WASHINGTON (Reuters) - The news that Britain had voted to leave the European Union on Friday may have been unexpected, but it did not catch U.S. swaps clearinghouses off guard, members of the industry said on Monday.
At a scheduled meeting on central counterparties, which act as middlemen in swaps and trades, the Commodity Futures Trading Commission tried to steer the conversation away from Brexit. Nonetheless, banks and clearinghouses indicated that they had weathered Friday's market tumble that resulted from the vote, which many had incorrectly anticipated would go the other way.
"Let me just observe that the last couple days have been an excellent example of how the system is working and is much stronger, I believe, than before," said Clifford Lewis, a member of the supervisory board at Eurex Clearing AG.
He added that centralizing risk and processing "has been hugely beneficial to the market."
"In the past everyone has prayed for an event like this on a Friday so people can beaver away on the weekend," he said. "I'm not sure we could have operated successfully without this kind of centralized processing and, critically, recognition of losses."
The meeting focused on how clearinghouses can coordinate preparations for a possible default of a major clearing member, emphasizing communication with each other and with traders.
"We know who to reach out to. You can imagine on Friday, we were talking to each other about the Brexit situation," Kevin McClear, general counsel at Intercontinental Exchange, told the meeting.
Kristen Walters, managing director at BlackRock, said there were signs post-crisis reforms are working.
"So I think last Friday just made me consider the fact that what we're doing is effective and it's in the right direction," she said. "I think we need to do more."
The CFTC, which regulates derivatives, said on Friday it was monitoring markets after Britain's vote.
At the meeting its chairman, Timothy Massad, said "thus far today they have functioned in an orderly manner, notwithstanding the volatility resulting from this vote."
CFTC Commissioner Sharon Bowen said regulators in the near-future will "need to make many decisions in light of this new reality."
"In the days and weeks to come, the industry and others who observe these markets, will have a much better sense of what are the temporary versus the long-lasting effects," she said.