Trading in WebExchange

Trading Rights

Trading rights are assigned to individual traders based on market characteristics. Not all traders have the same trading rights. For instance, all traders have trading rights in our political markets, but only traders with academic affiliation can trade in the returns markets. When you log in, WebEx reads your trading rights and builds a trading screen for you that reflects those rights.

The information below describes general trading rights that may be available to you. If you do not have the right to perform a particular function, your screen will not list that function.

Markets and the Objects Traded

WebEx contains many markets. A market is defined by sets of trading rules, traders, assets, and information. The characteristics of a specific market are defined in its prospectus. Each market is related to some future event. This future event determines how assets in the market will payoff. Generally, the market name contains a description of how these payoffs are determined. The most common of these are Winner-Takes-All, Vote-Share, and Linear-Returns markets.

An asset is any object traded in a market. Once an asset is opened for trade, it will remain in circulation until it is liquidated. Specific rules related to asset splits, dividends, retirements, liquidations, and trading times are described in the market prospectus.

Buying and Selling Fixed Price Bundles

A fixed-price-bundle is a set of assets which can be purchased from or sold to the exchange at a fixed price. This fixed price is the guaranteed aggregate liquidation value of the assets.

So that the IEM neither makes nor loses money, assets are placed in circulation by issuing fixed-price-bundles. For instance, a fixed-price-bundle containing 2 assets whose liquidation values will sum to $1.00 can be purchased from the exchange or sold to the exchange for $1.00.

To purchase or sell a fixed-price-bundle, use the market order menu. Choose the bundle name, specify the quantity you wish to trade, and click the "Market Order" button.

Your bundle order will be execute bundle by bundle. If you are buying bundles and do not have enough cash to purchase the entire number of bundles you requested, the order will be processed until you run out of cash. Similarly, if you are selling bundles, your order will be processed until you run out of the assets necessary to form complete bundles. Incomplete and partial bundles will not be processed.

Once bundles are purchased, they can be split up and each asset traded individually. Or, complete bundles can be resold to the exchange for the fixed bundle price.

Placing Market Orders

Market orders are requests to buy or sell assets at the current ask and bid prices. A market order consist of:

• an instruction to buy or sell
• an asset ticker symbol
• the quantity you wish to trade

To place a market order, use the market order menu (the row denoted "1" in the picture above). Choose the asset you wish to buy or sell from the Action/Asset select list ("1" in the picture above), specify the quantity ("2" in the picture above), and then click on the Market Order button ("4" in the picture above).

By default, you will be asked to confirm your market order before it is executed (a picture of the screen is shown below). If you wish to eliminate this confirmation step, remove the checkmark from the confirm box ("3" in the picture above) before clicking on the Market Order button.

Your market order will be executed one unit at a time. If you are buying an asset and do not have enough cash to purchase the entire number of assets you requested, the order will be processed until you run out of cash. Similarly, if you are selling assets, your order will be processed until you run out of the assets you are selling.

Market Orders are executed against your account in one unit increments. Before each unit is traded against your account, your asset and cash holdings rechecked to be sure that you have enough assets and cash to continue the trade. When the remaining portion of a trade becomes infeasible, that portion is cancelled and marked infeasible.

To see a list of all orders that you have placed for a particular asset, use the My Account button at the bottom of the WebEx screen.

Market Price Bundles

A market-price-bundle is a set of assets that will trade simultaneously at their respective market prices. The assets included in a particular market-price-bundle are defined in that bundle's description in the market prospectus.

Market-price-bundles initiate trades at current market prices (current bids if you place a sell order, current asks if you place a purchase order). The only difference between trading a market-price-bundle and trading its components individually is that the market-price-bundle guarantees that all components of the bundle will trade or no components will trade.

Market-price-bundle orders are subject to the same feasibility checks that are associated with market orders (purchase and sell orders) for individual assets. If a feasibility check fails for any asset in the market bundle, then the bundle will not trade. This means:

• To sell a market-price-bundle, you must own at least one unit of each asset in the bundle.
• To buy a market-price-bundle, you must have enough cash to purchase all the assets in a market bundle at their current asks.
• If one or more of the assets in the market-price-bundle do not have current ask prices, you will not be able to purchase a market bundle.
• If one or more of the assets in the market-price-bundle do not have current bid prices, you will not be able to sell a market bundle.
• Self trades are not allowed. If you attempt to trade a market-price-bundle against one of your own bids or asks, that bid or ask will be cancelled. WebExchange will continue to try to trade your market order after self trades are cancelled. If other traders have orders in the queue at the same price as your bid or ask, your market order may be traded against them.

Your bundle order will be executed one bundle at a time according to the feasibility checks described above. Market bundle orders that cannot be completed are are cancelled.

Changes in Current Bid and Ask Prices:
Like market orders for individual assets, market-price-bundles trade at current market prices when your order reaches the exchange. If prices change between the time you place your order and the time it reaches the exchange, you order will trade at the new prices.

You can protect yourself from unanticipated price changes by using the confirmation option when you submit a market order. Placing a checkmark in the confirmation box tells WebExchange to check prices before executing the order. WebExchange will then confirm that the price at which your order will trade is not worse that the price you saw when you confirmed the order. For purchases of market bundles, this means that the total price you pay for the order will be no higher then the price you confirmed. For sales of market bundles, this means that the total price for which you sell the bundle will be at least as great as the price you confirmed.