The LSE has seen off two takeover bids from Nasdaq in the past year

The Qatari Investment Authority approached the US exchange with the offer last week, the Sunday Times said.

Nasdaq put its 31% stake in the LSE up for sale in August, six months after it tried and failed to take over the firm.

By selling the �797m stake the US group hopes to prevent Dubai-based Borse Dubai from muscling in on its planned �1.85bn buy of Nordic exchange OMX.

Nasdaq and Borse Dubai are currently embroiled in a takeover for Stockholm-based OMX, which gives investors access to the biggest firms in Scandinavia and the Baltic states.

Consolidation

Last month, the Dubai group trumped Nasdaq's agreed offer for the exchange by tabling a �2.02bn ($4bn) offer for the group.

In an effort to fund its fight with Dubai over OMX, Nasdaq has put its LSE shares up for sale.

According to the Sunday Times report, the Qatari group has indicated it is willing to pay �15 a share for Nasdaq's stake in the UK exchange.

However, the Qatari Investment Authority may not be the only group prepared to snap up the holding.

Temasek, the investment arm of Singapore's government, and Deutsche Boerse are both said to be interested.

Rumours surrounding the deals come at a time of widespread consolidation in the sector, with exchanges trying to make acquisitions in an attempt to cut costs and become more efficient.

In June 2006, the New York Stock Exchange (NYSE) bought pan-European Euronext exchange for $10bn, creating the first transatlantic stock market.