Order Flow Toxicity and Informed Trading around Known Market Manipulation Events : Evidence from Interest Rate Futures

The objective of this paper is an ex-post review of the effectiveness of PIN and VPIN in determining changes in the information structure and order flow of a futures market around documented episodes of recorded manipulation of the reference rate, from the various publicly available regulatory reports. In keeping with previous studies on interest rate derivatives, this analysis finds that the average PIN is far higher for futures than for the equity market at or above 60%. Furthermore, I find a very strong connection between PIN, VPIN and time to maturity of the contract that is not fully explained by the time variation in activity in the market. However, an event study using both a new bootstrap approach and asymptotic standard error on the VPIN and PIN respectively around documented LIBOR manipulation cases has mixed results. For certain events I see a substantial change in the average detected levels of PIN and VPIN, however a cross sectional analysis of all reported cases up to mid-2015, indicates no significant change in the PIN and VPIN for the contracts in this Eurodollar sample