According to a report by the Wall Street Journal, which cites people familiar with the matter, the two exchanges haven't yet held talks but Nasdaq executives have discussed a possible combination between the two companies with bankers.

LSE shares rose to a new high of 707.50 pence on the news.

The two exchanges previously held merger discussions in 2002, but talks stalled on concerns about how a combined entity would be regulated, says the report.

But a potential tie-up between the two would create an exchange to rival the New York Stock Exchange. Nasdaq also has roughly the same market value as the LSE which makes a deal more likely as it could be structured as a merger of equals rather an acquisition, says the WSJ.

News of Nasdaq's interest in the LSE was also reported by CNBC yesterday.

Yesterday the LSE again urged shareholders to reject a £1.5bn hostile takoever bid from Australia's Macquarie Bank. The UK exchange said the 580p-a-share offer ignored its profit and revenue growth and consolidation prospects. The exchange has repeatedly rejected the offer, claiming that the Australian bank is trying to buy it "on the cheap".

But in its offer document, Macquarie argued that its bid was an "attractive, certain and deliverable cash offer" is the only offer currently available. Shareholders have until 31 January to accept the bid.

Earlier this week reports also surfaced that another LSE suitor, Pan-European exchange Euronext, is under pressure from one of its largest shareholders to kick-start merger talks with Deutsche Börse and drop its takeover bid for the UK market operator.