"It is in the interest of everybody to consolidate," DFM executive chairman Essa Kazim told reporters. "There have been discussions at the top level, meaning the owners of the exchanges."

DFM's profit fell by almost half in 2009 as market turnover slumped 43 percent to a five-year low of $47.2 billion. ADX turnover slid 70 percent last year to $19.1 billion.

This collapse in trading is spurring the UAE bourses to consolidate, analysts said, with many questioning the wisdom of having three stock exchanges -- DFM, ADX and Nasdaq Dubai -- in a country of 5 million people, while consolidation would boost liquidity and with it valuations.

"The growth potential of the UAE markets is limited without such a move," said Mohammed Yasin, Shuaa Securities chief executive.

"What doesn't make sense is for the markets to stay the same - the financial crisis has made for less resistance to consolidation. It has been discussed a few times and I think the political will is there."

ADX Deputy chief executive Rashed Al-Baloushi could not be reached for comment. Last week, he declined to confirm or deny plans for the ADX to merge with the DFM, but said: "It would be a positive move if it happens."

The DFM's planned takeover of Nasdaq Dubai will be completed within two weeks, Kazim said, with DFM paying Nasdaq OMX $121 million for its one-third stake.

"This is one of the industries that you always gain from a merger, from consolidation," said DFM's Kazim.

"You lower your marginal cost. It has been very popular in Europe, the US You have seen the industry continuously in this process of consolidation."

The DFM and Nasdaq Dubai will use a single trading platform and synchronize trading hours, with these changes taking a few weeks to complete, Kazim said.

But Nasdaq Dubai and DFM will remain separate because of their different regulatory regimes, Kazim said, with the former governed by Dubai Financial Services Authority, while DFM is bound by the rules of the Abu Dhabi-based Securities and Commodities Authority.  "As long as we have two separate jurisdictions we will continue to have two separate markets, but one exchange," said Kazim.

On Nasdaq Dubai, DP World -- just one of its 16 equity listings -- is one of the few listings to see daily turnover. The ports operator is seeking a London listing, saying it is unhappy with its market valuation.