IEM Prospectus: 2001 Mayoral Election in New York City

At 5:00PM, C.S.T. Wednesday, October 3rd the Iowa Electronic Market (IEM) will open trading in a market based on the 2001 Mayorial Election in New York City. 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.

Contract liquidation values in this election market will be determined by the outcome of the 2001 Mayorial Election in New York City. There are 3 contracts in this market representing 3 possible unique outcomes. The liquidation value of the contract which represents the plurality winner of the 2001 Mayorial Election in New York City will be $1.00. All other contracts will have a value of $0.00.

CONTRACTS

The financial contracts initially traded in this market are:

Code	Contract Description
NYCRep	$1.00 if the official Republican Party candidate is elected; $0.00 otherwise
NYCDem	$1.00 if the official Democratic Party candidate is elected; $0.00 otherwise
NYCOther	$1.00 if the official candidate of neither the Democratic nor the Republican party is elected; $0.00 otherwise

As the contest for the NYC Mayor unfolds, new candidate-specific contracts may be introduced as spinoffs on the contracts as described below. However, once a contract is listed it will remain active until after the convention when all contracts in the market are liquidated.

DETERMINATION OF LIQUIDATION VALUES

This is a Winner-Takes-All market. The contract that denotes the plurality winner of the 2001 Mayorial Election in New York City will have a liquidation value of $1.00, all others will have values of $0.00.

The contract NYCRep will be liquidated for $1.00 after the November 2001 election if the official Republican Party candidate is elected as the Mayor of New York City. If the Republican candidate is not elected as Mayor, the liquidation value of the NYCRep contract will be $0.00. Similarly the contract NYCDem will be liquidated for $1.00 or $0.00 depending upon whether or not the official Democratic Party candidate wins the election. And NYCOther will have a liquidation value of $1.00 if neither the official Democratic Party candidate nor the official Republican Party candidate win the 2001 NYC Mayorial election; its liquidation value will be $0.00 otherwise.

The New York Times will be the official source for election results

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, NYCMAYOR,at the upper righthand corner of the market window.

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

CONTRACT SPIN-OFFS

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 two or more new contracts which subdivide the payoff space of the original contract. 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.

MARKET CLOSING

This market will close at 12:00 noon on the day after the election. At that time, or as soon thereafter as results are available, liquidation values will be declared and and funds will be credited to the cash accounts of market participants.

CONTRACT BUNDLES

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 bundle is $1.00. Because exactly one of the outcomes denoted by the contracts in this market will result from the election, the total payoff from holding a bundle consisting of one of each contract until the market closes is $1.00.

To buy or sell bundles from the IEM exchange, use the “Market Orders” option from theTrading Console.

MARKET ACCESS

All current and newly enrolled IEM traders with US dollar denominated accounts will automatically be given access rights to the 2001 Mayorial Election in New York City Market. Access to this market is achieved by logging into the IEM and choosing NYCMAYOR 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).