Listing Segments

Listing segments are classifications of listed companies on BM&F Bovespa according to Corporate Governance practices. To be part of a listing segment companies have to voluntarily adopt best practices in Corporate Governance that are not required by legislation. The listing segment acts as a seal of quality that may help the company attracting funds and investors signaling high standards of transparency and accountability.

There are five listing segments. One of them is named Tradicional (Tradicional) and is nothing else than what legislation requires. Other is Bovespa Mais (Bovespa Plus), a special segment to small companies. In this text I will not analyze Bovespa Mais, that may be a topic for future text.

The more important listing segments are Nível 1 (Level 1), Nível 2 (Level 2) and Novo Mercado (New Market in a literal translation) in order of stricter requirements. The table above shows the more important features and is extracted from BM&F Bovespa website, not available originally in English (I did the translation myself):

You may consult the complete requirements in the listing regulations:

Novo Mercado regulation

Nível 2 regulation

Nível 1 regulation

Basically, the main difference of Novo Mercado and Nível 2 is the classes of shares allowed. Companies in some industries may have legal restrictions of foreign control (airline companies, for example) and cannot float common stocks in excess of what the legislation states. In this case, the company may want to adopt a high standard of Corporate Governance but cannot issue only common stocks, so they opt to be listed on Nível 2.

The creation of Novo Mercado was a major milestone to Brazilian Stock Market. It was created in 2000 based on experiences in other markets like Neuer Markt in Germany. The first company to opt for Novo Mercado was CCR S.A and nowadays there are 131 companies on Novo Mercado (see here). Most companies that went public after 2002 (like CCR) opted for Novo Mercado and the higher standards of Corporate Governance helped to unlock the public offerings market in Brazil.