IEM PROSPECTUS

1996 REPUBLICAN NATIONAL CONVENTION
WINNER-TAKES-ALL MARKET

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.

CONTRACTS

Initially there will be five contracts in this market: four representing specific candidates and a fifth representing all other (unnamed) candidates. The contract are: 
          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.

CREATING NEW CANDIDATE-SPECIFIC CONTRACTS

Throughout the campaign, new candidate-specific contracts may be added as new candidates become significant contenders for the Republican nomination.

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.

DETERMINATION OF LIQUIDATION VALUES

This is a winner-takes-all market. Contracts representing the candidate nominated by the Republican National Convention will pay off $1.00 each. All other contracts will be declared worthless. Liquidation formulas can be viewed by first selecting Display Options and then choosing Liquidation Formulas.

MARKET CLOSING

This market will close at noon, the day following the close of the Republican National Convention. At that time, liquidation values will be declared and funds credited to the cash accounts of the market participants.

UNIT PORTFOLIOS

Unit portfolios 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 unit portfolio is $1.00. Since exactly one candidate will win the nomination, the total payoff from holding a unit portfolio until the market closes is $1.00.

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.

MARKET ACCESS

Current and newly enrolled IEM traders will automatically be given access rights to the 1996 Republican National Convention Winner-Takes-All Market. Access to this market 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.