IEM Prospectus: 2010 Florida U.S. Senate Election Winner-Takes-All Market

On Monday, June 7, 2010 at 11:00am CDT, the Iowa Electronic Market (IEM) will open trading in a winner-takes-all market based on the 2010 Florida U.S. Senate election.

The payoffs in this market will be based on the popular vote received by the candidates in the 2010 Florida U.S. Senate election.

This document describes the 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 initially traded in this market are:

Code Contract Description
Crist_WTA $1 if Charlie Crist is not the Democratic or Republican nominee and receives the majority of popular votes cast for the 2010 Florida U.S. Senate election, $0 otherwise

FLDem_WTA $1 if the Democratic Nominee receives the majority of popular votes cast for the 2010 Florida U.S. Senate election, $0 otherwise

FLRep_WTA $1 if the Republican nominee receives the majority of popular votes cast for the 2010 Florida U.S. Senate election, $0 otherwise

FLOth_WTA $1 if a candidate who is not included in another contract in this market receives the majority of popular votes cast for the 2010 Florida U.S. Senate election, $0 otherwise

Determination of Liquidation Values

This is a winner-takes-all market. The payoff will be determined by which of the candidates receives the largest share of the popular vote cast in the 2010 Florida U.S. Senate election.

Contracts associated with candidates who do not receive the largest number of popular votes in the election will pay off $0. Contracts associated with the candidate that receives the largest number of popular votes will pay off $1.

The contract Crist_WTA will pay off $1 if Charlie Crist, running as neither the Democratic or Republican nominee, receives the largest share of the popular vote in the 2010 Florida U.S. Senate election.

The contract FLDem_WTA will pay off $1 if the Democratic nominee receives the largest share of the popular vote in the 2010 Florida U.S. Senate election.

The contract FLRep_WTA will pay off $1 the Republican nominee receives the largest share of the popular vote in the 2010 Florida U.S. Senate election.

The contract FLOth_WTA will pay off $1 if a candidate who is not associated with another contract in the market (that is, the Democratic nominee, the Repubican nominee, Charlie Crist, or any other named independent candidate) receives the largest share of the popular vote in the 2010 Florida U.S. Senate election.

Contracts representing candidates that do not receive the largest share of the popular vote in the 2010 Florida U.S. Senate election will expire worthless.

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, FLSen10_WTA, at the upper right hand corner of the market window.

OFFICIAL SOURCE FOR CONTRACT LIQUIDATION VALUES

The Florida Division of Elections website will be the official source used to determine payoffs. Payoffs will be determined using the results listed after, but closest to, 9:00pm on Thursday following the elections. In the event that the primary or Senate election is delayed or postponed, liquidation will take place in a timely fashion after the close of polling sites for the popular vote. If the Florida Division of Elections website does not post results by the Tuesday following the election, the results reported at in the St. Petersburg Times released closest to, but not after 9:00pm on Thursday following the election will be used to determine payoffs.

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

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. For instance, the contract FLDem_WTA could be split into two contracts, Xxx_WTA and FLDem_WTA, where Xxx_WTA denotes the candidate named Xxx becoming the Democratic nominee and subsequently receiving the largest share of the popular vote in the 2010 Florida U.S. Senate election and FLDem_WTA denotes an individual who is not specifically named as a Democratic nominee in another contract at the time of the Florida Democratic Primary Election becoming the official Democratic nominee and the Democratic nominee subsequently receiving the largest share of the popular vote in the 2010 Florida U.S. Senate election.

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.

Outstanding limit orders to buy or sell the contract which is to be spun-off will be canceled just prior to the spin-off.

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.

CONTRACT BUNDLES

Fixed-price 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 fixed price contract bundle is $1.00. Because exactly one of the listed Florida U.S. Senate election outcomes will result from the election, the total payoff from holding a fixed price contract bundle until the market closes is $1.00.

To buy or sell fixed price contract bundles from the system, use the “Market Orders” option from the Trading Console. Select “FLSen10_WTA (buy at fixed price)” from the Market Orders list to buy bundles. Select “FLSen10_WTA (sell at fixed price)” to sell bundles.

Bundles consisting of one share of each of the contracts in this market may also be purchased and sold at current aggregate market prices rather than the fixed price of $1.00. To buy a market bundle at current ASK prices, use the “Market Order” option as above but select “FLSen10_WTA (buy at market prices).” To sell a bundle at current market BID prices, select “FLSen10_WTA (sell at market prices).”

Bundle purchases will be charged to your cash account and bundle sales will be credited to your cash account.

This market will remain open until contract liquidation. Liquidation values will be credited to the cash accounts of market participants.

MARKET CLOSING

This market will remain open until contract liquidation. Liquidation values will be credited to the cash accounts of market participants.

MARKET ACCESS

Current and newly enrolled IEM traders with U.S. dollar accounts will automatically be given access rights to trade in the 2010 Florida U.S. Senate Winner-Takes-All Market. Access to this market is achieved by logging into the IEM and choosing “FLSen10_WTA” from the Navigation Bar.

Funds in a trader’s cash account are fungible across markets so new investment deposits are not required. Additional investments up to the maximum of $500 can be made at any time. New traders can open accounts using the IEM OnLine Account Application page. There is a one-time account registration fee of $5.00, and investments are limited to the range of $5.00 to $500.

Requests to withdraw funds may be submitted at any time by completing the IEM’s Online Withdrawal Request form or by completing and mailing the paper version of the request form. Additional information about requesting withdrawals is available at the IEM website.