Nyse Euronext says the investment, which is the largest it has ever made in a foreign exchange, provides it a "valuable presence" in the lucrative Middle East market.

The deal - which is expected to be completed in the fourth quarter - will see Qatar retaining a 75% stake in the DSM. Nyse Euronext will take up three of the 11 seats on the DSM board of directors.

Under the agreement, Nyse Euronext and Qatar will build an integrated cash and derivatives exchange, which will be based on technology supplied by the exchange.

"This partnership lays the foundations for us to build Doha into a world class financial centre. Our country's financial markets will be an integral part of a group which links together the world's major trading centres across the US and Europe and now the Middle East,'' says Sheikh Hamad bin Jassim bin Jabor Al-Thani, prime minister and minister of foreign affairs, Qatar.

The two parties say they will also work to bring Qatar's financial markets up to best practice international standards. The DSM will continue with its integrated clearing and settlement model in the short term, but plans eventually to link up with international clearing and settlement houses.

Nyse Euronext says will also base a number of its Middle East region operational and technology support functions in Doha, making it the exchange's "business hub" in the region.

Nyse Euronext rival Nasdaq OMX already has a foothold in the region through a 33% stake in the Dubai International Financial Exchange. The Dubai exchange also has a 20% stake in Nasdaq - in return for bowing out of its takeover bid of OMX - and bought Nasdaq's 28% stake in the LSE.

In today's statement Nyse Euronext says it submitted the most attractive offer for DSM "as part of a competitive bidding process".

According to a Financial Times (FT) report the competitive tender included a a deal submitted by the London Stock Exchange (LSE), in which the state-owned Qatar Investment Authority (QIA) holds a 15% stake. 

It was reported that LSE chief exectuve Clara Furse visited the Gulf state earlier this month, along with Martin Graham, head of equity markets at LSE, to talk with officials about the Doha deal, among other issues. The early-June visit also fuelled speculation that Furse was meeting with QIA following investor concern over the LSE's declining share price.

The LSE has seen its stock decline in recent months amid concerns that new rival upstarts are set to steal market share from the UK exchange. Last week the stock hit the lowest level for two years.

News that it has lost out to Nyse Euronext in Doha has resulted in LSE shares receiving another battering today, with the stock falling 5.06%, or 44 pence, to 825.00 pence in mid-day trading.