The London Stock Exchange reported excellent results, just a day after the Nasdaq (NDAQ:NDAQ) stepped up its attempt to win over LSE shareholders. The LSE reported a 9.9% rise in third quarter fiscal profits, while operating profits excluding one-time expenses increased 50% with revenues increasing 11.1%. The LSE attributed the growth to a 57% growth daily trading volume to 342,000, which came in significantly above the company's prior estimates. "The exchange is confident of an excellent outcome for the current financial year and continuing strong business fundamentals should ensure a strong performance for the financial year ending March 31, 2008," the exchange said in a statement. "This excellent performance supports the board's rejection of Nasdaq's offer, which significantly undervalues the business and the exchange's unique strategic position." The LSE also said the number of IPOs on its main market rose 39% to 50% during the quarter, along with a 68% increase in the average size of each new issue.

Clearly, this development puts increased pressure on Nasdaq, who argued that the exchange would experience difficulty competing in the future. Specifically, the Nasdaq said that the exchange would have to lower its costs in order to maintain market share; however, this recent development illustrates that this may not be true. Combined, these factors may make LSE shareholders think twice before approving a merger, despite the NDAQ's significant stake in the LSE that it threatened to sell off if the transaction fell through. Regardless, these stocks are two that are certainly worth watching during the next few months.

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