Britain's office of fair trading (OFT) said yesterday it would refer two rival proposals to buy the London Stock Exchange (LSE) to the Competition Commission, a step likely to delay any takeover by six months.

Shares in the London Stock Exchange sank 5 per cent after the news as the likelihood of a quick end to the protracted takeover battle receded.

The OFT announcement came as it concluded a two-month look at rival plans by Deutsche Börse and Euronext to acquire the LSE and create the world's second-biggest stock exchange after the New York Stock Exchange.

The OFT said in a statement the test for reference to the Competition Commission was met in relation to the supply of on-exchange trading services for equities in the UK in both cases.

"In respect of DBAG's (Deutsche Börse) bid, additional concerns arise in relation to the supply of clearing services for equities trades in the UK," the OFT said.

OFT chairman John Vickers said competition between exchanges in Europe had been episodic and that it needed to be investigated whether either merger would lessen future competition in equity trading in the UK.

The OFT considered that neither proposal was at this stage able to resolve all competition concerns in a sufficiently clear-cut manner, the OFT said.

The LSE said it had no immediate comment on the decision to refer the two takeover plans to the Competition Commission, whose in-depth probe is expected to take until September.

Last December, Deutsche Börse offered 530 pence per share, or £1.3 billion, to buy Europe's top equity market. Deutsche Börse's offer was rebuffed twice by the LSE before shareholders of the Frankfurt exchange forced the offer to be scrapped.

Rival exchange Euronext has yet to make a cash bid.

Deutsche Börse asked the OFT to continue with the probe into its proposal because it would make a fresh offer if Euronext or another third party were to unveil a firm bid.

Deutsche Börse was down 1.2 per cent at €58.85, while Euronext traded down 2.2 per cent at €27.28.