LONDON (AP) _ The London Stock Exchange pulled out of its planned merger with Germany's Deutsche Boerse on Tuesday to concentrate on fending off a hostile bid from Sweden's OM Gruppen, owner of the Stockholm exchange.

The move came just a day after Deutsche Boerse signaled trouble with the merger plan by postponing a vote of its shareholders.

The two exchanges had planned to create a pan-European market called iX, envisioned as a precursor to an alliance with the Nasdaq Stock Market in the United States.

``We have been saying all along that we think the iX deal is flawed. We think this is confirmation of that,'' said Jakob Haakanson, head of investor relations for OM Gruppen, the Swedish company which has mounted a $1.1 billion hostile bid for the London exchange.

``Not enough of the issues raised by cross-border consolidation have been resolved, and there is now too little time to build confidence that they would be resolved if the merger went ahead,'' said LSE chairman Don Cruickshank.

Deutsche Boerse ``regrets that the planned merger won't be pursued,'' spokesman Walter Allwicher said. Deutsche Boerse chairman Werner Seifert said the German exchange will ``examine alternatives,'' according to Allwicher, who declined to comment further.

``Generally speaking our offer is now the only one on the table,'' Haakanson said.

Cruickshank expressed confidence in stopping OM Gruppen's bid, which he has said would not benefit LSE's customers or shareholders. After that, he said, the LSE board, its shareholders and customers ``will review the means by which London's pre-eminent role in European equities trading can best be promoted in both their interests.''

The LSE has argued that OM was not an acceptable suitor for the exchange, and was not an ``attractive'' option to guarantee its future. OM's market capitalization is only one-fifth that of LSE.

The London-German merger proposal called for blue chip shares to be traded in London, while shares in high-tech firms would be traded in Frankfurt. The iX headquarters were to be in London.

OM Gruppen's chairman Olof Stenhammar had argued that the proposed London-Frankfurt merger reflected ``an outdated concept of merging two nationally based operations with limited regard to the technological and commercial changes in global equity markets.''

OM Gruppen, founded in 1985, supplies technology to stock exchanges, banks and brokers in more than 20 countries. It had launched its bid for the LSE last month.

It started the first for-profit, privately owned electronic derivatives exchange. It eventually integrated that market with the Stockholm stock exchange, which it acquired in 1998.

The technology-heavy exchange has grown into one of Europe's most successful, led by Ericsson, the world's third-largest cellular phone maker.

Milan's stock exchange, the Borsa Italiana, said Tuesday that internationalizing exchanges remained necessary. The Milan exchange had signed a letter of intent to join iX.

``The process appears inevitable, as well as bringing new opportunities, and the Borsa Italiana is ready to evaluate its own involvement and prospects'' in other possible combinations, the Italian exchanged said.