LSE could join rivals, say reports

The London Stock Exchange could join forces with two rivals to create a trading platform spanning three continents, it was reported today.

US stock market operator Nasdaq and Middle East exchange Borse Dubai plan to draw the LSE into an alliance challenging the recent merger between France's Euronext and the New York Stock Exchange, the Observer newspaper reports.

Nasdaq - which failed in a hostile bid for the LSE earlier this year - and Borse Dubai have struck a deal which saw the Middle East bourse withdraw from a takeover battle with Nasdaq over Nordic stock exchange OMX last week.

Under the agreement, Borse Dubai has bought Nasdaq's 28% stake in the LSE built up during its takeover attempt, as well as a near-20% holding in Nasdaq itself.

The duo now plans to form a new company with London at the head and link trading platforms in the Middle East, the US and Sweden, where OMX is based, the Observer says.

The LSE, which was unavailable for comment on the reports, may also face another bid from Nasdaq and Borse Dubai early next year when the US-based exchange is allowed to bid again under takeover rules.

But any fresh bid for the LSE could face opposition from the Qatari Investment Authority (QIA) after it too acquired a 20% stake as part of its long-term investment strategy.

The QIA, which also owns a 10% stake in OMX, said it intended to provide "stability and support" for the LSE board's efforts to reinforce the City of London's position as the world's leading capital market.

The LSE has seen off four takeover attempts in the past three years but the prospects of another potential bidding war sent its shares soaring to a record high on Friday.

The company's stock gained nearly 29% over the week to close at 1800p, valuing the exchange at almost £3.6bn (€5.16bn).