Nasdaq OMX and IntercontinentalExchange bid $11.3 billion for NYSE Euronext in an effort to trump Deutsche Boerse's deal, and pushed their case with an appeal to U.S. patriotism.

The counterbid -- unveiled on Friday to some skepticism it can succeed -- would redraw the world's capital markets so that Americans have a stronger hand than Europeans as exchange operators globally maneuver to come out on top.

The move presents U.S. lawmakers and regulators with a dilemma: whether to allow a German exchange to take control of the venerable New York Stock Exchange, or to allow the creation of a dominant American-run platform with massive market power.

The new offer is valued at $42.50 per share, a 12 percent premium to Deutsche Boerse's $10.2 billion all-stock bid, based on Thursday's closing prices. It would give NYSE shareholders cash and stock.

Antitrust questions, and concerns over jobs and Nasdaq's debt ratings, surround the agreement to split NYSE Euronext's stock business, which would go to Nasdaq, from its more profitable derivatives business, which ICE would get.

The pair had been left out of a recent merger frenzy, leaving them anxious to do something.

Bringing Nasdaq and NYSE Euronext together would create a stock-trading powerhouse in the United States and Europe that would also have a monopoly in listing U.S. public companies, and dwarf other U.S. options markets. It would be called NASDAQ NYSE Euronext.

In selling the unsolicited deal, Nasdaq Chief Executive Robert Greifeld -- for years a fierce cross-town rival of NYSE's Duncan Niederauer -- and ICE's Jeffrey Sprecher appealed heavily to the United States' thirst for remaining the world's financial center, its anxiety about losing out on new listings, and its need for a more stable market.

The U.S. can change its current course, Sprecher said on a call with analysts and media. We believe that there is a better combination that... provides scale and takes even more costs out of the system than the Deutsche Boerse deal.

Greifeld, who like Sprecher has a mixed deal-making record, said NYSE's surprise decision to sell out to the German bourse represented an unplanned-for opportunity, calling his offer clearly superior.

Already, the Deutsche Boerse bid was expected to attract intense regulatory scrutiny as the merged company would have a lock on European derivatives trading and clearing. The counterbid shifts the antitrust focus to whether one entity should have a lock on capital-raising in the United States.

Combining Nasdaq and NYSE -- perhaps Wall Street's fiercest rivals over the last couple decades -- could find trouble with the Justice Department's Antitrust Division. Greifeld said the companies reached out to regulators, calling any issues manageable.

STAYING RELEVANT

Early reaction out of Washington was cautious, though some lawmakers were cool to the deal. Democratic Representative John Conyers, who called the Deutsche Boerse plan totally unacceptable because it would cut consumer choice and U.S. jobs, said the Nasdaq offer was even worse in that regard.

I'm concerned about how this deal affects jobs in New York, said Charles Schumer, an influential New York senator.

Greifeld promised shareholders far bigger cost savings than in the German deal, but he did not say how severe the job losses would be. He said Nasdaq would keep the NYSE floor -- the icon of capitalism that was created in 1792 by brokers and merchants who met under a buttonwood tree in lower Manhattan.

Upstart trading venues like BATS have eaten deep into the market share of these traditional venues, forcing them in the last decade to upgrade and embrace electronic trading -- and to look to mergers to survive.

Nasdaq, the smallest of the four exchanges in play, needed to do something to stay relevant in the years ahead, some said. If it and ICE succeed, the world's largest bourse operators would be headquartered in the United States, Brazil, and Asia -- leaving Europe with a bruised Deutsche Boerse.

Nasdaq had a real risk of being marginalized, said David Weild, founder of Capital Markets Advisory Partners and former vice chairman at Nasdaq, in the corporate client division.

Under the proposal, Atlanta-based ICE would purchase NYSE's London-based Liffe platform, seen as a profitable gem, while Nasdaq would acquire its stock exchanges in New York, Paris, Amsterdam, Brussels, and Lisbon, its U.S. options venues and its technology suite.

Some details of how a deal would work have not yet been worked out. The management and the board of directors have not yet been determined, Greifeld said, adding he hadn't spoken to Niederauer or other NYSE executives.

But a group of banks led by Bank of America and Wells Fargo is prepared to arrange $3.8 billion of financing for the cash portion of the deal, Nasdaq and ICE said.

From a purely nationalist point of view, as an American, a lot of people are going to say yeah, yeah, yeah, that's great, said Kenneth Polcari, managing director at ICAP Corporates, a NYSE floor broker. But from a business point of view ... from a true global perspective, the Deutsche Boerse is probably the better option.

NYSE shares closed up 12.6 percent at $39.60, while Deutsche Boerse closed down 1.4 percent in Frankfurt. Nasdaq shares rose strongly through Friday to close at $28.23, up 9.2 percent, while ICE shares slipped 3.1 percent to $119.75.

BIDDING WAR?

Borse Dubai, Nasdaq's largest shareholder, and Sweden's Investor AB, the second-largest, said they backed the bid.

Deutsche Boerse said it continues to strongly believe that the envisaged merger of Deutsche Boerse AG and NYSE Euronext is the best possible combination for both shareholder groups and the stakeholders of the companies.

NYSE Euronext said its board would carefully review the new offer and urged shareholders not to take any action pending its review. A source said there was some shock that the cash portion of the counterbid was so small.

If I were at New York and Deutsche Boerse, I'd be thinking we don't have to match the price, we just have to build up the cash component a bit, said Thomas Caldwell, CEO of Caldwell Securities Ltd, a NYSE shareholder.

There is a steep 250 million euro ($356 million) termination fee attached to Deutsche Boerse's friendly deal.

Moody's Investors Service said Nasdaq's announcement makes the agency more likely to cut the company's debt ratings to junk over the medium term, while Standard & Poor's said that it might cut the exchange's ratings to junk in the near term.

Two junk ratings could create a headache for the combined exchange, because NYSE bondholders would have the right to force the company to buy back their $2.1 billion of debt. Nasdaq could be forced to raise even more money.

In Liffe, Sprecher would get an interest-rate business that eluded him when ICE's bid for the Chicago Board of Trade failed four years ago, and a successful deal could put pressure on chief rival CME Group Inc. ICE's market cap is $9.2 billion, about in line with NYSE Euronext.

For Nasdaq, with a $4.5 billion market cap, the deal would expand its core, albeit low-margin, stock-trading business, and could raise questions for shareholders well aware that the other exchange deals are driven largely by a need to diversify into more profitable derivatives trading.

EGOS AND OFFERS

Nasdaq was created in 1971 as the world's first electronic stock market by members of National Association of Securities Dealers frustrated by the Big Board's slowness to embrace new technology, and seeking to pressure trading costs.

The vast majority of North American and European stock trading is now high-speed and all-electronic, with Nasdaq and NYSE boasting some of the world's best technology.

In a flurry in February, Deutsche Boerse agreed to buy NYSE, the London Stock Exchange Group Plc announced a deal for Canada's TMX Group Inc. Last year, Singapore Stock Exchange bid for Australia's ASX Ltd.

When Deutsche Boerse bid for NYSE, CEO Reto Francioni acknowledged we have a bumpy road ahead of us. Some observers say his career hinges on winning NYSE.

Intensifying the merger race, regulators want to run much of the private swaps market though transparent venues in the wake of the financial crisis, an opportunity for exchanges.

Under the counterbid, NYSE shareholders would receive $14.24 in cash plus 0.4069 of a share of Nasdaq stock. The Deutsche Boerse proposal would exchange each NYSE Euronext share for 0.47 share of the combined company's stock.

Nasdaq and ICE said that within 12 to 18 months, the combined franchise would provide double-digit accretion to shareholders and save $740 million in annual operating costs. The Deutsche Boerse deal sees $400 million in cost savings and that immediately add to adjusted earnings.

Bank of America Merrill Lynch and Evercore Partners are advising Nasdaq, while Lazard, Broadhaven Capital Partners, and BMO Capital Markets Corp are advising ICE. (Additional reporting by Edward Taylor in Frankfurt, Sarah Lynch and Diane Bartz in Washington, and Phil Wahba, Jonathan Stempel, Paritosh Bansal, Edward Krudy, Clare Baldwin, Ben Berkowitz and Daniel Wilchins in New York, editing by Dave Zimmerman, Gary Hill and Tim Dobbyn)