Price dislocations: insights from trade repository data

This paper identifies price dislocation events in EuroSTOXX 50 futures, i.e., periods marked by high absolute returns. Combining public limit order book data with confidential trade repository data collected under the European Market Infrastructure Regulation (EMIR), we analyze market conditions around such dislocations. We find that price dislocations are accompanied by an increase in trading volume, and in the number of trades. EMIR data enables us to identify who participates in these trades, which allows us to tell if the volume increase is driven by fewer investors trading more, i.e., a more concentrated market, or by more investors participating. The latter could be argued to be a sign of a resilient market. We find evidence in support of such resilience, because the Herfindahl-Hirschman Index declines, both on the liquidity-demand and the liquidity-supply side. Our results further show that, contemporaneously, public order book variables explain most of the price dislocation events; adding private EMIR data contributes relatively little. We further find that predicting price dislocations is extremely hard, even after adding private EMIR data to public order book data. JEL Classification: G14, G18