IEM Prospectus: MNSen08_VS
2008 Minnesota U.S. Senate Vote Share Market

On Thursday, August 21, 2008, at 1:00pm CDT, the Iowa Electronic Market (IEM) will open trading in vote-share contracts based on the 2008 Minnesota U.S. Senate Election. This document describes those contracts and should be viewed as a supplement to the IEM 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 the 2008 Minnesota U.S. Senate Vote-Share Market will be determined by the percentages of the popular vote received by the official Democratic and Republican nominees for office and any third party candidates named on the ballot for the 2008 Minnesota U.S. Senate Election. For instance, contracts for a candidate who receives 32.4% of the popular votes cast for the Democratic, Republican, and named third-party candidates, will be worth 32.4 cents each. Payoffs are NOT affected by write-in votes received by other candidates not named on the ballot.


CONTRACTS

Initially the market will consist of three contracts representing the Democratic candidate, the Republican candidate, and rest-of-field. Rest-of-field includes all named candidates on the ballot that are not either the official Democratic candidate or the official Republican candidate.

Between the market open and the election, the IEM reserves the right to spin-off named candidates from the rest-of-field contract as discussed below.

At market open, the financial contracts traded in this market are:

Code Contract Description
DEM_MN_VS     $1 times the Minnesota U.S. Senate Democratic candidate's share of the popular vote
REP_MN_VS $1 times the Minnesota U.S. Senate Republican candidate's share of the popular vote
ROF_MN_VS $1 times the sum of all other named Minnesota U.S. Senate candidates' shares of the popular vote
 

The contract DEM_MN_VS represents the Democratic candidate who, as of the beginning the market, is undetermined. The contract REP_MN_VS represents the Republican candidate. The contract ROF_MN_VS represents all other candidates who are named on the Minnesota U.S. Senate election ballot.

After the official Democratic and Republican candidates are determined, the contracts representing those candidates may be renamed to reflect the names of the candidates. This will not affect the liquidation values of the contracts. If a candidate steps down before the election, the contract will be associated with the party's new candidate.

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, MNSen08_VS, at the upper right hand corner of the market window.


CONTRACT SPIN-OFFS

The IEM reserves the right to introduce new contracts to the market as spin-offs of the ROF_MN_VS contract. When a contract spin-off occurs, each ROF_MN_VS contract will be replaced by two new contracts: a candidate-specific contract and a new ROF_MN_VS contract. The new ROF_MN_VS contract will represent all remaining named third-party candidates in the market.

No trader of pre-spinoff ROF_MN_VS contracts will be adversely affected. Traders will receive the same number of each of the new contracts as they held in the original contract, and the sum of the liquidation values of the new contracts will equal the liquidation value of the original contract. Because the value of the ROF_MN_VS contracts may change when new candidate-specific contracts are spun off, all outstanding ROF_MN_VS bids and asks will be canceled at the time of the spinoff.

Decisions to spin-off contracts will be based on the judgment of the IEM directors. One input into the decision will be the degree of news coverage of the candidate indicating the candidate's viability. News sources used will include The Los Angeles Times, The New York Times, USA Today, The Wall Street Journal, and The Washington Post.

Spin-offs will be announced at least two days in advance. 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.


OFFICIAL SOURCE FOR CONTRACT LIQUIDATION VALUES

For purposes of determining liquidation values, we will use the vote counts declared final and reported by the Minnesota Secretary of State at their website, http://www.sos.state.mn.us/home/index.asp. If vote counts are not declared final by Friday of election week, we will use Friday's vote counts to liquidated contracts. If vote counts are not posted at the Minnesota Secretary of State website by Friday, midnight, of election week, we will use the vote counts last reported in the New York Times.

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


WRITE-IN CANDIDATES

This market is based only on the vote shares received by candidates named on the Minnesota U.S. Senate election ballot. Votes received by write-in candidates not named on the ballot do not affect contract payouts.


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 bundle is $1.00. Because the percentages of the popular vote received by each candidate must sum to one, the total payoff from holding a bundle consisting of one of each contract until the market closes is $1.00.

To buy or sell fixed-price bundles from the IEM exchange, use the "Market Orders" option from the trading Console. Select the option "MNSen08_VS" (buy at fixed price)" from the Market Orders list to buy bundles. Select the "MNSen08_VS (sell at fixed price)" option to sell bundles. Purchases will be charged to your cash account and sales will be credited to your cash account.

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 the option "MNSen08_VS (buy at market prices)". To sell a bundle at current BID prices, select the option "MNSen08_VS (sell at market prices)".


MARKET CLOSING

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


MARKET ACCESS

All current and newly enrolled IEM traders with U.S. dollar denominated accounts will automatically be given trading rights in the 2008 Minnesota U.S. Senate Vote Share Market. Access to the market is achieved by choosing MNSen08_VS in the "Market Selection" pull-down menu on either the Login-Welcome screen or at the bottom of the Trading Screen.

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 at https://iemweb.biz.uiowa.edu/signup. 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 tippie.uiowa.edu/accounts/withdrawals.html.