The LSE, which recently batted away a much lower bid from Australia’s Macquarie Bank Ltd., said Friday that the Nasdaq proposal of a 950 pence ($ 16.50) per share cash offer also undervalued the exchange, which is Europe’s oldest.

"The Board of London Stock Exchange firmly believes that the proposal, which represents only a 8 percent premium to the current market price, substantially undervalues the company, its unique position and the very significant synergies that would be achievable from the combination of London Stock Exchange with any major exchange group," the LSE said in a statement.

LSE shares rose 1.9 percent to close at 880 pence ($ 15.29) on Friday, while Nasdaq shares jumped $ 4.06, or 10 percent, to $ 43.56.

The Nasdaq confirmed that it had submitted a proposal of 950 pence per share to the LSE on March 9, saying the price represented a 72 percent premium to the closing price on Aug. 12, 2005 — the business day before Macquarie’s announcement of its potential interest.

"Nasdaq believes that its proposal would represent an attractive offer for shareholders, listed companies and the trading community and reflects unique benefits for LSE which have not to date been proffered by other parties," the company said in a statement.

The Nasdaq argued that the offer would transform the two exchanges into one trans-Atlantic marketplace that could trade both US- and European-listed stocks equally throughout the business days on both sides of the ocean.

The Nasdaq proposal is substantially above the 580 pence ($ 10.08) per share offered by Macquarie, Australia’s largest investment bank.

Macquarie gave up its bid last month after revealing it had acceptances for its offer representing just 0.4 percent of the exchange.

Macquarie argued that the LSE’s share price had become inflated because of the takeover interest swirling around it _ the pan-European exchange owner Euronext NV and Germany’s Deutsche Boerse AG also showed interest in the exchange.

Analysts were surprised at the high price offered by Nasdaq and said that the LSE’s rejection suggested it was trying to flush out interest from Euronext and Deutsche Boerse, as well as the newly public NYSE Group Inc., the parent company of the New York Stock Exchange.

"This is a very, very rich price," said Octavio Marenzi, chief executive of financial research firm Celent. "They must be seeing something that Euronext and Deutsche Boerse have not identified."

Marenzi said that it might be difficult for either competitor to come forward with a stronger bid given competition issues. He pointed out that a previous, lower offer from Deutsche Boerse collapsed when shareholders revolted and forced out the German exchange’s chief executive.

British regulators have indicated they would give either Euronext or Deutsche Boerse approval to take over the LSE on the condition that each ensure the independence of the exchange’s trade clearing provider _ an issue Nasdaq would not have to address.