Angela Knight, head of APCIMS (the Association of Private Client Investment Managers), which represents small stockbrokers, has predicted rising technology costs if Nasdaq succeeds in its bid for the London Stock Exchange.

Knight has already been rebuffed when asking for a meeting with Nasdaq chief, Robert Griefeld, who told her it was too early for such a meeting. Nasdaq has claimed lower costs in a partnership of equals.

The American technology exchange’s £2.4 billion ($4.2 bn) offer was instantly rejected by the LSE last week.

Nasdaq is currently considering its position, while the New York Stock Exchange is said to be preparing a counter-bid.

Directors of the London Stock Exchange are meeting this week to discuss their strategic options following last week’s bid by Nasdaq. They will look at the alternatives of a nil-premium merger with Euronext and an outright sale to the highest cash bidder. On Friday, the LSE’s shares closed at £11.70, more than 20pc above the Nasdaq offer.

A merger with Euronext would bring the LIFFE (London International Financial Futures Exchange) derivatives platform, bought by Euronext in 2001, back in line with the London equity market.

The Telegraph comments: “Clara Furse, LSE chief executive, is still interested in the possibility of a nil-premium merger with Euronext. But shareholders would need a cash sweetener to back such a plan, which would also need a compelling strategic basis to deliver enough future value against Nasdaq’s latest cash-in-hand offer worth £2.4bn.”

However, Euronext is otherwise engaged now as it’s also holding talks with Deutsche Borse. A spokesman for the German exchange said: “We have been quite clear we consider Euronext the most attractive of all the relevant consolidation options available to us.”

Meanwhile, John Thain, CEO of the New York Stock Exchange has already said he has been looking at all three main European exchanges for a possible acquisition.

The dance goes on.

Small investors in the London Stock Exchange account for around 12 percent of its shares. When their stockbrokers asked for talks with Nasdaq on the regulatory implications of its bid for the LSE, they were rebuffed.

Angela Knight, head of the Association of Private Client Investment Managers whose members act for thousands of these investors approached Nasdaq chief Robert Griefeld who was in London to meet with major shareholders. She got short shrift. It was too early for talks, APCIMS was told.

Knight is demanding that that the LSE obtains “absolute guarantees” that the US Securities and Exchange Commission will not intervene in British LSE-listed companies if Nasdaq were to win the bid battle. The weighty regulatory regime put in place after the Enron and Worldcom fiascos might well apply not only to the exchange but to all listed companies as well.

Since the success of London as a worldwide financial centre is based on a light regulatory touch, this would be a disaster for the whole City of London.

However, the law would have to be changed in Washington, and that could take years.

Nasdaq’s CEO, Bob Greifeld, has met the London Stock Exchange’s two largest shareholders to discuss a higher offer for the exchange. Investors are beginning to anticipate a bid above £12 ($21) a share.

The Times (London) reports: “One signficant shareholder in the LSE, the New York fund D E Shaw, which has about 1.4 percent, was revealed to have bought a further parcel on Wednesday at prices between £11.57 and £11.67. LSE shares, after strong advances in recent days, eased back 10p to £11.75.”

Greifeld is said to have met with representatives of Threadneedle Investments, which holds 14 percent of the LSE, and which earlier this week called for talks with potential bidders, and Scottish Widows, holder of 7 percent.

Nasdaq has made no secret of the fact that it is prepared to go over the heads of the LSE board by launching a hostile bid direct to shareholders.

Nasdaq refused to confirm or deny the meetings took place.

“The funds failed to return calls. The sensitivity of the situation means the City Takeover Panel will be watching closely to ensure there are no market-sensitive leaks.”

Hovering in the background with an anticipated offer is another potential suitor, the New York Stock Exchange, which is also refusing to comment.

The Times suggests the NYSE “is expected to play a long game and see how the situation with Nasdaq pans out. It is thought unlikely that LSE investors will accept any price from Nasdaq before seeing what the NYSE is prepared to offer.”