The prospect of a £13 billion-plus Europe-wide "super-exchange" took a dramatic step forward today as Frankfurt based Deutsche Börse opened its arms to a merger with its Franco-Dutch arch-rival Euronext.

With both exchanges appearing to shelve the idea of any imminent assault on the London Stock Exchange, talks over a so-called "merger of partners" between the former bitter competitors are expected to take place shortly.

Should they be successful, a combined Euronext and Deutsche Börse would dominate the European equity and derivatives markets and be capable of competing with heavyweight American exchange markets as the consolidation of the sector moves swiftly forwards.

Deutsche Börse operates the Frankfurt stock exchange and Eurex derivatives market, while Euronext was formed out of a merger between the French, Belgian and Dutch exchange. It now includes the Spanish and Portuguese markets and owns the London-based derivatives market Liffe.

The two companies have already held merger talks, although no agreement was reached in the expectation a tie-up would fall foul of European competition authorities.

However, the apparent burying of differences between Deutsche Börse and Euronext comes after technology-heavy American exchange Nasdaq launched a £2.4 billion bid for the LSE at the end of last week.

Nasdaq's interest in the LSE, which sparked a 30 per cent leap in its share price, is expected to be followed shortly by a counter-bid from the New York Stock Exchange.

Deutsche Börse expressed its enthusiasm for a tie-up with Euronext - which would create a company with a combined market value of at least £13 billion - despite it being granted clearance today to pursue a formal bid for the LSE.

It follows overtures made yesterday by Euronext, which also appeared to be moving away from an offer for the LSE.

Both exchanges have made clear that London is still a prize market, and have kept the door open if an opportunity emerges to launch a realistic takeover proposal.

"In light of the increased consolidation dynamics in the exchange industry, Deutsche Börse reconfirms its priority to actively shape the creation of a truly European exchange organisation. Deutsche Börse welcomes Euronext's statement that it intends to work constructively with Deutsche Börse towards this goal," the German group said.

"Deutsche Börse is looking forward to enter into concrete negotiations with Euronext management on realising a combination of the two groups on the basis of a merger of partners with a view to create a global market leader in the industry."