Winner-Takes-All Market

On Friday, June 18, 2004, at 1:00pm CDT, the Iowa Electronic Market (IEM) will open trading in a market based on the composition of the two houses of Congress following the 2004 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. The outcome of the U.S. Presidential election and the party of the elected vice-president will not affect the payoffs in this market.

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 Description
RH_RS      $1 if Republican House, Republican Senate
RH_NS $1 if Republican House, Non-Republican Senate
NH_RS $1 if Non-Republican House, Republican Senate
NH_NS $1 if 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.

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 2004 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 109th Congress as determined by each member’s 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. In the event that the election is delayed or postponed, liquidation will take place in a timely fashion after the close of polling sites for the popular vote.

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


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 an Announcement on your WebEx login screen.


Fixed price 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 fixed price contract bundle is $1.00. Because exactly one of the represented Congressional compositions will result from the election, the total payoff from holding a fixed price contract bundle until the market closes is $1.00.

To buy or sell fixed price contract bundles from the system, use the "Market Orders" option from the Trading Console. Select "CONGRESS04 (buy at fixed price)" from the Market Orders list to buy bundles. Select "CONGRESS04 (sell at fixed price)" to sell bundles.

Bundles consisting of one share of each of the contracts in this market may also be purchased and sold at current aggregate market prices rather than the fixed price of $1.00. To buy a market bundle at current ASK prices, use the "Market Order" option as above but select "CONGRESS04 (buy at market prices)." To sell a bundle at current market BID prices, select "CONGRESS04 (sell at market prices)."

Bundle purchases will be charged to your cash account and bundle sales will be credited to your cash account.


This market will remain open until contract liquidation. Liquidation values will be credited to the cash accounts of market participants.


Current and newly enrolled IEM traders will automatically be given access rights to the 2004 Congressional Control Market. Access to this market is achieved by logging into the IEM and choosing "Congress04" from the Navigation Bar.

Funds in a trader's cash account are 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 using the IEM OnLine Account Application page at There is a one-time account registration fee of $5.00, and investments are limited to the range of $5.00 to $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