Shares in the London Stock Exchange surged more than 27 per cent to crash through the £11 barrier, amid renewed hopes of a bidding war for the prized market asset and as expectations rise that the New York Stock Exchange is preparing an offer.

The exchange's rejection last Friday of a £2.4 billion bid by Nasdaq, the technology heavy American stock market, also prompted Threadneedle Investments - the LSE's largest shareholder with a 13.8 per cent stake - to say it was now prepared to hold talks with potential suitors.

The dramatic move by Threadneedle, which has long maintained the LSE is substantially undervalued, sharply increases the chances of the exchange finally losing its independence after 138 years.

Michael Taylor, the head of equities at Threadneedle, said: "As the LSE’s largest shareholder, we have consistently encouraged the board of the LSE to take a bold and steadfast view of its future and, should independence no longer be tenable, to maximise the value of its unique franchise.

"Commentators generally are now belatedly beginning to recognise the value of this business, likewise the market’s valuation is beginning to reflect current realities. We are now willing to discuss proposals with interested parties with the long-term interest of our clients remaining our paramount concern."

The LSE's shares leaped 238.5p this morning to 1,118.5p, an increase of an astonishing 27.1 per cent on its closing value last week.

The extraordinary increase added nearly £610 million to value of the LSE, which at the close of play last week was worth £2.25 billion.

The shares closed on Friday at 880p before the Stock Exchange revealed it had rebuffed an "unwelcome" 950p a share all-cash offer from Nasdaq, the technology heavy American stock market.

Over the weekend, Nasdaq signalled that it might be prepared to raise its bid to secure the backing of the LSE's board, which is thought to favour a tie-up with the NYSE above all other potential candidates.

As previously reported on Times Online and in The Times, the NYSE has already stated its interest in bidding for the London market, which has found itself seriously revitalised since shaking off a £1.3 billion bid approach from Deutsche Börse of Germany in late 2004.

Having previously signalled a value of about 800p a share would be acceptable - against the Börse's bid of 530p - the LSE rejected Nasdaq's 950p as seriously undervaluing the company and its prospects.

Michael Long, an analyst at Keefe, Bruyette & Woods, suggested in a note this morning that Nasdaq could offer between 1,550p and 1,650p and still make the deal stack up financially.

Mr Long argued that, although a rival offer from the NYSE was likely, pan-European stock exchange group Euronext has probably been priced out at this sort of level.

"We estimate that Nasdaq could offer 1,550p, assuming that it is funded by cash and debt, or 1,650p if 33 per cent of equity is also used. We have assumed synergies of 20 per cent of LSE's cost base in both scenarios," Mr Long said.

"We believe this approach by Nasdaq could trigger a counter offer from NYSE, which has already spoken publicly about its wish to be involved in global exchange consolidation. However, Euronext is likely to abandon its attempt to acquire LSE, in our view.

"The need to gain approval from shareholders who were already lukewarm on this acquisition, even before the prospect of a three-way bidding war, could prove too much of an obstacle," he said.

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