Wall Street's biggest firms are close to agreeing on a plan that would safeguard the financial markets from the crippling fire sales that engulfed Lehman Brothers Holdings Inc. and Bear Stearns Cos.

By doing so, the participants seek to reach a solution to what the Federal Reserve sees as the last systemic risk in the $1.6 trillion-a-day market for short-term funding yet to be addressed: The potential for questions over a bond dealer's liquidity to unleash a wholesale dumping of assets that causes a crisis of confidence in the financial system.

Prodded by the Fed, industry groups with the support of dealers, banks, and investors are coalescing around proposals to guarantee the most-liquid types of collateral used to borrow money in repurchase agreements, or repos, said five people with knowledge of the talks. Guidelines to ensure investors who accept riskier assets can price, hold, or sell the collateral if a dealer defaults are also being discussed, they said.