Shares of E-Trade and TD Ameritrade rose this morning after a report that the two online brokers are in the midst of merger talks.

The two brokers have discussed combining before, but pressure from outside investors may be adding to the urgency to reach a deal now, the Wall Street Journal reports. Earlier this year, the hedge funds Jana Partners and SAC Capital took a large stake in TD Ameritrade and began urging its management to merge with E-Trade.

Furthermore, E-Trade took a hit last week when rumors surfaced that its mortgage portfolio had weakened.

Both companies have publicly stated that they are open to consolidation, but neither would comment specifically on the current state of talks, the Journal notes.

A combination of the two brokerages would create the industry’s biggest player. The online trading industry has become fragmented as large commercial banks and new start-ups have entered the fray in recent years, pushing down the cost of commissions.

Related links:

• New York Times: A Closer Look at the TD Ameritrade Report
• MarketWatch: E-Trade and TD Ameritrade Reportedly Talk Merger