Nyse Euronext and Deutsche Börse have confirmed they are "engaged in advanced discussions regarding a potential business combination".
Earlier, shares in both exchange operators were suspended amid growing press speculation, originating with Germany's Der Aktionärsbrief, about a possible tie-up.
No deal has been reached, says a statement and any transaction would be subject to the approval of the two companies' boards, regulatory and shareholder approvals.
However, details have been revealed on the proposed arrangement, which would see them combine in all-stock transaction under a new legal entity incorporated in the Netherlands. Deutsche Börse shareholders would hold approximately 59% to 60%, and Nyse Euronext shareholders 40% to 41%, of the combined equity.
The group would have dual headquarters in New York and Frankfurt. The chairman would be Deutsche Börse's Reto Francioni, based in Frankfurt, with Nyse Euronext's Duncan Niederauer taking on the role of CEO, based in New York.
The pair claim they could realise around EUR300 million in cost synergies, principally from economies of scale in information technology, clearing operations, market operations and corporate centre functions.
In addition, they expect to generate "substantial incremental revenues" from clearing services, product innovation and cross-selling opportunities between the global cash and derivatives businesses.
A combined group would be "a true pacesetter across the spectrum of capital markets services, the combined group will offer clients global scale, product innovation, operational and capital efficiencies, and an enhanced range of technology and market information solutions".
Earlier, the London Stock Exchange and Canada's TMX Group revealed plans for their own mega-merger.