The article, which cites people familiar with the matter, says the two companies have been in "serious discussions" for weeks, but they aren't yet close to a deal.

A spokeswoman for E*Trade told WSJ reporters that the firm's management team believes there is "tremendous value in consolidation that aligns business strategy and operational synergies" and the firm will do what is in the best interest of its customers. A TD Ameritrade spokeswoman said the broker has talked and continues to talk to peers in the industry.

The two brokers have discussed an alliance in previous years but have never managed to agree on a deal. But the current round of talks come as TD Ameritrade is pressured by shareholders to find a merger partner. Recently hedge funds Jana Partners and SAC Capital - which claim to collectively own 8.4% of TD Ameritrade - urged the broker to seek a combination.

The funds claim that Toronto-Dominion Bank, which owns 39% of TD Ameritrade, opposes a merger because it wants to use the online broker to expand in the US instead of maximising shareholder value. Although the bank denied this, the two funds successfully pressured TD Ameritrade to remove TD Bank's chief executive from the brokerage's mergers and acquisitions committee in July.

The WSJ doesn't state what a merger deal between E*Trade and TD Ameritrade would be worth or how it might be structured. However one person familiar with the talks says the deal could create a company valued at $20 billion, given the cost saving that could result from uniting both company's accounts onto a single computer system.