Analysis: Consolidation is doing its best to become a key word in the vocabulary of the world's stock markets.

Yesterday's £2.7 billion (€4 billion) bid for the London Stock Exchange (LSE) by the Nasdaq marked the third attempt by the largest US electronic stock exchange to get its feet under the British share-trading table.

In the same vein, Nasdaq's rival, the New York Stock Exchange, last week moved closer to acquiring Euronext, owner of the Paris, Amsterdam, Brussels and Lisbon exchanges, as Deutsche Börse bowed out of the race.

However, despite all this momentum - since December 2004, Deutsche Börse, Euronext, Australian group Macquarie and British financial services group Icap have all been in talks to take over the LSE - the Irish Stock Exchange (ISE) remains untouched. While part of this is probably linked to the exchange's ownership structure - it is not a listed entity and is in fact jointly owned by seven stockbrokers - Dr Brian Lucey, senior lecturer in finance at Trinity College Dublin school of business, is not surprised.

"The Irish Stock Exchange has a limited future as an equity exchange," he said, pointing out that the majority of the trading is in a handful of stocks, which in many cases are actually traded more heavily in London or New York.

Dr Lucey is not alone in his beliefs. Eamonn Walsh, professor of accounting at the UCD Michael Smurfit school of business, said the Irish exchange would have to focus on a niche area in the future if it is to remain attractive to investors. As an equity exchange, its future is not exciting, he said, pointing in particular to the lack of initial public offerings in recent times.

To some extent, the Irish exchange is already focusing on niche areas. While the number of firms listed on the exchange has fallen from more than 90 in the mid-1990s to more than 50 today, it has added specialist funds in a bid to remain attractive.

And while these funds do not bring in a huge amount in revenue, they are strategically important, according to John Cotter, professor of finance and director of the centre for financial markets at UCD. "Size has always been an issue for regional exchanges and the current merger activity suggests that they will become even more vulnerable in the future."

Still, the exchange itself is adamant that any takeover of the LSE by Nasdaq will do little to change the European environment. "We are still faced with the same three large players in Europe irrelevant of who their owners are," said director of trading and regulation Brian Healy, referring to the LSE, Euronext and Deutsche Börse. "It isn't really a huge move forward for consolidation."

Sources within the Irish market agree. "It doesn't really matter who owns the exchange," said one. "They will still operate it as an exchange and we will still trade on it in the same way."

There is, however, an acknowledgement of the benefits of being part of a larger outfit, in particular the ability to lower trading costs, and market participants are in agreement that the Irish exchange might fare better as part of a wider group. Surviving European consolidation is not the only challenge, with the recent announcement that seven investment banks are planning to start their own pan-European equity trading system. In the long run this, rather than consolidation, may bring down the likes of the Irish exchange.