The London Stock Exchange is to take majority control of Turquoise and merge it with its own dark pool Baikal under a deal agreed with the rival MTF's investment bank owners.
Continuing to trade under the Turquoise name, the merged entity will be 60% owned by the LSE and 40% owned by existing Turquoise shareholders.
Under the deal, the LSE will fund the cash needs of the combined business for the first two years and take a £20 million charge to cover restructuring and the write-off of legacy technology costs.
For the year ended 31 December 2008, Turquoise's losses before tax were £15.7 million and its gross assets were £11 million.
The LSE says it will scrap the Cinnober-supplied Turquoise trading platform and build a new infrastructure for the joint venture using technology supplied by its recently-acquired tech subsidiary MillenniumIT.
Simon Hogan, Morgan Stanley's chief operating officer for sales and trading in Europe, comments: "Combining the operational expertise and MillenniumIT platform of the LSE with the market structure insights of a number of the largest European trading participants creates a dynamic and powerful partnership with every chance of success in the European equity market and other asset classes."
The LSE says it wants to to broaden equity participation in the new venture by selling up to a further nine per cent of the issued share capital to other interested parties.
Eli Lederman, CEO of Turquoise, says of the agreement: "In our first 18 months of operation we have achieved a pan-European footprint in both lit and dark trading. With the support of London Stock Exchange Group we will be able to simplify our operational structure, attract a wider network and expand the platform's product base."