Regardless of who wins the battle for the London Stock Exchange, the outcome will be a London-centred organisation driving pan-European share trading from what is already Europe's financial heart.

Four-country exchange Euronext and Germany's Deutsche Boerse are pursuing the LSE, hoping to woo users and shareholders with concessions such as locating a joint headquarters in London's financial district.

Winning what could be a $3 billion battle for dominance of Europe's equity markets would create the biggest stock exchange operator in Europe and the second-biggest in the world after the New York Stock Exchange in terms of the capitalisation of companies listed.

But winning that battle, which is expected to allow the exchanges to cut trading costs and better compete for listings and liquity, involves a growing list of concessions that are playing to London's favour and the benefit of its financial community.

Deutsche Boerse has been lobbying London's bankers for their crucial support and seeks to soothe fears that a takeover threatens the city's role as a top financial centre - while at the same time containing concerns in Frankfurt about the impact on Germany's financial sector.

Boerse has conceded that much of the two bourses' structures will stay in place while also promising lower trading costs and allowing London-based users a voice on its supervisory board, giving UK customers a say in its strategic direction. It is also expected to drop the 'German' from its name. Both Euronext head Jean-Francois Theodore and Boerse CEO Werner Seifert are reported to want to combine cash equities trading into a London unit run by LSE chief Clara Furse, on top of headquartering the merged firm in London.

"Theodore can perfectly well offer to transfer the cash activity to London," a London-based analyst said.

"He already did that with derivatives when Euronext took over LIFFE (the London financial futures market), so he can do it again by giving the management of five cash markets to Furse in London," the analyst said.

In addition to a hefty price tag, LSE, where the market value of listed companies exceeds €2.0 trillion, will seek a merger plan that is least disruptive technically for its users.

That leaves some market watchers to say Euronext, whose clients already clear and settle trades through the same infrastructure as LSE users, could offer the smoothest transition. Analyst Alain Dupuis at French broker OddoSecurities said that changing the LSE's trading system "would result in a very coherent business, with a high degree of uniformity on cash and derivatives covering five financial centres.

"A link-up between Euronext and the LSE carries fewer execution risks and obstacles," he said.

Although Euronext has given no indication so far on how it would integrate LSE markets, the pan-European exchange was widely expected to migrate all cross-Channel share trading operations to a single electronic platform - either its proprietary NSC trading system or London's SETS platform.

Boerse, by contrast, has already explicitly said that its plans do not include integrating markets or bourse segments.

It is eager to not repeat the mistakes of four years ago when it sought to team up with the LSE and angered UK brokers with plans that could have sounded the deathknell over the three-century old LSE.

Under the iX project, Boerse had planned to centre blue-chip trading in London, leaving Frankfurt with the dregs, in a move that with hindsight would have been damning, particularly after the Internet bubble burst, kicking off a two and the half year bear run.

This time, Boerse has pledged to keep market models and trading systems in place, leaving fund managers and analysts to predict that at least for the time being liquidity pools will stay where they are and with them, jobs and other resources. "As for liquidity, there will not be much change: in London, British shares will be traded and in Frankfurt, German ones," said Landesbank Rheinland Pfalz analyst Olaf Kayser.

"Under the current plans, neither liquidity nor single stocks would go to London, nor would (UK) banks trade here," said spokesman Rolf Drees at Union Investment, an institutional investment firm which is also the second-largest holder of Deutsche Boerse stock.