Nov. 12 (Bloomberg) -- UBS AG will offer algorithmic trading for shares on the Sao Paulo stock exchange, matching a move made by Bank of America Corp. last month as competition builds for market share in Latin America’s biggest bourse.

International algorithmic trading will allow investors to trade using computer programs from UBS without going through a brokerage, Switzerland’s biggest bank said in a press release. Zurich-based UBS began so-called direct market access in Brazil on July 2008, allowing stock traders to complete orders anonymously without going through a brokerage.

“Algo trading is going to be done by more sophisticated institutional investors or hedge fund that will go through the big banks,” said Tony Volpon, Latin American strategist at Nomura Securities International Inc. in New York. “It’s a different trading strategy and really is bringing a new type of client to the market.”

Algorithmic, or high-frequency, trading uses computers to analyze market conditions to determine how much of a stock or derivative to buy and when. There aren’t estimates of how widespread algorithmic trading is in Brazil because the stock exchange doesn’t force brokerages to identify themselves as high frequency traders, according to the exchange’s press department.

On the BM&F derivatives exchange, there are 10 international and 2 local brokers identified as algorithmic traders, according to the exchange.

Bovespa Performance

International brokerages are expanding their operations in Latin America’s largest market as record low interest rates around the world spur demand for higher-yielding, emerging- market assets. The Bovespa, Brazil’s benchmark equity index, has surged 137 percent this year in dollar terms, the biggest gain among the 89 global indexes tracked by Bloomberg. The measure slipped 0.1 percent to 66,362.13 at 10:33 a.m. New York time.

Bank of America, the biggest U.S. lender, announced last month it will offer algorithmic trading in Brazil. Interest from international investors has “significantly” increased this year and they are demanding more customized trading methods, according to an Oct. 28 statement from the bank.

This “caters to a different kind of client” than whom local brokerages service, said Volpon, a former strategist at Sao Paulo-based CM Capital, a unit of Madrid-based CM Capital Markets Holdings SA. “You’re going to have different brokers catering to different clients and they aren’t going to be competitive in all market niches.”

Brazilian equity trading rose 36 percent to an average of 334,000 trades a day as the Bovespa index jumped 20 percent in the quarter, according to a Nov. 11 statement from BM&FBovespa SA, Latin America’s biggest exchange. The exchange attracted 7.9 billion reais in stock investment from international investors in the third quarter, according to the exchange’s Web site.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.

Last Updated: November 12, 2009 10:56 EST