Germany's Deutsche Boerse has called for merger talks with the Paris-based Euronext exchange.
The merger call came as Deutsche Boerse unveiled rising profits
Deutsche Boerse boss Reto Francioni said closer ties would be "attractive" for both customers and shareholders.
He said the German exchange took a "pragmatic approach to consolidation", but added the combined firm's headquarters should be in Frankfurt.
Both Deutsche Boerse and Euronext have expressed interest in taking over the London Stock Exchange (LSE).
Deutsche Boerse launched a failed £1.3bn ($2.3bn) bid for the LSE in December 2004, a move which eventually led to the resignation of its then chief executive Werner Seifert.
Euronext, which comprises of the Paris, Amsterdam, Brussels and Lisbon stock markets, is still thought to be considering a move for the London exchange.
Deutsche Boerse and Euronext have held preliminary talks on cooperation, but so far failed to agree on terms.
A combination of the two would leapfrog the LSE as Europe's biggest market for securities trading.
"A combination of Deutsche Boerse and Euronext is by far the most attractive among a large number of relevant options - for customers and shareholders as well as for the financial centres involved," said Mr Francioni.
"Deutsche Boerse continues to be in favour of a dialogue with Euronext with a view towards a combination of two partners," he added.
Mr Francioni said management of the combined business would be divided between Deutsche Boerse's and Euronext's existing locations to create a "fair balance".
However, he stressed that he believed the German financial centre of Frankfurt should play host to the headquarters of a merged group.
Mr Francioni's comments came as Deutsche Boerse unveiled a leap in full-year net profits for 2005 to 427.4m euros, from 266.1m euros in the previous year.
Strong sales and income from the banking business helped boost the exchange's performance.
Deutsche Boerse jointly owns Eurex - the world's leading derivatives exchange - with the Swiss stock exchange.
Deutsche Boerse's overtures to Euronext will divert some of the recent acquisition interest away from the LSE, which has so far resisted takeover attempts by predators.
On Monday, Australia's Macquarie Bank admitted defeat in its £1.5bn bid for the LSE, with the Sydney-based group saying it had failed to win enough support for the move.