The London Stock Exchange (LSE) has rejected a proposed takeover bid from Australia's Macquarie Bank, saying it is "derisory" and undervalues the firm.
The London Stock Exchange has become a takeover target
The Australian lender had proposed a cash offer of 580 pence per LSE share, valuing the company at about £1.5bn.
The LSE already has rejected an offer from German rival Deutsche Boerse and analysts said that a bid would have to be closer to £1.8bn to be successful.
There have been a number of stock exchange mergers, with more expected.
Although Macquarie's offer trumped Deutsche Boerse's offer of 530p per share, it was still below the LSE's recent share price peak of 620p.
LSE shares closed at 619p on Friday, up 1.14% on the day.
Takeover speculation has surrounded the LSE since the end of last year as exchanges look to expand and create pan-regional markets in an effort to cut costs, lower fees and boost profits.
In December last year, Germany's Deutsche Boerse made a £1.3bn ($2.5bn) offer for the LSE, but this was dropped after opposition from its own shareholders.
Rival Euronext, which operates several European exchanges including the Paris exchange, has also been considering a bid.
In November, the UK's Competition Commission said it would approve any bid Euronext made for the LSE, provided it allowed the LSE independence and kept its clearing house activities intact.
Sweden's OMX Group, which failed to win control of the LSE four years ago, is also rumoured to be considering a second bid.
The LSE is seen as a key asset in the expected round of consolidation in Europe's stock exchanges.
However, the company is keen not to be bought cheaply and said that Macquarie's offer was a "derisory proposal".
Macquarie's offer "fundamentally undervalues the company and lacks any strategic or commercial credibility", the LSE said in a statement on Friday.
The LSE wants a higher price because of its earnings potential, the firm said.
MACQUARIE BANK: KEY FACTS
Largest investment bank in Australia
Pre-tax profits 2004/05: 1.1bn Australian dollars (£495m; $880m)
Employs 6,500-plus staff
Set up by UK firm Hill Samuel
Became Macquarie Bank in 1985
Operates in 21 countries
UK interests include M6 toll road and BBC Broadcast
"With alternative merger and acquisition scenarios still possible, including Euronext and Deutsche Boerse the chances of a bid at this level succeeding seem modest," said analyst Andrew Mitchell at Fox-Pitt Kelton.
Sydney-based Macquarie, Australia's biggest investment bank, is best known for buying into infrastructure companies such as airports and utilities.
Its involvement in the UK has so far included investments in the M6 toll road and technical services company BBC Broadcast.
The bank, which has been mulling over a bid since August, launched the offer a week before a deadline set by the Takeover Panel by which it must announce a bid or walk away.
"You can look at this two ways: either it's a way for Macquarie to save face ahead of walking away, or an attempt to buy some time," said analyst Justin Bates at Numis Securities.
"I think it's the latter. It shows they are at least half serious, and I'd be surprised if they didn't come back with a higher offer."