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Montreal Exchange three-month chart

TSX Group and the Montreal Exchange have confirmed they've resumed talksthat could lead to "a possible future business combination."

Both exchanges issuedbrief statements Thursday morning following a request fromMarket Regulation Services.

Trading inMontreal Exchange shares was halted at 9:50 a.m. ET on the TSX. At that time, the stock was up $1.99 to $31.19. After trading resumed at 11 a.m. ET, the shares soared — closing at$35.55, up $6.35.

TSX Group shares rose $2.90 to $53.

"There is no assurance that a transaction will result from these discussions," the exchanges said in identical statements. They added that they would not make any further comment"unless the situation warrants."

Some analysts said any bid for Montreal Exchange shares would have to offer a heftypremium, becauseso many shareholders had paid considerably more for their shares. MX shares have slid sharply from their first day of trading on March 27, when they were worth as much as $49.50.

The two groups have been exploring a possible merger for more than a year. Talks broke off earlier this year.

Last month, Quebec's finance minister said the TSX board had blocked a proposed deal that would combinethe Toronto and Montreal stock exchanges because a Quebecer would have become CEO of the merged entity.

Under a 1999 agreement, the TSX assumedMontreal's stock trading activity, while the Montreal Exchange won the right to carry out all derivatives trading. That agreement expires in March 2009.

The TSX has already indicated that it will be going after Montreal's fast-growing derivatives business when the non-compete deal comes to an end. In March, the TSX Groupsaid it is teaming up with a U.S. partner, International Securities Exchange, to invest about $26 million to start DEX, a derivative exchange scheduled to open in March 2009.

The CEO of the Montreal Exchange has also mused that his exchange could get back into equities trading after the TSX monopoly ends.

Confirmation of the merger talks comes at a time of extensive consolidation among stock exchanges around the world.

Finance Minister Jim Flaherty said in September that a merger of the two exchanges would be "in the best interest of Canada."