU of 19 January 2011 on the equivalence of certain third country
public oversight, quality assurance, investigation and penalty systems for auditors and audit entities
and a transitional period for audit activities of certain third country auditors and audit entities in the
European Union [notified under document C (2011) 117] Official Journal L 15 of 20 January 2011.
Decision by the European Systemic Risk Board on 21 September 2011 concerning the provision and
collection of information for the macro-prudential oversight of the financial system in the Union -
(ESRB/2011/6) Official Journal C 302 of 13 October 2011.
Other Documents
List of credit rating agencies registered in accordance with Regulation (EC) No. 1060/2009 of the
European Parliament and of the Council of 16 September 2009 on Credit Rating Agencies (CRA
Regulation) – 06-06-2011 http://ec.europa.eu/internal_market/securities/docs/agencies/list_pt.pdf
2011 Annual Report on the Activity of the CMVM and the Securities Markets
257
CMVM
ANNEX 2 - PUBLICATIONS
Periodic Publications
The 2010 CMVM Annual Report was published electronically in Portuguese and English and in book form
with a print run of 500 copies only in Portuguese.
The 2010 CMVM Management Financial Statements were published electronically.
The 2010 Annual Report on Investor Compensation Scheme 2010 was published electronically in
Portuguese and English.
Securities Market Review, Volumes 36 and 37 were published in electronic format.
All editions of the CMVM Bulletin were published electronically.
The CMVM Annual Report on the Corporate Governance of Listed Companies in Portugal was published
electronically.
Annual Report on Supervision of Financial Analysis was published electronically.
Venture Capital Annual Report was published electronically.
Non-Periodic Publications
Research Report “Value-at-Risk: Uma Aplicação ao Principal índice de Ações do Mercado Português” -
electronic format.
Working Paper “Information, Overconfidence and Trading: Do the Sources of Information Matter?” -
electronic format.
“Política da CMVM em Matéria de Produtos Financeiros Complexos” - electronic format.
“Recomendações aos Investidores em Instrumentos Financeiros” - electronic format.
“Recomendações aos Investidores em Produtos Financeiros Complexos” - electronic format.
“Guia sobre Produtos Financeiros Complexos” - electronic format.
“Glossário de Termos relativos a Instrumentos Financeiros” - electronic format.
“Recomendações da CMVM em face do Novo Regime da Participação nas Assembleias Gerais das
Sociedades com Ações Admitidas ao Mercado Regulamentado”, was published electronically.
2011 Annual Report on the Activity of the CMVM and the Securities Markets
258
CMVM
ANNEX 3: KEY DOCUMENTS RELEASED BY INTERNATIONAL ORGANISATIONS
ESMA
Group Key Documents
1. Review Panel 2011/26 Summary Report on the mapping of contingency
measures, January
2011/194 Report - Mapping of the Transparency
Directive, July
2. CEMA This Group did not prepare any final document.
3. Corporate Reporting SC /
Enforcement Mechanism
2011/373 Consultation paper - Considerations of
materiality in financial reporting, November
4. Corporate Finance SC Only letters were drawn up reviewing proposals from the
IASB and EFRAG
4.1
.
Task-Force Prospectus 2011/81 Recommendations - ESMA update of the CESR
recommendations on the consistent implementation of
Commission Regulation (EC) No 809/2004 implementing
the Prospectus Directive, March
2011/22 Report - ESMA Data on Prospectuses Approved
and Passported - July 2010 to December 2010, March
2011/85 Q&A Frequently asked questions regarding
Prospectuses: common positions agreed by ESMA
Members 13th updated version, June
2011/141 Consultation paper - ESMA’s technical advice
on possible delegated acts concerning the Prospectus
Directive as amended by the Directive 2010/73/EU, June
2011/323 Final report - ESMA's technical advice on
possible delegated acts concerning the Prospectus
Directive as amended by the Directive 2010/73/EU,
October
2011/444 Consultation paper - ESMA’s technical advice
on possible delegated acts concerning the Prospectus
Directive as amended by the Directive 2010/73/EU,
December
4.2
.
Transparency Sub-Group 2011/288 Call for evidence - Empty voting, September
2011 Annual Report on the Activity of the CMVM and the Securities Markets
259
CMVM
5.
CRA Technical Committee
2011/97 Consultation paper - ESMA Guidelines on the
application of the endorsement regime under Article 4 (3)
of the Credit Rating Regulation1060/2009, March
2011/114 Consultation paper - ESMA´s Technical Advice
to the Commission on Fees for CRA Supervision, April
2011/139 Final report - Guidelines on the application of
the endorsement regime under Article 4 (3) of the Credit
Rating Agencies Regulation No 1060/2009, May
2011/302 Consultation paper - Regulatory technical
standards on the information to be provided to ESMA by
a credit rating agency in its application for registration and
certification and for the assessment of its systemic
importance, September
2011/303 Consultation paper - Regulatory technical
standards on the assessment of compliance of credit rating
methodologies with the requirements set out in Article
8(3) of Regulation (EC) No 1060/2009, September
2011/304 Consultation paper - ESMA’s draft Regulatory
Technical Standards on the presentation of the
information that credit rating agencies shall disclose in
accordance with Article 11(2) and point 1 of Part II of
Section E of Annex I to Regulation (EC) No 1060/2,
September
2011/305 Consultation paper - ESMA’s Draft Regulatory
Technical Standards on the content and format of ratings
data periodic reporting to be submitted from credit rating
agencies, September
2011/463 Final report - Regulatory technical standards on
the information for registration and certification of credit
rating agencies, December
2011/464 Final report - Draft RTS on the content and
format of ratings data periodic reporting to be requested
from credit ratings agencies for the purpose of on-going
supervision by ESMA, December
2011 Annual Report on the Activity of the CMVM and the Securities Markets
260
CMVM
6. ESMA-Pol 10-292 Consultation paper - CESR technical advice in the
context of the MiFID review –Transaction Reporting,
April
10-349 Commission's response to CESR's letter regarding
the MiFID review, April
10-809 Consultation paper - Transaction Reporting on
OTC Derivatives and Extension of the Scope of
Transaction Reporting Obligations, July
10-808 Final report - CESR Technical Advice to the
European Commission in the context of the MiFID
Review – Transaction Reporting, July
6.1 Task-Force Forex 2011/412 Investor warning – Trading in foreign Exchange
(forex), December
7. Investment Management /
Operational WG
2011/112 Guidelines to competent authorities and UCITS
management companies on risk measurement and the
calculation of global exposure for certain types of
structured UCITS, April
2011/121 Discussion paper - ESMA’s policy orientations
on possible implementing measures under Article 3 of the
Alternative Investment Fund Managers Directive, April
2011/209 Consultation paper - ESMA's draft technical
advice to the European Commission on possible
implementing measures of the Alternative Investment
Fund Managers Directive, July
2011/220 Discussion paper - ESMA’s policy orientations
on guidelines for UCITS Exchange-Traded Funds and
Structured UCITS, July
2011/270 Consultation paper - ESMA's draft technical
advice to the European Commission on possible
implementing measures of the Alternative Investment
Fund Managers Directive in relation to supervision and
third countries, August
2011/273 Q&A - A Common Definition of European
Money Market Funds, August
2011/342 Opinion - Practical arrangements for the late
transposition of the UCITS IV Directive, October
2011/379 Final report - ESMA's technical advice to the
European Commission on possible implementing
measures of the Alternative Investment Fund Managers
Directive, November
8. Post Trading 2011/94 Report ESMA response to the European
Commission consultation on CSDs and securities
settlement, March
2011 Annual Report on the Activity of the CMVM and the Securities Markets
261
CMVM
9. Secondary Markets 2011/224 Consultation paper - Guidelines on systems and
controls in a highly automated trading environment for
trading platforms, investment firms and competent
authorities, July
2011/241 Opinion Waivers from Pre-trade Transparency:
CESR positions and ESMA opinions - updated December
2011, December
2011/456 Guidelines and Recommendations, Final report
- Guidelines on systems and controls in an automated
trading environment for trading platforms, investment
firms and competent authorities, December
10. Financial Innovation This newly created group has still not prepared any final
documents.
11. Investor Protection 2011/119 Q&A MiFID Q&A in the area of investor
protection and intermediaries, April
2011/445 Consultation paper on guidelines on certain
aspects of the MiFID suitability requirements, December
2011/446 Consultation paper on guidelines on certain
aspects of the MiFID compliance function requirements,
December
IOSCO
FR01/11 Principles on Point of Sale Disclosure, Report of the Technical Committee of
IOSCO, February
FR02/11 Intermediary Internal Controls associated with Price Verification of Structured
Finance Products and Regulatory Approaches to Liquidity Risk Management, Report of
the Technical Committee of IOSCO, February
FR03/11 Report on Trading of OTC Derivatives, Report of the Technical Committee of
IOSCO, February
FR04/11 Regulatory Implementation of the Statement of Principles Regarding the
Activities of Credit Rating Agencies, Report of the Technical Committee of IOSCO,
February
OR01/11 Mitigating Systemic Risk - A Role for Securities Regulators, Report of the
Technical Committee of IOSCO, February
FR04/11 Task Force on Unregulated Financial Markets and Products, Report of the
Technical Committee of IOSCO, March
CR01/11 Principles on Suspensions of Redemptions in Collective Investment Schemes,
Report of the Technical Committee of IOSCO, March
Principles for Financial Market Infrastructures, Report of the Committee on Payment
and Settlement Systems and the Technical Committee of IOSCO, March
FR05/11 Survey of Regimes for the Protection, Distribution and/or Transfer of Client
Assets, Report of the Technical Committee of IOSCO, March
2011 Annual Report on the Activity of the CMVM and the Securities Markets
262
CMVM
OR01/11 Task Force on Commodity Futures Markets - Report to the Financial Stability
Board, Report of the Technical Committee of IOSCO, April
FR06/11 Principles for Dark Liquidity, Report of the Technical Committee of IOSCO,
May
CR02/11 Regulatory Issues Raised by the Impact of Technological Changes on Market
Integrity and Efficiency, Report of the Technical Committee of IOSCO, July
Report On Asset Securitisation Incentives, Joint Forum (IOSCO, BCBS and IAIS), July
Report On OTC Derivatives Data Reporting and Aggregation Requirements, Report of
the Committee on Payment and Settlement Systems and the Technical Committee of
IOSCO, August
IOSCO-CPSS Public Comments Received to Consultation on Financial Market
Infrastructures Principles, Report of the Committee on Payment and Settlement Systems
and the Technical Committee of IOSCO, September
FR07/11 Principles for the Regulation and Supervision of Commodity Derivatives
Markets, Report of the Technical Committee of IOSCO, September
FR08/11 Methodology for Assessing Implementation of the IOSCO Objectives and
Principles of Securities Regulation, IOSCO Report (Replaces the February 2008
version), October
FR09/11 Regulatory Issues Raised by the Impact of Technological Changes on Market
Integrity and Efficiency, Report of the Technical Committee of IOSCO, October
FR11/11 Regulation of Nominee Accounts in Emerging Markets, Report of the
Emerging Markets Committee of IOSCO, October
OR05/11 Public Comments Received by the Technical Committee of the International
Organization of Securities Commissions and the Committee on Payment and Settlement
Systems to the Consultation Report - OTC Derivatives Data Reporting and Aggregation
Requirements, Report of the Committee on Payment and Settlement Systems and the
Technical Committee of IOSCO, October
Oil Price Reporting Agencies, Report by IEA, IEF, OPEC and IOSCO to G20 Finance
Ministers, November
FR10/11 Development of Corporate Bond Markets in the Emerging Markets, Report of
the Emerging Markets Committee of IOSCO In Collaboration with the World Bank
Group, November
Principles for the Supervision of Financial Conglomerates, Joint Forum (IOSCO, BCBS
and IAIS), December
ESRB
.
20/01/2011
Decision of the ESRB General Board on the selection, appointment and
replacement of ASC members
2011 Annual Report on the Activity of the CMVM and the Securities Markets
263
CMVM
20/01/2011
Mandate of the Advisory Scientific Committee
20/01/2011
ESRB Rules of Procedure
25/03/2011
ESRB Code of Conduct
03/06/2011
Decision of the European Systemic Risk Board on public access to ESRB
documents
21/09/2011
Decision of the European Systemic Risk Board on the collection of information
for macroprudential oversight
21/09/2011
ESRB response to the ESMA Discussion paper on "Policy orientations and
guidelines for UCITS exchange-traded funds and structured UCITS"
21/09/2011
ESRB response to the ESMA Consultation paper on "Guidelines on systems and
controls in a highly automated trading environment for trading platforms,
investment firms and competent authorities"
22/11/2011
Recommendation of the ESRB of 21 September 2011 on lending in foreign
currencies (ESRB/2011/1), OJ C 342
25/11/2011
Agreement between the EBA, the EIOPA, the ESMA and the ESRB on the
establishment of the ESRB Secretariat of specific confidentiality procedures in
order to safeguard information regarding individual financial institutions and
information from which individual financial institutions can be identified
09/12/2011
Views of the ESRB on the Envisaged Scoreboard Indicators relevant for
financial market stability
UNIDROIT
. INSTITUCIONAL DOCUMENTS
Governing Council: 90th session (Rome, 9-11 May 2011)
UNIDROIT 2011 - C.D. (90) 2, Annual Report - 2010
2011 Annual Report on the Activity of the CMVM and the Securities Markets
264
CMVM
General Assembly, 68th session (Rome, 22 June 2011)
UNIDROIT 2011 - A.G. (68) 2 rev. 1, Summary Report
General Assembly, 69th session (Rome, 1 December 2011)
UNIDROIT 2011 - A.G. (69) Misc. 1, Summary Conclusions
CURRENT WORK ON ITEMS ON THE UNIDROIT WORK PROGRAMME
Study LXV – Programme of Legal Co-operation
UNIDROIT 2011 - Study LXV – Scholarships; Impl. 22 rev, Research Scholarships
Programme: Implementation Report for the Financial Year 2010
Study LXXVIII B – Emerging markets issues, follow-up and implementation established
by the diplomatic Conference to Adopt a Convention on Substantive Rules regarding
Intermediated
Committee on emerging markets issues, follow-up and implementation established by
the diplomatic Conference to Adopt a Convention on Substantive Rules regarding
Intermediated (Second meeting, Rio de Janeiro, 27 and 28 March 2012)
UNIDROIT 2011 – S78B/CEM/2/Doc.1, Annotated provisional agenda
UNIDROIT 2011 – S78B/CEM/2/Doc.2, Information for Contracting States in respect of
the Convention's references to sources of law outside the Convention
Study LXXVIII C – Principles and rules on the netting of financial instruments
UNIDROIT 2011 – Study LXXVIII C - Doc. 1, UNIDROIT Study Group on principles
and rules on the netting of financial instruments. First meeting, Rome, 18 - 21 April
2011. Preliminary draft agenda - March 2011
UNIDROIT 2011 – Study LXXVIII C - Doc. 2, UNIDROIT Study Group on principles
and rules on the netting of financial instruments. First meeting, Rome, 18 - 21 April
2011. Preliminary draft Report on the need for an international instrument on the
enforceability of close-out netting in general and in the context of bank resolution,
prepared by Philipp Paech, London School of Economics and Political Science - March
2011
UNIDROIT 2011 – Study LXXVIII C - Doc. 3, UNIDROIT Study Group on principles
and rules on the netting of financial instruments. First meeting, Rome, 18 - 21 April
2011. A first tentative structure for Principles regarding the enforceability of netting
agreements (prepared by Philipp Paech, London School of Economics) - April 2011
UNIDROIT 2011 – Study LXXVIII C - Doc. 4, UNIDROIT Study Group on principles
and rules on the netting of financial instruments. First meeting, Rome, 18 - 21 April
2011. Report (prepared by the UNIDROIT Secretariat) - July 2011
UNIDROIT 2011 – Study LXXVIII C - Doc. 5, UNIDROIT Study Group on principles
and rules on the netting of financial instruments. Second meeting, Rome, 13-15
2011 Annual Report on the Activity of the CMVM and the Securities Markets
265
CMVM
September 2011. Annotated draft agenda - July 2011
UNIDROIT 2011 – Study LXXVIII C - Doc. 6, UNIDROIT Study Group on principles
and rules on the netting of financial instruments. Second meeting, Rome, 13-15
September 2011. Revised Preliminary Draft of Principles regarding the enforceability of
Close-out Netting Agreements - August 2011
UNIDROIT 2011 – Study LXXVIII C - Doc. 7, UNIDROIT Study Group on principles
and rules on the netting of financial instruments. Second meeting, Rome, 13 - 15
September 2011. Overview payment, clearing and settlement systems (prepared by the
UNIDROIT Secretariat) - September 2011
UNIDROIT 2011 – Study LXXVIII C - Doc. 9, UNIDROIT Study Group on Draft
Principles and rules on the netting of financial instruments. Second Meeting, Rome, 13 -
15 September 2011. Report (prepared by the UNIDROIT Secretariat) - December 2011
UNIDROIT Convention on Substantive Rules for Intermediated Securities ("Geneva
Securities Convention")
UNIDROIT 2011 - DC11/DEP – Doc. 1, The System of Declarations under the
UNIDROIT Convention on Substantive Rules for Intermediated Securities (“Geneva
Securities Convention”). An Explanatory Memorandum for the Assistance of States and
Regional Economic Integration Organisations
IMF
Enhancing International Monetary Stability—A Role for the SDR?, January
Macroprudential Policy: An Organizing Framework, March
Statement by the Managing Director to the International Monetary and Financial
Committee on the Fund’s Policy Agenda, April
Managing Sovereign Debt and Debt Markets through a Crisis—Practical Insights and
Policy Lessons, April
Analytics of Systemic Crises and the Role of Global Financial Safety Nets, May
Mapping Cross-Border Financial Linkages: A Supporting Case for Global Financial
Safety Nets, June
Key Trends in Implementation of the Fund’s Transparency Policy, July
TSR External Study—An Evaluation of IMF Surveillance of the Euro Area, July
TSR External Commentary—A Short Note on Surveillance and How Reforms in
Surveillance Can Help the IMF to Promote Global Financial Stability, July
Managing Director’s Action Plan IMFC, September
2011 Annual Report on the Activity of the CMVM and the Securities Markets
266
CMVM
Consolidated Multilateral Surveillance Report, September
Managing Global Growth Risks and Commodity Price Shocks—Vulnerabilities and
Policy Challenges for Low-Income Countries, September
Managing Volatility in Low-Income Countries: The Role and Potential for Contingent
Financial Instruments, October
The Fund’s Financing Role: Reform Proposals on Liquidity and Emergency Assistance,
October
The Multilateral Aspects of Policies Affecting Capital Flows—Background Paper,
October
Cross-Cutting Themes in Advanced Economies with Emerging Market Banking Links,
November
FSB
Progress in the Implementation of the G20 recommendations for strengthening Financial
Stability, February
Macroprudential policy tools and frameworks - Update to G20 Finance Ministers and
Central Bank Governors, March
Thematic Peer Review of Mortgage Underwriting and Origination Practices, March
Thematic Peer Review of Risk on Risk Disclosure Practices, March
Shadow Banking: Scoping the Issues, April
OTC Derivatives Market Reforms, April
Progress in the Implementation of the G20 Recommendations, April
Promoting global adherence to regulatory and supervisory standards on international
cooperation and information exchange, April
Implementation Progress Report on "The Financial Crisis and Information Gaps"
prepared by IMF staff and the FSB Secretariat, July
2011 Annual Report on the Activity of the CMVM and the Securities Markets
267
CMVM
FSB Consultative Document: Effective Resolution of Systemically Important Financial
Institutions, July
Common Data Template for Global Systemically Important Banks, October
OTC Derivatives market reforms, October
Assessment of the macroeconomic impact of higher loss absorbency for global
systemically important banks, October
Framework for monitoring and reporting on the implementation of G20 financial
reforms, October
Financial Stability Issues in Emerging Market and Developing Economies, October
FSB Consultation Document on Principles for Sound Residential Mortgage
Underwriting Principles, October
FSB Report on Consumer Finance Protection with particular focus on credit, October
Progress report from the FSB, IMF and BIS on macroprudential policy tools and
frameworks, October
FSB report with recommendations to strengthen oversight and regulation of shadow
banking, October
Global adherence to regulatory and supervisory standards on international cooperation
and information exchange, October
FSB G20 Overview progress report 4Nov11, November
FSB Letter to G20 Leaders on Progress of Financial Regulatory Reforms, November
SIE progress report - Fatal Flaw Plenary Review, November
FSB Key Attributes – Overview/Effective Resolution of Systemically Important
Financial Institutions/ Overview of responses to the public consultation, November
2011 Annual Report on the Activity of the CMVM and the Securities Markets
268
CMVM
FSB Key Attributes - Key Attributes of Effective Resolution Regimes for Financial
Institutions, November
FSB G-SIFIs, November
FSB Report on the Overview of Progress in the Implementation of the G20
Recommendations for Strengthening Financial Stability, November
European Corporate Governance Institute
Additions and changes to the codes database, since 1 September 2011
Guernsey
- GFSC Finance Sector Code of Corporate Governance, 30 September 2011
Ireland
- Corporate Governance Code for Collective Investment Schemes and Management
Companies, 14 December 2011
Italy
- Codice di Autodisciplina, December 2011
2011 Annual Report on the Activity of the CMVM and the Securities Markets
269
CMVM
ANNEX 4
STATISTICS
Annexed Table 1 – Details of the Analysed Auditors Reports per Type of Financial Intermediary
Annexed Table 2 – Distribution per Type of Financial Intermediary on the Opinion Issued by Auditors in the
Report Certifying the Safekeeping of Clients Assets
Annexed Table 3 – The Distribution of Auditors that Issued Report Certifying the Safekeeping of Clients Assets
2011 Annual Report on the Activity of the CMVM and the Securities Markets
270
CMVM
Annexed Table 4 – Issuers Required to Provide Annual Information
Annexed Table 5 – Entities providing Quarterly & Half-Yearly Financial Statements
Annexed Table 6 – Share Issuance per Public Company per Type of Share
2011 Annual Report on the Activity of the CMVM and the Securities Markets
271
CMVM
Annexed Table 7 – Share Issuance per Public Company and per Type of Offer
2011 Annual Report on the Activity of the CMVM and the Securities Markets
272
CMVM
Annexed Table 8 – Primary Bond Market, per Type of Offer
Annexed Table 9 – Share Indices
2011 Annual Report on the Activity of the CMVM and the Securities Markets
273
CMVM
Annexed Table 10 – Share Sector Indices
2011 Annual Report on the Activity of the CMVM and the Securities Markets
274
CMVM
Annexed Table 11 – Trading Volume on Euronext Lisbon per Type of Security
2011 Annual Report on the Activity of the CMVM and the Securities Markets
275
CMVM
Annexed Table 12 – Distribution per Sector of Trading and Market Capitalisation of Shares
2011 Annual Report on the Activity of the CMVM and the Securities Markets
276
CMVM
Annexed Table 13 – Trading Volume on European Union Stock Exchanges (Shares)
2011 Annual Report on the Activity of the CMVM and the Securities Markets
277
CMVM
Annexed Table 14 – Trading Volume on European Union Stock Exchanges (Bonds)
2011 Annual Report on the Activity of the CMVM and the Securities Markets
278
CMVM
Annexed Table 15 – Securities Admitted to Trading on Euronext Lisbon
Annexed Table 16 - Securities De-Listed from Euronext Lisbon
2011 Annual Report on the Activity of the CMVM and the Securities Markets
279
CMVM
Annexed Table 17 - Securities Suspended from Trading
2011 Annual Report on the Activity of the CMVM and the Securities Markets
280
CMVM
2011 Annual Report on the Activity of the CMVM and the Securities Markets
281
CMVM
Annexed Table 18 - Trading in Futures Contracts
2011 Annual Report on the Activity of the CMVM and the Securities Markets
282
CMVM
Annexed Table 19 - Securities Deposited with the Central Securities Depository
2011 Annual Report on the Activity of the CMVM and the Securities Markets
283
CMVM
Annexed Table 20 - Settlement via the Central Securities Depository
2011 Annual Report on the Activity of the CMVM and the Securities Markets
284
CMVM
Annexed Table 21 - Futures Trading on OMIP - Futures Contracts
Annexed Table 22 - Volume of Orders Received per Reception Channel
2011 Annual Report on the Activity of the CMVM and the Securities Markets
285
CMVM
Annexed Table 23 - Order Turnover on the Spot Market on behalf of Third Parties, per Asset Type
Annexed Table 24 - Online Brokerage Turnover
2011 Annual Report on the Activity of the CMVM and the Securities Markets
286
CMVM
Annexed Table 25 - Share Trading Turnover
Annexed Table 26 - Futures Trading – Market Share
2011 Annual Report on the Activity of the CMVM and the Securities Markets
287
CMVM
Annexed Table 27 - Day-Trading Weight on Euronext Lisbon
2011 Annual Report on the Activity of the CMVM and the Securities Markets
288
CMVM
Annexed Table 28 - Custodians of Securities
2011 Annual Report on the Activity of the CMVM and the Securities Markets
289
CMVM
Annexed Table 29 - Value of UCITS and SIF Assets Managed per Management Entity
Annexed Table 30 – UCITS and SIF: Weighting per Type of Asset in the Respective Capitalisation of Euronext
Lisbon
2011 Annual Report on the Activity of the CMVM and the Securities Markets
290
CMVM
Annexed Table 31 – Products in the Banking and Insurance Sector
Annexed Table 32 – Marketing of Foreign UCITS in Portugal
Annexed Table 33 - Value of Foreign UCITS per Entity in Portugal
2011 Annual Report on the Activity of the CMVM and the Securities Markets
291
CMVM
Annexed Table 34 - Value of Assets Managed per Real Estate Investment Fund Management Entity
2011 Annual Report on the Activity of the CMVM and the Securities Markets
292
CMVM
Annexed Table 35 – Aggregate Benchmarks of Securitisation Funds
2011 Annual Report on the Activity of the CMVM and the Securities Markets
293
CMVM
Annexed Table 36 – Management Entities of Venture Capital Funds and Venture Capital Companies
2011 Annual Report on the Activity of the CMVM and the Securities Markets
294
CMVM
Annexed Table 37 – Value Managed per Management Entity of Venture Capital Funds and Venture Capital
Companies
2011 Annual Report on the Activity of the CMVM and the Securities Markets
295
CMVM
Annexed Table 38 – Investment by Venture Capital Companies per Economic Activity Classification
Annexed Table 39 – Investment by Venture Capital Funds per Economic Activity Classification
2011 Annual Report on the Activity of the CMVM and the Securities Markets
296
CMVM
Annexed Table 40 – Financial Intermediaries Registered with the CMVM
Annexed Table 41 – Active Portfolio Management Companies Acting on Behalf of
Third Parties
2011 Annual Report on the Activity of the CMVM and the Securities Markets
297
CMVM
2011 Annual Report on the Activity of the CMVM and the Securities Markets
298
CMVM
Annexed Table 42 – Financial Intermediation Activities registered at the CMVM
2011 Annual Report on the Activity of the CMVM and the Securities Markets
299
CMVM
Annexed Table 43 – Administrative Procedures for Investment Funds in 2011
Annexed Table 44 – On-Line Reception of Orders
2011 Annual Report on the Activity of the CMVM and the Securities Markets
300
CMVM
Annexed Table 45 – On-Line Marketing of Investment Funds
Annexed Table 46 – Investment Recommendations per Financial Intermediary
2011 Annual Report on the Activity of the CMVM and the Securities Markets
301
CMVM
2011 Annual Report on the Activity of the CMVM and the Securities Markets
302
CMVM
Annexed Table 47 – Five Major Issuers Subject to Investment Recommendations
Annexed Table 48 – Number of Communications carried out via the CMVM Website per Issuer – 20 Largest
2011 Annual Report on the Activity of the CMVM and the Securities Markets
303
CMVM
Annexed Table 49 – Number of Communications carried out via the CMVM Website per Investment Fund
Management Company – 20 Largest
2011 Annual Report on the Activity of the CMVM and the Securities Markets
304
CMVM
Annexed Table 50 – Consultation Papers
Annexed Table 51 – Summary of Major Issues covered in Complaint Proceedings
2011 Annual Report on the Activity of the CMVM and the Securities Markets
305
CMVM
Annexed Table 52 – Target of Complaints
Annexed Table 53 – Auditors’ Reports on the 2010 Annual Financial Statements