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9 February 2011 Last updated at 08:18 GMT
London Stock Exchange sign The LSE has been the subject of numerous takeover
bids in recent years
The London Stock Exchange (LSE) has agreed a merger with TMX Group, which
operates the Toronto Stock Exchange.
The merged group will keep headquarters in both London and Toronto and become
the world's largest exchange for mining companies.
More than 6,700 companies will be listed on the combined exchanges, with a
market capitalisation of about 3.7 trillion ($5.9tn), the firms said.
Shares in the LSE climbed sharply in early Wednesday trading.
A number of leading exchanges have merged in recent years.
The New York Stock Exchange has bought Euronext, while Deutsche Borse has taken
over the International Securities Exchange in the US. The LSE, which has
successfully fought off a number of takeover approaches, has itself bought
Borsa Italiana.
'Deep expertise'
The LSE's chief executive Xavier Rolet, who will head the new enlarged business
said it was "an incredibly exciting merger with considerable growth
opportunities".
"We are creating the world's largest listings venue for the commodities, energy
and natural resources sectors, as well as the premium market for small,
mid-size and growth companies."
TMX's chief executive Thomas Kloet will be the firm's president.
"We are creating an international group with deep expertise, undeniable
leadership in key sectors and the ability to compete and win on the global
stage," Mr Kloet said.
"Canadian customers will benefit from access to one of the world's deepest
capital pools while European issuers will have an effective gateway to North
American financial markets."
'Interesting'
"These are arguably two of the most important mining exchanges in the world,"
Douglas Porter at BMO Capital Markets told the BBC World Service.
"Of course some of the world's biggest mining companies are on the LSE, and
some of the world's biggest gold companies, and hundreds if not thousands of
smaller mining companies are in the TMX Group.
"So certainly it brings together some of the most important mining groups in
the world under one broad umbrella."
As well as the Borsa Italiana, the LSE also operates MTS, a European bond
market, and the Turquoise trading platform. TMX also operates the Montreal
Exchange and the Boston Options Exchange, among others.
The merger was "interesting" said Justin Urquhart Stewart of Seven Investment
Management, but he added there may be opportunities for the LSE to be involved
in more lucrative deals.
"What this would do is take them from 10th or 11th in the international league
to fifth or sixth," he told the BBC.
"It'll allow them to have greater pools of liquidity and develop derivatives,
but it's not the big story. The big story would be a potential linkage with one
of the Indian markets, or potentially Singapore or maybe China.
"That's where they will get into a much larger scale operation. As yet we don't
know anything, but watch India over the next few months."