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Management Report 2010
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Management Report
2010
Executive Summary
Balance (COP$ Millions)
$ -
$ 20.000
$ 40.000
$ 60.000
$ 80.000
$ 100.000
$ 120.000
2006 2007 2008 2009 2010
90.
111
103
.880
93.
834
113
.698
117
.977
19.
940
20.
035
10.
771
15.
853
14.
854
70.
171
83.
845
83.
063
97.
845
103
.123
Assets Liabilities Shareholders' Equity
Operating IncomeOperating ProfitNet ProfitEBITDA*
66.30834.06226.52436.588
54.88021.89927.13424.940
48.8773.521
10.04218.630
53.76315.12918.43423.892
61.30526.38923.94430.071
Assets Liabilities Shareholders’ Equity
90.11119.94070.171
103.88020.03583.845
93.83410.77183.063
113.69815.85397.845
117.97714.854
103.123
Operating MarginNet MarginEBITDA MarginROEROA
51%40%55%38%29%
40%49%45%32%26%
7%21%38%12%11%
28%34%44%19%16%
43%39%49%23%20%
2006 2007 2008 2009 2010
Financial Information
Revenues Distribution
2006 2007 2008 2009 2010
Equity Fixed Income - (Transc & OTC) Derivatives Terminals
Market Data - SAE Listing Services Education & Others
3%
13%
6%0%
53%
24%
3%
19%
13%1%
42%
22%
3%
18%
7%8%2%
35%
27%
2%
20%
6%6%4%
34%
27%
3%
20%
6%6%4%
27%
34%
Multiples
EV / EBITDA P / E P / BV EV / VENTAS
0
5
10
15
20
25
30
35
2007 2008 2009 2010
27
18
23
27 25
33 30
34
6
4 5
7
12
810
13
P&L (COP$ Millions)
$ -
$ 10.000
$ 20.000
$ 30.000
$ 40.000
$ 50.000
$ 60.000
$ 70.000
2006 2007 2008 2009 2010
66
.30
8
54
.88
0
48
.87
7
53
.76
3
61
.30
5
34
.06
2
21
.89
9
3.5
21
15
.12
9 26
.38
9
26
.52
4
27
.13
4
10
.04
2
18
.43
4
23
.94
4
36
.58
8
24
.94
0
18
.63
0
23
.89
2
30
.07
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Operating RevenuesOperating Profits
Net Profits EBITDA*
COP$ Millions
Markets
Market Capitalization (COP$ Billions)
$ 0
$ 50
$ 100
$ 150
$ 200
$ 250
$ 300
$ 350
$ 400
$ 450
2006
126
206 196
287
418
2007 2008 2009 2010
Foreign Currency (USD$ Billions)
*Through the affiliate: SET-FX
159
198
234 247
257
0,22
0,29
0,36
0,43
0,41
0,0
0,1
0,1
0,2
0,2
0,3
0,3
0,4
0,4
0,5
$ 0
$ 50
$ 100
$ 150
$ 200
$ 250
$ 300
2006 2007 2008 2009 2010
Traded Volume (USD Billions) Number of Transactions (Millions)
Derivatives (COP$ Billions)
$ 0
$ 10
$ 20
$ 30
$ 40
$ 50
$ 60
2006 2007 2008 2009 2010
4
17
31
45
53
Includes Futures: TES, TRM, Shares and NDF's
BVC Indices Evolution
*Base 100 January 2010
110
100
90
120
130
140
IGBC COLCAP COL20
Index
COLCAPIGBCCOL20
31%30%28%
% Return2010
jan-10
feb-10
mar-10
mar-10
apr-1
0may-
10
jun-10
jun-10
aug-1
0sep
-10oct
-10no
v-10no
v-10de
c-10
Equity Market (COP$ Billions)
0,64
0,52
0,58
0,50
0,72
0,00
0,10
0,20
0,30
0,40
0,50
0,60
0,70
0,80
$ 0
$ 10
$ 20
$ 30
$ 40
$ 50
$ 60
2006 2007 2008 2009 2010
Traded Volume (COP Billions) Number of Transactions (Millions)
35 35
40 41
54
Fixed Income (COP$ Billions)
1.693
1.100 1.108
2.062
2.169
1,44
1,20
1,05
1,33 1,46
0,00
0,40
0,80
1,20
1,60
$ 0
$ 300
$ 600
$ 900
$ 1.200
$ 1.500
$ 1.800
$ 2.100
$ 2.400
2006 2007 2008 2009 2010
Traded Volume (COP Billions) Number of Transactions (Millions)
BVC Stock EvolutionBehavior of BVC share was outstanding both, regarding appreciation, and
liquidity increase.
At year closing the price per share amounted to COP$43, which meant a
46% increase with regard to former year’s closing.
Annual trades volume reached COP $457.857 million with a daily average
of COP $1.869 million and monthly average of COP $38.155 million. The
turnover growth with regard to 2009 was 74%.
Performance in terms of volume allowed it to be classified as a high
liquidity share during the year.
At year end the Company reported a market capitalization of COP
$804.697 million, which represents a 43% annual increase.
In the last year, the Company increased the number of shareholders by
more than 600, reaching a historical figure of 1.823. In accordance with
its interest on the total 18.672.822.217 shares outstanding, the holders’
distribution is the following:
As statutorily provided (Law 510/1999), no shareholder may be beneficial
owner of more than 10% of BVC’s outstanding shares.
Foreign funds equity interest in BVC increased by more than 6%, passing
from 16% in 2009 to 22.5%.
56
0.0
83
62
1.7
03
71
5.0
67
69
0.7
92
64
2.2
43
67
0.2
52
68
8.9
25
711
.43
5
74
3.0
76
84
5.7
77
79
7.2
27
80
4.6
97
$ 0
$ 100.000
$ 200.000
$ 300.000
$ 400.000
$ 500.000
$ 600.000
$ 700.000
$ 800.000
$ 900.000
jan-
10
feb-
10
mar
-10
apr-1
0 m
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0 ju
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ju
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aug-
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sep-
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oct-1
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c-10
7.7
41 2
0.5
12
51
.87
4
27
.64
3
15
.01
9
16
.51
6
38
.03
2 55
.69
2
87
.24
3
88
.40
0
24
.98
0
24
.20
5
29,9
33,2
38,2 36,9 34,3 35,8 36,8
38,1
39,7
45,2 42,6 43,0
$ 0
$ 5
$ 10
$ 15
$ 20
$ 25
$ 30
$ 35
$ 40
$ 45
$ 50
$ 0
$ 10.000
$ 20.000
$ 30.000
$ 40.000
$ 50.000
$ 60.000
$ 70.000
$ 80.000
$ 90.000
$ 100.000
jan-
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feb-
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mar
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apr-1
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0 ju
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ju
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aug-
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sep-
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oct-1
0 no
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c-10
Traded Volume (COP Millions) BVC Stock Price
During the year the Exchange took care of foreign fund investors request
from the United States, the United Kingdom, Canada Singapore and the
Middle East, on an ongoing basis, which evidences the interest of the
international investor community in BVC as a Colombian securities market
benchmark, and as an issuer.
As part of the Company’s promotion management, non deal road shows
were made in New York and London, with active participation in panels in
those cities. The purpose was to show the investment opportunities
offered by the Colombian market as well as introducing the Integrated
Market with Chile and Peru, (MILA), and the new technological products
and services of the Exchange.
BVC Shareholders Distribution.Dic.2010
2010No. of
Shareholders%
Shareholders%
Shares
Less than 1% 1796 98,5% 30,4%
Between 1% - 5% 24 1,3% 48,3%
Between 5% - 10% 3 0,2% 21,3%
Total 1823 100,0% 100,0%
*Data as of December 31, 2010
INVESTMENTFUNDS: 1,1%
UNIVERSITIES: 6,7%
INDIVIDUALS: 6,6%
PENSION FUNDS: 17,5%
BROKERAGE FIRMS: 30,9%
FOREIGN INVESTMENTFUNDS: 22,5%
OTHER COMPANIES: 14,7%
Management Report
2010
BOARD OF DIRECTORS
Members not considered independent Rafael Aparicio Escallón (Chairman of the Board)
Néstor Hincapie Vargas
Diego Jiménez Posada
Emilio Echavarría Soto
Rodrigo Jaramillo Correa
Germán Salazar Castro
Independent members
Sergio Clavijo Vergara
Carlos Eduardo Jaimes Jaimes
Roberto Junguito Bonnet
Santiago Montenegro Trujillo
Javier Jaramillo Velásquez
Bernardo Guzmán Reyes
Juan Camilo Vallejo Arango
PRESIDENT OF THE STOCK EXCHANGE Juan Pablo Córdoba Garcés
DIRECTIVE TEAM Alberto Velandia Rodríguez - Legal Vicepresident
Ángela Valderrama Guzmán - Marketing and Products Vicepresident
María José Ramírez Botero - Commercial and Issuers Vicepresident
Jitendra Puri - IT Vicepresident
AUDITOR Mauricio Bejarano Herrán
EXTERNAL AUDITOR Delloitte & Touche Ltda.
BVC
´S A
dmin
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BVC´S Administration
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I am pleased to present BVC corporate report for 2010,
an outstanding year due to the strategic progress of
the Company, the notorious growth of the Colombian
capitals market, and the outstanding financial results
of the Exchange in the midst of contrasts between the
international and domestic economic outlook.
During 2010 the global economy developed despite
enormous turbulence resulting from instability in the
Greek and Portuguese markets, accompanied by
periods of great uncertainty that in the end directed the
global capital flow towards emerging economies.
Consequently, Colombia was one of the main destinations
for foreign investment, which made the resources of
the portfolio return to historical levels. These market
conditions also benefited from regulatory changes made
by the National Government which furthermore, at the
end of the year promoted Equity Market appreciation
and considerably increased its liquidity.
As a result of this behavior, 2010 was an unprecedented
year in matters of equity trades reaching the sum of COP
$53,51 billion for transactions of this type of assets,
an amount which was also driven by the entry of new
issuers such as Canacol, Conconcreto and Davivienda,
as well as by high trading of stock certificates by the oil
company Pacific Rubiales and Ecopetrol, among others.
On the other hand, the expansive monetary policy
allowed low interest rates to be maintained and this
encouraged for the second consecutive year the placing
of corporate debt, leading to a record year for the Fixed
Income segment in matters of primary issues. Issuers
placed securities for COP $13,8 billion.
This year was characterized by a trend of peso
appreciation vis-à-vis the Dollar, in line with what
occurred in emerging markets. This led the Central
Bank to resume interventions in the Exchange market,
resulting in a degree of volatility. The traded turnover
grew 4% and, on average, USD $1.250 million dollars a
day were traded.
Towards the end of 2010 we were able to move the
NDF’s tradings towards the TRM Futures market
which, together with the market creators program for
the TES Futures, generated greater dynamics for our
standardized Derivatives market. We closed the year with
a daily average of 1.175 contracts which is equivalent to
a nominal value of approximately COP $ 25.15 billion.
This volume amounted to 5.815 contracts on average in
December.
In terms of strategy during the last twelve months,
the Exchange focused its efforts on building the basis
of a company with a global perspective, which in turn
benefited from momentum in the emerging economies,
in particular those of Latin America.
For this reason, action was concentrated on the creation
of the first Latin American Integrated Market (MILA,
its initials in Spanish), which seeks to unite the Stock
Exchange markets of Lima and the Trade Market of
Dear Shareholders:
Letter From the BVC President to the Shareholders
Lett
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the
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Lett
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Santiago, with that of Colombia, thereby strengthening
the regional presence of the combined markets, together
with their relations throughout the hemisphere.
With this focus, and after twelve months of dedicated
work with supervisors, the deposits and the stock
exchanges of the three countries became a viable entity
as the largest equity market operation of the region due
to the number of issuers, - the second most important
according to listed capitalization and the third most
relevant with respect to transactions turnover.
At present, the Company is working on starting trading
operations as soon as possible. We are aware of the
fact that this project is very promising and what is most
encouraging is the enthusiasm with which the Brokers
and Issuers of the three nations have supported the
initiative.
Furthermore and given the strategic similarities of the
Colombian and Peruvian markets, we wished to explore
the benefits of corporate integration with the Lima Stock
Exchange, which in turn will lead to faster growth and
better market penetration, given the economies of scale,
which in itself will provide business growth in relatively
small local markets.
This project which we are submitting for your
consideration seeks to strengthen the two Exchanges
with a single strategy to benefit from the human talent
and knowledge of each organization. International
experience shows the significant impact of such actions
and confirms the position of the Stock Exchange as a
leader in the region.
Finally, 2010 has been a financially positive year for
BVC, increasing net profits by 29%, reaching COP
$23.944 million, and this can largely be attributed to the
diversification of income and to the strong presence of
the Company throughout the market value chain.
The closing of this business year has reaffirmed our
commitment to maintaining a permanent equilibrium
and control of administrative expenses (1% growth), as
well as maintaining efficient investment and products’
profitability.
The most important contributors to our financial
performance were the Equity Market (34%), the Fixed
Income Market (26%), the listing and maintenance of
securities (15%,) and 25% from new products and
services within which the Derivatives Market contributed
around 3% of the revenues.
For the coming year, the BVC will progress with
determination towards its corporate goal of becoming a
World Class Stock Exchange, exploiting its management
capacity to the full in order to consolidate and benefit
from the results of those projects that are currently under
way.
Finally, I would like to thank you the Shareholders, the
Board of Directors and all of BVC’s collaborators, for the
good annual results which are the fruit of the trust that
each one of you has placed in this organization and in
the projects that support its future development.
Thank you very much,
Juan Pablo Córdoba Garcés,
President
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IndexBVC´S ADMINISTRATIONLETTER FROM THE BVC PRESIDENT TO THE SHAREHOLDERSBOLSA DE VALORES DE COLOMBIA AND ITS VISION OF THE FUTUREMARKET DEVELOPMENT
International Environment
National Environment
Markets
Fixed Income Market
Equity Market
Standardized Derivatives Market
New Products
Issuers Management
Commercial Management
MARKET DEVELOPMENT Regulatory Developments
Technological Evolution
New Products
Market Data
Colombian Capital
Corporate Governace
Securities Market Promotion
CORPORATE GOVERNANCEReport on Corporate Governance Practices
The Board of Directors
Adoption of Country Code Recommendations
BVC’s Governance Structure
Shareholders’ Rights
Basic activities of the Exchange’s Administration and Management
Stakeholders
Good Governance Code Reports
THE BUSINESSManagement Measurement Through the Balanced Score Card (BSC)
Investments And Strategic Alliances
Permanent Investments
Strategic Alliances
THE COMPANYHuman Capital
Internal Control Management
Independent evaluation Control System (ICS)
SOCIAL RESPONSIBILITYGLOSARY
5
Bolsa de Valores de Colombia and its Vision of the Future.
Profile of the Company
The Colombian Stock Exchange –BVC- is the main
trading forum of the country representing more than half
of the local capitals market volume and it is consolidated
as the fourth most important capital market of Latin
America.
The Company is listed in the Exchange since 2007
and at present it has over 1.800 shareholders, of
whom 22,5% are foreign. In 2010 it was designated
the number 24 company in the list of Best Enterprises
to work with in Colombia, according to the Great Place
To Work Institute. In this year it renewed its Processes
Quality and Standardization Certificates according to
the worldwide standard ISO 9001, version 2000, and
obtained acknowledgement of Excellency in Quality
Management awarded by ICONTEC.
At present, it is the administrator of trading platforms in
Fixed Income, Equities and Standardized Derivatives. In
addition, it created the first Commodities in energy in
the region -DERIVEX, with a local markets expert firm
–XM. The Exchange continues investing in all the value
chain of the capitals market and is trying to expand its
operation to Peru, through Corporate Integration of the
Exchanges.
The BVC is an active member of the FIAB and the WFE
and, together with the Exchange of Santiago and of Lima
is the leader of equity market integration, into what has
been called Latin American Integrated Market, MILA.
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Strategic Planning of the Company
The Exchange incorporated new Strategic Planning
challenges with a new and more ample vision of the
businesses future, in line with the internationalization
purposes of the securities market, the value chain
development, and the objective of being an admired
Company with loyal and personal relations with its clients.
VisionFor 2015 the BVC will be one of the three main trading fórum
in Latin America, maintaining its leadership within domestic
scope, and being acknowledged by enterprises as a real
option to finance their growth and by its shareholders as a
profitable company.
MissionTo contribute to the growth and development of the
capitals market, positioning the Exchange and its affiliates
as a capital/financial center in the region to provide
overall solutions. The Exchange is reliable, transparent,
efficient, and admired for its innovation capabilities,
connection with its clients, and learning ability.
2010 Strategy
In the latest years, the Exchange has concentrated its
strategic efforts in strengthening the basis for its growth,
and in deepening the local capitals market. To achieve
this, it undertook the task of completing the market
infrastructure, diversifying the products portfolio and
adjusting the regulatory framework. Concurrently, it has
been seeking to increase the number of participants,
developing liquidity mechanisms, and strengthening its
position in the market.
Consequently, in 2010 the internationalization strategies
that were being developed since 2008 were achieved
and foreign investment continued to be attracted.
The strategic progress achieved in the year allowed
progressing at a higher speed seeking efficiency,
diversification of income, creation of competitive
advantages, and insertion into global markets.
First of all, the Exchange focused its efforts in leading
the creation of the first equity interconnection market
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in the region, called Latin American Integrated Market
(MILA). It will be the first Equity Market in the region due
to the number of issuers; it will rank second in market
capitalization size; and third in trading volume. Likewise,
MILA will offer a complete universe of issuers, including
the mining, energy, financial and industrial sectors. All
these conditions make of MILA a global and extended
more liquid and diversified market, position that benefits
development of the participating exchanges.
The MILA effect made a real approach between the
nations and marked an important milestone, going
beyond the securities market. Regulators and authorities
of the three countries showed that it is possible to work
jointly in order to generate regional development and
growth. The new projected regulations for the integration
allowed listing of securities in foreign quoting systems
through integration agreements entered into with
exchanges, and authorized the creation of accounts
without disaggregating the beneficial owner in the
clearing houses.
Likewise, in 2010 the Exchange strengthened its foreign
securities trading. The year ended with two foreign
issuers listed in the National Registry of Securities and
Issuers (RNVE) and at the BVC, the securities of which
had an outstanding performance, and fostered liquidity
in the main equity market. Likewise, on December 15,
the Colombian Global Market (CGM) was inaugurated,
making it possible for foreign issuers to trade foreign
assets issued by domestic or foreign issuers under the
regulation of a foreign country, and which do not require
listing at the RNVE. In this latter market, every issuer
has the sponsorship of a SCB, and receives support to
develop the regulatory framework, harmonizing local
standards with international standards.
In the same direction, the BVC added to its strategic
achievement of the year, the determination of the
conditions that will allow the corporate merger between
the BVC and the Lima Stock Exchange (BVL). The
Memorandum of Understanding containing the
agreement was executed on January 19, 2011. This
merger, which is the first one of this type in Latin
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America, creates value for the shareholders, leverages
the growth of the companies, and brings forth multiple
merits and advantages for the market and their
participants. Among other, a better position will be
achieved with greater international relevance; the MILA
market will be strengthened; liquidity will be increased;
a diversified market will be consolidated; and the bonds
between the two countries will be enhanced. The new
company will be able to consolidate efficiently and to
improve competitiveness in the joint market, giving
room for synergies at all levels; technology, innovation,
cost optimization; transfer of know-how, and corporate
governance, among others, are included in such benefits.
Supplementing the aforesaid progress, in order to
materially foster foreign investment growth, the Exchange
promoted the issuance of regulations that streamline
the General Regime of Foreign Capital Investments in
Colombia and the Investments of Colombian Capital
Abroad. The new regulations will facilitate access to the
portfolio, making investments feasible.
On the other hand, regarding its internal strengthening,
and in order to continue improving relations with
clients, in 2010 the Stock Exchange continued with the
transformation towards a customer-centered company.
This process created differential competitive advantages,
ensuring that the entire organization will follow the
necessary steps to generate a unique and positive
experience for the customers, yielding them value and
securing their satisfaction and loyalty.
The processes map and the organzation chart
of the Company was redesigned with specialized
areas. Concurrrently, we began to incorporate high
performance interaction as a management culture, and
the foundations were established to implement business-
oriented marketing.
In 2011 the main objective will be to strengthen the
Company’s internationalization, consolidating the merger
with BVL, as well as commissioning the MILA. Likewise,
the Exchange shall continue with the customers
approach process, promoting a suitable organizational
culture, strengthening processes and developing human
capital in the Company.
Evolution of the Markets In 2010
The evolution of the BVC markets corroborated in
2010 the internationalization strategy and the offer
of innovation value proposals, as well as the correct
direction to expand the business, grow the market, and
generate value for the shareholders of the Company. The
market traded COP $2.274 billion during the year, 5,97%
above the COP $2.146 billion of the previous year.
This behavior was materially evidenced in the Equity
Market where the international context, the consolidation
of new foreign stock listing, such as Pacific Rubiales and
Canacol, and the leadership of the BVC to drive the equity
markets integration project with Peru and Chile (MILA),
aligned the conditions to yield a daily average volume
of COP $151.524 million, and a total annual turnover of
COP $53,51 billion. This volume is the greatest historical
traded amount in the equity market, and meant a
36.37% increase over the volume transacted in the
preceding year.
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On the other hand, BVC’s Fixed Income market grew
5% and mobilized funds for COP $2.214 billion, within a
low interest rate context, benefiting both, the investors,
and the issuers. Although the TES securities continued
being the most transacted asset with a 76.5% market
share, trading of private debt increased by 14% with total
transactions for COP $163 billion.
The primary debt issue exceeded the volume placed in
2009 by 2.9%; 35 issuers raised funds amounting to
COP $13,8 billion, with an average demand of 200% per
issue.
In the Derivatives Market there was a 1.830% growth
in the traded volume, mobilizing operations for an
amount of COP $25,15 billion. The promotion of the
existing products, the launching of new products and
the development of an intensive training plan for traders
supported this growth. During 2010 the TES Futures
Program for Market Creators was implemented; futures
were launched on ECOPETROL’s individual shares and
PFBCOLOM’s shares, and an exchange rate futures mini-
contract was entered into, which facilitated the NDF’s
market migration to the standardized derivatives market.
Furthermore, during the year the growth of the market
was benefited with the launching of new SAE services
for back office processes and information dissemination.
The SAE services supplement large electronic platforms,
through electronic access facilities with the same
technical standards, and facilitate reaching the trades
infrastructure, allowing automatic trading through
computational algorithms, among other.
Lastly, but not being less important, we highlight the
new scope of the educational programs offered by the
Exchange; historical goals were achieved in the “Bolsa
Millonaria” contest and in the equity and foreign currency
trading contests; new agreements were entered into with
universities; and two new BVC Points were created,
whereby the market, investment, and commercial offers
of the SCBs are promoted.
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Market Development Chapter 1
International EnvironmentAfter suffering the greatest economic activity drop of the
last eight decades (2008-2009), there was a 5% global
economic growth in 2010 according to the IMF figures,
slightly above its long-term trend. Notwithstanding,
recovery was not homogeneous; in high-income
countries, where the effects of the 2008 crisis were
severe and straightforward, there were growth rates
under those of developing countries. The divergence
of the macroeconomic cycles between regions brought
forth concern about the recovery sustainability and the
capacity of certain nations to finance their ever increasing
fiscal deficits. As a consequence of this uncertainty,
Mar
ket
Dev
elop
men
t
Source: International Monetary Fund
15,0
10,0
5,0
0,0
-5,0
-10,02007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4
World Developed Economies Emerging Markets
Growth from one quarter to another, by regions (%)
13
Post-Crisis Return 2010 return
20%
10%
0%
-10%
-20%
-30%
Commodities Emergentes EEUU Mundo Japón Europa
the level of the agent’s risk aversion changed abruptly
throughout the years, provoking high volatility episodes
in the price of financial assets, although in general such
assets reflected better economic conditions.
Since there was no direct spreading of the crisis, the
financial systems in emerging markets contributed to
a fast recovery of private demand. In turn, the better
perspective of these nations attracted the necessary
foreign investment flows in order for their economies to
grow above 7% on average1.
The foreign investment flow and the good economic
performance of these countries had a positive effect
on the value of their equity markets and on the price
of commodities, mainly pulled by Chinese demand. The
MSCI-EM index, which replicates the equity behavior of
emerging markets grew 16,4%2 and the Commodities
Index CRY grew 17,4% in 2010.
Developed economies also experienced slight recovery
of private demand, although more moderately. Their
average economic growth was 3%.
Source: International Monetary Fund
Mar
ket
Dev
elop
men
t
30
20
10
0
-10
-20
-30
2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3
Developed Economies Emerging Markets
15
10
5
0
52007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3
Developed Economies y Emerging Markets
1 Source: International Monetary Fund, average adjusted by PPP.2 Source MSCI-BARRA and Bloomberg, BVC estimates.
Quarterly change in actual gross investment, by economy type
Quarterly change of private consumption, by economy type (Annual %)
Equity and Commodities Indices Behavior
14
Source: Bloomberg and International Monetary Fund
Indeed, the absence of positive signals in the real estate
market, the weakness of the financial sector and the
slow recovery of the labor market, in particular in the
United States, did not allow a greater reactivation of
private demand.
Mar
ket
Dev
elop
men
t
2
1
0
-1
-2
-3
-4
2008
m1
2008
m2
2008
m3
2008
m4
2008
m5
2008
m6
2008
m7
2008
m8
2008
m9
2008
m10
2008
m11
2008
m12
2009
m1
2009
m2
2009
m3
2009
m4
2009
m5
2009
m6
2009
m7
2009
m8
2009
m9
2009
m10
2009
m11
2009
m12
2010
m1
2010
m2
2010
m3
2010
m4
2010
m5
2010
m6
2010
m7
2010
m8
2010
m9
2010
m10
2010
m11
To face the weakness of the financial and private sectors,
most of the administrations of developed economies
decided to extend fiscal and monetary encouragement
that had began at the end of 2008 and at the beginning
of 2009. Hence, the fiscal deficit of these nations and
their debt ratio with regard to the GDP continued growing.
Source: Bloomberg and International Monetary Fund
185
170
155
140
125
11
10
9
8
7
6
5
4
jan - 08
mar -
08m
ay - 08
jul - 08
sep - 0
8nov - 0
8jan - 0
9m
ar - 09
may - 0
9jul -
09se
p - 09
nov- 09
jan- 10
mar-
10m
ay- 10
jul- 10
sep- 1
0nov- 1
0
Case Shiller Housing Prices Index Unemployment
US Labor Market and Housing Prices Behavior
Employment Growth in Developed Economies (3 Months Average %)
15
Public debt as GDP percentage in the United States,
which was historically located around 40%, in 2010
closed at 65%, with projections of levels nearby 80%
for 2014. In the Euro Zone, this variable passed from
70% to 80%, although for many member countries it
exceeded 100%.
These circumstances brought concern to the market and
to the credit rating firms about the capacity of developed
nations to repay their debt, mainly in the Euro Zone. In
April, the Greek debt was rated by Standard & Poor’s
under the investment grade category and the interest rate
for certain maturities increased more than one thousand
basic points. Facing the refinancing impossibility at a
reasonable cost in the capitals market, Greece received
a EUR $110.000 million loan from the IMF.
The measure applied by the Fund and the commitment
of the European Union to support those nations under
difficulties were able to temporarily revert the drop of the
Euro value and the increase in agents’ risk aversion in
the market.
Notwithstanding, in August Ireland’s and Portugal’s
indebtedness costs drastically increased. In mid-
November, before the European Union granted a
loan to Ireland to recapitalize its financial system, the
indebtedness cost of Spain and Italy had already caught
up such situation. Things began to get back to normal
when the members of the area agreed to create a stability
fund for a value of around one billion euros.
Source: Bloomberg
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%1996 1997 1998 1999 2000 2001 2002
EEUU EUROZONE
2003 2004 2005 2006 2007 2008 2009 2010
Public Debt as GDP %
Mar
ket
Dev
elop
men
t
16
Source: Bloomberg
In the United States, the indebtedness increase
generated an ample discussion within the local political
scope, particularly after the Republican Party attained
majority in the Parliamentary elections at the end of
the year. However, it was the decision of the Federal
Reserve of increasing its balance through the purchase
of Treasuries for a value of USD $600.000 million,
measure which was called QE2, which most impacted
the local and international capitals market.
The FED decision not only affected the Treasuries market
which experienced high volatility and a curve ascending
increase, but that also resulted in a dollar value loss vis-
à-vis most of the world currencies. Likewise, it generated
a lesser funding cost in dollars that encouraged the use
of “carry” strategies and the purchase of risky assets,
favoring the equity market and the credit margins3.
For this reason, the equity market in the United States
had an outstanding performance; the SPX grew 12,8%
with a report of better profits than expected by the
majority of the companies listed in the index.
The economic recovery is expected to finally consolidate
in 2011. Notwithstanding, the countries in developed
economies must correct their fiscal imbalances, without
affecting the private demand recovery, and the emerging
Greece Ireland Portugal Spain Italy
0
600
400
200
1200
1000
800
01/2
010
02/2
010
03/2
010
04/2
010
05/2
010
06/2
010
07/2
010
08/2
010
09/2
010
10/2
010
11/2
010
12/2
010
01/2
011
Ireland RescueGreece Rescue
VIX Index EURO
01/2
010
02/2
010
03/2
010
04/2
010
05/2
010
06/2
010
07/2
010
08/2
010
09/2
010
10/2
010
11/2
010
12/2
010
01/2
011
10.00
0
20.00
30.00
40.00
50.00
1,30
1,25
1,20
1,15
1,35
1,40
1,45
1,50
Ireland Rescue
Greece Rescue
3 The price of commodities also increased facing the QE2 since they are used by the market as a hedge or speculation instrument to cope with dollar depreciation.
Equity and Euro Market Risk Aversion Behavior
CDS Behavior by Country (Basic Points)
Mar
ket
Dev
elop
men
t
17
Source: Bloomberg
economies must control the incipient inflationary booms
derived from the full use of productive factors. In the
global scope, the nations must coordinate their efforts
to correct commercial imbalances and possible tensions
derived from divergence in economic cycles between
emerging countries and developed countries.
National Environment
The same as the rest of the world, in 2010 Colombia
evidenced an economic growth exceeding what was
expected, and according to Government projections, the
actual growth was 4,5%. Monetary and fiscal measures
adopted to mitigate the effects of international crisis,
which were started in 2009 and extended to 2010,
promoted economic activity and permitted a rapid
recovery of the private sector trust indicator. In this
context of macroeconomic stability, the local financial
market had great dynamism and in certain markets there
were unprecedented appreciations and activity levels.
Source: International Monetary Fund
2,00
10 years treasury rate Dollar Value Index
1,50
2,50
3,00
3,50
4,00
75
77
79
85
83
81
87
89
QE2 Announcement
Greece Sovereign Crisis ja
n - 1
0
feb
- 10
mar
- 10
apr -
10
may
- 10
jun
- 10
jul -
10
aug
- 10
sep
- 10
oct -
10
nov
- 10
dec
- 10
Ireland Sovereign Crisis
1996
1997
1998
1999
2000
EEUUOil ExportingGermany + JapanChina + Asia Emerging Markets
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-2-1,5 -0,5 -0,5 10 -1,5-1
Treasuries and Dollar Value Index Behavior
Suplus / Deficit in the current account as %of the world GDP
Mar
ket
Dev
elop
men
t
18
During the first semester of the year, the monetary
measures developed in 2009 were continued. The
Central Bank decreased the intervention rate by 50 basic
points on April 30, while the growth of the public expense
was maintained above the growth of the economy.
In the second half of the year, the intervention interest
rate was kept stable but the fiscal expense share
in the economy decreased, being consistent with
the commitments established in the midterm fiscal
framework. When the new Administration took office
in August, it focused on carrying out an ambitious
legislative agenda, which gave outstanding results
such as the approval in the first round, of the fiscal and
royalties sustainability act, (constitutional amendment)
and the promotion of the 4-year economic plan, the main
axes of which are the encouragement of the housing,
transportation, farming, science and technology sectors.
As opposed to what happened in other nations of the world,
the monetary and fiscal promotion was accomplished
without adversely affecting the Central Bank’s inflation
goal, or the macroeconomic stability. During most part of
the year total inflation was maintained in the inferior limit
of the band established by the Central Bank and only
as of October, time when the effects of winter began to
affect the food prices-, it began to show a bullish trend.
On the fiscal side, according to preliminary information,
the Government was able to comply with the COP $70
billion goal of tax collection and the financing plan was
completed without altering the funding cost of all other
economy agents.
Source: Fedesarrollo y DANE (National Statistics Department)
Source: Central Bank
02
-jan
-09
02
-mar
-09
02
-may
-09
02
-jul
-09
02
-sep
-09
02
-nov
-09
02
-jan
-09
02
-mar
-10
02
-may
-10
02
-jul
-10
02
-sep
-10
02
-nov
-10
02
-jan
-11
123456789
10
Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
Central Bank Reference Rate (%) Behavior
Goverment Consumption (Annual Percent change)
Mar
ket
Dev
elop
men
t
19
Source: Central Bank
Source: DANE
In this favorable macroeconomic context, trust and
demand of the private sector increased substantially.
The greatest dynamism in households spending
and investment was in turn reflected in the growth of
consumption, commercial and mortgage funds.
Direct foreign investment amounted to USD $9.485
million, with an 84% share in the petroleum and mining
sectors. On the other hand, portfolio foreign investment,
which had been negative in 2009, increased to USD
$2.349 million. External trust in Colombian economy
was also reflected in the external indebtedness cost
decrease. The credit margin of the 5-year Colombian
debt decreased 21%, reaching 112 basic points.
Good performance of local economy fostered markets
performance. The Equity Market had an outstanding
performance. The main equity indexes of the country
reached unprecedented values with growth above the
main indexes of the world and of the region.
Janu
ary
Febr
uary
Apr
il
Mar
ch
May
July
June
Aug
ust
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
1,00%
1,50%
2,00%
1,50%
3,00%
1,50%
4,00%
1,50%
Annual Inflation Lower Range Higher Range
2,00%
01
-01
-10
01
-02
-10
01
-03
-10
01
-04
-10
01
-05
-10
01
-06
-10
01
-07
-10
01
-08
-10
01
-09
-10
01
-10
-10
01
-11
-10
01
-12
-10
01
-01
-11
3,00%
4,00%
5,00%
6,00%
7,00%
8,00%
9,00%
DTF-90
IBR Overnight
Tasa Banrep
TES2014
In the Fixed Income market, the TES curve displaced
downwards and considerably decreased the upturn with
which it began in 2010. Decrease in the funding cost
encouraged private debt placement, which reached
Inflation Bahavior During 2010
Interest Rate Behavoir
Mar
ket
Dev
elop
men
t
20
COP $13,8 billion. For the end of the year, the greatest
inflation expectations forced a slight correction in the
discount rates of instruments issued by the Government,
especially in the long segment of the yield’s curve.
In the Exchange Market, the Colombian Peso (COP)
evidenced a 6,92% appreciation. The greater entry of
external flows and the dollar global trend encouraged
such behavior. As a fast response to peso appreciation,
the issuer purchased USD $3.060 million throughout
the year, of which USD $420 million were obtained
through direct auction. In the meantime the Government
adopted a series of tax and re-organization measures in
its funding strategy for 2010 and 2011.
It is expected that in 2011 the Government will develop
an aggressive investment program to offset the negative
effects caused by La Niña phenomenon in the country’s Source: Bloomberg
Source: Fedesarrollo
40353025201510
50
-5-10-15-20-25-30-35-40
nov-08 feb-09 may-09 aug-09 nov-09 feb-10 may-10 aug-10 nov-10
%
Consumer ConfidenceCommerce ConfidenceIndustry Confidence
12,00
10,00
8,00
6,00
4,00
2,00
0,00
-2,00
-4,00
Household Consumption Gross Capital Formation
Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q 3 2010
Source: Financial Superintendence and BVC.
-10%
0%
10%
20%
30%
40%
50%
60%
feb
-06
apr-
06
jun-
06
aug-
06
oct-
06
dec-
06
feb
-07
apr-
07
jun-
07
aug-
07
oct-
07
dec-
07
feb
-08
apr-
08
jun-
08
aug-
08
oct-
08
dec-
08
feb
-09
apr-
09
jun-
09
aug-
09
oct-
09
dec-
09
feb
-10
apr-
10
jun-
10
ago-
10
oct-
10
Total Commercial Consumption Housing
16141210
8642
2006
2007
2008
2009
2010
Confidence Indicators (Fedesarrollo)
Household’s Consumption Behavior and Investment
Private Debt Raised (COP Billions)Loans Annual Growth
Interest Rate Behavoir
Mar
ket
Dev
elop
men
t
21
infrastructure and in the general economy. On the
monetary side, the Central Bank will possibly increase
the intervention rate in the second semester, gradually
neutralizing the expansive monetary policy implemented
in the last two years.
With regard to the external sector, it is expected that the
global economic recovery will have a positive impact on
the price of commodities and on the country’s exchange
terms. With this in mind, it is particularly relevant for
10
11
9
8
7
6
5
4
3
20 4 6 8
TT
TT
10 12 14
500
550
450
400
350
300Q1 2010 Q2 2010 Q3 2010 Q4 2010
Source: Bloomberg, curved generated through logarithmic interpolation.
Source: Bloomberg, curved generated through logarithmic interpolation.
Curve Inclination (Basic Points)
TES Yield Curve Behavior in 2010
Mar
ket
Dev
elop
men
t
22
Source: Bloomberg
the Government to continue with the adoption of the
fiscal rule, which will allow the country assuring that the
mining-energetic boom generates the necessary funds,
not only to finance the development plan, but also to
obtain the necessary fiscal indicators to recover the
investment grade lost during the 90s.
COLCAP Bovespa IPC-Mexico Standard and Poor’s FTSE NIkkei 225
01/2
010
01/2
010
01/2
010
02/2
010
02/2
010
03/2
010
03/2
010
04/2
010
04/2
010
05/2
010
05/2
010
06/2
010
06/2
010
07/2
010
07/2
010
07/2
010
08/2
010
08/2
010
09/2
010
09/2
010
10/2
010
10/2
010
11/2
010
11/2
010
12/2
010
12/2
010
12/2
010
150,00
140,00
130,00
120,00
110,00
100,00
90,00
80,00
Source: Bloomberg
Suize Frank
Sterline PoundYen
Euro
Candian Dollar
Dollar Index
Peruvian Peso
Chilian Peso
Real
Colombian peso
-10,00% -5,00% 0,00% 5,00% 10,00% 15,00% 20,00%
Behavior of the equity indices in local currency(standardized series, base 01/01/2010)
Foreign currency return vis-á-vis USD in 2010
Mar
ket
Dev
elop
men
t
23
In 2010 the fixed income traded volume at the BVC grew
5,34%, reaching COP $2.214,05 billion. This behavior
took place in a year where the interest rate continued
low and economy performance was above expectations.
Such economic climate favored both, the issuers, and
the investors.
Of all the negotiations carried out throughout the year,
the TES continued being the most transacted Fixed
Income securities, with a 76,43% share, followed by
private debt with 19,04%, and public debt different from
TES with 4,53%.
TES Market With regard to the previous year, the total TES Market
value, including transactions effected at the MEC and
SEN, decreased 18,41%, reaching COP $3.018,81 billion
in 2010. The drop took place in the trades volume of the
Markets
Fixed Income Market
2.500
2.000
1.500
1.000
500
2001(jun-dec)
2002 2003 2004 2005 2006 2007 2008 2009 2010
100%90%80%70%60%50%40%30%20%10%0%
Transactional Listing
jan-08
mar-08
jul-08
sep-08
nov-08
jan-09
mar-09
jul-09
sep-09
nov-09
jan-10
mar-10
jul-10
sep-10
nov-10
Source: BVC
Fixed Income Market Traded Volume (COP Billions)
Trading Distribution
Mar
ket
Dev
elop
men
t
24
SEN system, which decreased 40%. In contracts, the
BVC increased its transactions volume by 2,12% and its
share in this market reached 54,7%.
Private Debt In the private debt secondary market, securities were
transacted for COP $163,15 billion, which exceeded by
13,96% the amount registered in 2009. To this date, this
is the largest annual traded volume ever seen at the BVC
for such securities.
In the primary market, the bullish trend in amounts
placed was maintained, showing a 2,83% growth with
regard to previous year. The supply of securities in the
primary market evidenced an average excess demand
2.500,00
2.000,00
1.500,00
1.000,00
500,00
2003 2004 2005 2006 2007 2008 2009 2010
MEC SEN
through auction of 2,06 times. Of the total issues, 48%
of the securities were indexed to the CPI, 12% to the
DTF, 8% to the IBR, and the remaining 31% were fixed
rate securities.
For 2011 it is expected that Fixed Income market
maintains the current transaction volumes. In addition,
as promoter of the securities market, the BVC will
implement a strategy to increase liquidity in the
transactional system. The fundamental pillar of this
strategy is the development of new products. In addition,
the Exchange, in alliance with the National Government,
will seek enhancement of the regulatory framework for
the existing Fixed Income transactions.
Source: BVC and Central Bank
TES Volumes per Market (COP Billions)
Trading Distribution
Mar
ket
Dev
elop
men
t
25
Equity Market
The favorable conditions of the local market, the presence
of new issuers, the greater appetite of international
investors, as well as the changes in the equity transaction
model and the streamlining of the transactions systems
accomplished in 2009, materially fostered the increase
of Equity Market volumes in 2010.
This dynamics was consolidated in the second half of the
year with a change in the trend of the monthly amount
dealt with, in such a way that during the last quarter a
monthly average of COP $4,56 billion was reached.
The daily transactions average was COP $151.524
million, representing a 32% increase with regard to 2009.
Likewise, the total transacted in the year was considered
the maximum annual historic figure ever attained, and
amounted to COP $37,1 billion, representing a 33,9%
increase vis-à-vis the COP$ 27,7 billion transacted in the
preceding year.
2008 2009 2010
2,10
2,05
2,00
1,95
1,90
1,85
1,80
$ 30.000.000
$ 25.000.000
$ 20.000.000
Total Raised Total Demanded Bid to Over
$ 15.000.000
$ 10.000.000
$ 5.000.000
jan-
10
feb
-10
mar
-10
apr-
10
may
-10
jun-
10
jul-1
0
aug-
10
sep
-10
oct-
10
nov-
10
dec-
10
6
5
4
3
2
1
0
COP
Billi
ons
The COLCAP index started with a value of 1.367 units,
and ended the year in 1.824; the appreciation evidenced
was 33,4%. The behavior of the stock prices, added to
the primary issuance of Davivienda’s preferred stock and
the listing in the market of Pacific Rubiales and Canacol,
among other, explains the market capitalization behavior.
It increased 46,5% compared to 2009 closing, ending
the year with a value of COP$ 417 billion.
Source: BVC
Source: BVC
Equity Market Monthly Trading in 2010
Private debt primary market
Daily Trading Average 2005 – 2010
CO
P M
illio
ns
Mar
ket
Dev
elop
men
t
26
160.000
140.000
120.000
100.000
COP
Mill
ions
80.000
60.000
40.000
20.000
2005 2006 2007 2008 2009 2010
2.000
1.900
1.800
1.700
1.600
1.500
1400
1.300
1.200
01/12/2009 01/03/2010 01/06/2010 01/09/2010 01/12/2010
The presence of foreign stock issuers at the BVC was
consolidated with the listing of Pacific Rubiales Energy
as the first foreign issuer of Equity on December 22,
2009. This share showed high liquidity and had a 109%
appreciation. Furthermore, as of the second quarter
of the year it made part of the basket that makes up
COLCAP capitalization index.
In this same line, transactions of Canacol Energy’s
common share began since August. This share showed
a 58% appreciation with a maximum transacted volume
in October.
Source: BVCSource: BVC
Source: BVC
BB COP
2010
100 200 300 400 500
2009
2008
2007
2006
2005
Private debt primary market
Market capitalization 2005-2010
Daily Trading Average 2005 – 2010 COLCAP Index 2010
27
120.000.000
100.000.000
80.000.000
60.000.000
40.000.000
20.000.000
3.500
3.000
2.500
2.000
1.500
1.000
500
Num
ber o
f Sha
res
COP$
01/08/201001/07/2010 01/09/2010 01/10/2010 01/11/2010 01/12/2010
Volume Price
30.000.000
25.000.000
20.000.000
15.000.000
10.000.000
5.000.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
Am
ount
Rai
sed
(CO
P M
illio
ns)
COP$
01/12/200901/12/2009 01/12/2009 01/12/2009 01/12/2009
Volume Price
In September the market received preferred stock from
Banco Davivienda, which evidenced an appreciation
of 42% and their volume of transactions was nearby
COP $1 billion. Furthermore, in December the Building
Company Conconcreto increased its floating with a new
primary issuance, which underwent a 28% appreciation.
On the other hand, the distribution of investors in the
secondary market on equities presented considerable
changes during 2010. The participation of foreigners
amounted to 6,3% of the market with a 84% increase
in the transacted volume. In the same way, the segment
of individuals increased the transactions volume by 50%
during the year.
Finally, as a result of its good performance, the market
provided income for COP $20.845 million, with a 45%
increase vis-à-vis the revenues obtained in 2009.
For 2011, the BVC will continue with the process of
strengthening the Equity Market through the offer of new
products, the consolidation of the MILA Market and the
CGM, and the formalization of corporate integration with
the BVL.
Standardized Derivatives Market
The BVC continued its strategy of consolidating and
strengthening the Derivatives Market through the
promotion of existing products, the creation of new
ones and the implementation of an intensive training
and educational program. The transacted volume was
represented in 174.368 contracts, with a 1.830%
increase over 2009. Revenues received from the
Standardized Derivatives Market amounted to COP
$1.633 million. New members and investors had joined
this market.
Source: BVC
Source: BVC
Source: BVC
COP
Billi
ons
35,0
30,0
25,0
20,0
15,0
10,0
5,0
_
Indi
vidu
als
Indu
stry
Sec
tor
Inst
itutio
nals
Inte
rmed
iarie
s
Non
- Re
side
nts
2009 2010
Pacific Rubiales Energy
Traded Volume per Investor Type on Equities
Canacol Energy
Mar
ket
Dev
elop
men
t
28
COP
Mill
ions
2009
-1
2009
-2
2009
-3
2009
-4
2009
-5
2009
-6
2009
-7
2009
-8
2009
-9
2009
-10
2009
-11
2009
-12
2010
-1
2010
-2
2010
-3
2010
-4
2010
-5
2010
-6
2010
-7
2010
-8
2009
-9
2010
-10
2010
-11
2010
-12
5.00
4.00
3.00
2.00
1.00
0.00
Performance Evolution of Existing Products The volume of TES futures represented 54% of the
total transactions during 2010, with a daily average of
COP $53.934 million, equivalent to 202 contracts. This
behavior was supported in the implementation of the
Market Creators Program, which resulted in an important
liquidity increase, promoting the annual turnover increase
in 321,33% and the participation of non market creator
entities, which represented 24%.
On the other hand, the volume of exchange rate
futures represented 45% of the total transactions with
a daily average of COP $46.419 million, equivalent to
599 contracts. These amounts increased the trades
by 1.025% vis-à-vis the preceding year. The result is
explained by the final migration of the NDF’s market to
the futures market. Consequently, at year closing the
NDF’s totalized a volume of COP $27,64 billion, showing
a 32,7% decrease with regard to the former year. The
revenues received by this market amounted to COP
$925 million.
FOTO DERIVADOSFELIPE TRUJILLO
Source: BVC
Traded volume
Mar
ket
Dev
elop
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29
100%
90%
80%
70%
60%
50%
40%
20%30%
10%0%
USD
Gov. Bonds
Shares
2010-1
2010-2
2010-3
2010-4
2010-5
2010-6
2010-7
2010-8
2010-9
2010-10
2010-11
2010-12
New Products
ECOPETROL’s Shares Futures and BANCOLOMBIA’s
Preferred Stock were introduced to the futures market
in February. The trades turnover of these instruments
amounted to COP $385 million, representing 1,53%
of the total trades. The accrued daily average passed
from 13 contracts in April to 430 in December. The new
stock futures evidenced a slow development but allowed
progressing in the entities readiness.
Likewise, as a response to the need of offering new
investment and hedge tools on exchange rate, the mini-
futures contract on TRM was launched in November. The
amount traded with this instrument since its entry to the
market represented 0,96% of the total trades, volume
equivalent to COP $242.265 million.
Training Program The consolidation of new and existing products was
materially supported by the implementation of our training
program addressed to direct traders of the market, through
seminars offered by the BVC to each one of the trading
desks. To supplement this, international conferences on
different derivative products trading were held with the
additional participation of financial curricula professors of
the main universities. A total of 624 persons were trained
and the largest covered group was the traders, with 56%.
Participants The number of participants increased during the year,
engaging four new entities as members of the market,
and there was an increase in the number of active
trading entities, which passed from 19 a 25. The BVC
accompanied the new entities both, in the process to get
ready, as well as in the entry to the Market.
The Market evidenced diversification, by type of
participant. While in 2009, 80% of the traded volume
was accomplished by SCBs, in 2010 such participation
was reduced to 54% (see Graph No 5). For all other
entities a participation increase is observed, pointing out
the amount traded by Banks, which passed from 13% in
2009 to 33% in 2010; furthermore, the nominal traded
volume by all entities increased on average 17 times with
respect to the previous year.Source: BVC
- Market Share per Entity Type
Volume Distribution per Instrument Type
Mar
ket
Dev
elop
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t
30
Banks
Brokerage firms
Financial Corp.
Pension Funds
Others
33,0%
13,5%
79,8%
9,8%
5,7%
2,7%
0,9%0,1%
0,2%
54,4%
2009
2010
Brokerage Firms
Pension Funds
Banks
Financial Corp.
Trust Companies
Leasing Companies
1714
3
3
11
1
3
9 9
2
1
2009
2010
Traders
Risk teams
Commercial & distribution
Students
Teachers
Managers
Others
56%
14%
11%
7%
6%2%4%
On the other hand, in 2010 the Derivatives Market
evidenced an increase in traded volume by clients, which
amounted to 18,42% , as compared to 6,35% of the
previous year. The traded volume by clients increased
The derivatives operations were mainly accomplished
through the trading terminal provided by the BVC.
Notwithstanding, the use of routing systems represented
9% of the traded volume during the year, with an amount
of COP $8,2 billion. This figure is equivalent to three
times the one recorded in 2009.
During the year a material increase in the listing volume
was evidenced. Market share of this segment reached
41% over total trading, as compared to 3% achieved in
due to the new use of derivative products in investment
structures of SCB’s clients. The house trading desks
operated 81,5% under this figure.
2009. Such increase was explained by the dynamics of
the Exchange Rate Futures market that maintained the
NDF’s operating in the migration process.
Finally, actions conducted by the BVC before the
competent authorities allowed approval of regulatory
amendments at the end of 2010, which created better
Market access conditions for foreign investment in
derivative products and a fiscal treatment more in line
with the market needs concerning investment in liquidity
indexes derivatives.
Source: BVC
Source: BVC
Attendance per Agent Type
- Number of Members per Entity - Market Share per Entity Type M
arke
t D
evel
opm
ent
31
100%
90%
80%
70%
60%
50%
40%
20%
30%
10%
0%
2010
-1
2010
-2
2010
-3
2010
-4
2010
-5
2010
-6
2010
-7
2010
-8
2010
-9
2010
-10
2010
-11
2010
-12
Third Parties Prop.
100%
120%
80%
60%
40%
20%
0%
2009 2010
OTC Electronic
3%
97%
41%
59%
In 2011 the BVC shall continue with the promotion
and development of its strategy in the Derivatives
Market in three fundamental aspects: consolidation of
the existing products with the implementation of new
liquidity schemes, training sessions to the Market and
the expansion of products supply on local and regional
underlying items. All the above, given the importance
of the Derivatives Market internationalization process
expected to take place in 2011 with the corporate
integration of the Colombian and Peruvian Exchanges,
as well as with the MILA launching.
Source: BVC
Source: BVC
Volume by Trading Account
Volume Distribution per Transaction Origin
Mar
ket
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elop
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32
Issuers Management
The main management objective with local and foreign
issuers is to contribute to the growth and development
of the capitals market by channeling savings towards
productive investment, seeking new Fixed Income and
Equity issuers and giving more potential to the current
ones.
In 2010, the market promotion made by BVC brought
forth the listing of 14 new securities issuers, of which
10 corresponded to debt, and 4 to equities. In addition,
the launching of the Colombian Global Market (CGM) is
highlighted, where 21 foreign stock were registered in an
independent trading board.
With regard to services provided to issuers, the BVC
worked in continuous improvement entering into and
executing special operations which, is reflected in the
excellent results obtained in the service satisfaction
individual surveys, as well as in the provided services
global survey.
To conclude, it is pointed out that billing for listing and
maintenance fees of securities issuers represented
15,80% of the Company’s total operating income.
Issuers CommitteeThe Issuers Committee is a discussion body of
representatives from securities issuer entities listed at the
BVC that studies the most relevant topics of the market
to feedback different authorities with its experience.
Such committee was created in 2009 and it continued
in 2010.
Likewise, it studies and discusses topics of interest for
the issuers and assesses regulations proposals that
may have an impact on their entities, in order to submit
concrete motions to the Financial Superintendence,
the Ministry of Finance and any other regulatory or
legislatives entities, if required.
Source: BVCNumber of issuers
Fixed income
Equity Market
2004
200381
108121
106140
98162
94149
90147
89
87
86
188
171
2005
2006
2007
2008
2009
2010
2000 50 100 150
Historic Issuer Evolution
Mar
ket
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elop
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t
33
The Committee is comprised by ten securities issuer
companies who designated a principal member and an
alternate member to act as spokesmen in the discussion
and study of different topics. Furthermore, the Committee
has a chairman designated by the other members, who
is in charge of ensuring correct development of the
tasks and leads the different discussions, proposals and
commitments acquired in furtherance of the quarterly
and annual sessions.
The Issuers Committee is supported by the Exchange
throughout development of its different sessions and
in line with the above it led the organization of the
Annual Issuers Meeting held on November 30th. Topics
dealt with in 2010 were debated in such meeting and
Source: BVC
$ 16.000.000
$ 14.000.000
$ 12.000.000
$ 10.000.000
$ 8.000.000
$ 6.000.000
$ 4.000.000
$ 2.000.000
$ 0
5352
33
22
13
Raised volume
No. auctions
Rais
ed v
olum
e (C
OP
Mill
ions
)
2006 2007 2008 2009 2010
attendants had the opportunity to state the issues they
deemed relevant to be studied and discussed by the
Committee in 2011.
Fixed Income It is worth mentioning that in 2010 the BVC was a
strategic ally in the growth of Colombian companies.
In this year 35 companies, 10 of which were recently
incorporated, obtained financing for their projects
issuing debt securities. Throughout the year such issuers
performed 53 Dutch Auctions or final demands, and in
total obtained funds in the capitals market amounting to
COP $13,79 billion, increasing by 2,9% the amount of
debt placements through special trades accomplished
at the BVC, as compared to 2009.
Numbers of Auctions and Raised Volume
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ket
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Tabla 1. Operaciones Especiales de Renta FijaIssuer No. of Transactions Security Amount Raised
Banco Bilbao Vizcaya Argentaria Colombia S.A. BBVA Colombia 1 Ordinary Bonds $ 468.680
Banco Colpatria Multibanca Colpatria S.A. 1 Subordinated Bonds $ 154.400
Banco Davivienda S.A. 3 Ordinary Bonds $ 1.250.000
Banco de Bogotá S.A. 1 Subordinated Bonds $ 199.998
Banco de Comercio Exterior de Colombia S.A. 1 Ordinary Bonds $ 382.370
Banco de Occidente S.A. 1 Ordinary Bonds $ 359.550
Banco Popular S.A. 3 Ordinary Bonds $ 1.100.000
Banco Santander Colombia S.A. 1 Subordinated Bonds $ 140.000
Bancolombia S.A. 1 Ordinary Bonds $ 600.000
Carvajal Internacional S.A. 1 Ordinary Bonds $ 400.000
Cementos Argos S.A. 2 Commercial Papers $ 250.000
Citibank Colombia S.A. 2 Ordinary Bonds $ 255.900
CMR Falabella S.A. 2 Ordinary Bonds $ 92.950
Codensa S.A. E.S.P. 1 Ordinary Bonds $ 225.000
Ecopetrol S.A. 1 Public Debt Bonds $ 1.000.000
Emgesa S.A. E.S.P. 1 Commercial Papers $ 70.000
Empresa de Energía del Pacífico S.A. E.S.P. 1 Ordinary Bonds $ 600.000
Empresas Públicas de Medellín E.S.P. 1 Public Debt Bonds $ 500.000
Fideicomiso No. 3-4 1331 Concesionaria de Occidente 1 Ordinary Bonds $ 162.500
Fideicomiso Titularización Inversiones Conconcreto S.A. 1 Credit Content Securities $ 100.000
Financiera Andina S.A. Finandina 3 Ordinary Bonds $ 86.083
Financiera de Desarrollo Territorial S.A. Findeter 3 CDTs $ 1.038.650
Grupo de Inversiones Suramericana S.A. 1 Commercial Papers $ 233.652
Helm Bank S.A. 1 Ordinary Bonds $ 400.000
Interbolsa S.A. 1 Ordinary Bonds $ 120.000
Isagen S.A. E.S.P. 1 Public Debt Bonds $ 400.000
Leasing Bancolombia S.A. 2 Ordinary Bonds $ 620.000
Leasing Corficolombiana S.A. 1 Ordinary Bonds $ 86.332
Patrimonio Autónomo Grupo Financiero de Infraestructura 2008-1 1 Ordinary Bonds $ 180.161
Patrimonio Autónomo Grupo Financiero de Infraestructura 2010 1 Ordinary Bonds $ 121.605
Patrimonio Autónomo TDEX 10-1 1 Credit Content Securities $ 345.700
Patrimonio Autónomo Títulos Homecenter 1 Credit Content Securities $ 100.000
Patrimonio Autónomo Transmilenio Fase III 2 Credit Content Securities $ 282.270
Titularizadora Colombiana S.A. Hitos 6 Mortgage Securities $ 1.169.935
UNE EPM Telecomunicaciones S.A. 1 Public Debt Bonds $ 300.000
TOTAL 53 $ 13.795.737
(COP Millones)
Source: BVC
Fixed Income Issuances
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ket
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elop
men
tFurthermore, it is worthwhile highlighting the trust of
investors in this market with
three relevant facts. First, the issues demanded amount
which is approximately COP $28,47 billion, corresponding
to 2,06 times the total amount placed.
Second, the success in securities rated AA+ issuances
accomplished by companies of the real and financial
sectors, such as Carvajal Internacional, Financiera
Andina, Grupo Financiero de Infraestructura
(Infrastructure Financial Group), Interbolsa and Isagén,
which obtained 14,8% of the funds placed through debt
issues in 2010.
And a third aspect, the long placement terms, between 15
and 30 years, of companies such as EPSA, Isagén, Grupo
Financiero de Infraestructura, EPM and Ecopetrol, which
allows them a long-term financing, at attractive rates.
35
Source: BVC
$ 3.500.000
$ 3.000.000
$ 2.500.000
$ 2.000.000
$ 1.500.000
$ 1.000.000
$ 500.000
$ 0
Demanded Volume
Allocated VolumeCOP
Mill
ions
Individuals Legal Entities
Pric
e (C
OP)
42,48%25.000
20.000
15.000
10.000
5.000
_
$16.129 $22.980
30/12/201005/10/2010
Price Evolution of Banco Davivienda Stock (PFDAVVNDA)
Equity Issue Allocation of Banco Davivienda by Investor Type
Equity Market Four new issuers of equities were listed in 2010. Canacol
Energy became the second foreign issuer in having
access to the market. Banco Davivienda and Proenergía
Internacional followed the process, together with Fondo
de Capital Privado Inmobiliario Grupo Interbolsa, which
listed its equity securities.
Within the special operations on equities accomplished,
it is worthwhile pointing out the primary issues of
Banco Davivienda preferred stock, and of Constructora
Conconcreto’s and Fogansa’s common shares.
Source: BVC
ISSUER
BANCO DAVIVIENDA CONSTRUCTORA CONCONCRETO FOGANSA
Value
Allocation Date
Suscription Price per
Share (COP)
Number of total shares
allocated
Total Amount Allocated
(COP)
Total Amount
demanded (COP)
September 20th, 2010
$ 16.129
26.000.000
$ 419.354.000.000
$ 5.461.633.757.108
December 20th, 2010
$ 1.315
72.000.000
$ 94.680.000.000
$ 1.198.903.836.360
December 30th, 2010
$ 2.000
5.202.797
$ 10.405.594.000
$ 10.405.594.000
Ordinary Shares Ordinary SharesPreffered Shares with no voting rights
Equity Issues
Regarding Shares Public Offerings (SPOs), three
transactions were executed with a total awarded amount
of COP $88.615 million in securities of Compañía
de Electricidad del Tuluá, Compañía Colombiana de
Inversiones and Proenergía Internacional. In the last
trading, Compañía de Petróleos de Chile –COPEC-
acquired the additional shares with which it became the
beneficial owner of 56,15% of Proenergía Internacional’s
outstanding shares, acquiring control of the company.
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Source: BVC
Public Offers of Shares
IssuerResult Publication
DatesRaised Volume(COP Millions)
Compañia de Electricidad de Tulúa S.A. E.S.P. 24/08/2010 $1.873
Compañia Colombiana de Inversiones S.A. E.S.P. 20/09/2010 Deserted
Proenergía International S.A. 16/12/2010 $86.742
Total $88.615
Colombian Global Market (International Quotation System)
The Colombian Global Market was launched last
December 15. This made it possible to trade foreign
securities at BVC, under the international quote modality.
The CGM allows improving competitiveness among
international markets; increases public offerings of
securities, and allows brokers to increase their business
opportunities.
Such securities will be traded, cleared and settled
through the systems currently managed by the BVC in
an independent board or session and Deceval shall be
the entity in charge of managing such securities through
the omnibus account held with Deutsche Bank, in its
capacity as international custodian. In addition, trading
hours were expanded, homologating the time with the
New York market trading system.
The securities listed in the CGM are only addressed
to professional investors, in the terms established in
Decree 2555/2010. Furthermore, it is important to note
that a securities listing application may only be made by
Source: BVC
Sponsor (Brokerage Firms)
Correval S.A. Interbolsa S.A. Valores Bancolombia S.A.
Anadarko Petroleum Corp (APC) Amazon.com Inc (AMZN) Apple Inc (AAPL)
Murphy Oil Corp (MUR) Barrick Gold Corp (ABX) Bank of America Corp (BAC)
Citigroup Inc (C) Caterpillar Inc (CAT)
General Electric Co (GE) Chevron Corp (CVX)
Google Inc (GOOG) Exxon Mobil Corp (XOM)
Gran Tierra Energy Inc (GTE) The Goldman Sachs Group Inc (GS)
Pfizer Inc (PFE) Johnson & Johnson (JNJ)
Research In Motion Ltd (RIM) JPMorgan Chase & Co (JPM)
Schlumberger Ltd (SLB) The Procter & Gamble Co (PG)
Wal-Mart Stores Inc (WMT)
Issuers listed in 2010 in the Colombian Global Market (CGM)
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37
ENTITY TYPE
PRODUCT BROKERAGE FIRM BANKS TRUST SELLER TOTAL
Own data
Internal Routing
External Routing
E-trading Data
Internal Data
Back Office
Distribution Data
15
5
7
7
5
6
N.A.
2
1
N.A.
N.A.
1
N.A.
N.A.
2
0
N.A.
N.A.
0
N.A.
N.A.
N.A.
0
N.A.
N.A.
0
N.A.
2
19
6
7
7
6
6
2
SAE Allies
Exchange Broker Firms (SCBs, for its initials in Spanish),
who shall assume information responsibilities and the
obligations contained in the mentioned Decree, as
well as in BVC Regulations and Single Circular, in their
capacity as Sponsors.
COMMERCIALMANAGEMENT Commercial management in 2010 was concentrated in
promoting and selling new products and services, and in
accompanying the listing of the Exchange Broker Firms
(SCBs) for the new MILA market, and strengthening
the building of loyal and personal relations with clients,
thorough value generating interactions.
Important changes have occurred in the services sale
process. Clients have been invited to participate in the
implementation of new services, by getting involved
in a pioneers program that allows them participating
since the developing and testing stage, until launching.
Leadership of participating clients in the program has
facilitated the implementation of the process and their
acquaintance with the service, obtaining effective and
efficient feedback in both directions. In the particular
case of Fixed Income- SAE-, Interbolsa and Correval
acted as pioneers, who at the end of the year were in the
testing phase.
SAE was positioned in the market as a product that
provides competitive advantage in business development.
During the year, entities related to the product increased,
passing from 11 in 2009 to 21 in 2010. Herein below is
a list of clients, by service:
Source: BVC
Mar
ket
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t
38
The PRIM Board promotion, a product launched in May
as a result of the team work between the Exchange
and the banking sector, was intensified through the
commercial force in 2010. At the end of the year, COP
$957.000 million had been issued through the PRIM,
with a monthly average of COP $119.000 million. Ten
direct issuers actively participated, and two were involved
in the underwriting contract. This board provided income
for COP $50.58 million during the year.
The launching of the MILA market bought forth new
challenges to BVC’s commercial area. Increasingly, the
importance of the Exchange participation in the clients’
readiness stages becomes evident, particularly in the
case of MILA, to help understanding of the integration
functional, commercial and operative model, and the
immersion process of the three markets.
BVC’s commercial force assisted the SCBs in their
approach to the Chilean and Peruvian markets. Visits
were made to the Stock Exchange Markets of the two
countries, with attendance of 68 Colombian clients.
During such trip every delegation had the opportunity to
know the regulators, the clearing houses and the main
issuers, getting closely acquainted with the operation of
the markets and organizing one-on- one encounters with
the different brokers of the country. As a result, clients
made approaches and entered into commercial alliances
to support MILA’s future operation.
In November, commercial management was centered in
the dissemination and organization of MILA’s launching
official event, in order to summon foreign investors,
vendors, and other important actors of the international
market, to promote and begin positioning the global
trading accounts of this market.
Likewise, during the year activities focused on building
loyal and personal relations with clients. At the beginning
of the year the event “TRADERBVC” was held for the
first time, through which the Exchange acknowledged
the efforts and management activities of those traders
and entities that participated the most in such markets.
Furthermore, the BVC managed the development and
implementation of strategic activities addressed to
provide tools to the SCBs to be more competitive with
their clients; to attract new investors to the sector; and to
acknowledge and give more feasibility to the brands. In
this sense, the first syndicated type market research for
the Stock Exchange sector, called “Customer Satisfaction
Level of the SCBs and Top of Mind” was developed and
co-financed with the participation of nine firms.
The results allowed obtaining strategic information
to optimize retention of clients, improve their service
standards; generate strategic actions to achieve better
recognition of their brands and improving their products
portfolio.
Also, the first advertising campaign of the Stock
Exchange sector was launched, jointly with five SCBs.
The campaign sought to promote investment in the
Exchange and to increase feasibility for the participants’
brands.
Finally, clients have acknowledged the management
accomplished during the year through the rating granted
to the Exchange in the annual customer satisfaction
survey. Such survey reflected an increase in clients’
percentage with loyal and personal relations with the
BVC, passing from 15% in 2008 to 31% in 2010, as well
as in the total satisfaction indicator which passed from
4.1 to 4.3 in the same period.
Mar
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MARKET DEVELOPMENT Chapter 2
The insertion of the Exchange in international markets
was one of the pillars that guided the regulatory strategy.
In this front, the Exchange promoted changes tending
to make feasible the integration of Equity Markets
managed at the Lima Stock Exchange, the Santiago
Trade Exchange and the Colombian Stock Exchange.
As a result of this management, the National Government
issued regulations that allow trading of cash equities
in the integrated market, making it feasible to create
accounts without segregation of the beneficial owner in
the clearing houses, taking into account all applicable
rules for the market integration to become a reality.
The General Regime of Capital Investments from
Abroad in Colombia and of Colombian Capital Abroad
was streamlined. This change, particularly in the regime
applicable to portfolio investments, allowed:
Regulatory Developments M
arke
t D
evel
opm
ent
41
• Implementation of Securities Lending.
• Making payments through a manager, eliminating the
obligation of establishing a foreign capital investment
fund and
• Accomplishing monetary operations with derivatives financial
instruments. Likewise, the establishment of guarantees
required for such trades were expressly authorized.En
ese mismo contexto, se eliminó la solidaridad que
existía para los emisores por el cumplimiento de las
obligaciones de registro de la inversión extranjera.
In this same context, the existing solidarity for issuers
regarding compliance with foreign investment registering
obligations was eliminated.
Concerning the Tax Reform that took place in the last
month of 2010, the Exchange was able to match the
existing tax treatment for profits obtained from the sale
of stock, with the treatment for the trade of derivatives
consisting in securities the underlying item of which is
exclusively represented in shares listed in a Colombian
securities exchange, or in indexes or interest in collective
funds reflecting the behavior of such shares.
In other fronts, the National Government, by means of
Decree 2555 integrated into a single body of rules, those
applicable to the financial, insurance, and the securities
market, which significantly simplified its structure.
In addition, during the year the BVC promoted and
accompanied the updating of regulations that ended
in the issuance of Decrees related with provision of
prices to the market, the financial consumer protection
regime, the liquidity creators, the multi-funds scheme,
the external audit for entities supervised by the Financial
Superintendence, the securities centralized clearing
houses, cancellation of foreign shares listing, severance
pay and pension funds investment regime, as well as
the insurance companies technical reserves, materiality
criteria applicable to capital investments accomplished
through affiliates and subsidiaries of financial entities
from abroad, requirements for the offering of securities
issued by foreign entities, and the Exchange funds.
Herein below there is a list of the amendments approved
regarding the regulations of the transactional systems
managed by BVC:
BVC- Equity Market• Implementation of Securities Lending.
• Colombian Global Market (system of foreign
securities quotes)
• Trading of spot and simultaneous operations for BOCEAS
MEC Fixed Income• Creation for the Prim board
• Management of quotas whenever systems yielding
value added are used.
• Orders router in the fixed income market
Standardized Derivatives• Adjustment to the trades annulment procedure
Intellectual Property During 2010, the BVC accomplished actions tending to
protect its brands and to monitor registration applica-
tions that had been filed. To that end, follow-up is made
to the effectiveness of each of its brands, as well as to
the new registration procedures that have to be submit-
ted before the authorities.
As a result of such function, the BVC obtained the regis-
Mar
ket
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tration of the brand Colombia Capital in classes 35 and
36. In addition, together with Depósito Centralizado de
Valores S.A., it started the registration proceeding for the
MILA Brand in classes35, 36 and 42.
It also fully complied with the copyright regulations with
regard to the installed software. The Administration
has complied with the provisions of Section 57, Decree
2649/ 1993.
TECHNOLOGICAL EVOLUTION
In 2010 the Exchange successfully reinforced certain
strategic pillars of its technological infrastructure, with
the objective of supporting the new business needs ex-
pressed in interconnection of the new Integrated Market
of the region (MILA) and opening the door to new possi-
bilities of growth in the local market.
The IT architectural design seeks to comply with the
highest international standards, being ready to support
the ongoing business increase, the development of in-
novating products, and the connectivity of brokers in the
region.
The challenge posed by the integration of the Colom-
bian, Peruvian and Chilean Equity Markets demanded
the implementation of multiple technologies, such as
the adoption of the routing HUB to multiple destinations
based on FIX protocol, to achieve functionalities such
as: transnational entry of stock purchase-sale orders,
brokers risk control, and multi-market trading screens.
Likewise, the strengthening of the orders messenger and
transportation infrastructure (EAS) was worked, and this
will allow supporting the organic growth of trading volu-
mes in the near future when having several countries
connected to our trading system.
The integrated functionality tests were started at the end
of 2010 involving not only Exchanges, but also regulators
and members of the market that wished to participate in
the first White March.
In the local strategic development plane, the Exchange
worked in improvements to the service levels and in te-
chnical support for clients and third parties both, in their
certification stage for involvement, and in maintenance.
Care given by the Electronic Access Services (EAS) de-
serves highlighting.
Likewise, through technological enhancements BVC see-
ks to raise the efficiency of transactional systems. With
this in mind, the response times were reduced by 80%
in electronic data delivery services through SAE. The mi-
dterm objective is to match the standards used in the
large Exchanges of the world.
The technological innovation processes were also
applied to our issuer clients. The experience of the re-
cent past in the sale of Ecopetrol’s shares allowed us to
automate the processing of clients’ massive requests in
equity democratization processes, via E-form. This was
the case of Banco Davivienda, where the platform was in
capacity of processing up to 300.000 requests per day.
Increasingly the Exchange’s technological innovation is
more sophisticated, adopting best practices available in
the market, with the philosophy of continuing to improve
the experience of clients’ interaction with the Exchange.
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New Products
Electronic Access Services (EAS)
Within the channels development strategy, the BVC works
so that the Access of the final client to the Exchange’s
systems becomes more efficient. This is why connectivity
mechanisms are developed and implemented giving
access to, and optimizing execution of joint procedures
between the Exchange and the brokers.
The Electronic Access Services (EAS) comply with these
functions upon integrating the brokers’ applications with
the BVC’s systems. Hence, EAS provide benefits for the
brokers, facilitating their clients’ access to the securities
market and allowing automation of their internal
processes.
Access of local and foreign investors to the BVC’s
equity market, through external routing (E-trade) and
the interconnection with the Peruvian and Chilean
Exchanges in the Latin American Integrated Market
frame (MILA), are two examples of the way in which EAS
provides access to new participants in the local market.
As a result of the implementation of the channels
development strategy, the volume transacted through
external routing increased 86%, passing from COP $1.85
billion in 2009 to COP $3.43 billion at year closing.
Regarding the strategy to improve the market
infrastructure, the Exchange placed two new services at
MILA Interconnection
ELEX X-STREAM TELEPREGON
1
ELEX Clients X-Stream Clients SEBRA Clients
Conceptual Diagram
GWFIX
GWFIX
GWFIX
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the disposal of the brokers (EAS Back Office and internal
routing) and continued providing market information
(EAS In house Information and EAS Market Information).
EAS Back Office offers the brokers the possibility to
accomplish the complementation and compliance
process in an automated manner. Through these
services, 287.582 transactions or fractions were
automatically completed throughout the year.
The internal routing services allow brokers accomplishing
transactions without need of using the BVC’s screens.
This characteristic grants the brokers the possibility
of integrating their risk assessment systems with the
LEO (Orders Electronic Book), decreasing the inherent
operative risk of entering mistaken orders. Through
internal routing, the traded volume amounted to COP
$960.000 million.
In house Information EAS allows its users receiving
information of the trades and orders accomplished by
them. The number of entities subscribed to this service
grew 100%, passing from 10 in 2009 to 20 at 2010
closing.
Market Information EAS, provides its users with the
necessary information to feed their E-trade applications
and to create internal screens with tools suitable to their
particular needs. The number of users of this service
grew 133%, passing from 3 in 2009 to 7 in 2010.
The addition of these factors made it possible for the
Exchange at the end of the year to obtain revenues from
this product for COP $532 million, which implies a 265%
increase with regard to the COP $146 million obtained in
the preceding year.
Infoval
Although Colombian market has deepened its liquidity in
the last years, certain private debt references continue
being inconvenient upon estimating valuation prices due
to the marginal number of businesses observed.
Infoval, jointly with the Inter-American Development
Bank (IDB), consulted alternatives leading to valuation
methodologies that improve a fair exchange pricing
estimate. During such research, different agents gave
their feedback, covering several aspects deemed
important in determining prices.
In this same line, methodological changes were
accomplished in the estimate of the zero coupon curve,
achieving a better adjustment in the estimated rates for
terms under 365 days to maturity.
On the other hand, on March 25 the National Government
issued Decree 985 regulating the pricing activity in the
Colombian market and the investment pricing of entities
subject to inspection and supervision of the Financial
Superintendence. Within the framework of these
regulations there is an opportunity to give independence
to the pricing activity and to offer alternatives for the
brokers. The Decree provides a one year transition period
within which BVC has been conducting activities leading
to comply with the specification therein contained and to
development of the strategy to face the new challenge.
In addition, to cope with the expansion of the products
portfolio offered by the BVC and its affiliates, and trying
to facilitate brokers’ access to the necessary information
to manage their portfolios, Infoval started to provide
pricing of securities listed at the CGM and Derivex and is
carrying out the necessary adjustments to provide MILA
information.
In 2010 Infoval received revenues for COP $1.551 million.
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Market Data
The promotion and distribution of information support
BVC’s trading account at international level and the
attraction of new investors in the local market. Therefore,
the main purpose of IT and e-means management
is to deliver efficient information through a reliable
infrastructure that conforms to our clients’ needs.
In line with this objective, in 2010 BVC worked in three
fronts: the promotion of information through alliances
with the media and information vendors; the expansion of
their knowledge about the clients; and the improvement
of the support and service provided to clients.
Furthermore, the BVC focused its efforts on the
maintenance and progress of relations with information
vendors, strong allies in the internationalization and
trading account strategy. This way, five companies of
different countries (Chile, United States and England)
were engaged in the testing phase. This task seeks to
place information about the Colombian market at the
disposal of more foreign actors.
Colombia Capital
The Stock Exchange of Colombia is the executor of
the agreement entered into with the Inter-American
Development Bank (IDB) (effective since November,
2005), the main objective of which is to expand the
depth of the capitals market in Colombia; it has nine local
partners involved, including the National Association
of Entrepreneurs (Andi), the Colombian Association
of Severance Pay and Pensions Fund Administrators
(Asofondos), Deceval, the Chambers of Commerce of
Bogota, Medellin, Cali and Bucaramanga, Proexport,
and the Financial Superintendence of Colombia (SFC).
The activities accomplished in 2010 were developed as
follows:
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Component I, Issuers for the first time: As of this date, there are 46 companies involved in the
Agreement, three of which have launched bond issues
(Colombia (2), Alquería and Alpina), one stock issue
(ECOPETROL) and one Securitization of Assets (Home-
center-Sodimac).
Component II, Promotion to the Private Capital Industry: Through this component as of December 2010, 10
private capital funds have joined the Agreement:
SEAF Colombia, Tribeca, LAEFM Forestal and LAEFM
Hydrocarbons (I and II), Visión Capital Privado Interna-
cional FdF, Aureos Capital, ALTRA I, Escala Capital and
Mercantil Colpatria.
Also, there are 10 initiatives in process of being incor-
porated: ARCADIA Capital Partners, Progresa Capital,
GEM Colombia, Palmfund, Promisión, Global Securities,
TS Capital, Corficolombiana and Fairenergy.
Component III, Dissemination and Promotion Instruments:
Component III, Dissemination and Promotion
Instruments: during the year a compilation of three
Corporate Governance Booklets was made, one Issuers
booklet, six Case Studies prepared by Fedesarrollo,
one guide for the Legal Representative of Bondholders,
a guide for a Securities Clearance Agreement and a
Fascimile Value Guide, the documents of which may be
openly consulted through our web page where access
can be currently attained through different social
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Corporate GovernaceIn order to support the implementation of corporate
governance practices in 20 Colombian companies, in
June, 2008 the BVC entered into a non-reimbursable
technical cooperation agreement with Corporación
Andina de Fomento CAF. At 2010 closing, the project
had 16 enterprises, 11 of which joined in prior years.
The related companies as of 2010 were: Masering, C.I.
Disan, Instituto de Desarrollo de Antioquia -IDEA, Brío de
Colombia, and BancoAgrario. In addition, two enterprises
are now joining the process, and an additional one has
shown interest in joining the project.
Capital Markets Promotion EducationThe Exchange continues working in taking the Colombian
Capitals Market to a broader mass of people and in
approaching more and more the Securities Market to
all Colombians. The main tool to achieve this objective
is education, which is developed through three pillars:
physical presence through the BVC Points, academic
programs, and promotion of the market and its products.
BVC PointsDuring the year we continued expanding coverage
nationwide by opening of two new BVC Points, allowing
taking our brand and educational initiatives to 17 places
in the main 10 cities of the country.
BVC Points are used to develop activities focused on
promoting the market, providing access to information
in line and to educational programs, approaching
stakeholders to the SCBs and to other entities sharing
the market, such as the Financial Superintendence and
the Self-regulator of the Securities market (AMV, for it
initials in Spanish).
Academic programs: The academic offer was strengthened by increasing
the number of programs offered to learn to invest in
stock and in foreign currency, and by providing general
knowledge on the capitals market and its products.
We offer academic programs through BVC Points and
through an agreement with the universities. These
programs also include two contests: BolsaMillonaria and
Architects of the Market.
The agreements with universities offer specialized topics
on the securities market for pre-graduate students;
they endorse specializations, and develop extension
programs on topics related with investment and market
knowledge. In 2010, 65 students participated in 14 cities,
and agreements were strengthened with 25 universities
nationwide.
During the year, 2.870 Colombians, including students,
housewives, retirees and professionals participated in
this initiative. In addition, the scope of the courses with
conferences on the capitals market was supplemented
in order to inform on the entities’ role, rights, duties and
protection schemes for financial consumers, as well as to
promote the market products and to facilitate approach
of the firms to potential investors.
Furthermore, the contest “Bolsa Millonaria” that was
implemented nine years ago and is addressed to pre-
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communities and the micro-site www.nuestrabolsa.com,
which in 2010 reached more than 150.000 Colombians.
Likewise, the Exchange and Corferias carried out
the second specialized fair of the financial and stock
Exchange sector, Expoinversión, with an attendance of
more than 9.808 persons.
The educational front implied COP $1.167 million
revenues for BVC.
Markets In line with the massive strategy, the number of
individuals that make trades operations during a year is
increasing. During 2010, 190.914 individuals purchased
their sold shares, representing a 252% growth in the period
2003 – 2010.
graduate and post graduate students reckoned with the
participation of 7,630 students of 154 universities in 96
cities. The contest was also privately accomplished with
a banking entity that used it as a tool to train 822 officers
on Equity Market issues.
The BVC, in agreement with AMV conducted the first
version of the contest Architects of the Market, which
through research, seeks to deepen the knowledge of
pre-graduate and post-graduate university students on
the Colombian capitals market. The papers of those who
deserve acknowledgement are published and awarded
prizes. 35 Articles were received during the first version
of the contest.
Promotion of the Market and its Products: Promotion of the Market and its Products: Promotion
of the market is fulfilled with the delivery of information
through booklets, electronic newspapers, fliers, virtual
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Corporate Governance Chapter 3
4 The Recommendations Code of the Colombian Corporate Best Practices -Country Code- , issued through External Circular 028/2007 and amended by External Circular 056/ 2007, is a set of recommendations in matters of corporate governance, the adoption of which is voluntary, and the addressees are entities registered at, or having securities listed in the National Securities and Issuers Registry – RNVE, excepting in the Nation; and the equity trusts; the collective funds referred to in Decree 2175/2007; the universities mentioned in Act 546/1999; the territorial entities referred to in Section 286 of the Political Constitution; the loan multilateral bodies; foreign governments and foreign public entities; branches of foreign companies and foreign entities.
The Stock Exchange has incorporated high governance
standards in its corporate governance structure and has
established good governance practices in its guidelines
related to administration and management of the Company.
The increasing dynamics of the Colombian capitals market,
the projects within international scope, and the increasing
number of shareholders of the Exchange, constitute
factors that make it necessary for the BVC to consider the
Corporate Governance Rules as a fundamental tool for
good performance, growth, and creation of value.
The Company has characterized for being a leader in the
adoption and implementation of Corporate Governance
practices in Colombia, raking first and second in the results
of the survey “Country Code” in the two years where such
survey was implemented, as may be evidenced in the
results annually disclosed by the Financial Superintendence
of Colombia regarding the “best corporate practices
survey”, the purpose of which is to disclose compliance
with corporate governance practices by Colombian issuers,
and the adoption of the Country Code recommendations4.
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The BVC adopted its Good Governance Code in 2005,
which has been amended from time to time to meet
the growth demands and the increase in the number of
shareholders and also due to the increasing international
impact on the securities market.
The purpose of the Good Governance Code is to
establish parameters that, supplementing the applicable
statutory and legal regulations, will orient the way
in which the administration of the Exchange should
manage its situation as a commercial company, and
as an entity that exercises a public interest activity and
promotes development of the capitals market, securities,
derivatives, structured products, and foreign currency.
The Code contains principles and standards aiming at
guaranteeing the exercise of shareholders’ rights, and
a correct administration of the Company, together with
a sound management of relations with stakeholders
including detection, prevention, and control of conflicts
of interest, and the existence of a secure and transparent
market, with adequate pricing in the systems managed by
the Company or its subordinated companies. At present
there is an organizational commitment of the Company
that fosters and allows compliance with the provisions
foreseen in the mentioned Code.
Herein below we are listing the most relevant aspects in
matters of Corporate Governance developed during the
year.
The Board of Directors
The BVC’s Board of Directors is the body that has been
entrusted with “compliance with the strategic and
organization tasks of the Company, the maximization of
value and profitability in the interest of the shareholders,
as well as the development and operation of ordered,
transparent, and secure markets, with adequate pricing.
Likewise, the Board of Directors is to develop tasks to
evidence the existence and efficacy of internal controls
allowing adequate follow-up of the Company’s operation”5.
This body is made up by 13 principal members without
alternate members, 7 of which are independent6.
This body is made up by 13 principal members without
alternate members, 7 of which are independent . The
General Shareholders’ Assembly at its meeting held on
March 25, 2010 designated the following members:
5 Article 46 of the Bylaws 6 In accordance with Section 2.10.1.1.1 of Decree 2555/2010 and paragraph third of Article 47 of the Stock Exchange Bylaws, to be independent it is required not to have any relation whatsoever with the Exchange or with its “subordinated companies […], entities shareholders of the Exchange, […] partners, shareholders, or capital contributors of entities shareholders of the Securities Exchange of Colombia […], entities or individuals that provide goods or services to the Exchange or its subordinated companies […], as well as with an employee, administrator, proxy, mandatary, agent, advisor, consultant, contractor or supplier of goods or services of the Exchange or its subordinated companies […], or with entities that receive donations or contributions from the Exchange […], or with public entities with regulation and supervision functions regarding the securities public market”.
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Board of directors period 2010 - 2011
Sergio Clavijo Vergara Rafael Aparicio Escallón
Bernardo Guzmán Reyes Emilio Echavarría Soto
Carlos Eduardo Jaimes Jaimes Nestor Hincapié Vargas
Javier Jaramillo Velászques Rodrigo Jaramillo Correa
Roberto Junguito Bonnet Diego Jiménez Posada
Santiago Montenegro Trujillo Germán Salazar Castro
Juan Camilo Vallejo Arango
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It is to highlight that those who are members of BVC’s
Board of Directors are well acknowledged executives with
an excellent reputation. In order to ensure impartiality and
independence, none of them have labor or commercial
bonds with the Exchange or its affiliates.
Adoption of Country Code Recommendations
The BVC answered the survey on adoption of Country
Code recommendations, as established by the Financial
Superintendence. Such entity published the third annual
report based on a statistical analysis accomplished on
the data received from the surveys answered by issuers
of the real and financial sectors. Such results assess the
degree of implementation of the Corporate Governance
Measures foreseen in Country Code by Securities Issuers
during the period January to December, 2009.
Concerning the observations made by the Financial
Superintendence regarding the survey results dealing
with corporate good governance practices at the BVC,
we shall highlight the following:
“The Securities Exchange of Colombia, which complied
with 90,24% of the measures suggested by the Code,
continues being one of the entities that adopts most of
the recommended measures.”
“The Colombian Securities Exchange and Leasing Bolívar
with 90.24 % adoption of recommendations are the
financial sector issuers that reported the greatest degree
of compliance with the recommended measures.”
“(…) it is important to state that the Colombian Securities
Exchange excludes 4 measures because they are non-
applicable.”
Due to the above, we may state that the BVC, in its
capacity as Securities Issuer, maintains the leadership
in the implementation of Corporate Governance Best
Practices in the country, and shall continue working,
jointly with the authorities, in proposals and initiatives
required by the securities market in this respect.
Report on Compliance with Standards and Codes (ROSC).World Bank
In 2010 the World Bank, through the Financial
Superintendence, sent to the different associations of
issuers of the Colombian Securities Market, a survey
based on the Organization’s Corporate Governance
Principles for Economic Development and Cooperation
(OCDE) adopted in 1999 and amended in 2004, which
constitute a global parameter of Corporate Governance
practices.
The BVC filled in the survey in question, and it is reported
that the Company complied with 94% of the 51 applicable
recommendations. The questions were related to a)
protection to minority shareholders, b) remuneration and
evaluation of administrators and members of the Board
of Directors, c) functions of the Board of Directors and d)
internal and external controls of the Company.
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a. Main amendments to the Good Governance Code
In order to maintain our Good Governance Code updated
and in agreement with the new market trends and
demands, in 2010 certain amendments were made with
the purpose of accomplishing the relevant adjustments
to include the Colombian Global Market as part of the
markets managed by the BVC and the updating of the
Ethics Code with regard to the risk systems, controls
and mechanisms implemented by the BVC to identify
and timely deal with the risks and anti-ethical or illegal
conducts.
b. Board of Directors and its Committees
In accordance with the BVC’s Good Governance Code
and in order to facilitate development of functions and
compliance with objectives of the Board of Directors
and of assuring that in certain matters there should be
separation and analysis prior to remittance to the Board
of Directors, the following Committees were created:
In order to assess the activities of the Board of Directors
and its Committees, BVC’s administration takes into
account the following criteria: a) compliance with the
meetings schedule, b) the number of sessions in which
there was quorum to deliberate, c) attendance of each
one of the members to the meetings; d) compliance
with the scheduled agenda, and d) approval of the
corresponding minutes.
The following were the results corresponding to the
period April 2010 – December 2010:
c. Self-Assessment of the Board of Directors
The Good Governance Code of the Exchange contains
the obligation of annually accomplishing an individual
and a collective self-evaluation of the Board of Directors,
MembersBoard ofDirector
RegulationCommittee
Corporate GovernanceCommittee
Administrationand FinancialCommittee
AuditCommittee
Emilio Echavarría Soto 7/9 7/7 4/4
Diego Jiménez Posada 8/9 5/7
Néstor Hincapíe Vargas 3/9 1/4
Germán Salazar Castro 7/9 7/7
Rafael Aparicio Escallón 8/9 6/7 2/2
Roberto Junguito Bonnet 9/9 2/2
Bernardo Guzmán Reyes 6/9 1/3
Juan Camilo Vallejo Arango 6/9 5/7 4/4
Sergio Clavijo Vergara 7/9 7/7
Carlos Eduardo Jaimes Jaimes 9/9 4/4 3/3
Rodrigo Jaramillo Correa 9/9 2/2 3/4
Santiago Montenegro Trujillo 8/9 1/2 3/3
Javier Jaramillo Velásquez 8/9 2/2
Attendance% 66,4% 61,7% 90,0% 53,3% 58,3%
Complaince with schedule % 100% 100% 100% 100% 100%
No. of meetings with quorum to deliberate
9 7 2 4 3
Compliance with agenda 95% 100% 100% 100% 92%
% Approval of minutes 100% 100% 100% 100% 100%
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in order to establish the efficiency and efficacy levels
regarding compliance with duties and functions,
achievement of objectives, and assumption by the Board
members of the principles and responsibilities of the
Board.
The self-evaluation examines the individual participation
of each member of the Board, the performance of the
Board of Directors as a whole, and the relevance, depth,
and frequency with which the different topics of the
Board are to be discussed.
d. Remuneration Policies for the Board of Directors and
the President of the BVC
The Good Governance Code provides that the Corporate
Governance Committee has among its functions the
determination of the Board of Directors’ remuneration
policies.
Furthermore, the Code provides that the Board of
Directors shall define the remuneration of the BVC’s
President and prohibits payment of remuneration to
the President in shares or other securities issued by
the Company. Neither will the President have the option
to acquire shares or other securities issued by the
Exchange.
The Good Governance Code of the Exchange contains
the obligation of annually accomplishing an individual
and collective self-evaluation of the Board of Directors,
in order to establish the efficiency and efficacy levels
regarding compliance with duties and functions,
achievement of objectives of such body, and assumption
of the Code principles by the members of the Board with
their own accountability.
Individual participation of every co-director is examined
through self-evaluation, with the performance of the
Board of Directors as a whole and the relevance and
frequency with which the different topics are to be
debated at the Board.
e. Remuneration policies for the Board of Directors and
the President of the BVC
According to the Good Governance Code, the Corporate
Governance Committee is to study the Board of Directors
remunerations policy, among its functions.
Likewise, the Code provides that the Board of Directors
defines the remuneration of the BVC’s President and
prohibits payment in kind (shares or other securities
issued by the Company as remuneration). Neither is
the President allowed to receive incentives or options
to acquire shares or other securities issued by the
Exchange.
f. Trades entered into with partners and administrators.
During 2010 the Exchange did not enter into trades with
its directors, administrators, main executives and legal
representatives including their relatives, partners and
related persons, different from labor relations. Likewise,
commercial relations with its clients were framed within
market terms and conditions.
g. Legal Proceedings
As of December 31, 2010, seven judicial proceedings
have been filed against BVC, with claims amounting to
COP$ 7.439.175.520. The corresponding contingencies
values are found in the respective contra-accounts
and, acknowledging the rating of such contingencies,
accounting provisions amount to around COP$
103.625.520.
Shareholders’ Rights
Subject to the legal provisions and to the Bylaws of the
Company, BVC’s Good Governance Code contains a space
that establishes and develops BVC’s shareholders rights
related mainly to agenda topics that may be discussed
at the General Shareholders’ Meetings, the information that
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shall be placed at the disposal of shareholders, and issues
regarding prompt and sufficient access to information. It
includes the possibility of requesting specialized audits,
making recommendations to the Corporate Governance
Committee. On the other hand, it establishes the
right to discuss and solve differences arising between
shareholders or administrators and the Company, as well
as controversies arising among shareholders or between
them and the administrators, and gives the possibility of
presenting petitions, claims, or proposals to the Company
and of obtaining a timely response thereto.
Basic activities of the Exchange’s Administration and Management
a. General Shareholders’ Assembly
In 2010 the Exchange’s General Shareholders Assembly
held its ordinary session on March 25, prior call made by
the Administration.
The Assembly was attended by shareholders that
represented a total of 12,284,656,481 shares, equivalent
to 65.7890% of the outstanding shares. Likewise, Doctors
Rafael Aparicio Escallón, Chairman of the Board of Directors
of Bolsa de Valores de Colombia S.A.; Juan Pablo Córdoba
Garcés, President of the Exchange, and Jairo Perdomo
Mantilla, Principal External Auditor, member of the firm
Deloitte &Touche Ltda., attended the meeting.
The Assembly studied and analyzed the reports of the
Board of Directors, the President of the Exchange and
the External Auditor corresponding to the management
developed during 2009; likewise, the Assembly approved
the motion for the distribution of profits, the Financial
Statements corresponding to business year from January
1st to December 31, 2009, accompanied by their respective
notes and by the opinion issued by the External Auditor of
the Exchange represented by the firm Deloitte & Touche
Ltda., who was designated by the members of the Board
to act for the period April 2010-March 2011 determining
its fees and approving the relevant appropriation for such
activity.
It is to state that BVC’s General Shareholders’ Assembly
approved an amendment of Bylaws at its ordinary session,
as follows:
a. BVC’s Corporate Purpose: Determine the manner in
which the BVC may participate in the corporate capital of
other companies, and the possibility to provide services to
such companies.
b. Duties of the Board of Directors: To include, within the
functions of this management body, those duties that were
not contemplated by BVC’s corporate provisions in order to
harmonize the Bylaws with Circular 038/2009 issued by
the Financial Superintendence.
c. Duties of the President: To include, within the President’s
duties, those tasks that were not specifically contemplated
in BVC’s corporate provisions in order to harmonize the
Bylaws with Circular 038/2009 issued by the Financial
Superintendence.
Under this premise, it is important to state that the Exchange,
complying with its Corporate Governance policies, placed at
the disposal of its shareholders, within the term established
for the purpose, the information and necessary documents
for deliberation and decision-making.
b. Assessment of the President of the Exchange
The Corporate Governance Committee of the Board of
Directors assessed the activity of the President of the
Exchange corresponding to the 2010 period, for which it
took into account compliance with the goals and indicators
established in the Balanced ScoreCard and form provided
for such purpose
c. Annual report of the Audit Committee to the Board of
Directors
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Bogota D.C., February 23, 2011
SeñoresBOARD OF DIRECTORS Bolsa de Valores de Colombia S.A.Bogota
Ref.: Annual Report of the Audit Committee to the Board of Directors
Gentlemen:
The Annual Report of the Audit Committee of the Board of Directors of Bolsa de Valores de Colombia S.A. (the Exchange), is presented based on what is established in on paragraphs 2.3.10. and 2.2.32, Chapter IX of Accounting and Financial Basic Circular, abiding by the provisions of paragraph 7.7.1.2.1., Chapter 9, Title I of Legal Basic Circular, both provisions issued by the Colombian Financial Superintendence.Based on the above and on the provisions of paragraph 7, Section 4.1.4.18 of the Exchange’s Good Governance Code, in my capacity as Chairman of the Board of Directors’ Audit Committee, I shall present the report on the activities developed and the results obtained by the Committee during the period April 2010 – February 2011:
I. Composition of the Audit Committee
According to paragraph f, Article 50 of the Exchange’s Bylaws, the Audit Committee is made up by three members of the Board of Directors, who are independent. For the period 2010 - 2011 doctors: Bernardo Guzmán, Santiago Montenegro and myself Carlos Eduardo Jaimes, were elected and I was designated Chairman of the Committee.
II. Duties and powers
According to the provisions of Section 4.1.4.14 of the Exchange’s Good Governance Code, the Audit Committee is a body that supports the duties of the Board of Directors concerning internal control follow-up of the entity and of the audit function.The specific duties of the Audit Committee are detailed in Section 4.1.4.15 of the Exchange’s Good Governance Code, abiding by the statements of the Legal Basic Circular concerning the role and functions of this body.III. New model of Institutional Internal Control
The second stage of the Exchange’s Internal Control System–SCI adaptation to the guidelines established in External Circular 014/2009, as amended by Circular 038 of the Colombian Financial Superintendence was executed in 2010. Such process that started in 2009, allowed improving aspects of the system, identifying and managing gaps, and what is most important, incorporating good practices and highly acknowledged international standards in the institutional internal control.
Based on a work plan and with the participation of all relevant actors, the Exchange developed several activities within which statutory amendments are highlighted, together with the approval
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of amendments to the Good Governance Code, the definition of policies by the administration bodies, approval an anti-fraud program and of a new version of institutional Internal Control Manual, the implementation of several adaptations to procedures in different fields, development of dissemination and training events, and even the incorporation of new IT tools to support control management, such as the ERA –Enterprise Risk Assessor application, implemented by Internal Audit in 2010 and in process of being adopted by the Quality and Risks Management for 2011.
With the execution of the aforesaid tasks, the Exchange complied with the regulatory requirements established for 2010, and in particular it timely certified the required adjustment for the Exchange before the Colombian Financial Superintendence, concerning the following elements of the Internal Control System
a) Risk Management. b) Information and Communication of Control Activities (Including the Internal Control System for Accounting Management and IT Management). c) Monitoring. d) Independent Assessment.
Notwithstanding the tasks accomplished, the challenges of the Administration in the future regarding this matter are essentially the maintenance of the systems and their consolidation, due to which adequate risk management, self-assessment from time to time, and independent assessment by the control bodies, are of great importance to support control’s continuous improvement.
IV. Internal Control Policy of the Exchange
Internal control policies approved by the Board of Directors on August 26, 2009 were fully effective in 2010 and did not undergo any amendments. Such guidelines are based o n self-regulation, self-control, and self-management principles, and encompass guidelines in all Internal Control System structural fields, i.e. environmental control, risk management, control activities, information and communication, monitoring and assessment.
V. Committee’s Operation Assessment
According to the Exchange’s Good Governance Code policies, and in order to assess the activities conducted by the Board of Directors’ Audit Committee, the following factors were taken into account: i) compliance with the schedule set for the meetings; ii) number of sessions where there was quorum to deliberate; iii) attendance of each one of the members to the meetings, iv) compliance with the scheduled agenda, and v) approval of the corresponding minutes. Within the analysis period, the Board of Directors’ Audit Committee has ordinarily met four (4) times, including the session where this Report was submitted for consideration. All meetings have had quorum to deliberate and decide. The agenda of every session, together with the presentations used at the meetings were placed at the disposal of the Committee members in BVC’s web page. 24 of the 26 scheduled topics have been discussed in the past meetings, which means that 92% of the subjects initially proposed have been studied.
Furthermore, the Committee approved 100% of the minutes, and on average, attendance of the members to the meetings held represent 58.3%.
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VI. Assessment of the Internal Control System Effectiveness
In order to obtain a complete overview to assess the institutional internal control system, the Committee addressed different topics for the period 2010-2011 within each one of the system elements:
Environmental Control
1. Review of the scope, work schedule and follow-up of implementation of External Circulars 014 and 038/2009 issued by the Financial Superintendence, regarding the internal control system, with emphasis in matters related to the administration bodies, and the following system elements: risk management, information and communication, control activities (includes accounting management and IT management Internal Control System), monitoring, and independent assessment. This task was accomplished in sessions held on May 25, and August 25, 2010.
2. Review of the anti-fraud program proposed by the Administration at the session of May 25, 2010.
Risk Management
1. Analysis of the evolution of the residual operative risk level (Audit Committee meetings held on November 22, 2010 and this session where this report is submitted for approval).
This assessment was especially important since this Committee had proposed amendments to the operative risk management methodology in 2009, which were incorporated during the first semester of 2010.
2. Review of the Business Continuity Plan (in session of November 2).3. Review in all sessions, of the report on activities dealing with prevention and control of
asset laundering and financing of terrorism at the Exchange.
NOTE: Although the application of SARLAFT is not mandatory for the Exchange, the entity implemented, and maintains, its own control model on this matter.
Information and Communication
The Committee developed the following tasks in all its sessions:1. Review of the intermediate (trial) balance sheets2. Review of the financial, market, IT, and operation indicators.
In addition, the Committee developed the following tasks related to the annual closing of the Exchange’s financial statements (in this session where this report is being submitted for consideration):
1. Review of the individual and consolidated financial statements as of December 31, 2010. 2. Review of the draft of the External Auditor’s opinion on such financial statements. 3. Review of the results of the External Auditor selection process, as well as of his fees.
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Control Activities Review of the plans and results related to IT controls evaluation developed through the special scope of systems audit under the charge of the External Auditor. Such analysis was made in all sessions of the Committee.
Independent Assessment and Monitoring
Review of the internal audit annual management report at this session of the Committee, including the evaluation of internal control systems’ status as of December 31, 2010.
Effectiveness Conclusion
Based on the above information, the Committee considered that the institutional internal control system has been adequate during the last year since it allows reasonable compliance with the following objectives:
1. To improve efficiency and efficacy in operations. 2. To prevent and mitigate occurrence of fraud originating both, inside the Company, and
outside the Organization.3. To accomplish adequate risk management.4. To increase reliability and timeliness in Information to be presented 5. To comply with the applicable regulations and provisions.
Finalmente, el comité considera fundamental cerrar las brechas detectadas en la evaluación independiente del Sistema ejecutado por la Auditoría Interna, en particular la implementación de la “línea ética”, asunto de importancia para el programa Anti fraude y las observaciones relevantes formuladas a los procesos de Gestión de Riesgos y Tecnología fundamentalmente.
VII. Main Measures Adopted
Although no material deficiencies were detected as a consequence of the preceding information analysis, the following principal measures were derived from the observations made by the control body and the opinions of the administrators:1. Improvement of accounting and tax controls.2. Risk management review/validation regarding operation, anti-fraud programs, and the Business Continuity Plan.3. Closing of gaps in information security, and in particular, measures to improve compliance with requirements established in External Circular 052/2007 issued by the Financial Superintendence.4. Execution of improvements in technology management processes related to the following domains: •IncidentsManagement. •ManagementofChanges •ManagementofAvailability •CapacityManagement •ConfigurationManagement. •ServiceDeskDuties5. Implementation of a new model and technological tool by Internal Audit.
It is worthwhile stating that during the period there were no observations submitted by the supervision bodies, and no penalties were imposed.
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VIII. Control Bodies Management
Internal Audit and External Audit participated in all sessions informing on the progress of the respective action plans and, when pertinent, submitted relevant findings and recommendations. The Committee gave special care to the supervision of the activities of such bodies, making follow-up of efficacy and independence, as well as of the scope of their tasks in accordance with the control needs of the entity. For such purpose, the Committee discussed the following main issues:
1. Review and approval of the Internal Audit Annual Plan for 2011, as well as of the Budget required for the development of activities. Such tasks were accomplished at the Committee’s session held on November 22, 2010, abiding by new provisions issued by the Financial Superintendence.The Internal Audit Work Plan for 2010 was approved at the Audit Committee meeting held on February 23, 2010, date which is not included within the period of this report.
2. Review and approval of the External Audit Annual Plan for 2010. Such approval was granted at session held on May 25.
3. Quarterly review of the report details and main findings and recommendations of such bodies.
4. Examination of the administration’s progress regarding closing of the main findings or internal control observations posed.
The review of the aforesaid points allowed concluding that the scope of the Internal Audit Plan contained the main business risks; that the audit tasks followed technical standards, and that the results meet the control needs of the entity. Likewise, the Committee could establish that the Internal Auditor accomplished his tasks with independence, objectivity, resources and information, without limitations affecting the audited scope.
Furthermore, the Committee considers adequate the new Internal Audit organization focused on a risk–based approach, which facilitates alignment with international standards, and allows maximization of efficiency.
With regard to the External Audit elected by the General Shareholders’ Assembly held on March, 2010 it is concluded that he has exercised his duties according to the provisions of the Bylaws and the applicable regulations.
IX. Framework of the Committees relations
Upon approval of the annual report by the Audit Committee, it shall be submitted for the consideration of the Board of Directors, abiding by the provisions of paragraph 7, Section 4.1.4.18 of the Good Governance Code, in order to disseminate its content and conclusions, and to allow such body to request any additional report deemed relevant.
Furthermore, if approved, this Report will be submitted for the consideration of the General Shareholders’ Assembly as part of the information to be placed at their disposal for the exercise of the inspection right stated in Section 447 of the Code of Commerce and 43 of the Exchange’s Bylaws.
In matters of Senior Management, it is to note that all meetings of the Committee were attended by the President of the Exchange, the Vice-president and Secretary and the Internal Auditor,
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which facilitated discussion of the topics, and promptness in commitments designation by the Committee to the Administration. Likewise, the External Auditor, who also performed the Exchange’s system audit tasks, attended all Committee meetings.
Coordialy yours,
CARLOS EDUARDO JAIMES JAIMESChairman of the Audit Committee
Stakeholders
a. Dividends Distribution Policy
The General Shareholders’ Assembly of Bolsa de Valores
de Colombia S.A. (BVC), at its meeting held on March
COP$
Profit before mandatory reserves: $18.434 million
Mandatory reserves
Legal Reserve $211 million
Reserve -Decree 2336/1995 (year 2009) $978 million
Profit before occasional reserves $17.245 million
Partial release of Occasional Reserves 2007 $2.720 million
Release Reserve -Decree 2336/1995 (2008) $535 million
Profit before Occasional Reserves $20.500 million
Occasional Reserves $5.000 million
Dividends Available for Distribution $15.500 million
Dividends to be distributed in cash $15.500 million
Dividends per share, in cash $0,830099
25, 2010 approved the motion for the distribution of
2009 profits, in the following terms:
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To this respect, it is important to mention that the
dividends in cash were paid in three equal installments
on April 23, June 23, and August 23 to those who were
deemed to be shareholders at the time of payment, in
accordance with Section 455 of the Code of Commerce.
No dividends in shares were declared.
b. Suppliers
The relation of the Exchange with its suppliers is framed
within high ethical and legal standards contained in the
good and services procurement procedure, wherein
the mechanisms to maintain transparency in selection
of suppliers are determined and the criteria sought to
foster the quality of goods and services acquired by the
organization are established.
This way, minimum criteria to be taken into account for
the evaluation and selection of suppliers are included. In
addition, the Exchange applies suppliers reassessment
procedures from time to time, allowing to ensure quality
and compliance of the service received.
c. Authorities
The Exchange is an entity subject to the supervision of
the Financial Superintendence and therefore it must
carefully observe and comply the applicable provisions.
In addition, BVC must respond to the requisitions that
such supervision authority issues in exercise of its legal
duties.
It should be pointed out that the Exchange has fully
complied with the terms established by the Financial
Superintendence to implement all provisions and
standards issued by such entity.
Good Governance Code Reports
a. Complaints, claims and proposals of the
shareholders and other stakeholders
In accordance with the information filed at the Centralized
Complaints System of the Company, it was evidenced
that during the year 69 complaints and 17 claims were
submitted before the Exchange, coming from different
stakeholders. The average response time to the person
presenting the complaint was twelve days.
In 14 of the 86 mentioned cases the response time
exceeded 15 days, which indicated that 83.7% cases
were solved within the term provided in the Good
Governance Code.
b. Claims on compliance with Good Governance Code
In 2010 there were no complaints on compliance with
the Exchange’s Good Governance Code.
c. Illegal or Anti-ethical Acts
The Vice-presidency Secretariat did not receive
information from the administrators or employees of the
Exchange or its related companies on facts that they
know of and that, in their opinion, imply any form of
non-compliance with ethical principles or conduct rules
stated in the Ethics and Conduct Manual.
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THE BUSINESS Chapter 4
7 Operating income in 2005 was concentrated 52.59% in fixed income market revenues.
The Business During 2010 the BVC obtained outstanding financial results.
This behavior is the result of strategies implementation
focused on achieving diversification of income and profitable
growth. Operating income amounted to COP $61,305
million; net profit was COP $23.944 million, EBITDA of the
organization amounted to COP $30.071 million and the
EBITDA margin was 49,05%.
The business turnover accomplished through the BVC
reached the sum of COP$ 2.629 billion, which represents
a 4,37% increase with regard to 2009. The equity market
growth is highlighted with a volume increase of 31,94% and
the derivatives market with 616,45%. The fixed income
market also grew in 5,18%.
In terms of operating income composition there is an
important diversification vis-à-vis the concentration
identified in 20057. The following is the share of the different
markets in the generation of the COP$ 61.305 million:
equity market 34,00%, fixed income 26,94%, listing and
maintenance 15,80%. Strengthening of new products,
such as the derivatives market, sale of information, and
special trades also contributed to the diversification of
income.
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40,00%35,00%30,00%25,00%20,00%15,00%10,00%5,00%0,00%
1,00%Modifications and Corrections
1,51%NDF
1,90% Others
2,53%Infoval
2,66%Derivatives
3,74%Publications and Susbscriptions
4,01%Especial Operations
5,90%Terminals
15,80%Inscription and Maintenance of Securities
26,94%Fixed Income
34,00%Equity Market
COP
Mill
ions
2006
35.000
30.000
25.000
20.000
15.000
10.000
5.0002007 2008 2009 2010
The austerity policy implemented since 2006 has been
reflected in the low growth of operating expenses. In 2010
expenses without amortizations and depreciations came up
to COP$ 31.306 million, showing an annual average growth
of 1.00%.
The amortization expense was reduced in COP $4.974
million as a consequence of the application of the balance
reduction methods applied to expenses resulting from
projects developed in previous years and that are being
amortized since 2008. Total expenses were reduced by
10% with regard to 2009.
As a result of the operating income and expenses
management, the company shows an EBITDA growth of
25.86% with regard to 2009. EBITDA represents 49,05%
of operating income, growing 4,61% vis-à-vis the preceding
year.
Adequate accounting management and tax planning of the
latest years allowed requesting in 2010 the reimbursement
of taxes for an amount of $555 million before the National
Customs and Tax Administration – DIAN- and the tax rate
was optimized in 1,36% vis-à-vis the 33% established by
law (the rate came up to 31.64%).
On the other hand, the value of the Company’s assets at
2010 closing was COP $117.977 million. It shows a COP
$4.279 million growth compared to the last year (3.76%).
This appreciation is largely the result of an adequate
investment portfolio management.
Operational Expenses Evolution
Operating Income Distribution
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As a result of the EBITDA growth, the Exchange strengthened
its equity by 5.39%, and accumulated growth in the last
five years amounts to 46.96%. This behavior makes it
possible to comply with the internationalization and growth
challenges.
MANAGEMENT MEASUREMENT THROUGH THE BALANCED SCORE CARD (BSC)To achieve alignment of the organization with the strategy
defined in Mega 2015, the BVC adopted the BSC tool since
2005. Through this tool follow-up of the long-term strategy is
made, using an annual measurement on punctual indicators.
The Balanced Score Card conjugates the financial and non-
financial indicators in perspective dealings with Finances,
Markets or Clients, Processes, Strategic Capitals, or Internal
Affairs.
The following Charts show the results of each one of the
annual indicators defined for every perspective of the BSC
in 2010.
COP
Mill
ions
2006
120.000
100.000
25.000
80.000
60.000
40.000
0
20.000
2007 2008 2009 2010
2006 2007 2008 2009 2010
Operational Revenues 66.308 54.880 48.877 53.763 61.305
Operational Expenses without Amortizations and Depreciations.
30.060 29.940 30.315 30.021 31.306
Amortizations and Depreciations 2.187 3.041 15.041 8.613 3.610
Total Expenses 32.247 32.981 45.356 38.634 34.916
Operating Profits 34.061 21.899 3.521 15.129 26.389
Net Profits 26.524 27.134 10.042 18.434 23.944
Assets 90.111 103.880 93.834 113.698 117.977
Liabilities 19.940 20.035 10.771 15.854 14.854
Shareholders Equity 70.171 83.845 83.063 97.844 103.123
EBITDA $ 36.588 24.940 18.630 23.892 30.071
EBITDA % 55% 45% 38% 44% 49%
ROA (Net Profits / Assets) 29% 26% 11% 16% 20%
ROE (Net Profits / Shareholders Equity) 38% 32% 12% 19% 23%
Soundness (Assets / Liabilities) 452% 518% 871% 717% 794%
Indebtedness(Liabilities / Asstes) 22% 19% 11% 14% 13%
Financial Indicators
Shareholders Equity
Figures in COP Millions
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Internal or Processes Perspective
... Executing reliable processes oriented to results and to
continuous improvement …
Financial Perspective
“The BVC creates value for its shareholders developing the
securities market …
Client Perspective
... Being highly competitive with value proposals for our
clients and … working jointly with brokers and regulators …
Indicator Unit
Goal Definitions
Actual 2010Minimum Maximun
Exceed Expectations
Operational Residual Risk level Reduction % 11,0 12,0 13,0 13,12
Project Advances % 70 80 90 81,21
Indicator UnitGoal Definitions
Actual 2010Minimum Maximun Exceed Expectations
BVC Transformation Focused on Clients Implementation Plan
% 90,0 95,0 100,0 93
Loyal Clients with personal relationship % 31 33 35 31
Indicator UnitGoal Definitions
Actual 2010Minimum Maximun Exceed Expectations
EBITDA * $ mm 18.692 20.692 23.892 30.071
Operational Expenses (with prepaid expenses)
$ mm 32.898 31.331 29.764 32.413
New Product Incomes $ mm 2.657 3.795 4.554 2.690
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Strategic Capitals Perspective
Investments And Strategic Alliances
Permanent Investments
In 2010 the BVC continued with its strategy of being the
Latin American benchmark of the securities market for local
and foreign investors, and this is why seeking to strengthen
its position, soundness and competitiveness, the BVC
continues consolidating its presence throughout the entire
value chain infrastructure of the Colombian securities
market through strategic investments in companies
that make part of it, and that contribute to develop and
strengthen market infrastructure. Herein below there is a
summary of the equity interest and financial indicators of
BVC’s investments.
AFFILIATES PERMANENT INVESTMENTS
INVESBOLSAagora360
54,85% 49,95% 54,99% 100%
22,89%
20,15%
Cámara de Compensaciónde Divisas de Colombia S.A. 25%
… And having the persons and the organization with
the necessary learning ability to achieve the MEGA”
Indicator Unit
Goal Definitions
Actual 2010Minimum Maximun Exceed Expectations
Human Capital Management: 50% Performance Management and 50% GPTW
% 80 90 95 88,50
Technology Enlistment Grade % 3,05 3,12 3,14 3,14
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ÁGORA 360 S.A.
The activities that BVC was accomplishing through its
affiliate ÁGORA 360 S.A. to provide trade automation
services to brokers has been restructured and this is why
as of December 29, 2010 ÁGORA 360 S.A. entered into
liquidation grounds that initially foresee reimbursement of
contributions to shareholders
Affiliates
INTEGRADOS FX S.A. (SET FX)
Integrados FX provides transactional, listing and spot market
information systems and foreign currency forwards. SET FX
leads the Colombian Exchange market operating 100% of
the transactional market, being the foreign currency market
benchmark in Colombia. In 2010 USD $257 billion were
traded with SET FX, exceeding by 4% the traded volume in
2009, with 408.794 trades.
DERIVEX
On June 2, 2010 DERIVEX was incorporated, a company
that manages the first standardized derivatives market of
energY commodities. The BVC created this company in
association with XM Compañía de Expertos en Mercados
S.A. E.S.P. as a strategic ally. The first product launched was
electricity futures. DERIVEX began operations in October
2010 negotiating a contract on the monthly electricity
average of October, at a price of COP$ 120 per KW/h.
At 2010 closing it had eight members and the technical
committee of the market with the participation of all the
established and energy sector brokers.
Financial indicatorsAgora
2010 2009
Revenues 232 670
EBITDA -360 148
Net profit -483 33
Assets 8.258 6.771
Liabilities 2.514 841
Shareholders´equity 5.930 5.930
EBITDA margin -155% 22%
Net margin -208% 5%
ROE -8% 1%
ROA -6% 0%
COP $ Million
Financial indicatorsDerivex
2010
Revenues 34
EBITDA -311
Net profit -349
Assets 1.787
Liabilities 186
Shareholders´equity 1.601
EBITDA margin -916%
Net margin -10266%
ROE -22%
ROA -20%COP $ Million
Financial indicatorsSET FX
2010 2009
Revenues 4.378 4.725
EBITDA 2.386 2.947
Net profit 1.570 1.968
Assets 2.941 3.457
Liabilities 657 775
Shareholders´equity 2.284 2.682
EBITDA margin 54% 62%
Net margin 36% 42%
ROE 69% 73%
ROA 53% 57%COP $ Million * Information reported to the SFC
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INVESBOLSA SAS
INVESBOLSA was incorporated on March 10, 2010
and its main corporate purpose is the incorporation and
participation in companies and entities directly related
with the activities and services provided by the BVC, in
order to facilitate, expand or supplement BVC’s corporate
purpose. The company may invest in the corporate capital
of companies where BVC may invest according to its
legal regime. Furthermore, it may accomplish any other
economic activity in Colombia or abroad.
PERMANENT INVESTMENTS
DECEVAL S.A.
It manages and has the custody of securities and it records,
clears and settles trades made at the BVC. In 2010
DECEVAL had the custody of securities amounting to COP
$281,8 billion, with a 38% increase with regard to 2009.
It also had the custody of equity securities for COP $189,1
billion and Fixed Income securities for COP $92,7 billion.
The balance of dematerialized issues at 2010 closing
amounted to COP $217,5 billion and securities for COP
$79,8 billion were managed.
CÁMARA DE RIESGO CENTRAL DE CONTRAPARTE S.A. (CRCC)The CRCC is in charge of clearance and settlement, acting
as a clearing house, eliminating default risks in BVC’s
standardized derivatives obligations.
Financial indicatorsCRCC
2010 2009
Revenues 1.849 743
EBITDA -2.177 -3.161
Net profit -4.170 -4.574
Assets 25.746 25.041
Liabilities 560 685
Shareholders´equity 25.186 24.356
EBITDA margin -118% -425%
Net margin -226% -616%
ROE -17% -19%
ROA -16% -18%
In Millions of COP $ *Information reported to SFC
Financial indicatorsDeceval
2010 2009
Revenues 58.694 51.960
EBITDA 35.039 27.862
Net profit 22.601 22.116
Assets 88.943 83.416
Liabilities 18.735 15.135
Shareholders´equity 70.208 68.281
EBITDA margin 60% 54%
Net margin 39% 43%
ROE 32% 32%
ROA 25% 27%
In Millions of COP $ *Information reported to the SFC
Financial indicatorsInvesbolsa
2010
Revenues -
EBITDA -0,0
Net profit 0,5
Assets 50,9
Liabilities 0,3
Shareholders´equity 50,6
EBITDA margin -
Net margin -
ROE 1%
ROA 1%
In Millions o COP $
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reducing risks associated to default of foreign currency
trades, including liquidity, market, trading, and legal risks.
In 2010 it accomplished 432.941 trades for USD $302
Billion, 8% above 2009.
Strategic Alliances
MILA Latin American Integrated Market:
2010 gave rise to the MILA, -Latin American Integrated
Market-, the main purpose of which is to create a single
diversified, ample and attractive Equity Income Market for
local and foreign investors, and to expand access to capital
for current and potential issuers, providing greater liquidity
and interest in our markets.
MILA is the result of the consolidation of the stock market
integration project managed by the BVC, the Lima Securities
Exchange (BVL) and the Santiago Trade Exchange (BCS),
under the model of “Brokerage Routing with value added”.
In 2010 the CRCC cleared and settled a total of 264.277
contracts, 1.674% above 2009, corresponding to 15.144
trades made by 21 members of the Standardized
Derivatives market.
CÁMARA DE COMPENSACIÓN DE
DIVISAS DE COLOMBIA S.A. (CCDC)
The CCDC manages the clearing and settlement system of
the spot trades between brokers of the Exchange market,
Financial indicatorsCCDC
2010 2009
Revenues 5.257 5.506
EBITDA 876 941
Net profit 402 436
Assets 2.957 2.596
Liabilities 371 413
Shareholders´equity 2.585 2.183
EBITDA margin 17% 17%
Net margin 8% 8%
ROE 16% 20%
ROA 14% 17%
COP $ Millones *Información reportada a la SFC
72
At operating level the MILA consists in the interconnection of
transactional platforms under the standard communication
protocol, allowing the brokers of the three countries access
to information of securities listed at the Exchanges, sending
purchase and sale orders directly to the market, prior
agreement with local brokers.
During the year, the MILA Project progressed in the
detailed definition of the integration model, the issue of
the regulations that legally supported the development of
the required application, the implementation of the agreed
communication protocol, and the approach of the three
countries’ brokers. All these efforts will end in 2011, giving
rise to the new market.
MILA has become a unique initiative that will serve as
benchmark for future integrations worldwide.
Important Events Occurred After Business Year Closing
Merger BVC– BVL
EIn January 19, 2011 the Lima Securities Exchange BVL,
and the Colombian Securities Exchange BVC signed a
Memorandum of Understanding determining the first steps
to be followed for the first corporate merger of this type
between two securities Exchanges in Latin America, after
approval by both General Shareholders’ Assemblies and
authorization by the supervisors of Colombia and Peru.
The merger will create a new more competitive actor to face
the challenges of a global capitals market and will represent
an opportunity for the Stock Exchange industry of both
countries, increasing the value of the companies through
operative synergies and the development of new products
in both markets.
To carry out this operation, it has been agreed that the
contribution of BVC and of BVL to the merged entity shall
be 64% and 36%, respectively, where the clearing ratios for
Class A and Class B shares issued by the BVL will be fixed
with regard to the new Exchange common shares.
Shareholders of both companies shall become the
shareholders of the merged entity. Both BVC and BVL shall
continue operating in their respective countries as they have
been doing to this day, reporting to their Board of Directors
and being supervised by the regulation authorities of their
countries.
SOFTVAL
On January 13, 2011 Sociedad Comercial Softval S.A. was
registered at the Bogotá Chamber of Commerce under
No. 01444696, Book IX, incorporated by means of Public
Deed No 4163 executed before the 21st Notary Public of
Bogotá on December 23, 2010. Its corporate purpose is the
provision of pricing services for non-standardized financial
instruments, specialized databases and financial estimates.
The
Bus
ines
s
73
The Company Chapter 5
In 2010 the Human Capital strategy: “attract, retain, and
develop the best human talent in key trading accounts
ensuring achievement of the BVC strategy”, was centered
in the following aspects.
The Exchange was selected as company No. 24 within
the list of Best Companies to work with, according to
the Great Place to Work Institute. This privileged ranking
was attained thanks to the commissioning of the action
plan to improve the labor environment, the unconditional
support of leaders and the decisive commitment of each
one of the employees.
With the main actions that allowed consolidation of the
labor environment at the Exchange, we point out the
following:
The creation of the program Human Promoters,
with 18 voluntary leaders, represents every area of
the organization; such promoters were trained to be
ambassadors of the Human Capital Strategy in their
areas. Today they are acknowledged as allies of the
strategy, for they have been agents of the positive change
by becoming more integral professionals.
The
Com
pany
Human Capital 75
Commitment and Customer Service Area Leaders, who
were offered a course on Service Management with
awarding of diplomas.
BVC made a more thorough assessment of the profiles
of 51 employees (President, Vice-president, Managers,
Directors and Leaders (involved with the Clients’ project);
and it applied the PPI (productivity indicator) test to
100% of the employees. With the information provided
by these tools on the behavior styles, the employees
and their leaders understand, manage, and efficiently
encourage the work of employees and the design of
relevant improvement plans.
In addition, thanks to the consolidation of the Performance
Management Integral System the employee progress
process was reviewed in terms of the targeted results,
development of conduct goals, abilities, and technical
skills.
Acknowledgment space was created within “BVC
Interaction “, wherein 85 employees have been
acknowledged for their commitment, effort, dedication
and passion for their work. Likewise, this has been
a space to interact and share relevant topics such as
Strategy, Great Place to Work, Risks Culture and Quality.
Human capital policy was consolidated by searching
internal equity, leveling the compensation delivered
by BVC to 100% of its employees. Career paths were
defined for 50% of the Exchange’s population, enabling
future direction of the employees within the organization.
BVC’s Human Capital management continues giving
priority to filling vacancies by promoting internal
employees. 58% of the vacancies were covered from
inside.
To continue with the Human Capital development, the
ongoing training program was positioned through its
most prominent programs: Stock Exchange Masters
(120 employees trained in products and services offered
by BVC); Training and Leadership Program (Training in
Coaching, the Art of Trading, Service, Innovation and
Creativity Orientation, Corporate Strategy and Human
Capital); English, (training for 60 employees) and Training
Abroad (a sponsored employee).
In the second half of the year, taking into account the
strategy of the Company centered in establishing loyal and
personal relations with our clients, strategy revitalization
workshops were accomplished, including Service
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Com
pany
76
This space has been institutionalized as a formal
communication channel highly esteemed by all the
organization.
The Program “Wellbeing” completed its third year of
effectiveness, allowing the employees and their families
to enjoy spaces and activities for personal growth,
amusement, integration and friendship.
The BVC and its subordinated companies developed
different initiatives in 2010 focused on strengthening their
Internal Control Systems, by developing better practices
and complying with regulations and requirements
established by the Financial Superintendence.
Herein below we shall show the progress and
achievements obtained in each one of the Internal
Control Components:
Environmental Control
In development of the Client Project objectives and in order
to optimize its processes, it redesigned its organizational
structure and the authority and accountability levels
in agreement with the mission, vision, and strategic
objectives of the Company.
On the other hand, the Exchange promoted compliance
with its ethical values and principles and internal control
policies by developing training and sensitization programs
addressed to all employees. Likewise, document review
mechanisms were established and documents update
practices were implemented in areas already formalized.
Risk Management
The internal control system and its components were
strengthened through the identification, assessment,
and treatment of risks to which the Exchange is exposed
to in furtherance of its operation.
Risk management monitoring activities accomplished
by the BVC allowed analyzing the risk events identifying
their causes, defining the required corrective actions to
decrease their probability of occurrence.
Concurrently, work was performed to process the
treatment measures for identified risks, and to optimize
the processes, achieving a 13.12% reduction in the
residual operative risk level, exceeding the 12.00%
established goal.
Regarding the Business Continuity Plan, three IT tests
were performed for Fixed Income, Equity Securities,
and Derivatives products, one of which had market
involvement. Furthermore, weekly tests were made to
processes backed at the Alternate Transactions Center.
The execution of such tests allowed training the work-
team and update the Plan.
Business impact and risk analyses were updated in the
methodology to manage Business Continuity, and the
contingency events, notification, and escalation scheme
were improved. This allowed speeding communication
and decision-making internally, improving the quality
and promptness of the messages sent to the market
while such events are being taken care of.
The
Com
pany
Internal Control Management
77
OR
GAN
IZAT
ION
AL
STR
UC
TUR
E
PRES
IDEN
CY
Audi
ting
Area
Mar
ketin
g an
d Pr
oduc
ts V
PCo
mm
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l VP
Corp
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PSe
cret
aria
Gen
eral
: Le
gal -
Gen
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Sec
reta
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P
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l Man
ager
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ect D
irect
orTr
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orIn
term
edia
ries a
nd
Intis
tutio
ns M
anag
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Fixe
d In
com
e Mar
ket
Man
ager
Com
mer
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irect
orEq
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Mar
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Man
ager
Com
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cial A
rea
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ty M
arke
t Di
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or
Arch
itect
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nd S
oftw
are
Man
ager
.Pl
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nd F
inan
ce
Man
ager
Hum
an R
esou
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M
anag
er
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s and
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lity
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ager
Risk
s and
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an R
esou
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and
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and
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orAd
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or
Soft
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ervi
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nd
Infra
estru
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ager
Infra
estru
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e Dire
ctor
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tions
Dire
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Soft
ware
Man
agem
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Soft
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Man
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ontin
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Ar
ea
Data
Sec
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Are
a
Socia
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pons
abili
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ctor
Med
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nd P
ublic
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stor
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anag
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and
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Serv
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Man
ager
The
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pany
78
In addition, the BVC is working in the integration of
its transactions risk management systems, business
continuity, information security, asset laundering and
financing of terrorism, in order to optimize administration
and accomplish an integral management of the risks
associated to transactions, projects’ management, the
environment and technology.
Control Activities
To improve its control policies and procedures the
Exchange made an integral review of the processes,
validating their compliance with the instructions
established by the Administration, regarding risks and
control measures.
On the other hand, forms were created to allow objective
control evaluations and to identify gaps in order to
improve efficacy. In addition, segregation of functions
was strengthened together with detection controls
through the implementation of the Anti-fraud Program
and the Information Security Management System.
Improvements were made to the accounting controls and
processes in order to guarantee reliability of the financial
statements and other reports that present the financial
situation and results of the entity, seeing that they
comply with the applicable provisions, principles and
regulations. Among such improvements, the following
are highlighted:
• Updating of the internal accounting policy with all the
amendments and updates of local standards.
• Implementation of controls to guarantee quality,
sufficiency, and timeliness of the financial information.
• Updating of the accounting and financial risks map.
Informationand Communication
To optimize management of information used and
transactions derived data, and in order to see that all
security, quality, and compliance criteria are taken into
account, the Exchange continued with the consolidation
of the Information Security Management System (SGSI).
The activities accomplished for such process included
the following aspects:
• Definition of information security policy and scope
• Identification and classification of Information
• Implementation of the mechanisms to safeguard
information security criteria, and to detect and correct
errors in the provision and processing of information.
In order to maintain an effective corporate communication,
improvement was made in internal and external means
established for the transmission of significant information
to stakeholders.
Furthermore, in 2011 the implementation of the
Ethics Line as an independent channel that allows the
employees to report possible frauds or non-ethical
conducts was completed, thus contributing to effective
risk management.
Monitoring
The Exchange reviewed the presence and operation of
each one of the Internal Control components, through
high level committees, ongoing monitoring activities, and
self-evaluations.
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79
Human Capital Management
IT Management
Legal & Regulatory Management
Projects Management
Client Service Management
Clients Satisfaction Client Needs
Marketing Management
Commercial Management
Operation
Product Management
Strategic Management
AuditCorporate
Governance
Financial & Administrative Management
Quality Management
Risk Management
High level follow-up was strengthened by establishing
committees that analyze and monitor tactic and strategic
activities development of the Company, and that issue
reports addressed to the Administration for decision-
making. As a supplement, monthly follow-up is made to
action plans implemented by the ongoing improvement
processes and management of actual and potential risks.
The internal control system self-evaluation exercise
was accomplished conducting a survey among the
employees to know their perception on this system and
to identify improvement opportunities for each one of the
components. The results obtained reflect a satisfactory
perception with regard to the progress achieved in the
implementation of the Internal Control System.
Subordinated Companies
BVC made follow-up to the management of its
subordinated companies for the implementation
and maintenance of the internal control system and
concluded that INTEGRADOS FX S.A. and DERIVEX
S.A. have an effective system that complies with the
regulation requirements established by the Financial
Superintendence.
In addition, AGORA 360 S.A. (in liquidation) and
INVESBOLSA S.A.S., entities that are not supervised by
the Financial Superintendence, accepted the policies
and practices that according to their corporate purpose
and development of activities are deemed applicable.
Quality Management
To continue strengthening the Quality Management
System (SGC) and consolidating the institutional
culture focused on operative excellence, as well as the
satisfaction of clients’ needs, initiatives such as the co-
pilots programs, the training plans, and the follow-up
to continuous improvement activities for every process
were developed.
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The co-pilots program consisted in training 16 employees
to support continuous improvement through leadership
at meetings and improvement tools. The implementation
of this program allowed every process to have a
guideline for the definition of corrective, preventive, and
optimization action plans.
On the other hand, training plans were developed for
the employees, together with sensitization activities
addressed to all levels of the Company, and this was
made through campaigns, messages, and spaces where
the progress reached in continuous improvement was
acknowledged. Development of these plans allowed
strengthening the organizational culture, oriented
towards operative excellence and clients’ satisfaction.
Closing of audit findings, mitigation of operative risks,
non-conforming products management, and optimization
of transactions were all issues monitored through the
Continuous Improvement indicator, which reflected 97%
compliance at year end.
In addition, the Exchange updated the processes map to
focus the operation on the generation of value proposals
for its clients, understanding their current and future
needs, and complying with their requirements, in order
to establish loyal, personal and long-term relations.
Independent evaluation of the Internal Control System (ICS)
In accordance with Legal Basic Circular of the Financial
Superintendence, Title I, Chapter 9, paragraph 7.5.2.,
in addition to the permanent follow-up by the Senior
Management and the self-evaluation of every area, it is
necessary to accomplish a periodical assessment of the
Internal Control System (ICS) under the charge of units
or persons independent from the processes, i.e. internal
auditors or external auditors, specially engaged for the
purpose.
To comply with the above, Internal Audit was given the
task in 2010 to make an independent assessment of the
ICS. Such assessment was carried out according to the
scope and coverage defined in the regulations and the
results were delivered to the Administration at year end.
0 10 20 30 40 50 60 70 80 90 100
Monitoring
Communication
Data
IT CI
Accounting CI
Control Activities
Risk System Management
Control Environment
Implementation Scope
General Considerations
Calification (0 - 100%)
Internal Control System Assessment 2010
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81
Financial Superintendence and abiding by international
standards. As a result of the above, it started the
application of a new risk-based audit model with the
support of a new technological tool. The main results of
the work accomplished were the following:
a. Construction of standard models to manage the
following model types:
• Risk-based audits (evaluation of processes, risks,
and controls).
• Quality Audits, based on ISO 9001:2008 standard
• Compliance Audits (assessment of compliance with
legal or internal rules and management systems.)
b. Definition of e-questionnaires regarding controls efficacy
assessment (self-evaluation and/or audit evaluation).
c. Definition of a systematic and documented mechanism
for internal supervision of the audit work.
d. Automatic generation of audit reports (proformas)
and organization of working papers (planning, tests,
execution activities, reports, follow-up records).
As a main conclusion, it was informed that the ICS
elements, meaning the control environment, risk
management, control activities (included in the ICS
special areas), information, communication and
monitoring, evidenced during the year an efficacy
average of 85,43%.
Taking as basis the observations and recommendations
made by Internal Audit, short-term plans were defined
with the necessary actions to close the detected gaps.
Finally, in compliance with the guidelines of External
Circular 038/2009, a certification of the Chairman of
the Board and the Legal Representative of the Exchange
was issued on January 14, notifying the Financial
Superintendence on full compliance with the requirements
established for the “ICS independent evaluation” as of
December 31, 2010.
Internal Audit
During the year Internal Audit ended the task of adapting
this area according to the guidelines established by the
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82
e. Contrast risk assessment (comparison of inherent or
residual risk assessment of the process against the audit
results).
With support of the new model definitions that were
incorporated throughout the year, the Audit area
developed a work plan, duly approved by the Audit
Committee that contained the following lines of action:
a. Assessment of controls efficacy for the most relevant
risks. Such assessment implied the review of the
Financial, Human Management, Transactions, Legal
Management and Innovation (projects) processes in
2010, with the new audit model.
b. Evaluation of the Quality Management System,
examining the Exchange’s processes to determine their
conformance with the planed provisions and with the
requirements of ISO 9001:2008 standard, as well as
with the requirements established by the organization,
and their efficacy. Such revision implied execution of
processes quality audits, accomplished through mixed
audits in certain cases (including risk assessment), or
independent audits in other cases.
c. Review of the Exchange’s corporate governance and
risk systems’ efficacy. The above included an assessment
of the Operative Risk Management System –SARO, as
well as of the provisions established by the Financial
Superintendence regarding Information Security,
compliance with the Corporate Governance Code and
finally, the Independent Evaluation of the Internal Control
System at the end of the year.
d. Development of processes to check special transactions
of the Exchange (Dutch auctions and stock public offerings),
and technological contingency tests.
e. Execution of certain ad-hoc control assessments on
relevant matters upon request of the Senior Management
regarding relevant matters.
As a result of the mentioned Audit tasks, the respective
report with the findings and recommendations was
prepared and delivered, and the closing plans thereof
were discussed with persons accountable for the
The
Com
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83
respective areas. Likewise, the progress of such plans
was reviewed quarterly, finding that as of December 31,
the average progress was 86,98% for the total audit
reports that had been officially delivered within at least
three months.
Activities developed by the Audit area, together with
the important role played by the Board of Directors
and the Audit Committee in the plan’s follow-up and in
the analysis and feedback of results, and the special
dedication of the administration to close the detected
findings, were all factors that undoubtedly contributed
to strengthen the institutional internal control, which in
the end is the central axis of the control bodies’ mission.
It is important to stress that the Administration provided
funds and information required to accomplish the Audit
work without limitations and in independence conditions.
The internal auditor submitted quarterly reports to teh
Board of Directors and to the Audit Committee.
Technology Audit
As of 2009, the IT audit responsibilities of the Exchange
have been entrusted to the same firm that provides
External Audit services through a special scope.
Development control of such responsibilities is to be
made by Internal Audit.
Based on the work plan determined for 2010,
fundamental tasks related with the following aspects of
IT management were developed:
a. Evaluation of the IT general controls operative
efficacy with emphasis in change control, transactions
management and information security.
b. Evaluation of the IT governance scheme: IT
strategic planning and implementation efficacy of ITIL8
methodology in the Exchange’s Technological Area.
8 Information Technology Infrastructure Library
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84
c. Accounting system’s reliability analysis with emphasis
in information integrity controls in interfaces between
critical systems and the accounting system.
Action plan progress, with the results, findings and
recommendations of completed audits were quarterly
submitted to the Audit Committee. In addition, situations
detected within the improvement plans were incorporated
in audited areas.
8 Information Technology Infrastructure Library
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pany
85
Social Responsibility Chapter 6
The Exchange continued consolidating its Social
Responsibility (SR) strategy by developing activities and
initiatives aligned with the corporate objectives, where it
engaged not only employees but allied companies and
organizations.
Some of the activities planned were strengthened or
reoriented in order to provide a better economic, social,
and environmental value for the country and the main
stakeholders. This way the commitment to include social
responsibility and sustainability within daily businesses
and activities continued strengthening.
A greater participation of employees and directors
involved in different activities was achieved, together
with a greater integration of the Company areas in the
execution of initiatives.
The activities accomplished are aligned with the 5 work
axes defined in the SR Strategy.
Entrepreneurial Development and Private Capital Funds
We continued working in the development of an
entrepreneurial growing environment for small and
medium size companies –Pymes-, by promoting the
Private Capital Funds Industry (FCP), to facilitate access
Soc
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87
At year end the Due Diligence process was being
conducted to five of these companies, and it is expected
to reach the necessary agreements to make the
necessary investments in 2011.
On the other hand, the Corporation continued developing
promotion activities for the Fund and applying the
concept of Profitable Social Investment and Impact
Investing to motivate and attract more actors, or to
create similar initiatives that favor economic and social
development of the country.
Taking the Capitals Market to more People
For the second year, the Exchange together with ISA,
developed guides for individual investors with basic
information on the capitals market and the ways in which
they may invest.
The 5.000 guides were distributed free of charge
directly by ISA and by the Exchange in the BVC Points of
Medellin, Cali and Bogotá, and they were placed at the
disposal of the general public in the Internet portals of
both companies.
Promotion of Sustainable Development
Within this axis we provided support to the development
of the project for voluntary mitigation of greenhouse
to capital for the development of business and operation
models that may produce economic, social, and
environmental positive impacts.
Under this context Corporación Inversor (created
between the BVC and other 13 organizations to manage
the Investor Private Capital Fund), continued looking for
investment opportunities and for new investors to meke
Impact Investing9 to manage the Investor Private Capital
Fund), continued looking for investment opportunities
and for new investors to meke Impact Investing10).
The Corporación Inversor’s main SR Strategy initiative
obtained the approval of its Regulations by the Financial
Superintendence and the consolidation of investment
commitments for COP $5.500 million, which will allow
making the initial closing in the first half of 2011. The
fund expects to collect between COP $30.000 and
COP $40.000 million in two years to invest in small and
medium size enterprises (PYMES).
Within the investment opportunities analysis such
Corporation reviewed around 70 opportunities among
projects, including recently created enterprises and
already consolidated Pymes. Analysis was deepened
in 11 of them which complied with the social and/
or environmental impact criteria and provided value
according to the business model and to corporate
governance and financial criteria. Companies that arrive
to a second level of analysis receive feedback from the
Corporation so they may improve in aspects where they
show deficiencies.
9 Avina Colombia, Banca de Inversión Bancolombia, Brigard & Urrutia, Compartamos con Colombia, Corporación Mundial de la Mujer, Estrategias Financieras y Corporativas, Fundación Bavaria, Fundación Diego y Lía, Fundación Saldarriaga Concha, JP Morgan, LAEFM Colombia and McKinsey Colombia10 Impact Investing refers to those investments that seek to provide social impact while providing economic profitability.
Soc
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effect gases emission (GEI) in order to structure a
voluntary market for the trade of emission certificates,
led by Natura Foundation and BID.
It is expected to define BVC’s interest in that project
in 2011 in order to provide better value for sustainable
development of the country and the project.
Development of a Social Responsibility Culture - SR
The commitment to promote a SR culture inside the
organization and also externally, led to strengthen
volunteer activities with the employees, and to include SR
topics within the chat “Getting to Know the Exchange”.
This initiative started in August in the three main cities
and included a total of 59 chats with 1.597 persons who
acquired basic knowledge on the SR topic in the capitals
market and on the main projects of the Exchange on this
subject.
On the other hand, the volunteer activities joined 34%
of the employees who participated in two organized
activities benefiting not profit organizations that provided
aid to children and mothers head of a family. In addition,
we continued supporting the Ventures Contest by
contributing in the evaluation and feedback of young
entrepreneurs business plans.
Also, the employees participated in four campaigns
to raise donations in kind and in cash for vulnerable
populations and persons who suffered damages
in the Haiti earthquake and in Colombia’s winter
wave. Accordingly, the employees contributed COP
$17´995.000 and 28 markets for a value of around COP
$4´500.000.
Implementation of a SR Strategy at BVC
In this last front a significant change was evidenced in
the contribution made by the Company to the different
social projects and activities developed.
Under this context, contributions for COP $270 million
were made through Colombia Humanitaria, to non-
profitable organizations, of which COP $100 million
were destined to those that had suffered damages
due to the winter. The remaining value was distributed
among organizations involved in strategic projects of
the Company, and among certain institutions that were
taking care of vulnerable populations.
Soc
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AFP Pension Funds
AMV Capital Market Autoregulator
BOLSA Stock Exchange
BSC Balanced ScoreCard
BVC Bolsa de Valores de Colombia
BVL Bolsa de Valores de Lima
BCS Bolsa de Comercio de Santiago
COP Pesos colombianos
CRCC Central Counterparty Clearing House for Derivatives
EBITDA Earnings Before Interests, Tax Depreciation and Amortization
EVA Economic Value Added
FIAB Latinamerican Exchanges Federation
SARLAFT Risk System Management of Money Laundry & Terrorism
SCB Brokerage Firms
USD Dólares de los Estados Unidos
Glo
ssar
y
Glossary
90
www.bvc.com.co
