2002 US Senate Control
Winner-Takes-All Market

At 5:00PM, C.S.T. Wednesday, February 20th the Iowa Electronic Market (IEM) will open trading in a market based the composition of the US Senate after the November 2002 U.S. elections. 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.

Contract liquidation values in this winner-takes-all Senate Control Market will be determined by whether the Democrats increase the number of seats they hold in the Senate, maintain an absolute majority but do not increase their lead, or lose the absolute majority. The contract that represents the actual outcome of the election will have a liquidation value of $1.00. All other contracts will expire worthless.


The financial contracts initially traded in this market are:

Code Contract Description
DS.gain     Democrats win more than 50 Senate seats
DS.hold     Democrats win 50 Senate seats
DS.lose     Democrats win 49 or fewer Senate seats

The contract DS.gain represents the outcome that Democrats increase the number of seats they now hold in the Senate; that is, Democrats hold more than 50 Senate seats after the election. The contract DS.hold represents the outcome that Democrats maintain an absolute majority in the Senate, but do not increase their control; that is, Democrats hold exactly 50 Senate seats. The contract DS.lose represents the outcome that Democrats lose an absolute majority in the Senate (hold 49 or fewer Senate seats).

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.


This market is a winner-takes-all market. The contract that denotes the actual outcome of the election will have a $1.00 liquidation value; all others will expire worthless. For example, if as a result of the November 5, 2002 elections, Democrats hold 50 Senate seats, the contract DS.hold will pay off $1.00 and the contracts DS.gain and DS.lose will each expire worthless. The New York Times will be our official source of election results. For purposes of determining payoffs, we will use the composition of the Senate as determined by each member's declared party affiliation on the election ballot. Liquidation formulas can be viewed by first selecting Display Options and then choosing Liquidation Formulas.


This market will close at noon, November 6, 2002, 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.


Contract Bundles 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 2002 Senate Control Market. Access to this market is achieved by logging into the IEM and choosing "2002_Senate" 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 (