IEM Prospectus: 2000 U.S.Presidential Vote Share

At noon (C.S.T.) on Wednesday, January 5, 2000, the Iowa Electronic Market (IEM) will open trading in a vote-share 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 Democratic, Reform, and Republican nominees in the 2000 U.S. Presidential election.

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 traded in this market are:

Code	Contract Name
DemVS	1$ times 3-party vote share of Democratic Party nominee
ReformVS	1$ times 3-party vote share of Reform Party nominee
RepVS	1$ times 3-party vote share of Republican Party nominee

Once a party’s official nominee is determined, the name of the associated contract will be changed for clarity. However, the contracts will always denote the official Democratic, Reform, and Republican party nominees. If a party’s candidate subsequently drops out of the Presidential race, the related contract will denote the person designated as the official replacement by that party and the name of the contract will be changed accordingly.

DETERMINATION OF LIQUIDATION VALUES

This is a vote-share market. To determine payoffs, we will sum up the total popular vote received by the Democratic, Reform, and Republican nominees and then determine the percentage of that total that each of the three nominees received. Each contract will pay off $1.00 times that party’s percentage of the three-party vote. For instance, contracts for a nominee that receives 32.4% of the three-party vote, will payoff 32.4 cents each. Votes received by any other presidential candidates will not be used to determine payoffs in this market.

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 candidate, 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_VS, 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.

MARKET CLOSING

This market will close at noon, Friday, November 10, 2000 and will be liquidated shortly therafter. 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 Vote-Share Market can be purchased from or sold to the IEM at any time. The price of each contract bundle is $1. Since the percentages of the popular vote received by the three candidates must sum to one, 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_VS bundle.

MARKET ACCESS

Current and newly enrolled IEM traders will automatically be given rights to trade in the 2000 U.S. Presidential Vote-Share Market. Access to this market is achieved by logging into the IEM and choosing “PRES00_VS” 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. Requests to withdraw funds may be submitted at any time by sending email to the IEM Office (iem@uiowa.edu).