A merger would create Europe's third biggest stock market

Zurich-based SWX confirmed it had been approached by the Frankfurt-based Deutsche Boerse about possible talks.

A merger would create Europe's third-largest exchange bringing firms such as Nestle, Novartis and Siemens into a single market.

Deutsche Boerse attempted to merge with the London Stock Exchange in 2000.

Greater co-operation

SWX, owned by a consortium of 60 banks, said it was considering a proposal from Deutsche Boerse.

A spokesman for the exchange said: "I can confirm that there is an invitation from the Deutsche Borse towards deeper co-operation but whether there will be talks must yet be decided. At the moment there are no talks."

A merger would create the third largest exchange in Europe behind the London Stock Exchange and Euronext.

Analysts expect the number of individual national exchanges to fall in the next decade as a single European market in financial savings begins to emerge.