Malone's herding result is about averaged guesses, not markets. When people see each other's guesses and the group's answer is their average, copying costs nothing and errors pile up, so the group converges, grows more confident and gets less accurate. A market is reflexive: a trade that pushes the price the wrong way creates a profit for whoever trades against it, so a visible bad price pulls informed traders away from the herd instead of into it. That is why agents reading each other's positions is not fatal to a decision market; what the market needs protected is enough depth that correcting a wrong price pays, not traders' blindness to the price.

Evidence 2 passages

groundsSuperminds (audiobook machine transcript), Thomas W. Malone
For instance, in one compelling experiment, when group members saw information about one another's guesses, their guesses moved closer together, and they became more confident that their guesses were right. But their guesses actually became less accurate.
groundsSource document
I can buy and sell to influence the prices in the short-term, but there's nothing stopping traders from pushing prices back to where they where before. In fact, this is exactly what a rational trader would do.

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