On Tuesday, January 3, 1995, the Iowa Electronic Market (IEM) will open trading in a winner-takes-all market based on the 1996 Republican National Convention. 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.
Payoffs in this winner-takes-all convention market are determined solely by the outcome of the 1996 Republican National Convention. Contracts representing the Republican National Convention's nominee for the presidency will pay off $1.00 each. All other contracts will be declared worthless. Payoffs are NOT affected by events subsequent to the convention.
Code Contract Name DOLE Robert Dole GRAM Phil Gramm KEMP Jack Kemp QUAY Dan Quayle RCROF All Other Candidates
The contract, DOLE, will pay off $1 if Senator Robert Dole is the official republican nominee for the presidency. Similarly, the contract, GRAM, will pay off $1 if Senator Phil Gramm is the republican nominee; the contract KEMP will pay off $1 if former Housing Secretary Jack Kemp is the republican nominee; and the contract QUAY will pay off $1 if former Vice President Dan Quayle is the republican nominee. The contract, RCROF, will pay off $1 if some candidate not listed in this market is the Republican Convention nominee.
As the contest for the Republican presidential nomination unfolds, new candidate-specific contracts may be added. However, once a contract is listed, it will remain active until all contracts in the market are liquidated.
When a new, candidate-specific contract is created, it will be spun-off from the RCROF contract. Each RCROF contract will be replaced by two new contracts: a candidate-specific contract and a new RCROF contract. The new RCROF contract will represent all remaining un-named candidates in the market. Since the value of the RCROF contract may change when a new candidate-specific contract is spun off, all outstanding RCROF bids and offers will be cancelled at the time of the spinoff.
To buy unit portfolios from the system, use the "Purchase" option from the TRADING MENU and enter 1$ as the contract name. To sell unit portfolios to the system, use the "Sell" option from the TRADING MENU and enter 1$ as the contract name. 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 MKT as the contract name. The price charged for market portfolio purchases will be determined as the sum of current ask prices, and the price received for market portfolio 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.