Icap held 'exploratory' merger talks with London Stock Exchange

Icap, the world's largest inter-dealer broker, is looking to buy a major global equity trading platform and has already held talks with the London Stock Exchange, which has been the subject of a fierce takeover battle for the past 21 months.

In a statement released yesterday, Icap confirmed it had held talks with the LSE this summer, but said they had ended. It is believed Icap's chief executive, Michael Spencer, was unwilling to strike a deal at the exchange's current high share price, which has risen more than three times since it was first approached by Deutsche Börse in December 2004.

"Following recent press speculation regarding talks between Icap and the London Stock Exchange, Icap confirms it has had exploratory discussions regarding a possible merger of the two companies. These discussions have been discontinued," the broker said.

Icap is now believed to be casting its eye over other global exchanges and is thought not to have ruled out returning to the table with the LSE in the future.

Goldman Sachs, one of the LSE's biggest clients, caused controversy in the City last year when it tried to buy a large stake in the London exchange. However, Angela Knight, the head of the Association of Private Client Stockbrokers and Investment Managers, said she did not believe a deal with Icap would pose the same conflict of interest, even though it is also one of the LSE's clients.

She added that she believed an Icap/LSE tie-up was compelling. "You can only get synergies if you can reduce costs by combining your engine rooms - and that would be possible with Icap," she said.

Icap's talks with the LSE look set to be the start of another round of action for the exchange. As of 2 October, Nasdaq, New York's technology-based exchange which took a 25 per cent stake in the LSE six months ago, will be free to bid for the exchange again.

However, if Nasdaq decides to pursue an offer for the exchange, it will be obliged to pay at least the £12.43 a share it paid when it bought its stake. This is the level at which shares in the LSE closed on Friday.

Icap, which recently joined the FTSE 100, is expected to unveil another set of strong results on Thursday. The LSE declined to comment.