Nasdaq's London Gamble

The Nasdaq Stock Market (NDAQ) is facing a jam of its own making.

The share price of the tech-heavy exchange has fallen 40% to a little over $26 since March when the Nasdaq began gobbling up huge blocks of London Stock Exchange stock. The overseas assault was a strategic move by the Nasdaq to outpace its competitors in the rush to global consolidation.

Sources say Nasdaq CEO Bob Greifeld is spending much of the summer trying to hammer out a financing scenario that would enable the U.S. exchange to buy the rest of the LSE that it doesn't already own. People familiar with the Nasdaq say the exchange could try to make another play for the LSE at the end of September -- the first time it's eligible to launch a formal takeover bid under British law.

But some now wonder whether the Nasdaq has paid too high a price in acquiring its 25.1% stake in the LSE -- an equity position that essentially gives the Nasdaq veto power over bids from another exchange, including the rival New York Stock Exchange(NYX).

"When the initial move was made, I thought that it was a brilliant move," says Phil Guziec, equity analyst at Morningstar. "[Nasdaq] could stake out territory and get some good insight into the LSE.''

But Guziec says the chance of a Nasdaq takeover of the LSE gets smaller as the Nasdaq's stock keeps sinking. "Or, it gets pushed into the future," he says.

To be sure, shares of other U.S. exchanges haven't fared well the past few months. A Chicago Board Options Exchange index that tracks the performance of publicly traded U.S. exchange stock is down 12.7% since the Nasdaq's slide began.

But no other exchange stock has performed as badly as the Nasdaq. The NYSE is down about 19% during the same time, while the Chicago Mercantile Exchange is up 7.7% and the Chicago Board of Trade is up 5.2%.