A group of Wall Street securities firms is pledging to improve processing for the over-the-counter derivatives market within the year.

In a letter to the Federal Reserve Bank of New York, the firms (including JP Morgan, Merrill Lynch, Goldman Sachs, Citigroup, UBS, among other major players) pledge to use electronic confirmation platforms for eligible trades/

By July, the dealers and buy-side firms will be meeting matching and accuracy targets. The dealers will be live for central settlement by September.

A trio of industry trade associations have promised to deliver an implementation plan by May.

The Fed said it welcomes the plans announced by the firms. “The letter outlining these commitments represents increased collaboration among major dealers, buy-side firms and key industry associations, and it supports the recommendations set forth in the March 13, 2008, policy statement of the President’s Working Group on Financial Markets,” it said.

Since OTC derivative dealers started addressing credit derivative processing issues in 2005, they have reduced confirmations outstanding more than 30 days by 85%, increased electronic processing to more than 90% of all credit derivative trades and eliminated the risk of novations causing dealers not to know their counterparties, the Fed said.

“Nevertheless, volume surges in mid-2007 underscored the processing challenges that persist in the OTC credit derivatives market. To support long-term growth, the processing infrastructure must be capable of processing transactions efficiently through periods of sustained high volume and market volatility,” it added. “The new commitments reflect market participants’ recognition that achieving this objective requires end-to-end automation, increased interoperability and targeted improvements to the processing workflow.”