The London Stock Exchange plans to set up a pan-European, off-bourse trading platform with Lehman Brothers, the groups said, to fend off start-up rivals hurting LSE's business.
The joint venture called Baikal would offer access to securities across 14 European countries in a so-called dark liquidity trading pool that also offered algorithmic, or computer-driven, trading functions.
"Baikal aims to address the growing complexity of order execution (...) by allowing (...) participants to trade larger orders in a trusted environment, thereby minimizing market impact," the groups said on Thursday.
The joint venture will start business in the first quarter of 2009, the groups said, and will be headed by LSE's chief executive, Clara Furse.
The move comes a day after Project Turquoise, an alternative European cash equities trading platform established by a group of big investment banks, said it would go live on August 18.
On Tuesday, NYSE Euronext bought 25 percent of the Doha Securities Market for $250 million as western exchanges are looking to boost their presence in booming emerging markets as business in America and Europe slows.
Shares in LSE, Europe's biggest stock market, have fallen over 50 percent this year amid fears it is losing market share to new trading platforms such as Nomura-owned Instinet's Chi-X, which offer faster trading execution times.
LSE shares were 5 percent lower, after jumping more than 11 percent in the previous session when Qatar's sovereign wealth fund said it was in talks with London and German stock exchanges for new partnerships.
Rising dissatisfaction from hedge funds with traditional stock exchanges and the European Union's new MiFID market abuse regulation have sparked the birth of an entire generation of alternative trading venues.
LSE shareholders were enjoying a Middle-Eastern bidding war for the exchange's business only nine months ago, but much of the takeover speculation has disappeared, now that the exchange's future looks much tougher and Qatar holds a 15 percent stake in the London-based company.
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