Project Turquoise, the share-trading system backed by a group of the world’s largest investment banks, is understood to be negotiating the takeover of Plus Markets, the fast-growing London exchange.

Plus, formed from the old Ofex over-the-counter market, said yesterday that it had signed non-binding heads of terms with an unnamed third party.

It said that the deal would constitute a reverse takeover.

The exchange, itself listed on AIM, asked for trading in its shares to be suspended pending further developments.

Trading was halted at 28p, up ¾p, valuing Plus at about £88 million.

Project Turquoise was formed a year ago by seven investment banks, including Credit Suisse, Citigroup and Merrill Lynch, to undercut the fees charged by the London Stock Exchange.

But progress has until now been so slow that it has been nicknamed Project Tortoise.

Analysts suggested that a takeover of Plus, as well as providing it with a ready-made trading platform, could solve Project Turquoise’s struggle to find a chief executive.

Simon Brickles, the ambitious boss of Plus, is a former head of AIM and is well regarded in City circles.

The exchange claims to trade more than 1,000 small and mid-cap shares representing a combined market capitalisation of nearly £200 billion.

Companies that trade exclusively on Plus include Shepherd Neame, the Kent brewer and pub operator, Weetabix, the breakfast cereal maker, and Arsenal Football Club.

Plus formally became a stock exchange in July with a specific plan to attack the LSE’s dominant position in London and drive down share listing and trading costs.

It is taking advantage of new EU rules to promote competition, brought in under the Markets in Financial Instruments Directive (Mifid) to offer a market in more than 7,000 European stocks. Mifid comes into force on November 1.

Close Brothers, the company’s biggest shareholder, is seen as a willing seller of its 25 per cent stake.

Neither Plus nor Project Turquoise could be reached for comment yesterday.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive