CADE’s General Superintendence issues opinion about the transaction between BM&FBovespa and Cetip

In a decision published in the Official Gazette on November 30, the General Superintendence of the Administrative Council of Economic Defense - CADE submitted to its Administrative Tribunal the analysis of the merger set between BM&FBovespa S/A – Bolsa de Valores, Mercados e Futuros (BVMF, for its acronym in Portuguese) and Cetip S/A – Mercados Organizados, involving stock and Over-The-Counter - OTC markets in Brazil (Merger 08700.004860/2016-11). 

Considering the information obtained from the Parties, clients and other regulators, such as the Securities and Exchange Commission of Brazil – CVM (for its acronym in Portuguese) and the Central Bank of Brazil, the General Superintendence concluded that the markets in which both BVMF and Cetip  operate have elevated barriers of entry, especially  regarding the access to the infrastructure of the central securities depository service (CSD, for its acronym in Portuguese), whose replication by  potential entrants would be less efficient and difficult to implement. The merger unifies the only two competitors in the central securities depository markets in Brazil.

The report also stated that there is evidence that BVMF could be considered an entrant in other segments of the OTC market in which Cetip is a monopolist. The conclusion suggests that the merger would eliminate a potential competition of the Parties in this market.

The General Superintendence verified that there is an economic overlap between BVMF and Cetip at certain OTC market sectors. However, these market sectors are not representative in the total amount of the Parties’ combined services and the level of competition detected is considerably incipient, due to BVMF’s low market share.

In return to the problems found, the operation presents elements of relevant qualitative efficiency, as showed by the Parties and based on the reports of several clients consulted during the instruction of the proceeding.

For the General Superintendence, although the operation presents competition concerns, the efficiencies appointed indicate that remedies might mitigate such concerns  and, at the same time, ensure the achievement and the transfer of efficiencies to consumers. 

 CADE’s Administrative Tribunal will be responsible for the final decision on the approval, disapproval or adoption of remedies to mitigate the competition concerns identified in the transaction. The Tribunal's decision can be applied unilaterally or by means of an agreement negotiated with the Parties. The proceeding will be referred to a reporting commissioner, who will present it for the board’s judgment.

 The operation was notified on June 28 of this year. From this date, CADE has 240 days, which can be extended for additional 90 days, to review and issue a decision on the transaction.