On Thursday, February 7, 2019, at 11:30am CST, the Iowa Electronic Market (IEM) will open trading in vote-share contracts based on the 2020 Presidential 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 2020 Presidential Vote-Share Market will be determined by the percentages of the two-party popular vote received by the official Democratic and Republican nominees in the 2020 U.S. Presidential Election. Contracts will be associated with the candidates officially nominated by each party. For instance, contracts for a candidate who receives 32.4% of the popular votes cast for the Democratic and Republican candidates, will be worth 32.4 cents each. Payoffs are NOT affected by votes received by nominees from other parties, the outcome of the electoral college or any vote taken by the House of Representatives should such a vote be necessary.
Two-party popular vote means the sum of the popular votes cast for the Democratic and Republican parties.
Initially the market will consist of one pair of contracts representing an unnamed Republican presidential nominee and an unnamed Democratic presidential nominee.
Between the opening of the market and the end of the conventions, the IEM reserves the right to split contracts into (possibly several) named nominees for either or both parties as discussed below.
After the Democratic and Republican National Conventions are completed, two contracts will remain in the market: one representing the Democratic party with its actual nominee and one representing the Republican party with its actual nominee. The payoff to these two contracts will be determined by the percentage of the two-party (Democratic plus Republican) popular vote in the 2020 U. S. Presidential Election received by each party.
At market open, the financial contracts traded in this market are:
|UDEM20_VS||$1 times the Unnamed Democratic Nominee's share of the two-party popular vote in the 2020 U.S. Presidential election
|UREP20_VS||$1 times the Unnamed Republican Nominee's share of the two-party popular vote in the 2020 U.S. Presidential election|
The contract UDEM20_VS represents the Democratic candidate who, as of the beginning the market, is unnamed. The contract UREP20_VS represents the Republican candidate who, as of the beginning the market, is unnamed.
Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, PRES20_VS, at the upper right hand corner of the market window.
The IEM reserves the right to spin off contracts associated with named, potential nominees. When new, candidate-specific contracts are created, they will be spun-off from the UDEM20_VS or UREP20_VS contracts.
For example, suppose that the UDEM20_VS contract is split into (1) a named Democratic nominee designated by NAMED20_VS where NAMED represents the new, named potential Democratic nominee and (2) a new UDEM20_VS contract, which represents remaining unnamed potential Democratic nominees. The new contract NAMED20_VS will liquidate at $1 times the percentage of the two party vote taken by the Democratic party IF the associated named candidate becomes the official Democratic nominee. If the associated candidate does not become the official nominee, the NAMED20_VS contract will expire worthless. UDEM20_VS will liquidate at $1 times the percentage of the two party vote taken by the Democratic party if the specifically named candidate does not become the official Democratic nominee.
UDEM20_VS may be split repeatedly as other interesting named candidates emerge. Contracts associated with named candidates will always liquidate at $1 times the percentage of the two party vote taken by the Democratic party IF the associated candidate becomes the official nominee. UDEM20_VS will always liquidate at $1 times the percentage of the two party vote taken by the Democratic party if no specifically named candidate becomes the nominee.
UREP20_VS may be split in a similar fashion.
No holder of the pre-spinoff contracts will be adversely affected by the spin-off. 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. Outstanding bids and asks for the contract which is to be split will be canceled just prior to the spin-off.
Contract spin-offs will be announced in the IEM News Screen at least two days in advance of the spin-off.
After the official Democratic and Republican nominees are determined by their respective conventions, all contracts that will expire worthless (that is those associated with non-nominated candidates and the unnamed contracts if named candidates are nominated) will be removed from trader portfolios and the trading screen. Thus, after the official Democratic and Republican nominees are determined there will again be only two contracts in the market: one denoting the Democratic party in the upcoming election and the other denoting the Republican party in the upcoming election. If a nominee steps down after the convention but before the election, the liquidation values of contracts will remain unaffected even if the nominee is replaced by a previously named nominee.
Determination of Liquidation Values
The election data posted on the New York Times official website at 5pm CST on Wednesday, November 4, 2020, or as soon after as available, will be the official source used to determine payoffs. In the event that the two parties' popular votes are not reported at that website by midnight, Wednesday, November 4, 2020, the Washington Post official website will become the official source. Should neither source report popular vote by midnight Wednesday, the information reported in the print version of the New York Times on Thursday, November 5, 2020, or as soon thereafter as reported, will be used. In the event that the election is delayed or postponed, liquidation will take place in a timely fashion after the close of polling sites for the popular vote.
The judgment of the IEM Governors and Directors will be final in resolving questions of interpretation and typographical or clerical errors.
Third Party Candidates
This market is based only on the Democratic and Republican popular vote in the 2020 Presidential Election. It will remain unaffected by the entry of any third party candidates into the race.
Fixed price contract 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 the percentages of the popular vote received by each candidate must sum to one, the total payoff from holding a contract bundle until the market closes is $1.00.
To buy or sell fixed price contract bundles from the system, use the "Bundle Orders" option from the Trading Console. Select "Pres20_VS" and the radio button "Buy at Fixed Price" from the Bundle Orders list to buy bundles. Select "Pres20_VS" and the radio button "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 "Bundle Orders" option as above but select "Pres20_VS" and the radio button "Buy at Market ASK Prices." To sell a bundle at current market BID prices, select "Pres20_VS" and the radio button "Sell at Market BID 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.
Current and newly enrolled IEM traders with U.S. dollar accounts will automatically be given access rights to trade in the 2020 U.S. Presidential Vote Share Market. "Pres20_VS" 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 by using the "Adding to Your Investment" link found under "My Account" while logged into the IEM software. New traders can open accounts using the "Open An Account" button found at the IEM website, https://iem.uiowa.edu. 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. Additional information about requesting withdrawals is available at the IEM website at https://iemweb.biz.uiowa.edu/accounts/withdrawals.html.