Nasdaq signalled an end to its ambitions to take over the London Stock Exchange yesterday in a move widely seen as a precursor to a raised bid for OMX, the Nordic exchange that it is vying for with Dubai.

The American exchange, which failed to buy the LSE in March after a bitter takeover battle, said that it would sell its 31 per cent stake and use the £800 million proceeds to buy back debt and shares. The move comes amid a wave of consolidation as exchange operators face increased competition, particularly in Europe, and follows Nasdaq’s agreed $3.7 billion (£1.9 billion) bid for OMX in May.

Nasdaq hopes that the share buyback will raise its share price and bolster its part-share bid for OMX in the face of a higher $4 billion cash offer for the Nordic exchange from Borse Dubai.

Bob Greifeld, the Nasdaq chief executive, said yesterday that the American exchange remained committed to the OMX merger, despite Dubai’s intervention. “Our bid represents the best long-term value for our shareholders and, most importantly, for OMX shareholders,” he said. He was speaking from Sweden, where he noted that he was meeting Magnus Böcker, the OMX chief executive, and the group’s shareholders. Although he declined to comment on the timing or price of any raised bid for OMX, Mr Greifeld strongly suggested that a higher offer was a possibility.

He said: “If and when we would change the terms of our offer . . . we will maintain our M&A discipline with respect to the price and the terms of our offer.”

Sources said it was likely that Nasdaq, as well as relying on a rally in its share price, would also need to sweeten the cash component of its bid to fend off Dubai.

Speculation swirled about who would line up to buy Nasdaq’s stake. Given the number of past LSE suitors, including Deutsche Börse, Macquarie Bank and Euronext, analysts said it was likely that Nasdaq would be forced to sell to a rival trade buyer, which could be the New York Stock Exchange or even Dubai. Shares in the LSE jumped on the news, closing up 31p to £13.01, as traders bet that Nasdaq selling its stake could prompt another takeover bid for the London exchange from a third party.

Nasdaq, which said that it had hired JPMorgan and UBS to evaluate its options, noted that it had already had tentative conversations with a couple of potential buyers, although those talks had been informal.

At present prices, Nasdaq’s 61.3 million LSE shares, which were bought for an average price of £11 a share, are worth £798 million.

However, Mr Greifeld said he believed that a large premium would be justified for the stake. “We believe there are buyers out there,” he said.

Nasdaq said it estimated that selling the stake would increase its earnings per share for 2008 by approximately 30 cents to 35 cents a share.

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