Pre-trade diligence · Market Trust
Market Fitness: is this prediction market fit to trade, cite, or hedge?
Before you size a position, cite a probability, or use a prediction market to offset an exposure, three questions decide if the market is usable: will it settle cleanly, can you fill at size, and is the price reliable. Convexly is the independent layer that reads those, market by market.
Three questions before you use a market
A prediction-market price is only usable once you trust how the market resolves, can transact the size you need, and believe the quote is a fair reference. Convexly reads each of these per market, independently, and never recommends an action. It scores the instrument, not your position.
Will it settle cleanly?
Resolution-reliability and the participant-integrity screen read the settlement source, the rule text, and whether the price was shaped by a concentrated or unidentified flow. A market that voids, disputes, or resolves on a technicality pays zero at the moment you rely on it. Settlement risk is the first thing a user of the market must price.
Can you fill at size?
The executability read estimates visible depth and modeled price impact at a given order size, plus the spread cost. A market that moves 20 to 50 percent against a meaningful order is not usable at that size, however attractive the headline price. The honest output on most active markets is that they are not fillable at institutional size, and that is the point.
Is the price reliable, and where is it better?
The structural-coherence flag marks where a quoted probability looks inconsistent with related markets, and the cross-venue read shows where two venues disagree on the same claim. When Polymarket and Kalshi price the same event differently, at least one is a worse entry, and a user choosing where to act learns which.
Why an independent layer
A venue cannot credibly audit its own settlement, and the largest prediction-market venues now have exchange and investor ties that make a self-issued quality read a conflict. The reads above are most valuable precisely when they are negative, and the most common honest output is that a market is not fillable at size or not yet clean enough to cite. An execution-free, fee-free, independent auditor is the only party that can publish that.
Mapped to the diligence factors regulators ask about
The June 2026 CFTC notice of proposed rulemaking on event contracts asks venues and counsel to address settlement integrity, manipulation, asymmetric information, and whether a price is a sound reference. Convexly's existing surfaces map onto those questions directly.
Settlement integrity
Market Trust resolution-reliability read + the source and rule-text check.
Susceptibility to manipulation
Participant-integrity / concentration screen on the flow that shaped the price.
Insider or asymmetric information
Edge Score participant-quality context on who is in the market.
Price-basing utility
Structural-coherence flag + cross-venue disparity read on whether the price is a usable reference.
What this is, and is not
- Descriptive diagnostics, not advice. Convexly does not tell you whether or how much to trade, hedge, or cite.
- Prediction markets are validated in the academic record as forecasts, not as proven hedges. A probability and a hedge that tracks your exposure are different things; basis risk is real.
- The Market Trust verdict is a candidate diagnostic with an honest interval. It is not presented as a settled settlement-risk rating until its pre-registered forward calibration resolves.
- Some inputs are not yet measured and are labeled as such on every card: durability of depth across time, and resolved-outcome dispute history.
How to read it
The methodology and the qualitative reads (resolution reliability, manipulation screen, basis-risk note) are open on every Market Trust diligence packet. The at-size executability detail (fill cost at $100, $1,000, and $10,000) is a Researcher read. Desks that need programmatic, portfolio-scale diligence can ask about the Market Fitness API on the Trader waitlist. Open a Market Trust packet to see a read on a live market.