NYSE-Euronext suffered its first major setback last week as CEO John Thain, 52, looked poised to replace Stan O’Neal as boss of Merrill Lynch.

Wall Street was shocked at the news as Larry Fink had seemed quids in for the post. Thain was formerly President of Goldman Sachs.

The move leaves a hole at the top of stock exchange group NYSE-Euronext as the man who forged the transatlantic merger jumps ship.

Chief operating officer Duncan Niederauer looks poised to take control.

Merrill’s share jumped 5 percent as Wall Street absorbed the news.

So the nationalist argument won after all, bolstered by the impeccable business case put by Clara Furse and the London Stock Exchange board.

This is a departure from recent events where much of the UK’s prime and strategic assets have been sold off to less than glittering buyers from all over the world.

Clara Furse can be proud of her unyielding defence of the centrepiece of Britain’s powerful financial centre in the City of London.

Inevitably, the discussion moves on to : what next? As if just doing the job is not enough for our news hungry generation.

Talk is that the LSE may link up with the New York Stock Exchange and participate in its forcoming wedding with Euronext. What was that the late Princess Diana said about three in a marriage?

Given her record of doughty defence of the LSE’s independence, why would she suddenly cave in to John Thain’s overtures? Better an all-out assault against a weakened Nasdaq to turn the tables. But I doubt relations would be good following a successful outcome and Furse has been as reluctant to go on the offensive as she has been stout in defence.

There are many options open to the London exchange now. Which it chooses to follow will be of absorbing interest during the rest of this year.

John Thain, CEO of the New York Stock Exchange, has said he will not improve terms of its £10.7 billion merger with Euronext, despite noises from rival Deutsche Borse that its proposal was worth more.

The Times (London) reports: “Speaking to journalists in New York last night, and reported by AFP, Mr Thain said he noted continued moves by Deutsche Borse to lure Euronext away from the agreed merger but said he would not increase his offer price, whatever plan the German exchange came up with.”

Euronext said: “This first half of the year has been the best one ever for cash and derivatives markets and has created the conditions for all business lines to register an increase in their revenues. This strong performance has been achieved in spite of the impact of changes in the scope of consolidation.”

Euronext’s Chief Executive, Jean-Francois Theodore, and John Thain have said they are on course to complete their landmark merger during the first quarter of next year.

The New York Stock Exchange.

Fox News is reporting the story we published earlier this week, that the New York Stock Exchange is actively contemplating setting up a London-based rival to the New York Stock Exchange:

“NYSE Group Inc. (NYX) would consider creating a rival London exchange to compete with the London Stock Exchange for new listings, but had also not ruled out bidding for it … ‘There would be two options (if a combined NYSE/Euronext cannot compete for international listings),’ NYSE Chief Executive John Thain [said]. ‘The first of which would be to set up our own exchange in London. However, I would not rule out the other option (buying the LSE),’ he added.”