STRUCTURED DV01 NEUTRAL TRANSACTION ON FRC

(FRC DV01 NEUTRAL)

1. Contract Information

The structured DV01 neutral transaction on FRC, is a structured transaction that combines
two FRC maturities in opposite side (Buy or Sell) with quantities calibrated in order to
equalize the DV01 value of both maturities (“Structured Transaction” or “Product”).

Because it is a structured transaction, the Product does not represent a new future contract
and there are no open positions in the end of the day, but allow the simultaneous trading of
two different FRC maturities. Therefore, the transactions are automatically generated, and
all the financial results and settlements will be applied on each FRC maturity individually,
and consequently on each DDI arising from FRC, as provided by the rules in force, available
on B3´s website.

Object Percentage rate differential between both maturities.

Ticker FRI.

Price quotation Expressed as a percentage rate, to two decimal places.

Tick Size 0.01 of an interest rate point.

2. Ratio

Ratio is the proportion of Nearby Month´s quantities related to the Deferred Month´s
quantities of the Strategy. The value is fixed during the day and daily updated in the end of
the trading session, according to B3´s calendar. It will be calculated according to the
following formula:

When the calculation is not done in third-to-last trading session day of the month:

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 50.000 50.000
[( )−( )]
(npl − nbasismonth ) (npl − nbasismonth )
1 + (ipl × 360 1 + (ipl + 0.01%) × 360
Ratio =
50.000 50.000
[( )−( )]
(npc − nbasismonth ) (npc − nbasismonth )
1 + (ipc × 360 1 + (ipc + 0.01%) × 360

Ratio = proportion of Nearby Month´s quantities related to the Deferred Month´s

quantities, truncated to the 6th decimal place;
ipl = deferred month´s closing price in the calculation date, expressed as a percentage
rate;
npl = number of days between the calculation date and the day preceding the deferred
month´s expiration date;
nbasismonth = number of days between the calculation date and the day preceding the
DDI basis month´s expiration date;
ipc = nearby month´s closing price in the calculation date, expressed as a percentage
rate;
npc = number of days between the calculation date and the day preceding the nearby
month´s expiration date;

When the calculation is done in third-to-last trading session day of the month:

50.000 50.000
[( )−( )]
(npl − n2ndddi ) (npl − n2ndddi )
1 + (ipl" × 1 + (ipl" + 0.01%) ×
360 360
Ratio" =
50.000 50.000
[( )−( )]
(npc − n2ndddi ) (npc − n2ndddi )
1 + (ipc" × 1 + (ipc" + 0.01%) ×
360 360

Ratio" = proportion of Nearby Month´s quantities related to the Deferred Month´s

quantities, truncated to the 6th decimal place when the calculation is done in third-
to-last trading session day of the month;
ipl" = deferred month´s closing price in the calculation date when the calculation is
done in third-to-last trading session day of the month, expressed as a percentage
rate and calculated according to the following formula:

nddipl
1+(iddipl × ) 360
360
ipl" = ( n2ndddi − 1) × ( )
1+(i2ndddi × ) nddipl −n2ndddi
360

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 Where:
iddipl = DDI´s settlement price of same FRC´s maturity to be
calculated (deffered´s month);
nddipl = number of days between the calculation date and the day
preceding the DDI deferred month´s expiration (same of FRC to be
calculated);
i2ndddi = 2nd DDI month´s settlement price, there is, the DDI month
that will become the basis month
n2ndddi = number of days between the calculation date and the day
preceding the 2nd DDI month´s expiration date;

npl = number of days between the calculation date and the day preceding the deferred
month´s expiration date;
n2ndddi = number of days between the calculation date and the day preceding the 2nd DDI
month´s expiration date;
ipc " = nearby month´s closing price in the calculation date when the calculation is done
in third-to-last trading session day of the month, expressed as a percentage rate;
npc = number of days between the calculation date and the day preceding the nearby
month´s expiration date;

In special situations of abrupt market oscillation, Ratio recalculations on intraday may be

considered and, if updated, participants will be noticed in advance.

3. Automatic transaction to be generated in FRC:

a) Nearby Month
• Ticker: FRC.
• Price Quotation: Expressed as a linear percentage per annum, daily based on a
360-day year, to two decimal places.
• Maturity: Maturity with shorter expiration date.
• Quantity: Traded quantity on Strategy multiplied by Ratio, indicated in item 2,
rounded to the closest multiple to the round lot of the underlying asset of the strategy..
• Side (Buy or Sell): Opposite to Strategy transaction.
• Price: Reference tunnel price for that maturity on Strategy trading instant.

b) Deferred Month
• Ticker: FRC.

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 • Price Quotation: Expressed as a linear percentage per annum, daily based on a
360-day year, to two decimal places.
• Maturity: Maturity with longer expiration date.
• Quantity: Traded quantity on Strategy.
• Side (Buy or Sell): The same as traded on Strategy transaction.
• Price: Will be defined according to the following formula:

Pricepl = Pricepc + Pricestrategy

Onde:
Pricepl = price to be allocated on Deferred month, expressed as a percentage
rate per annum, rounded to 2 decimal places;
Pricepc = reference tunnel price for that maturity on Strategy trading instant,
expressed as a percentage rate per annum;
Pricestrategy = traded price on Strategy, expressed as a percentage rate per
annum;

4. Rounding criteria on FRC quantities

Regarding the rounding criteria considered in the calculations above, it should be

universally rounded to the integer part of the quantity. The following procedure is adopted
for distributing the quantity of Nearby Months when more than one customer is specified in
a trade:

a) The preliminary number of contracts is calculated for each customer, based on the
specified number of Strategies, multiplying the specified quantity by the Ratio;

b) The preliminary number of contracts for all customers are added up and the result is
compared to total quantity of Strategy;

c) Should there be a difference between nearby months of the clients, the number of
contracts for the customer with the largest preliminary number will be altered in one or
more contracts, so that the new sum equals the nearby months.

This procedure becomes necessary in order to avoid a different number of short and long
quantities in FRC automatically generated from the Strategy.

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5. Special provisions

In situations not foreseen in this instrument, including without limitation those deriving from
measures implemented by government entities, regulators of other competent bodies, as
well as any other events that directly or indirectly affect the formation, calculation,
representativity, publication, availability or continuity of the underlying or any of the variables
of this contract, B3 will, at its sole discretion, take the measures that it deems necessary for
the contract’s settlement, continuity or extension on an equivalent basis.

6. Governing law

This instrument is governed by and will be construed under the laws in force in the
Federative Republic of Brazil.

7. Application of B3´s rules and regulations

All norms, rules, regulations and procedures established by B3 shall be applied to this
instrument.

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