In its pre-close year-end update, the LSE says it expects to report "excellent" annual results thanks to a surge in trading volumes on the SETS system.

The exchange says growth on SETS has accelerated over the year, benefiting from a secular shift in the pattern of trading and facilitated by its new Infolect data delivery system which was introduced in September 2005.

It says 18 of the 20 busiest trading days ever recorded on SETS occurred following the introduction of Infolect in September and an increase in trading capacity in October.

The average daily value of trading on SETS increased 29% to £4.5bn in the 11 months to February. So far this month the number of average daily bargains has been 293,000, up 42% on last year.

Says Clara Furse, LSE chief executive: "The recent acceleration of growth on SETS means that trading in March will exceed all previous records by a significant margin. Our business goes from strength to strength creating more value by the day."

The exchange says its information services unit also experienced strong growth, with the total number of terminals receiving LSE data rising by 8000 to 102,000 in the 11 months to February.

The LSE's emphasis on its trading platform comes amid rumours that Nasdaq would replace the exchange's technology with its own if a takeover bid was successful. The LSE has rejected a 950 pence per share offer from the US exchange earlier this month, saying the bid substantially undervalued the company. Nasdaq has reportedly met with LSE shareholders since then in an attempt to drum up support for its offer.

But, following a report by UK newspaper The Financial Mail on Sunday, speculation is mounting that the UK market operator is considering launching its own takeover bid for Swedish exchange operator OMX. The Scandinavian firm originally launched a hostile takeover bid for the London exchange in 2000, which was branded inadequate by the LSE.

LSE shares have rocketed since Deutsche Börse made an offer for the UK exchange in December 2004 and the stock passed the £11 mark shortly after Nasdaq disclosed details of its bid and has continued to rise. However the stock slipped slightly this morning and fell 0.70%, or 8.50 pence, to 1118.50 pence in mid-morning trading.

In a separate move, Proquote, the LSE's market data and trading terminal business, is also launching an order management system (OMS) for stockbrokers, which allows firms to capture, route and execute orders from a number of sources.

Orders can be entered and executed with retail service providers, the SETS Order Book or via a broker. The trade execution information is then forwarded to the back office for settlement.