The Knicks and Rockets discussed a potential Tracy McGrady trade again Wednesday morning.

Sources familiar with the negotiations told ESPN.com that while the Knicks informed the Rockets that they remain interested in acquiring McGrady in a deal for Larry Hughes and Jared Jeffries, they are still unwilling to meet all of the Rockets' demands, which includes cap relief, Jordan Hill, the swapping of 2011 first-round picks and the Knicks' 2012 first-round pick.

"We'd like McGrady and the cap relief," one Knicks source said. "But the Rockets are asking for too much. We're willing to pay a premium to make a deal. But the price right now is still too high."

According to the source, the Rockets are still looking for other partners. The Bulls have been mentioned as a possibility, however, sources believe that their offer is less attractive than even New York's reduced offer.