* Income up 6 percent on Q3 last year
* 2011 has started well
* Development of future projects progressing well
* LSE shares flat in early morning trading
(Updates with LSE share price, further background, detail)
LONDON, Jan 27 (Reuters) - The London Stock Exchange, battling competition from low-cost rivals, said 2011 had started well as revenues and income rose during its third quarter.
The British bourse said on Thursday income for the three months ended December 31 had increased by 6 percent from last year to 165.9 million pounds ($263.9 million).
The LSE said there had been a 75 percent increase in the number of new issues on its markets, while an increase in trading on money markets had boosted fixed income revenues.
It was positive on the first few weeks of 2011 and said there was a strong pipeline of future deals and encouraging market trends for initial public offerings (IPOs).
"Calendar 2011 has started well relative to Q3 with cash equities average value traded in the UK up 15 per cent at 4.8 billion pounds per day (down two per cent on January last year) and share of trading remains steady at 63.0 per cent," it said in a statement.
Shares in the LSE were down about 1.2 percent by 0915 GMT.
The LSE's new trading system Turquoise has been hit by technical glitches, but the LSE said on Thursday that it was making good progress on Turquoise and other projects.
"Development work for derivatives trading on Turquoise is going well and we are on schedule for launch in calendar Q2," Chief Executive Xavier Rolet said in a statement.
"Preparation is also advanced for the roll out of the Millennium Exchange trading platform for the UK equities market next month."
The LSE has been fighting to claw back business lost to low-cost competitors such as Chi-X Europe and Bats Europe, which have grown quickly off the back of high-volume trading firms.
The LSE also competes globally with NYSE Euronext, Deutsche Boerse and Nasdaq. ($1=.6287 Pound)
(Reporting by Sudip Kar-Gupta, Editing by Rosalba O'Brien and Jane Merriman)