NEW YORK — A rare emergency trading session opened Sunday afternoon to allow Wall Street dealers in the $455-trillion derivatives market reduce their exposure to a potential bankruptcy filing by Lehman Brothers Holdings Inc.

U.S. regulators and bankers were making last-ditch efforts on Sunday to prevent toxic assets from ailing Lehman Brothers spilling into global markets and rupturing investor faith in the international financial system.

“This is an extremely, and I stress extremely, rare event. It also speaks to the more general notion that, in today's highly disrupted financial markets, the unthinkable is thinkable,” said Mohamed El-Erian, the chief executive of Pimco, the world's biggest bond fund, based in Newport Beach, California.

The session opened at 2 p.m. (ET) and was due to run until 4 p.m. New York time, according to the International Swaps and Derivatives Association.

ISDA later extended it for another two hours.

Trading involved credit, equity, rates, foreign exchange and commodity derivatives. ISDA confirmed a “netting trading session” was taking place for over-the-counter derivatives, in which trades that offset each other are settled.

ISDA estimates the OTC derivatives market excluding commodities has a value of $455-trillion.

Market sources said the special session was initiated by the Federal Reserve.

The aim is to reduce risk associated with a potential bankruptcy filing by Lehman Brothers Holdings Inc.

“Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time Sunday,” said the statement. “If there is no filing, the trades cease to exist.”

Britain's Barclays Plc , which had appeared to be the frontrunner to take over Lehman – excluding its bad mortgage-related assets – pulled out of the bidding early in the afternoon, according to a person familiar with the matter.

That raised the risk of a Lehman bankruptcy. Lehman hired law firm Weil Gotshal & Manges to prepare a potential bankruptcy filing, the Wall Street Journal reported on Saturday in its online edition, citing a person familiar with the matter.

The special session “is a way to offset the risk between the remaining large banks and insurance companies and fund managers prior to the markets opening in Asia,” said Mark Grant, managing director of structured finance at Southwest Securities, based in Dallas.

Mr. Grant is expecting a turbulent session when the U.S. markets reopen for business on Monday.

“No one has any idea about the credit quality of the assets in Lehman's portfolio and no one has a handle about the size of the CDS contracts,” he said.

“The market is going to be spooked. People will be fearful and no one outside a very small group of people knows what Lehman going into liquidation will mean.”

If there is a forced sale or liquidation, “this could set off another round of writedowns globally.”