Brazilian financial exchange BM&F Bovespa SA (BVMF3.BR) has yet to decide whether it will write down losses on its investment in the U.S. megabourse CME Group Inc. (CME) in its fourth-quarter earnings, a top bourse executive said Tuesday.

Earlier Monday, the CME announced a $275 million write- down in its fourth-quarter earnings because the value of its investment in BM&F Bovespa has fallen dramatically amid a sharp decline in the Brazilian exchange's share price.

CME, the world's largest futures exchange operator by volume, has a 5% stake in the BM&F Bovespa, and the Brazilian exchange has a stake of approximately 1.7% in its U.S. counterpart.

"Under Brazilian accounting rules, we wouldn't have to make the write-down. But we are converting to IFRS international standards and we have to look into whether an adjustment should be made for 2009," said Carlos Kawall, BM&F Bovespa's chief financial officer.

BM&F Bovespa's stake in CME is worth approximately $200 million. CME shares have fallen by more than 70% over the past 12 months amid the international market turmoil.

Regardless of whether the investment charge is made, Kawall said that the investment is worth much more to BM&F Bovespa than the current evaluation.

"We see an exaggeration in the losses registered by CME stocks. Its revenues are increasing despite the difficult investment climate," said Kawall.

Meanwhile, the strategic partnership with CME will bring great benefits to BM&F Bovespa in the coming years, he added.

BM&F Bovespa has been order routing its products on the CME Globex system since Sept. 30 and plans to launch euro futures contracts in Brazilian reals and a euro contract in dollars through the partnership with the CME group.

While the current economic crisis and credit crunch have hurt exchanges, Kawall noted that exchanges could come out stronger from the crisis as derivatives move from over-the-counter markets to regulated exchanges.

"After the problems with toxic assets, investors will look to move to more regulated, more transparent markets," he said.

The use of central counter-party clearing would reveal the hidden "over-the-counter" contracts that were key to the global crisis.

BM&F Bovespa shares closed 2.6% lower at 6.70 Brazilian reals ($2.89). The stock has fallen 58% over the past 12 months.

-By Alastair Stewart; Dow Jones Newswires; 5511 2847-4520; alastair.stewart@dowjones.com

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