Endorsements from two leading proxy advisory firms could turn out to be the London Stock Exchange's secret weapon as it bids for the widely held TMX Group , operator of the Toronto Stock Exchange.

Glass, Lewis & Co, a major U.S.-based advisory firm, recommended for a second time on Tuesday that TMX shareholders vote in favor of the LSE's C$3.6 billion ($3.7 billion) friendly takeover offer at a shareholder meeting on Thursday.

The 10 a.m. EDT vote, timed to coincide with a parallel decision from LSE shareholders, is effectively also a vote on a rival C$3.8 billion hostile offer from Maple Group, a consortium of Canadian banks and pension funds.

A No vote for LSE means the Maple offer goes ahead. A Yes vote kills Maple's offer and leaves the friendly takeover in regulators' hands.

Both sides sweetened their bids last week.

There are two big proxy firms that have recommended the LSE/TMX merger, and that's a big plus for that merger, said a high level Canadian competition lawyer who could not be quoted by name due to his firm's policy.

There are a lot of mutual fund companies and others that listen to these firms because it gives them a kind of protective cloak to vote in favor of a merger and say, 'hey, we followed what all these proxy advisor firms said.

The takeover battle for TMX Group, which controls the Toronto Stock Exchange and its sibling venture exchange, has become increasingly polemic, raising a debate about how Canada should react to a race for growth among global exchanges.

The LSE, billing its mostly-stock proposal as a merger of equals, promises to create a transatlantic exchange that would be a powerhouse of mining and energy listings.

The Maple Group, whose all-Canadian members include four major banks, five huge pension funds and North America's top life insurer, says in an unashamedly nationalistic proposal that it will keep a crucial domestic asset in Canadian hands.

Proxies for the June 30 vote are due in on Tuesday, even as both sides lobby investors, politicians and financial community leaders for support.

The updated report from Glass Lewis comes a day after the London Stock Exchange said a total of five proxy advisory firms have recommended its offer, including Institutional Shareholder Services and three smaller European firms.

On the balance, despite improvements to Maple's offer, which we believe make this an even closer call than before, when compared to the enhanced LSE proposal and weighed against the risks that remain in each proposal, we ultimately believe the LSE-MTX merger remains the best alternative for TMX shareholders, Glass, Lewis & Co said.

Maple Group urged shareholders to file proxies against the LSE bid before noon on Tuesday so they could be considered in Thursday's vote.

(Editing by Janet Guttsman)

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