Nasdaq has dropped its planned £2.43bn cash bid for the London Stock Exchange, which was rejected by the UK market operator for being too low.
LSE shares dropped 8.2% to 1027.50 pence after Nasdaq released a statement saying it was withdrawing its bid, but the stock is still well above the US exchange's 950 pence a share offer.
The LSE rejected Nasdaq's share offer 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.
Nasdaq says it reserves the right to bid for the LSE again in the future if another third party company makes an offer for the UK exchange. Nasdaq near-neighbour the New York Stock Exchange has taken a watchful interest in the European exchange consolidation process and may yet be tempted to thow its hat into the ring.
Nasdaq is the third suitor to be rejected by the LSE in the last 18 months. The UK exchange successfullly fought off a hostile bid from Australia's Macquarie Bank earlier this year, while Deutsche Börse was forced to abandon its bid for the London exchange last year following pressure from its shareholders.
However Nasdaq's bid - which was considerably higher than Macquarie's 580 pence per share offer and Deutsche Börse's 530 pence per share deal - stirred interest among some of LSE's largest shareholders and prompted Threadneedle Investments, the biggest shareholder in the UK exchange with a 13.8% stake, to say that it would be willing to negotiate with potential bidders for the UK exchange.
Earlier this week the LSE said it was expecting to report "excellent" annual results, thanks to a surge in trading volumes on its electronic order book system, SETS. The exchange said trading volumes on SETS have soared over the last year and are on course this month to break all previous records.
Rumours also surfaced this week that the UK exchange is considering launching its own takeover bid for Swedish exchange operator OMX.