2002 US Congressional Control
Winner-Takes-All Market

At 5:00 pm (C.S.T.) on Thursday, January 18, 2001, the Iowa Electronic Market (IEM) will open trading in a winner-takes-all market based on the selection processes for the Cabinet, Judicial, and other appointments of the Bush Administration.

Contract liquidation values in this market will depend on when and whether particular nominees for Administration and Judicial positions pass the appropriate confirmation process for that position and are sworn into office.

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 financial contracts initially traded in this market are:

Code Contract Name
AG_JA0315 1$ if John Ashcroft becomes Attorney General by 3/15/01, $0 otherwise
AG_other 1$ if any other Attorney General outcome occurs, $0 otherwise
IS_GN0315 1$ if Gale Norton becomes Secretary of the Interior by 3/15/01, $0 otherwise
IS_other 1$ if any other Interior Secretary outcome occurs, $0 otherwise
Contracts appear in sets. Each set represents an ongoing appointment process for a particular position in the Administrative or Judicial branches of the U.S. Government. Each contract in the set represents a unique outcome for that appointment. And the set of contracts covers a full range of possible outcomes. Typically, contract names will be of the form XX_yyyy, where XX refers to the position and yyyy designates a particular outcome, such as the swearing in of a particular person in the position by a particular date. Typically there will be one contract in each set with a name of the form XX_other, this contract representing all possible outcomes not covered by other contracts. The selection of contract sets to be listed and the timing of the addition of those sets are the prerogative of the Board of Directors of the IEM.

As the confirmation process progresses, new contracts may be introduced as spinoffs of existing contracts as described below. Generally, only the XX_other contract will be involved in such spinoffs. Once a contract is listed it will remain active until trading in the full set of contacts has ended and all contracts in the set are liquidated.

Determination of Liquidation Values

This is a winner-takes-all market. One contract in a set will liquidate at $1.00, and all other contracts will liquidate at $0.00. The identification of the winning contract can be triggered by either the passage of time or the induction of a nominee into the position. When such an event first results in an outcome which is consistent with the description of one and only one of the contracts traded in a set, then trading in the full set will cease, that one contract will be declared the winner with the liquidation value of $1.00, and all contracts in the market will be liquidated.

Note that contract descriptions such as "John Ashcroft becomes Attorney General by 03/15/01" means the nominee has completed the confirmation process and is officially sworn into the position on or before midnight of the specified date. Holding the position on a temporary, "Acting" or "Interim" basis would not meet the conditions of the description. Likewise, timely completion of the confirmation process but an official induction, or swearing-in, which occurs after midnight of the specified date would not meet the conditions of the description. Further note that contract liquidations are final. The first occurrence of a triggering event, that is any event which identifies a winner, will mean the end of the market for that set of contracts. Any event occurring subsequent to the first triggering event will have no bearing on the market, even if it might appear to identify a different contract as the winning contract.

The New York Times will be the official source used to determine outcomes. The judgment of the IEM Governors and Directors will be final in resolving ambiguities or questions caused by typographical or clerical errors.

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, APPOINTMENTS, at the upper right hand corner of the market window.

Contract Spin-Offs

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 two or more new contracts which subdivide the payoff space of the original contract. 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.

Generally, the contract in any set to be spun off would be the XX_other contract. As an example, the contract

  • AG_other -- 1$ if any other Attorney General outcome occurs, $0 otherwise
in the listing of initial contracts above might be spun off into the following three contracts:
  • AG_JA0415 -- $1 if John Ashcroft becomes Attorney General after 3/15/01 but by 4/15/01, $0 otherwise
  • AG_XX0415 -- $1 if XX becomes Attorney General by 4/15/01, $0 otherwise.
  • AG_other -- $1 if any other outcome occurs, $0 otherwise.
From the time of the spin off, there would then be four contracts trading in the market, the original AG_JA0315, the two new contracts AG_JA0415 and AG_XX0415, and the contract AG_other which continues to trade but has a reduced set of outcomes associated with it.

Decisions to spin-off a contract will be announced at least two days in advance of the spin-off. The new contract names, the contract descriptions which reveal the formulas for liquidation values, and the timing of the spin-off will be included in the announcement. This announcement will appear as an Announcement on your WebEx login screen.

Market Dates

This market will open at 5:00 pm on Thursday, January 18, 2001, and remain open indefinitely. Sets of contracts will be introduced to trading in the market at times determined by the Board of Directors. Trading in these contracts will continue from their introduction until a day or two after some event (generally the passage of time or the swearing in of an appointee) triggers the declaration of a winning contract as described above under the heading DETERMINATION OF LIQUIDATION VALUES. Within a few business days of the triggering event, further trading in contracts in the set will cease and contracts will be liquidated.

Contract Bundles

Contract bundles consisting of one of each contract in a set representing a particular appointment can be purchased from or sold to the IEM at any time while trading in the contract set is open. The price of such contract bundles is $1.00. Since exactly one contract in the set will liquidate for $1.00 and the others will liquidate for $0.00, the total liquidation value of a contract bundle when liquidations are declared will be $1.00. Thus, the IEM will neither profit from nor lose money on the purchase or sale of contract bundles.

To buy or sell contract bundles from the system, use the "Market Orders" option from the Trading Console and select the bundle appropriate for the desired contract pair.

Market Access

Current and newly enrolled IEM traders will automatically be given rights to trade in the BUSH ADMINISTRATION APPOINTMENTS market. Access to this market is achieved by logging into the IEM and choosing "APPOINTMENTS" from the Navigation Bar.

Funds in a trader's cash account are generally fungible across markets so new investment deposits are not required. Additional investments up to the maximum of $500 can be made at any time. New traders can open accounts with the IEM OnLine Account Application. There is a one-time account registration fee of $5.00, and investments are limited to the range of $5.00 and $500.

Requests to withdraw funds may be submitted at any time by completing the IEM's online Withdrawal Request form or by completing and mailing the paper version of the request form. Additional information about requesting withdrawals is available at the IEM website.