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NEW YORK, April 1 (Reuters) - The Federal Reserve Bank of New York said on Wednesday that large dealers in the credit derivative market have agreed to expand the use of central clearing houses to more products and participants.

The Fed met with 15 dealers, eight buyside firms and a number of regulators and industry groups on Wednesday to discuss progress in central clearing initiatives and plans to further improve transparency in the $27 trillion market.

Central clearing of credit default swaps market is viewed as key to removing the systemic risks posed by the failure of a large counterparty.

Credit default swaps (CDS) are used to insure against a borrower defaulting on its debt or to speculate on its credit quality.

Participants in Wednesday's meeting "supported broadening the use of CDS central counterparties to include a wider set of firms and CDS products," the Federal Reserve said in a release.

"They also agreed to report all CDS trades not cleared through a central counterparty to a central trade repository," the bank said.

The Intercontinental Exchange (ICE.N: Quote, Profile, Research) and CME Group Inc (CME.O: Quote, Profile, Research), which runs the Chicago Mercantile Exchange, are the two main contenders in the race to clear the majority of U.S. trades, with ICE benefiting from support from large dealers that own a stake in the company.

Some fund managers have expressed concern, however, that counterparty risk is highly correlated between the institutions backing ICE and that the clearinghouse may concentrate counterparty exposure to a small number of participants, instead of removing it entirely.