The Owls had made Wallace one of their first targets of the summer, but the 22-year-old has opted to move to Championship rivals Wolverhampton Wanderers instead.
Wallace completed a move to Molineux earlier today and that will be a blow for Wednesday, who are determined to make a number of additions over the coming months.
The Owls have funds to spend on new players following the takeover of Dejphon Chansiri, but they will be hoping to be more successful in their pursuit of other transfer targets.
Wallace has impressed at League Two level this season, scoring 14 times and claiming eight assists, and he is regarded as one of the finest talents in the lower divisions.
It seems that Wednesday will have to set their sights elsewhere, though, as they look to add quality to their squad.
Wolves only narrowly missed out on one of the Championship's play-off spots this season and it may be that this impressive showing was ultimately what persuaded Wallace to move to the Midlands club, rather than Wednesday.