The London Stock Exchange said yesterday it was in talks with various parties as part of a strategic review, but it moved to dampen speculation that it was set to announce a merger soon.

The 200-year-old exchange, whose shares hit an all-time high earlier in the day, said it did not expect to make any announcement on those talks when it released its financial results next week.

"As part of its ongoing review of strategic options, the exchange is in discussions with various other parties. If appropriate, an announcement may be made at a later date," it said in a brief statement. It did not name any of the parties.

The LSE is a jewel in European bourse consolidation and a likely target for its major rivals.

Exchanges are merging in response to pressure from their own shareholders and financial investors generally to cut costs and create deeper markets.

Industry sources said last month that New York's Nasdaq exchange, which was seeking to make a land-grab in Europe, was in bid talks with the London-based exchange.

Shares in the LSE, which were introduced to the market in July last year at a price of 397.5p sterling, soared to a new high of 503p, before settling back to close 5.6 per cent up on the day at 488.75p.

Others that could be keen on buying the LSE include the rapidly expanding Euronext market that brings together Paris, Amsterdam, Brussels and Lisbon, and Germany's Deutsche Börse.

Both are itching to become the leading consolidator in Europe.

Sources close to the Nasdaq talks said bankers were working to pull off a merger with the LSE within weeks, in the hope that rivals preoccupied by their own recent acquisitions would find it hard to break up any deal.

The sources said advisers believed a quick deal would make it much harder for any of the LSE's potential suitors to step in with a counter offer.

Some believe Deutsche Börse's recent acquisition of clearing and settlement house Clearstream and Euronext's purchase of London's derivatives exchange LIFFE may restrict their ambitions, but others said both would pull out all the stops to get the LSE.

Experts have forecast an auction for the LSE as Europe's markets compete for cross-border business and respond to investor demands to drive down trading fees. Nasdaq, with less than $300 million (€329 million) in cash at the end of last year, would struggle to match higher bids.

The LSE will announce its annual results on May 23rd. - (Reuters)