The Group's structure results from the merger of the São Paulo Stock Exchange, or Bovespa, and the Brazilian Mercantile and Futures Exchange, also known as BM&F - a bit like the NYSE and CME merging in the USA. See CME Group Inc: Secular trends.
In 2017, the CETIP clearing house was added to the mix, giving shape to the B3 Group as it stands today - and incidentally to a market operator as essential as it is integrated.
In terms of activity, the Brazilian stock market has been in the doldrums for some time now, with very few new listings and domestic capital flows fairly dried up by political instability.
Perhaps this explains B3's lower valuation. Once solidly anchored around an average of twenty-five times earnings, it is now trading at less than fifteen times earnings, well below all the major American and European market operators.
In terms of margins and profitability, however, B3 is on a par with them - be it the CME, the London Stock Exchange or Deutsche Borse. The Brazilian company also distributes all its profits to shareholders, and pursues an aggressive share buyback policy.
On the other hand, demand from international investors remains strong, as Brazil is by far the most important market for funds focusing on emerging countries; the same applies to derivatives markets, with commodity exports still at their peak.
Another - and perhaps more relevant - explanation for the discount lies in Brazil's hyperinflationary environment. Over the last fifteen years, the real has lost two-thirds of its value against the dollar and the euro. Inflation has risen again in recent months, forcing the Brazilian central bank to tighten its monetary policy once again.
Logically, this has had the effect of directing domestic capital flows towards fixed-rate products rather than equity markets.
