The Tokyo Stock Exchange accounts for around 90% of the country's equity trading while its Osaka rival has a strong hold on the domestic derivatives market.

Following press speculation, TSE chief executive Atsushi Saito told reporters a deal was possible but stressed any agreement would have to wait until after the exchange completed its long awaited initial public offering, which could take a year.

However, Osaka president Michio Yoneda is quoted as hoping for some agreement within three months.

The TSE, one of the largest exchanges in the world, has seen a flurry of merger activity from global contemporaries in recent weeks. Deutsche Boerse and Nyse Euronext have agreed to merge as have the LSE and Canada's TMX Group.

Meanwhile, in Asia the Singapore Exchange is bidding to buy Australia's ASX in a deal worth over $8 billion.

LSE chief Xavier Rolet recently predicted that this is just the start of a round of consolidation that could leave as few as three super groups standing in five years.

But opposition to the TMX tie-up is mounting in Canada. Three of the country's six top banks - Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and National Bank of Canada - have penned a letter outlining their concern that the deal would hurt Toronto's ambitions to become a global financial services hub and lead to job losses as London became the global centre for technology across the merged exchange.

The letter continues: "More troubling, key decisions would be shifted overseas. The CEO of the new exchange would be based in London and the majority of directors will be from the LSE. We believe the TMX has choices in achieving this goal. It might restructure the deal in a way that better recognizes the TMX's current standing as a viable global exchange. It could acquire other exchanges or electronic matching/trading platforms, in Canada or abroad. Or it could bolt on other capital market-related activities to its operation. The key is to preserve its mission and remain an engine of growth in Canada and in global markets."

The Exchange has fired back, arguing that the merger represents a pooling of ownership at the holding company level and is not "in any way" a merger of exchanges.

"By spreading our cost base across a broader organisation, our ability to develop and deploy industry-leading innovations, new products and winning technology quickly and efficiently is significantly enhanced.," says the Exchange. "Access to an international and well-established sales and business development organisation gives TMX enhanced ability to attract new investors, participants and overall interest to Canada. And, as these investors drive up activity, deepen liquidity and increase the overall capital pool available for Canadian public companies, our exchanges can even better serve the market."