Iowa Electronic Markets Henry B. Tippie College of Business W283 PBB University of Iowa Iowa City, IA 52240 iem@uiowa.edu IEM PROSPECTUS: 1994 VIRGINIA SENATE RACE WINNER-TAKES-ALL MARKET At 12:00 noon (C.S.T.) Thursday, June 30, 1994, the Iowa Electronic Market (IEM) will open trading in a market based on the outcome of the 1994 Virginia Senatorial Election. This document describes the contracts and payoffs in this Winner-Takes-All Market and should be viewed as a supplement to the IEM Trader's Manual. Except as specified in this supplement, trading rules for this market are the same as for other markets in the IEM. Payoffs in this market are determined solely by the candidate who receives the largest number of popular votes in the November 8, 1994 election. Contracts corresponding to the candidate receiving the largest number of votes will earn 1 dollar each and contracts in the other candidates will earn nothing. CONTRACTS -- The financial contracts traded in this market are: Code Contract Name W.COL Marshall Coleman W.NOR Oliver North W.ROB Charles Robb W.WIL Douglas Wilder W.VAROF Rest of Field This market will close at 11:59 p.m. on election eve, Monday, November 7, 1994. As soon after the election as official election returns are announced, liquidation values will be declared and funds credited to the cash accounts of the market participants. DETERMINATION OF LIQUIDATION VALUES -- Contracts in the candidate who receives the largest number of votes in the election will be paid $1.00 each. All other contracts will be declared worthless. UNIT PORTFOLIOS -- Unit portfolios, consisting of one of each of the five contracts listed in the market, can be purchased from or sold to the IEM system at any time. The price of each unit portfolio is $1.00. Use the "Purchase" option from the TRADING MENU and enter "W.1$" as the name of the contract to buy unit portfolios. Use the "Sell" option from the TRADING MENU, with "W.1$" as the contract name, to sell unit portfolios. Purchases will be charged to your cash account and sales will be credited to your cash account. Unit portfolios may also be purchased from and sold to other traders at current market prices. Use the Purchase and Sell options as above but enter "W.MKT" as the contract name. The price charged for such purchases will be determined as the sum of current ask prices, and the price paid for such sales will be the sum of current bid prices. Should no corresponding bid or ask be present for one of the candidates, contracts in that candidate will be excluded from the portfolio; otherwise the number of contracts purchased or sold will be the same in each candidate. MARKET ACCESS -- Current and newly enrolled IEM traders will automatically be given access rights to the Virginia Senate Winner- Takes-All Market. Access to these contracts is achieved via the "Market Selection" option on the Login, Market and other Menus. 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. With five days' advance notice, funds may be withdrawn on the 15th of any month.