The German stock market operator Deutsche Börse AG is in the early stages of planning a bid for the London Stock Exchange, Britain's Sunday Telegraph newspaper has reported.

The report said the chief executive of Deutsche Börse, Mr Werner Seifert, had told several of his shareholders about his plans and that the investment bank Goldman Sachs was working on the proposal.

"Bankers say Seifert is now drawing up plans to approach Clara Furse, his counterpart at the LSE, probably by summer," the newspaper reported, adding that Deutsche Börse preferred a friendly merger.

The bourse declined to comment on the report."As ever, we do not comment on speculation," spokesman Mr Walter Allwicher said.

It is 18 months since merger plans between the London and German exchanges to create the iX European exchange collapsed. Both firms have been under pressure after missing out on acquiring Britain's LIFFE derivatives exchange.

The LSE, whose shares last traded at 433p sterling, has defended its record on growth and said it was not sitting on its hands but acknowledged there was speculation about a bid.

The cash in Deutsche Börse's war chest has been exhausted by a €1.6-billion offer to buy the 50 per cent of settlement and clearing house Clearstream International it does not already own.

LSE chief executive Ms Clara Furse has said that LSE's future might or might not include a merger with another European market operator.