Investors in the London Stock Exchange have backed its bid to take over Borsa Italiana by a large majority. Some 78 percent of the shareholder base approved the deal, including Nasdaq, former hostile bidder for the LSE which holds 30 percent of the shares.

Chief Executive, Clara Furse said, “This value-creating deal also accelerates our shared vision to become the world’s capital market”.

The Borsa brings a welcome strength in derivatives and fixed-income trading to an often beleaguered London market that let slip the chance to buy Liffe five years ago. The deal will put the LSE in the Footsie 100 for the first time.

It will now be more difficult for any predator wishing to snap up the LSE in future. Nasdaq’s agreement may signal it now accepts that future bids are out of the question.

The London Stock Exchange (LSE) is in the process of finalizing an agreed £1.1 billion ($2.1bn) all-share takeover of Borsa Italiana, the Milan stock exchange.

The TimesBusiness is reporting : “The board of the Borsa was locked in a second day of meetings, but unofficial indications were that agreement had been reached. The LSE is prepared to offer 4.9 of its shares for every one in the Borsa.”

That does seem to be a whopping price to pay for the seventh largest exchange in Europe, but clearly Clara Furse is getting her retaliation in first to beat off counter offers from New York or Frankfurt.

The merger will create Europe’s biggest exchange read from the value of companies listed there, with around half of the FTSE Eurofirst 100 listing.

The two exchanges will be owned by one company headed by Clara Furse, LSE’s chief executive. Her Italian counterpart, Massimo Capuano will become her deputy.

We also hear that the Borsa will have five seats on the board to London’s seven, giving the Italians far greater presence than the sizes of the two exchanges would suggest.

London is capitalised at £2.7 billion, against just over £1 billion for Borsa Italiana.

A formal confirmation of the agreed offer could come on Monday morning. It would leave the two New York exchanges in a quandary. The New York Stock Exchange is now merged with Euronext, operator of four continental markets, and Liffe, the financial futures market in London. The merged group has expressed an interest in buying the Borsa but has yet to table a formal offer and will now have to decide if it can trump the London terms.

By diluting the Nasdaq holding from 30 percent to 20, the merger will make it more difficult for the Americans to bid again in January.

Milan and London will continue to be operated separately under the terms of the agreement, but the LSE is expected to concentrate on the benefits of becoming a larger player on the world stage

Clara Furse is also expected to emphasise the attractions of MTS, the government bonds trading platform. The Borsa has already moved to take control of the platform this week, and it could boost the LSE’s capabilities in the derivatives market where it is weak.

“Tommaso Padoa-Schioppa, the Italian Economy Minister, pledged support for a Milan-London link last night, describing it as ‘a very positive accord because it creates a very strong international presence’. ”

The London Stock Exchange strengthened its negotiating hand in the battle for market consolidation with a 60pc increase in operating profits to £81.3 million ($154.5m)for the first half on revenues up 20pc at £163.3 million ($310.3m).

The LSE said it was on course for an “excellent” set of full-year results, and lifted the dividend by 50pc to 6p a share.

The Times (London) reported that “executives, led by Clara Furse, chief executive, and chairman Chris Gibson-Smith, were tight-lipped about their plans for the next stage of a set of international exchange mergers that centres on London, America’s Nasdaq, pan-European exchange Euronext, the New York Stock Exchange, and Germany’s Deutsche Borse”.

Gibson-Smith commented : “The exchange has once again demonstrated the value it creates for market users and for our shareholders. We are well positioned for continuing success going forward, and the results achieved in the first half of the year support our expectation of an excellent result for the full year.”

Meanwhile, Deutsche Borse also reported strong quarterly and nine-month earnings. Yesterday it pulled out of strategic talks with the Italian Stock Exchange over a joint proposal to merge with Euronext.

Clara Furse was reported as saying : “New issues, new products and net technology are combining to facilitate a structural shift in equities trading, significantly improving the quality of the market for our increasingly international customer base and creating more value for shareholders.”

It will be interesting to see what comes out of the discussions with the Tokyo Stock Exchange. These number won’t do the LSE’s case any harm at all.

Euronext has announced that it supports a proposal to merge its stock exchanges with Deutsche Borse and Borsa Italiana, as long as it is part of its merger with the New York Stock Exchange.

The intriguing possibility now opens up of an even bigger transatlantic giant emerging to challenge the London Stock Exchange.

With Nasdaq in talks with the hedge funds which own 30pc of LSE shares and a figure of 1300p being bandied about as the cost of buying out these shares, it’s beginning to look like two great pan-Atlantic exchanges may emerge over the next 12 months.

Unless, that is, Clara Furse can find a white knight to save the old LSE.