This is 25 per cent above Garban-Intercapital's (Icap) closing price of 180 pence on Wednesday, but below its price of over 300 pence reached after the announcement of Garban's merger with Intercapital in June. The shares were up 13.5 pence or 7.5 per cent at 193.5 pence by 1100 GMT.

Zions planned to increase its stake in Garban-Icap to no more than 20 per cent subject to US regulatory clearances and had agreed not to sell any of the stake within two years, Garban-Icap said.

The newly merged Garban-Icap is striving to migrate out of the struggling voice-based bond and foreign exchange broking business into electronic inter-dealer bond broking.

It's share price has fallen 22 per cent this year and underperformed the UK market by 33 per cent this year as voice-based brokers' margins and profits have been squeezed.

Electronic broking is expected to boom at the expense of voice brokers as traders in the multi-trillion dollar a year sector hunt for lower costs and more efficient back offices.

Garban-Icap and others, including Cantor Fitzgerald, Liberty Brokerage and Instinet, are racing to create wholesale electronic bond broking systems. Garban Icap has a joint venture with news and information group Bloomberg.Garban-Icap said it would share technology and products with Zions Bancorp, which is one of the 26 primary bond dealers in the huge US Treasuries market. Garban-Icap Chief Executive Michael Spencer said Zions' Internet expertise had made it the leader in trading small "odd lot" packages of bonds, often with smaller investors.

"If you want to trade small-ticket amounts - less than $1 million in US Treasuries, they have a very effective and dominant position in odd lot trading on the Internet," Spencer told Reuters in an interview.

"We propose to do exactly the same thing at the beginning of next year in UK gilts," he said.

"We will not go to individual customers at the outset. We will go to other members of the stock exchange initially and in due course the independent Financial advisors."

Unlike the equity markets, bond markets have until now been almost totally dominated by investment banks and large institutions trading in the inter-dealer market. Retail investors have become much more heavily involved in the equity markets, particularly in the United States as online trading has boomed.

A move to Internet trading of bonds by smaller investorscould herald a weakening of the dominance of big bond traders.

"This is no different to what is happening in the equity markets. Many people provide this service in the equity markets, but nobody provides it in the debt markets," Spencer said.

"This is a niche which has huge potential for us, but it can only be economically exploited in a high technology environment, and hence why we want to use the Zions tie-up."

Garban-Icap was formed from the merger announced in June and largely completed by September of the Exco-Intercapital group and Garban, which was itself demerged from United News and Media last year.