The US Nasdaq Stock Market has withdrawn its proposed Pound 2.43bn bid for the London Stock Exchange after the latter rejected its advance.
'Nasdaq announces that it no longer intends to make an offer for the LSE,' the US exchange said.
Earlier this month, shares in the LSE jumped by 30% following speculation of a bid war. On Thursday they fell 8%.
Nasdaq's move sparked speculation that the New York Stock Exchange (NYSE) and Euronext would table counter-bids.
The US exchange gave no reasons for the decision to pull its 950p-a-share bid offer, but said that it could return to the bid arena if the LSE's board had a change of heart or if a rival launched an offer.
Nasdaq follows in the footsteps of German rival Deutsche Boerse and Australian bank Macquarie who both withdrew their offers for the LSE after being rejected by its board.
The Nasdaq's 580-pence-a-share offer trumped the amount Macquarie was willing to pay, but the LSE still rejected it saying that it 'substantially' undervalued the group.
The latest development in the takeover saga will heighten speculation that the NYSE may launch its own bid offer now that it has been given a clear run.
If the NYSE did decide to make an approach it would become the fourth major world exchange to show an interest in the London exchange.
Germany's Deutsche Boerse kicked off the takeover race for the exchange with a £1.25bn approach in 2004. It later walked away in the face of shareholder protests.
Paris-based Euronext has also expressed an interest in the London exchange.
Earlier this week, the LSE said it was on track for an excellent trading performance in 2006, but has declined to comment on Thursday's decision by the Nasdaq to abandon its bid.
'Business continues to go from strength to strength,' an LSE spokesman said.
© BBC - British Broadcasting Corporation
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