Nasdaq Inc (NDAQ.O) said on Wednesday it would buy U.S. options exchange operator International Securities Exchange for $1.1 billion from Deutsche Boerse AG , the latest announcement in a spate of merger talks in the exchange space.

ISE operates three electronic options exchanges which together account for more than 15 percent of U.S. volume, while Nasdaq operates another three. Combined, Nasdaq would have market share of more than 40 percent, extending its lead as the No. 1 U.S. options exchange operator.

"The ability to further that lead gives us advantages as to how we could serve our customers because you have a different volume versus scale arrangement," Bob Greifeld, Nasdaq's chief executive officer, said in an interview.

The deal would also free up capital for Deutsche Boerse, which has said it plans to merge with the London Stock Exchange Group Plc to create a European trading powerhouse that could better compete against U.S. rivals.

Intercontinental Exchange Inc (ICE.N 0.07%) said it may make a rival bid for the LSE, raising the prospects of a takeover battle.

Nasdaq, which plans to move ISE's trading platforms onto Nasdaq technology, said it could strip out $40 million from the two businesses through the transaction.

The deal will also give Nasdaq an additional 20 percent stake in the Options Clearing Corporation, for a total of 40 percent ownership in the world's largest equity derivatives clearing corporation.

Greifeld said he had been looking at buying ISE for years, but that talks with Deutsche Boerse CEO Carsten Kengeter picked up over the past three months.

The deal does not include ISE's stake in No. 2 U.S. stock exchange operator BATS Global Markets, or blockchain startup Digital Asset Holdings, which will continue to be owned by Deutsche Boerse, the German company said.

Nasdaq said the transaction was expected to be finalized in the second half of the year, pending regulatory approval, and it would likely add to Nasdaq's earnings within 12 months of closing.