Reports surfaced Sunday in London that the biggest U.S.-based index mutual fund company is tossing its hat into the ring to purchase the leading sponsor of exchange-traded funds.

The Sunday Telegraph is reporting that the Vanguard Group, which virtually created the modern indexing marketplace for individual investors, has made a bid in the neighborhood of $5 billion to buy Barclays Global Investors' iShares business.

The combination would create an ETF industry juggernaut with some $311.9 billion in total assets. Such a figure is based on estimated ETF asset levels for both Vanguard and BGI's iShares lineup at the end of April. It would easily bolt Vanguard, now No. 3, past current No. 2 State Street Global Advisors.

Perhaps more importantly, such a huge combined war chest would represent more than half of the U.S. ETF market's total asset level of $535.3 billion, according to the latest tallies by the National Stock Exchange. 

The Telegraph article made no mention of specific sources. But reporter Mark Kleinman wrote that Vanguard was being advised on the deal by Chicago-based investment banker William Blair & Co. 

Valley Forge, Penn.-based Vanguard was started by John Bogle, who launched the first retail index fund in 1976. The firm says it now has more than $1.1 trillion in assets. But it was late to the ETF field and has been chasing No. 1 BGI, a unit of British banking giant Barclays Plc, for years.

Entering May, Vanguard had an estimated $50.7 billion in ETF assets while BGI's iShares franchise controlled $261.2 billion. In second place was State Street Global Advisors at around $133.5 billion. (See related story with complete data here.)

Whether the unconfirmed report over the weekend turns out to be true or not, it's sure to spark more interest in Barclays' rather public auction of its ETF products. 

Private equity player CVC Capital Partners almost had a deal for all of BGI in early April. The price tag at the time was listed at $4.4 billion. But it also came with plenty of strings, including parent Barclays providing much of the financing and an escape clause for the seller if a better bid could be found by June 18. (See related story here.)

Of course, that's just what happened. 

In early May, reports surfaced that at least three new bidders were jumping into the competition. Interestingly, the proposals supposedly just involved iShares and upped the ante to $5.3 billion. Also, it should be noted that Vanguard was not named as one of those interested parties. (See related story here.)

Throw into the mix that slightly more than $91 billion of SSgA's asset total of $133.5 billion heading into May came from just two funds—the original ETF, the SPDR S&P 500 (NYSE: SPY) and the SPDR Gold Shares (NYSE: GLD).

At the very least, with a June 18 deadline looming from the original CVC agreement, some sort of reshaping in the industry's landscape could be on the horizon.