Traders work the floor of the New York Stock Exchange...

Traders work the floor of the New York Stock Exchange Wednesday in Manhattan. Deutsche Boerse AG of Frankfurt, Germany, is in advanced talks to buy NYSE Euronext, operator of the New York Stock Exchange. (Feb. 9, 2011) Credit: Bloomberg News

BERLIN -- Germany's Deutsche Boerse AG, the company that runs the stock exchange in Europe's largest economy, is in advanced talks to buy NYSE Euronext in a deal that would create the world's largest trading powerhouse.

NYSE Euronext, which also operates exchanges in Europe, Wednesday announced the possible merger with the owner of the Frankfurt stock exchange. The new company would have dual headquarters in Manhattan and Frankfurt, Germany.

The disclosure came hours after news of a $2.9-billion merger between the London Stock Exchange and TMX Group Inc., parent company of the Toronto Stock Exchange.

Both announcements mark a shake-up for an industry under intense cost pressure from upstart electronic rivals, but one that offers new opportunities after the financial crisis in on-exchange derivatives trading.

NYSE Euronext said it expected the two market operators to combine businesses under a new legal entity incorporated in the Netherlands. Its shares were up $4.69, or 14 percent, to close at $38.10 in trading Wednesday.

The NYSE is already the world's largest stock market, but the largest U.S. exchange is the $20-billion CME Group Inc., which runs the Chicago Mercantile Exchange. "The real motivation here is really about competing with the CME Group," said Larry Tabb, founder and chief executive of the Tabb Group.

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