The rapidly consolidating world of exchanges just got a little tighter.

The NYSE is partnering with BIDS Holdings, an alternative trading system, to compete for block stock trading. The Big Board is also making an equity investment in BIDS, which is owned by Wall Street firms like Citigroup, Credit Suisse and Deutsche Bank. 

The deal proves that while credit markets have slowed the pace of most dealmaking, financial exchanges keep chugging along.

The new venture, which will compete with established block trading systems like Liquidnet and ITG, may prompt a response from the NYSE’s archrival Nasdaq — or one of the other exchanges jockeying for position in U.S. equity markets.

It comes on the wake of a globe-crossing deal announced last month, in which Nasdaq agreed to swap stakes with with Borse Dubai, increase its bid for Stockholm-based OMX and possibly gear up for another run at the London Stock Exchange.

New trading technology is driving the exchange consolidation wave, as investors crave the fastest ways to buy and sell stock, bonds and complex derivatives. Strategic buyers have been able to conduct deals without private equity firms getting in the way, as the highly regulated space is not one that has attracted majority leveraged buyouts.

(Image: NYSE CEO John Thain (left), Yours Truly, (right). Reuters file)