The London Stock Exchange PLC (LSE.LN) on Thursday confirmed that it is in exclusive talks to buy alternative trading system Turquoise Trading Ltd.

The talks "may lead to a transaction," the exchange said in a statement, adding that a further announcement will be made in "due course."

Earlier Thursday, Financial News reported that Turquoise entered into exclusive talks with the exchange following weeks of a strategic review. Financial News is published by News Corp. (NWS), the owner of this newswire.

Turquoise, which is owned by nine U.S. and European investment banks, and began trading in September 2008, is one of several "alternative" trading platforms facing trading volume pressure because of the financial crisis.

Nonetheless, their existence has challenged traditional players, such as the LSE, with faster and cheaper services.

"Acquiring Turquoise at a low value would make strategic sense for the LSE, since it will mean we won't have to wait until the MillenniumIT integration is complete for the LSE to have a pan-European order book," Arden Partners analyst Sarah Spikes said.

The exchange bought MillenniumIT, a Sri Lankan software company, last month for $30 million, as it works to replace its trading platform with a faster system.

Valuing Turquoise could prove to be difficult, analysts say, since the banks that own it have provided most of its trading volume. Once the joint venture is sold, liquidity may dry up.

According to Diego Perfumo, an analyst with Equity Research Desk in the U.S., the LSE is likely looking for commitments from those banks to continue routing stock orders to the platform.

"(The LSE) is doing a favor to the banks, taking this out of their hands to operate it more efficiently, so the exchange would want to get an order flow commitment," Perfumo said. "The value of such a deal is zero if there is no commitment from the banks."

Speculation has swirled around the future of Turquoise for months, after its market share fell heavily in March following the expiration of liquidity commitments from its nine shareholders.

UBS AG (UBS) was reportedly hired to help Turquoise in the strategic review, and it sent sales prospectuses to 18 possible buyers, including Germany's Deutsche Boerse AG (DB1.XE), the NYSE Euronext (NYX), Nasdaq OMX (NDAQ) and the LSE.

The banks behind Turquoise are Morgan Stanley (MS), Goldman Sachs Group Inc. (GS), BNP Paribas SA (BNP.FR), Societe Generale SA (GLE.FR), Citigroup Inc. (C), Deutsche Bank AG (DB), Credit Suisse Group (CS), UBS AG and Merrill Lynch, now part of Bank of America Corp. (BAC).

At 1522 GMT, shares of LSE were down 5 pence, or 0.6%, at 851 pence.

-By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, patricia.kowsmann@dowjones.com

(Jacob Bunge in Chicago contributed to this article.)