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Updated from 7:50 a.m. EST


Nasdaq Stock Market

Tuesday said a report that it is considering a merger with the

New York Stock Exchange

because of increased competition from other electronic exchanges is "incorrect and has no basis in fact."

The Wall Street Journal

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Tuesday reported that Nasdaq Chief Executive Robert Greifeld made the overture about three weeks ago and the idea remains in very preliminary stages.

In a brief statement, the Nasdaq said the story was based on "rumors and speculation."

Both trading forums -- the Nasdaq calls itself a market and the NYSE an exchange -- are currently fighting through serious challenges. The Nasdaq has seen both its trading market share and number of listings decline in the wake of the technology crash of 2001, while the NYSE's floor-based specialist system has drawn fire in the wake of the ouster of Chairman Richard Grasso.

The Nasdaq and NYSE previously discussed a merger in 1999, but the talks hit an impasse. Any combination would face significant legal hurdles as well as difficulties integrating the Nasdaq's electronic system with the NYSE's open-outcry auction format. Officials from both declined to comment.

The merger would face

Securities and Exchange Commission

review and possibly scrutiny by other agencies. Regulation of a combined entity would also pose complications, as currently the NYSE regulates itself while the Nasdaq is overseen by the NASD.