Toxic Order Flow & Insider Trading
Market integrity is essential for a fair prediction exchange. This page explains information asymmetry and how TPX handles trading by informed participants.
What Is Toxic Order Flow?
Toxic order flow refers to trades from participants who have better information than the rest of the market. These traders consistently profit at the expense of less-informed participants, which can discourage regular traders from participating.
- Insiders who know an outcome before it's public
- Participants who can influence the outcome being predicted
- Traders with access to non-public data sources
Information Asymmetry
Some level of information asymmetry is natural and even desirable — it's what makes prices accurate. A trader who does better research should be rewarded. The problem arises when the asymmetry comes from privileged access rather than effort.
The paradox: Prediction markets need informed traders to set accurate prices, but too much informed trading drives away the liquidity providers who make the market function.
TPX Policies
TPX takes market integrity seriously. While we cannot prevent all informed trading, we monitor for suspicious patterns and reserve the right to:
- Void trades that appear to be based on insider information
- Suspend accounts engaged in market manipulation
- Delay resolution if integrity concerns arise
- Adjust market rules to prevent exploitation
Reporting Concerns
If you suspect insider trading or market manipulation, please contact us at integrity@torontopx.ca. All reports are reviewed confidentially.