“Many prediction markets would be better off as batched auctions” by William Howard

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23d ago 9:18

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All prediction market platforms trade continuously, which is the same mechanism the stock market uses. Buy and sell limit orders can be posted at any time, and as soon as they match against each other a trade will be executed. This is called a Central limit order book (CLOB).
Example of a CLOB order book from Polymarket Most of the time, the market price lazily wanders around due to random variation in when people show up, and a bulk of optimistic orders build up away from the action. Occasionally, a new piece of information arrives to the market, and it jumps to a new price, consuming some of the optimistic orders in the process.
The people with stale orders will generally lose out in this situation, as someone took them up on their order before they had a chance to process the new information. This means there is a high [...]
The original text contained 3 footnotes which were omitted from this narration.
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First published:
August 2nd, 2025
Source:
https://www.lesswrong.com/posts/rS6tKxSWkYBgxmsma/many-prediction-markets-would-be-better-off-as-batched
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Narrated by TYPE III AUDIO.
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Images from the article:

Example of a CLOB order book from Polymarket

Call auction at the moment of execution: All orders to the left of the crossover point will be executed at the price of $10

Continuous trading market at a point in time: Any order that crosses the spread is executed immediately, so at a random moment there is no overlap between the bid and ask curves

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