Dynamic requoting under evolving volatility

Develop a dynamic microfoundation in which prediction-market CLOB makers requote as the volatility regime evolves, thereby determining how endogenous quote revision changes screening, rent extraction, and coexistence with the LMSR.

Background

The paper’s equilibrium analysis assumes that CLOB makers commit a single pre-shock quote and cannot revise it after liquidity provision and quoting. This assumption is central to the no-pickoff screening mechanism: quotes inside the possible signal band are picked off, whereas quotes outside the band screen informed traders and earn rent from tail demand.

The authors explicitly identify a dynamic model in which makers can requote as volatility evolves as an unresolved extension. Such a model would relax the single-quote commitment and could clarify how practical market makers adapt their spreads, depth, and inventory exposure when the volatility regime changes.

References

Four limitations mark an opening: (i) the mechanism rests on a single pre-shock quote, so a dynamic microfoundation in which makers requote as the volatility regime evolves is an important open question; (ii) AMM depth enters only through a scalar $L$, leaving concentrated, Uniswap-v3-style bucketed depth a natural next step; (iii) our results are positive throughout---we characterize which configurations survive, not which one a platform should choose; and (iv) the calibration rests on one short-horizon contract type, so whether the same results survive in other markets remains an empirical question.

— Who Aggregates Information? Screening, Rent, and the Coexistence of CLOB and AMM Prediction Markets  (2609.20017 - Zang et al., 17 Sep 2026) in Section Conclusion and Open Directions