All roads to the London Stock Exchange now must pass through

Nasdaq

I:IXIC

.

Nasdaq, in a strategic move, announced Friday that it had increased its ownership stake in the LSE to 25.1%, giving it the right to block any merger bid by one of its rivals. The move by Nasdaq throws a monkey wrench into any potential plan by the

NYSE Group

(NYX)

to make a play for the LSE.

British law gives a shareholder who controls more than 25% of a company's stock the right to effectively stop a merger.

"We are pleased to have increased our strategic investment in LSE in excess of the important threshold of 25%,'' said Robert Greifeld, Nasdaq's chief executive officer and president.

Ever since the London exchange rejected Nasdaq's $4.2 billion hostile bid in March, Nasdaq has been acquiring big blocks of stock in the LSE.

Nasdaq's strategic move comes at a time of frenetic maneuvering among the world's stock exchanges. Nasdaq and NYSE, both seen as potential acquirers, are setting their sights on several European exchanges.

Much of the attention right now is focusing on a brewing battle between Germany's Deutsche Boerse and NYSE for the affections of Euronext, a European stock and derivatives exchange. The Deutsche Boerse has made a formal merger proposal to Euronext, which is expected to take up the bid at its annual shareholder meeting on Tuesday.

But some big investors in Euronext, including hedge fund giant Atticus Management, are hoping to push NYSE to jump in with its own bid for Euronext. Atticus, which owns significant equity stakes in Euronext, the NYSE and Deutsche Boerse, has reportedly warned the Big Board that it's prepared to back the German exchange's bid if NYSE doesn't come up with its own merger plan.

The

Financial Times

has reported speculation that NYSE could be interested in a complicated three-way merge involving itself, Euronext and the LSE. But with Nasdaq crossing the 25% threshold, a deal of that sort could be off the table.

Nasdaq, in breaching the 25% threshold, said it had acquired 2.2 million shares of the LSE for $51.1 million. This is the fifth time Nasdaq has bought a big block of LSE shares since withdrawing its hostile bid.

Earlier this week, Standard & Poor's cut Nasdaq's credit rating to junk status because of all the borrowed money it has used to acquire stock in the LSE.

Nasdaq acquired an initial 15% equity stake in the LSE by borrowing money from

Bank of America

(BAC) - Get Report

. BofA gave Nasdaq a $1.92 billion line of credit, some of which was used to pay for the deal.

Nasdaq has since announced plans to sell 18.5 million shares to the public in a push to repay BofA and other lenders.