Reyes and Baptista in possible exchange.

Arsenal's Jose Antonio Reyes and Real Madrid's Julio Baptista are close to swapping teams, news reports said on Wednesday.

Citing Reyes' agent, Herminio Menendez, news agency Efe said the two clubs were holding talks aimed at agreeing on an exchange before the transfer deadline at midnight Thursday.

Madrid has made earlier cash bids to sign Reyes but Arsenal's insistence on a reported fee of €18 million (US$23 million) halted any deal.

However, it appears that by offering Baptista Arsenal is much more interested.

The London club hoped to sign Baptista from Sevilla a year ago although the Brazil midfielder instead chose to join Madrid in a €20 million (US$25 million) deal.

However, Baptista is regarded as dispensable by Madrid coach Fabio Capello, who took charge in July and has already brought in four new players - Juventus' Fabio Cannavaro and Emerson, Manchester United's Ruud van Nistelrooy, and Lyon's Mahamadou Diarra.

A deal would end Atletico Madrid's hopes of signing Reyes. Madrid's crosstown rival has also had offers rejected.

The 22-year-old forward has not played for Arsenal this season and would be eligible to play for Madrid in this season's Champions League.

Reyes, who joined Arsenal from Sevilla in January 2004 and who last year extended his contract to 2011, has long since shown interest in a return home.

In February 2005, the Spain international was kidded into acknowledging his desire for a move during a mock interview staged by a Spanish radio station.

Last month, he told the Spanish press he was keen to leave Arsenal for Madrid, saying he hadn't adapted to life in England, the language or the climate.

Reyes said last weekend he wouldn't play again in the English league and suggested he didn't mind which Spanish club he joined.