Winner-Takes-All Market

At noon (C.S.T.) on Friday, January 29, 1999, the Iowa Electronic Market (IEM) will open trading in a market based on the composition of the two houses of Congress following the November 2000 U.S. elections. Contract liquidation values in this Congressional Control market will be determined by the number of seats won by members of the Republican Party in each house. Initially, four contracts will trade in this market, each representing one of four possible unique and exhaustive outcomes. The liquidation value of the contract which represents the actual outcome of the election will be $1.00. All other contracts will have a value of zero.

This document describes that market and should be viewed as a supplement to the Trader's Manual. Except as specified in this prospectus, trading rules for this market are the same as those specified in the Trader's Manual for the Iowa Electronic Market.


The initial financial contracts traded in this market are:

     Code       Contract Name

     RH_RS       Republican House, Republican Senate
     RH_NS       Republican House, Non-Republican Senate 
     NH_RS       Non-Republican House, Republican Senate
     NH_NS       Non-Republican House, Non-Republican Senate

The first two letters of the contract symbol represent the net effect of the U.S. House of Representative elections: Rh means that Republicans hold 218 or more of the 435 seats in the House; Nh means that Democrats together with any other non-Republicans hold 218 or more seats in the House. The last two letters in the symbol represent the net effect of the U.S. Senate elections: Rs means that Republicans hold 51 or more of the 100 seats in the Senate; Ns means that Democrats together with other non-Republicans hold 50 or more seats in the Senate. Note that an even split of seats in the Senate is resolved in favor of the Ns contract.

The Directors of the IEM reserve the right to introduce new contracts to the market as spin-offs of existing contracts. When a contract spin-off occurs, an original contract will be replaced by new contracts which divide the payoff range of the original contract into sub-intervals. No holder of the pre-spinoff contracts will be adversely affected. Traders will receive the same number of each of the new contracts as they held in the original, and the sum of the liquidation values of the new contracts will equal the liquidation value of the original. Decisions to spin-off a contract will be announced at least two days in advance of the spin-off. The new contract names, the specifications regarding liquidation values and the timing of the spin-off will be included in the announcement. This announcement will appear as a News Bulletin on your WebEx login screen.

All references to "House seats" in this document are to voting seats in the House of Representatives and specifically exclude those non-voting seats held by Representatives from American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the District of Columbia.


This is a winner-takes-all market. The contract that denotes the actual outcome of the election will have a liquidation value of $1.00; all others will have values of $0.00. For example, if the number of House seats won by Republicans in the November 2000 election is 217 and the number of Senate seats won by Republicans plus the number of seats held by incumbent Republican Senators not up for re-election is 51, the contract NH_RS will have a value of $1.00 and the other three contracts will have values of zero.

The New York Times and Congressional Quarterly Weekly Report will be the official sources for election results and party affiliations of continuing Senators, respectively. For purposes of determining payoffs, we will use the composition of the House and Senate for the 107th Congress as determined by each member’s declared party affiliation at the time of the election. For Representatives and newly elected Senators, this will be their party affiliations as shown on the election ballot. For Senators not standing for re-election, this will be their party affiliations as reported in the most recent Congressional Quarterly Weekly Report at the time of the election.


This market will close at noon, November 8, 2000, the Wednesday of election week. At that time, or as soon thereafter as official election returns are announced, liquidation values will be declared and funds credited to the cash accounts of market participants.


Unit portfolios consisting of one share of each of the contracts in this market can be purchased from or sold to the IEM system at any time. The price of each unit portfolio is $1.00. Since exactly one of the represented Congressional compositions will result from the election, the total payoff from holding a unit portfolio until the market closes is $1.00.

To buy or sell unit portfolios from the system, use the "Market Orders" option from the Trading Console.


Current and newly enrolled IEM traders will automatically be given access rights to the 2000 Congressional Control Market. Access to this market is achieved by logging into the IEM and choosing "Congress00" from the Navigation Bar.

Funds in a trader's cash account are fungible across all markets so new investment deposits are not required. Additional investments up to the maximum of $500 can be made at any time. Requests to withdraw funds may be submitted at any time by sending email to the IEM Office (