With the London Stock Exchange about to unveil its defence strategy against a £2.7 billion bid by major shareholder Nasdaq, new record trading figures have given the LSE a big boost in its fight to remain independent.

Chief Executive, Clara Furse’s main line of defence is that the Nasdaq bid is “cheap” in the context of the exchange’s recent performance in world markets. The new results to be announced this week show the LSE to be the fastest growing stock market in the world.

The LSE raised £27.9 billion ($54.5bn) last year, 71pc up on the previous year. This is said to include £10.3bn from businesses which would normally be expected to use the American markets.

The value of share dealing was also up by more than 36pc at £142bn ($277bn). It’s also reckoned that seven of the LSE’s best trading days occurred in December, a month of restricted opportunities to trade.

In the defence document, Clara Furse is expected to return funds to shareholders and promise a dividend rise of more than 50pc in the context of record profits.

As always as of late the hedge funds, which own 30pc of LSE shares, hold the key to its survival. If Furse can persuade them to be patient and await results, she may force Nasdaq on the back foot.

Nasdaq CEO, Robert Greifeld, has already confirmed that he will set up a rival exchange in London if he fails to secure the LSE. New regulations from the European Union mean that the field will be open to all-comers soon. With Project Turquoise promised from a medley of banks, and tiny Plus Markets set to tilt at windmills, the LSE board may not be too worried at that prospect. London is its home turf, after all, and a few choice tie-ups, especially on the derivatives side, would strengthen its hand.

This month will see the emergence of a much clearer picture and greater definition added to the parties’ positions.

The London Stock Exchange is preparing to present its defence against Nasdaq’s £2.9 billion bid this week.

Its main claim to independence will be a reiteration of the exchange’s buoyant earnings boom, arguing that a price of £12.43 seriously undervalues its potential.

There are suggestions that the LSE may also resume cash returns to shareholders, while continuing its efforts to find a white knight protector.

Clara Furse and the board of the London Stock Exchange have until the end of January to save the independence of the 300-year-old London Stock Exchange after American raider, Nasdaq, formally posted its £2.9 billion offer to shareholders.

January 27 is the last date for the New York exchange to make its final bid above the current £12.43 offer. Leading commentators in the City have expressed alarm over the possibility of losing London’s driving institution.

Nasdaq’s Chief Executive, Bob Greifeld, commented : “We continue to believe that our offer of 1243p represents a full and fair value for LSE shareholders taking into account the new competitive threats that the LSE will face in 2007 and beyond.”

In what was seen as fighting talk, he claimed Nasdaq would take control of the LSE if it buys a 50pc stake plus one share. They already own just under 29pc of LSE shares.

The Daily Mail reports : “Until today Nasdaq, as is common in most bids, had been aiming for 90 per cent acceptances, the level at which a bidder can force the remaining shareholders to sell out. Having a mere 51 per cent control of the LSE would considerably hamper what changes Nasdaq could bring to London. The offer document is also unusual in that it makes no great attack on the current management of the Stock Exchange.”

Greifeld is said to believe the LSE will face major competition from both Project Turquoise, a pan-European trading system being set up by seven of the world’s top investment banks, and from other low-cost alternatives.

Nasdaq has borrowed $5.1 billion (£2.6 billion) and will issue $775 million of preference shares to fund the operation.

Nasdaq has made a new offer valued at £2.7 billion ($5.13bn) for the London Stock Exchange.

The LSE board has rejected the bid, claiming it undervalues the buoyant stock market, which has posted record trades and earnings in recent reports.

Nasdaq already owns more than 25pc of LSE shares, giving it a powerful advantage in the current round of consolidation deals. With the New York Stock Exchange well on its way to takeover Euronext, Nasdaq sees a liaison with the LSE as strategically crucial in its battle for business with its close NYC neighbour.

Shares in the LSE have traded briskly since the offer was made. The BBC calculates that if Nasdaq bought them all, they would have a 50pc holding in the company. That’s unlikely to be the case though.

With a proposed softening of America’s draconian Sarbanes-Oxley rules and a new bill protecting the LSE from foreign regulation from the Treasury, the major obstacles to a merger seem to be melting away.

Clara Furse and her board may have other tricks up their sleeves, not least a tieup with an exchange in the Far East — Tokyo was mentioned recently.

It’s still all to play for.