New York tops the rankings as one of the world's big financial centres, but now London, with free-wheeling and open markets, could upstage the US, where stiff regulation has given foreign investors cold feet.

The US domestic capital markets still dwarf those in Europe and the New York Stock Exchange and Nasdaq offer trading in shares in some of the world's biggest companies.

Wall Street boasts the world's biggest banks - Citigroup, Bank of America and JP Morgan Chase, as well as the world's leading corporate finance firms such as Goldman Sachs and Morgan Stanley.

But Wall Street can now be a more costly and complex place to do business for foreigners because of a regulatory crackdown after the excesses of the internet stock boom and the collapse of Enron.

Tougher immigration controls after the September 11 World Trade Centre attacks have also made it more difficult to move clients/staff into the US.

So Wall Street is coming to London, as illustrated by the New York Stock Exchange and Nasdaq's overtures to the London Stock Exchange.

"I think both the NYSE and Nasdaq are probably trying to find a way of getting themselves outside the brick wall that is being built around America," said one senior executive at a London-based investment bank.

Former US central bank head Alan Greenspan last week said he was "disturbed" by the fact that initial public offerings had moved away from the US largely to London.

International capital is gravitating to London because of its more pragmatic approach to regulation, its open marketplace and proximity to some emerging markets, plus access to a highly-skilled and international workforce. "Those are the critical factors when you talk to major foreign investors about their views on London," said Chris Gentle, research director at accounting and consulting firm Deloitte.

"We are seeing a pecking order developing about where investors like to invest and where newer companies want to list," Mr Gentle said. "If you get the right mixture of corporate governance, infrastructure - which London has at the present time - then that is why it is such a focal point."

The long-running battle over who owns the London Stock Exchange illustrates London's key position.

The New York Stock Exchange and Nasdaq are the latest contenders in the contest for the LSE. They want to grab some of the spoils from London's pre-eminence as an international capital centre.

"It's very understandable why both the New York Stock Exchange and Nasdaq would be very interested in forming some combination with the London Stock Exchange," said Paul Myners, a leading figure in UK finance, who is currently chairman of UK retailer Marks and Spencer.

"This is their attempt to jump on the train before it finally leaves the station."

A study published this week by IBM's Institute for Business Value and the Economist Intelligence Unit predicted London would remain a magnet for talent to help it stay on top.

"We are seeing a flocking to London on behalf of the Tier 1 broker/dealers - the Morgan Stanleys, Merrill Lynches, Goldman Sachs - you name it, are relocating key skills over there," said Suzanne Dence, from the IBM Institute for Business Value.

But executives also warn against overconfidence in London's success.

Alan Yarrow, chairman of the London Investment Banking Association said: "I think the point that London has got to be careful about is that it must not be complacent."