"This decision was based on the assessment that a transaction supported by both sides will not be achievable," Deutsche Boerse, Europe's biggest securities exchange by market value, said in a statement Wednesday.

The decision brings to a close chief executive Reto Francioni's nearly yearlong effort to acquire Euronext, which in June accepted a rival bid from NYSE Group, operator of the New York Stock Exchange.

Francioni tried to persuade Euronext shareholders and European policy makers to back Deutsche Boerse, without increasing its offer.

"To have any chance of winning Euronext away from the Americans, Deutsche Boerse would have to raise its offer significantly," said Angela Knight, chief executive of the London- based Association of Private Client Investment Managers and Stockbrokers, which represents brokerages in Europe and Britain. This "opens the door for NYSE to take Euronext."

Deutsche Boerse shares fell as much as 4.5 percent in Frankfurt while Euronext dropped as much as 5.2 percent in Paris.

Deutsche Boerse and Euronext began merger talks last December.

The negotiations stalled over disagreements on issues such as where the headquarters of a combined exchange should be located.

Talks resumed in March as Nasdaq Stock Market bid for London Stock Exchange, Europe's third-largest exchange by market value.

Euronext also stepped up talks with NYSE Group and on June 2 agreed to a cash-and-stock offer. Since then, the value of NYSE Group's bid has risen 35 percent to US$13.5 billion (HK$105.3 billion) after shares in the US exchange rallied.

Euronext and NYSE Group plan to seek shareholder approval for their deal in December and complete the transaction by March.

Euronext, led by Jean-Francois Theodore, and NYSE Group chief executive John Thain have pressed ahead with their planned combination.

The deal would create a company eclipsing Deutsche Boerse by uniting markets for stocks and options in San Francisco, Chicago and New York with bourses in Paris, Amsterdam, Brussels and Lisbon.

Together, the exchanges would list companies with a combined market value of US$27 trillion.

Since the German exchange announced a revised offer on June 19, NYSE shares have rallied 70 percent, more than twice the gain by Deutsche Boerse.

NYSE Group shares have risen 26 percent this month, spurred by staff cuts and a plan to lift restrictions on electronic trading at the New York Stock Exchange.

NYSE Group's offer, which once trailed Deutsche Boerse, is now valued at about 10.6 billion euros (HK$105.81).

Deutsche Boerse's proposal, which depends on the volume-weighted average price of its stock and Euronext shares over three months, is valued at about 10 billion euros.

Securities markets worldwide have announced about US$35 billion of combinations over the past two years.

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