What are the different stages of a market?
Unlike asset (crypto, stocks) markets, prediction markets are finite in nature and must come to an end - due to the nature of prediction markets occurring around real-world events, there is also a need for markets to go through a number of different stages.
This section is intended to help everyone better understand the stages a market will go through.
The market is open and it is possible to open new orders or cancel open orders.
If there is particularly suspicious activity observed on the exchange, or if there was some sort of technical issue that needed to be resolved before trading could resume. While the market is halted, it is not possible to place new orders, though it is possible to cancel open orders.
‘In-play’ is generally considered a distinct category of trading on events because trading tends to be much more volatile while the event is unfolding live. There are additional technical complexities when trading in-play due to the potential for information asymmetry between participants (for example, if someone were sitting in the stadium vs. streaming it on a slow internet connection).
A market is no longer open for trading, and is waiting for final resolution.
The time period between trading ceasing and market resolving will typically be short, but in certain cases may take time. For example, trading may cease on the day of an election but the results may not be known with certainty for some time. In others, the resolution consensus mechanism may mean that it takes more time for this to be worked through.
The markets outcome has been determined. At this stage it is possible for any winnings or market proceeds to be collected or paid-out.
A market is no longer valid. Reasons for this may include:
- Some information about the market or event has changed significantly such that users who had previously traded and hold positions are unfairly advantaged or disadvantaged.
- The event has been cancelled or postponed beyond a specified period of time.
- One or more of the listed outcomes in the event are explicitly no longer a possible outcome (i.e. a runner removed from a race) or have been substituted in a way not anticipated or allowed for in the rules of the market. Information comes to light which means the outcomes specified are no longer
- Complete and mutually exclusive - i.e. ‘Other’ wasn’t specified as an option and a new, unanticipated contender has appeared.
- There has been a technical issue with how the market was specified leading to possible errors in resolution or how users would be paid out.
- For some reason, it has not been possible for the oracle network to achieve consensus on the result of the market despite all attempts and within a reasonable period of time.