IEM Prospectus:Pres00_WTA
2000 US Presidential Election
Winner-Takes-All Market

At noon (C.S.T.) on Monday, May 1, 2000, the Iowa Electronic Market (IEM) will open trading in a winner-takes-all market based on the November 7, 2000, U.S. Presidential election.

The payoffs in this market will be based on the popular vote received by the official Democratic, Reform, and Republican nominees in the 2000 U.S. Presidential election. Payoffs are NOT affected by votes received by nominees from other parties, the outcome of the electoral college or any vote taken by the House of Representatives should such vote be necessary.

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.


CONTRACTS

The financial contracts initially traded in this market are:

Code Contract Description
Dem 1$ if the Democratic Party nominee receives the most popular votes, $0 otherwise
Reform 1$ if the Reform Party nominee receives the most popular votes, $0 otherwise
Rep 1$ if the Republican Party nominee receives the most popular votes, $0 otherwise

DETERMINATION OF LIQUIDATION VALUES

This is a winner-takes-all market. The payoff will be determined by which of the three nominees receive the biggest share of the popular vote cast for the Democratic, Reform, and Republican candidates in the 2000 U.S. Presidential election.

Contracts associated with the two nominees that do not receive the bigger number of popular votes in the election will pay off $0. Contracts associated with the nominee that receives the bigger number of popular votes will pay off $1, provided that there have been no contract spin-offs in the market. In the event of spin-offs, payoffs are determined as described below.

The Friday, November 10, 2000, New York Times will be the official source used to determine payoffs. In the event that the three parties' popular votes are not reported in that edition of the New York Times, the Friday, November 10, 2000, edition of the Washington Post will become the official source. Should neither paper report popular vote in their Friday edition, information last reported in the New York Times will be used. In the event that one of the parties' popular vote is not reported, that vote share will be assumed to be zero. For example, if the Reform Party chooses not to nominate a nominee, then the Reform vote may not be reported in the paper. In such a case, the Reform Party popular vote will be assumed to be 0 for purposes of determining liquidation values.

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, PRES00_WTA, at the upper right hand corner of the market window.

The judgment of the IEM Governors and Directors will be final in resolving questions of typographical or clerical errors and ambiguities.


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. For instance, the contract Dem could be split into two contracts, Dem_G50 and Dem_L50, where Dem_G50 denotes the case in which the Democratic nominee receives the most popular votes AND that the Democratic voteshare is 50% or more of the total three-party vote, while Dem_L50 denotes the case in which the Democratic nominee receives the most popular votes AND that the Democratic voteshare is less than 50% of the total three-party vote.

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.

Outstanding limit orders to buy or sell the contract which is to be spun-off will be canceled just prior to the spin-off.

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 an Announcement on your WebEx login screen.


MARKET CLOSING

This market will close at noon, Friday, November 10, 2000 and will be liquidated shortly thereafter. Liquidation values will be credited to the cash accounts of market participants.


CONTRACT BUNDLES

Contract bundles consisting of one of each of the contracts listed in the Presidential Winner-Takes-All Market can be purchased from or sold to the IEM at any time prior to the market close. The price of each contract bundle is $1. Since exactly one contract will pay off $1 and all others will pay $0, the total payoff from holding a contract bundle until the market closes is $1.00.

To buy or sell contract bundles from the system, use the "Market Orders" option from the Trading Console and select the PRES00_WTA bundle.


MARKET ACCESS

Current and newly enrolled IEM traders will automatically be given rights to trade in the 2000 U.S. Presidential Winner-Takes-All Market. Access to this market is achieved by logging into the IEM and choosing "PRES00_WTA" 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. New traders can open accounts on the IEM OnLine Account Application page at https://iemweb.biz.uiowa.edu/signup. There is a one-time account registration fee of $5.00, and investments are limited to the range of $5.00 to $500.