The Singapore Stock Exchange Ltd is tying up with London's main bourse to make a joint bid for the London Metal Exchange, a source told Reuters on Friday, as the world's largest metal market seeks a suitor in a deal that could be worth 1 billion pounds ($1.57 billion).

The consortium has appointed a bank to advise it on the bid, the source added, with the auction expected to attract rival offers.

The joint bid underscores the ambitions of both exchanges to diversify into the fast growing space of metals trading, as traditional businesses of equity and derivatives trading faces increasing competition.

Both the SGX and the LSE are coming off of failed merger attempts, which took place earlier this year amid a flurry of exchange auctions that were prompted by loss of market share across the industry to electronic trading and other platforms.

The LME, the world's biggest market for industrial metals, said last week that it was considering a sale, with an expected price tag of around 1 billion pounds ($1.57 billion). The number of suitors for the exchange has risen to double digits, Chief Executive Martin Abbott told Reuters on Thursday.

SGX declined to comment. Calls and an email to the London Stock Exchange's media hotline were not immediately answered. The source declined to be named as the discussions were confidential.

SGX, led by experienced dealmaker Magnus Bocker, has been trying to raise the profile of Asia's second-largest listed bourse and compete against its larger rival in Hong Kong.

Bocker was the man who stitched together seven Nordic bourses to create OMX, later sold to NASDAQ . For a Newsmaker on Bocker.

But his attempts to buy ASX Ltd was rejected by the Australian government just five months ago.

LSE too had to face defeat in its pursuit of Toronto Stock Exchange after a consortium of Canadian banks launched a counter offer.

The SGX-LSE combination is expected to face competition from other LME suitors, including CME Group Inc , the largest futures exchange in the United States, IntercontinentalExchange and UK-based broker ICAP , according to sources.

Joining hands with LSE gives them a good starting point in this process, the source added.

The LME, established in 1877 above a London hat shop, accounts for 80 percent of traded volume in global metal futures transactions. It saw record trading volumes last year of 120 million lots equivalent to $11.6 trillion and 2.8 billion tonnes of metal.

Any deal would have to be accepted by 75 percent of shareholders, which include Goldman Sachs , J.P Morgan and trading firms including Amalgamated Metal Trading and Metdist. Pre-tax profit in 2010 fell 28 percent to 12.5 million pounds.

(Additional reporting by Rachel Armstrong in SINGAPORE; Editing by Michael Flaherty and Jonathan Hopfner)