By Robert Melnbardis

MONTREAL (Reuters) - Montreal Exchange Inc MXX.TO shareholders approved the C$1.1 billion takeover on Wednesday of the derivatives exchange by TSX Group Inc (X.TO: Quote, Profile, Research), operator of the Toronto Stock Exchange, in a transaction aimed at strengthening the country's top bourse.

The vote was 99.6 percent in favor of the cash and stock offer, well above the two-thirds needed. The transaction to combine the two exchanges also requires approval from several regulatory bodies.

The companies are pairing up against a backdrop of consolidation among global exchanges and new domestic competition in the form of alternative trading systems.

If the union proceeds, the enlarged company will be known as TMX Group Inc.

Luc Bertrand, will remain chief executive of the Montreal Exchange, which specializes in derivatives trading. He will also oversee the integration of the two groups.

"The combined group will have a stronger platform to compete in the context of globalization of the exchange industry," he told shareholders.

After the meeting, Bertrand declined to comment on whether TMX's priority will be to seek acquisitions or tie-ups outside the country.

Bertrand noted, however, that there is room for domestic growth in standardized derivatives products and parallel over-the-counter products.