> For the complete documentation index, see [llms.txt](https://prismnetwork.gitbook.io/prismnetwork-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://prismnetwork.gitbook.io/prismnetwork-docs/5.-risk-management-system/5.3-market-risks-liquidity-traps-and-execution-security.md).
# 5.3 Market Risks, Liquidity Traps, and Execution Security
Market risks in prediction markets stem not only from incorrect directional judgments but also from insufficient liquidity, excessive bid-ask spreads, false trading depth, external platform rule changes, regional restrictions, and settlement disputes. Prism Network continuously monitors order book depth, bid-ask spreads, trading volume, executable order sizes, slippage levels, market status, settlement rules, and access restrictions across different markets.
The system identifies potential market manipulation and liquidity traps. For example, a market may show a significant probability deviation but lack sufficient executable depth; a price may appear attractive but the bid-ask spread is too wide; an event's trading volume may surge but the sources are concentrated among a few accounts or suspicious addresses. For such markets, the system applies risk labels and restricts them from entering automated execution paths.
**External Risk Judgment:**
Different prediction markets may have regional restrictions, KYC requirements, asset limitations, or political event restrictions. Prism Network does not alter the rules of external platforms themselves, but rather aggregates, displays, and executes within their rules, access conditions, and settlement frameworks. For markets with unclear rules, unstable settlement, or significant restrictions, the system lowers their execution priority.
The Execution Engine checks user authorization, account balances, order size, maximum slippage, market status, and risk parameters before placing orders. During execution, it continuously monitors fill status, partial fill ratios, order book changes, on-chain confirmations, API responses, market halts, and settlement progress.
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