Dubai, April 1:

The London Stock Exchange (LSE) and its counterpart in the wealthy Gulf state of Dubai have held talks about forging a strategic alliance that could involve the acquisition of cross-shareholdings.

The move would continue the trend of consolidation among global exchanges.

City of London sources confirmed that the LSE, headed by chief executive ClaraFurse, is among six parties which Dubai officials say have expressed an interest in acquiring a stake in the Dubai International Financial Exchange (DIFX).

Omar bin Sulaiman, governor of the Dubai International Financial Centre, which owns DIFX, played down the idea of an imminent deal, but sources in London said that an alliance involving collaboration on trading systems, joint marketing ventures and the cross-listing of exchange-traded funds was a real possibility in the near term.

‘Acquiring equity stakes in each other could come later,’ said a London-based investment banker with knowledge of the situation. An LSE spokesman would only say: ‘We are looking at a range of options involving exchanges within different geographies.’ Last month, the LSE agreed to co-operate with the Tokyo Stock Exchange ina number of areas designed to encourage access to each other’s markets.

A pact between the LSE and Dubai would be significant because it would put London in pole position for secondary listings of Dubai companieswhich the Gulf state intends to partially privatise in the next 18 months.

First on the block could be DP World, the Dubai group that paid nearly GBP4bn for P&O, the British ports operator two years ago. Emirates, the airline which sponsors Arsenal’s new football stadium, would probably be next, followed by the Jumeirah hotels and leisure conglomerate.

The Dubai government, which would retain majority holdings in the companies, would raise billions from the sales through IPOs. The primary listings would be on DIFX, which Dubai trumpeted as marking the birth of the Arab HongKong when it launched in 2005.

Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, said last week that the country was looking to spend billions of dollars this year to diversify the emirate’s cash holdings through international acquisitions.A number of western companies are being eyed by Dubai government bodies, which have been active on the international stage in recent years.

Dubai has bought stakes in firms such as Daimler Chrysler, London-based Standard Chartered Bank, Tussauds Group and Time Warner. A Dubai investment arm has acquired a 3.5 per cent holding in Euronext, the pan-European exchange operator that recently merged with the New York Stock Exchange.

The LSE recently fought off a hostile takeover bid from America’s Nasdaq. The US firm retains a 29 per cent stake in London but it has indicated that it will not seek to block expansion by London as it seeks to take advantage of global consolidation.

Dubai recently scored one of its biggest marketing coups by luring Dave Lesar, boss of oil services company Halliburton to set up office there.