* Turkey promoting Istanbul as financial hub
* Stock, gold and derivatives exchanges merging
* Bourse aims to finalise talks by July
By Seda Sezer and Ebru Tuncay
ISTANBUL, May 8 Turkey is in talks with the London Stock Exchange and Nasdaq about a partnership deal that could see it sell a stake in the Istanbul bourse as part of a drive to promote the city as a financial hub, its deputy prime minister said.
Turkey is in the process of merging the Istanbul Stock Exchange, the Gold Exchange and Derivatives Exchange into Bourse Istanbul - an important step in the government's bid to privatise the company and create a regional financial centre.
"We are holding talks with London and Nasdaq for strategic partnerships on Bourse Istanbul," Deputy Prime Minister Ali Babacan told reporters at a conference on Wednesday.
Once the Bourse settles on a strategic partner, which could involve it selling a stake in return for technology support, it will also seek opportunities for co-operation with other exchanges, such as cross-listings or joint indexes.
Bourse chairman Ibrahim Turhan said talks were continuing with international organisations including Deutsche Boerse and the CME Group, owner of the Chicago Mercantile Exchange (CME), as well as Nasdaq and the LSE.
"Our aim is to finalise talks by July and progress to the level of signing a memorandum of understanding," Turhan said.
Bourse Istanbul has said the state will retain a 49 percent stake but will divest a stake of up to 41 percent, part of it through a flotation. It has not given further details. The remaining 10 percent is held by other investors.
"There is an IPO plan for around a 20-25 stake and the rest is planned to be sold in smaller stakes to other bourses, investment banks, a technology provider or hedge funds," a source familiar with the partnership talks told Reuters.
"Instead of such a fragmented structure, a bigger stake sale to a single strategic investor of this 41 percent would be more efficient," he added.
Turhan said last year the company wanted to decide on future strategic partners by the middle of this year and that other bourses, technology firms, sovereign wealth fund managers and investment banks were interested.