The UK Financial Mail is warning of regulatory chaos if Nasdaq or the New York Stock Exchange succeed in taking over the LSE.

The Mail reports: “Secret legal advice given to a potential bidder for the London Stock Exchange warns of a regulatory tangle lasting years if the LSE is taken over by an American exchange. The document, seen by Financial Mail, says that the LSE will face extra costs from a tie-up and that there is no way it could avoid American regulations.”

The legal advice is said to conclude that a merger between the LSE and an American exchange would not work. Of course, if the advice was given to a rival for the LSE, an element of spoiling may have crept in here, especially as it contradicts an earlier story in the Mail last week that a deal was possible between the British FSA and the American SEC on light-touch interference across the Atlantic.

However, Angela Knight, Chief Executive of APCIMS, the stockbrokers association, said: “I am very aware that there is legal opinion circulating that warns about the negative consequences of American rules creeping into London.” She calls for “absolute guarantees”, and says: “Any agreement between both sides should have political agreement as well.”

Once again this saga shimmies into another shape, leaving the principals wondering where to turn next. This week the LSE’s Clara Furse, will hold talks with the Nasdaq chief, but will also keep in touch with the NYSE and Euronext.

As usual, anything could happen.