Following Nasdaq’s £1.9 billion ($3.7bn) deal to buy Swedish exchange OMX, which operates in Iceland, the Baltic states and Scandinavia, Dubai has muscled in on the act.

The Dubai International Financial Centre is said to be “the world’s newest international financial centre”. It has appointed HSBC to advise it on a possible challenge for OMX.

On Friday, OMX agreed to be taken over by Nasdaq, the New York exchange, which last year made two failed attempts to buy the London Stock Exchange.

The Nasdaq cash and share deal for OMX would have created a £3.8 billion ($7.5bn) company with operations in eight countries. It would be the third transatlantic merger between exchanges in the past 12 months.

The Times (London) reports, “The DIFC’s decision to consider a counterbid further underlines the international ambitions of the tiny Gulf state. Last year, Dubai Ports World, another arm of the Dubai government, seized control of some of the world’s most important ports when it acquired P&O. The planned bid for OMX signals DIFC’s ambitions to raise Dubai’s profile in international financial markets.”

The Dubai International Financial Exchange, which opened for business in 2005 was intended to “create an environment for progress and economic development in the UAE and the wider region”.

So, the consolidation of the world’s stock markets proceeds apace. In March the New York Stock Exchange completed its acquisition of Euronext, the pan-European borse. Nasdaq claims still to have ambitions to bid for the LSE, but is prevented by City regulations from bidding again until next February.

A combination of OMX, which is being advised by Credit Suisse and Morgan Stanley, and the slightly larger Nasdaq, being advised by JP Morgan, would create a company worth 30% more than the LSE, which has a market value of £2.7 billion. OMX has a derivatives business that ranks behind NYSE Euronext’s Liffe, and Eurex, controlled by Deutsche Börse. It is considered particularly attractive by other exchanges because of its innovative financial-trading technology.

Nasdaq is planning to use new generation OMX technology as a base for the group, which would, it claims, deliver two-thirds of the £76m ($150m) that may be gained from the merger.

Dubai, however, might just have the last word.

With Robert Greifeld identifying three key areas of interest for Nasdaq in the next year, a renewed bid for the London Stock Exchange seems likely. The areas are :

* Taking market share from NYSE Group.
* Fending off BATS, a new electronic stock market.
* Forging mergers and acquisitions.

It is then anticipated that Nasdaq will make a new attempt to take over the LSE before the end of the third quarter of next year.

The LSE has declined to comment on Nasdaq’s position. In return, it ratcheted up takeover rumours by claiming that it’s looking at its own “strategic alternatives”.

The Times (London) reports :

The New York market has been linked to takeover talks with both the Philadelphia Stock Exchange and the Nordic OMX market in the past week. It is understood that the talks with Philadelphia are advancing well and that Nasdaq insiders expect a takeover to be sealed within six months.

Talks with OMX, which has also tried and failed to take over the London exchange, are at a much earlier stage, but both potential deals are part of a wider strategy to boost Nasdaq’s balance sheet and improve its product offering, so that its next bid for the LSE will be more difficult to reject.

A Nasdaq insider commented, “The long-term objective is still London. This is a game of chess and LSE is the king.”

We await the new LSE moves with great interest.

A tie-up between the London Stock Exchange and Icap, the world’s largest inter-dealer broker, has been discussed during the summer, it has emerged.

Icap is expected to confirm today that talks have taken place. The main sticking point seems to be the current share price of the LSE, which, at more than £12 ($22.56), has all but doubled this year.

A merger would create a formidable all-British heavyweight valued at £6 billion ($11.28bn), with a strong derivatives base. It would, at a stroke, make up for the strategic defeat of losing Liffe to Euronext.

However, the complementary nature of the parties means that cost savings would be hard to find. Whereas Nasdaq might justify the high price of a bid (£12.43 is the floor price it must pay in the near term) by savings derived from rationalization, Icap would see a dilution in value after any deal.

Clara Furse, the LSE chief executive, has a lot of balls in the air as the autumn season gets underway. Buying the Scandinavian exchange OMX, is one option; various possibilities involving private-equity outfits also beckon, plus the tempting prize of Icap.

Over-arching all, however, is the American Nasdaq, which, with 25.3pc stake and a clear field of play from next Monday, remains the one to be beaten.

At last Clara Furse and the board of the London Stock Exchange are waking up to the threat of Nasdaq and Sarbanes-Oxley regulation. It seems they are looking for a “white knight” among private equity firms.

Meanwhile, the prospect of a direct takeover of OMX, the Scandinavian and Baltic exchange operator and former bidder for the LSE, has been around for a while and seemed dormant. But as the LSE hummed and hah’d, fiery Nasdaq has let it be known that it too may bid for the company. Mysterious.

Alex Brummer, the UK Mail’s City Editor, opines : “Under the stewardship of Clara Furse we have an LSE which has enriched investors but lost global standing.”

Now we are being fed the notion that an almost £3 billion ($5.5bn) management buyout, led by Clara Furse herself and backed by private equity, would keep the aspidistra British flag flying over London soil.

Well, it’s better than nothing. Let’s see some action though before October 2 when Nasdaq is handed the golden arrow. And a deal with OMX would help protect the LSE from the new Euro-American conglomerate even now thinking ahead to its demise.