The Gunners boss has been linked with a January loan move for the Spain Under-21s international, who says that he would consider quitting Los Blancos if not afforded "a relevant role", though coach Carlo Ancelotti has no intention of letting him go.
"We are not in talks with Real about anybody," Wenger said at a press conference on Friday when asked about transfer negotiations with Madrid.
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The Frenchman went on to restate his distate for the "distraction" of the transfer window as a whole, arguing that it would be better to limit it to the summer.
"It's always sensitiv,e especially when other players play for Premier League clubs," the Arsenal manager continued. "At the moment, I believe we have no shortage unless some other big injuries. That's why it's important just to continue to focus on our performances and our next game.
"The transfer market is a distraction that, for me, is not welcome. I think it would be much better that there is no transfer market at all in January and the team starts and finishes with the same players would be fair unless you have big injuries.
"For the rest, what is important is that we focus on the quality of our performances because it's a period that is very sensitive at the moment and every game is now a massive game."