The LSE told HKEX in a letter that it had fundamental concerns about key aspects of the proposal which it said had no strategic merit, and that HKEX's relationship with the Hong Kong government would "complicate matters".

HKEX's valuation of the LSE falls "substantially short" and the "ongoing situation in Hong Kong" adds to uncertainty for shareholders, the London bourse added, a reference to weeks of pro-democracy street protests in the former British colony.

"Accordingly, the board unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement," the LSE said in a statement.

HKEX, Hong Kong Exchanges and Clearing, had no immediate comment.

LSE shares were trading up 1.3 per cent at 7352 pence after the statement, little changed from earlier levels.

LSE's blunt rejection letter said the Hong Kong Exchange's offer did not meet its strategic objectives. It said it was sticking with its core strategy of expanding into data with the $US27 billion ($A39 billion) Refinitiv deal, rather than taking a "significant backward step" by bulking up on market transactions in the HKEX proposal.

HKEX's offer had required the London exchange to ditch the Refinitiv acquisition.

The LSE also said a Hong Kong takeover could well be rejected by regulators or governments in Britain, the United States and Italy.

HKEX's assertion that implementing the deal would be swift and certain "is simply not credible", it added.

The London course also owns the Milan exchange and has a significant American presence through its FTSE Russell index subsidiary and LCH, its derivatives clearing house which dominates the US dollar swap market.

Australian Associated Press