Stock markets are proving to be attractive investments

However, Icap, the world's largest inter-dealer broker and a recent entrant into the FTSE 100 stock index, said the talks had been called off.

A number of firms including Nasdaq and Euronext have been linked to a takeover of the London Stock Exchange (LSE).

The LSE has resisted approaches, saying that it can continue to grow alone.

Share drive

Earlier this year, LSE chief executive Clara Furse said that the company would not do a deal for the sake of doing a deal.

However, analysts and market observers have speculated that stock exchanges will need to merge if they wanted to keep on growing and offer a wide-range of global financial services.

Already the New York Stock Exchange has agreed to merge with European market Euronext, and analysts are expecting further tie-ups in the industry.

The LSE is attractive because of the UK's light-touch regulatory regime that makes it less onerous for companies to list their shares.

Analysts also said that a tie up with Icap, which offers derivatives, fixed income, energy and other money-market broking services, would make sense.

Reports over the weekend suggest that Icap had stepped back from talks because it felt that the LSE's shares were overvalued.