Prospectus: RCONV12 2012 Republican Nomination Winner-Takes-All Market

On Tuesday, August 30, 2011, at 11:30am CDT, the Iowa Electronic Market (IEM) will open trading in a market based on the Presidential nomination process of the 2012 Republican National Convention.

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 nomination market will be determined by the outcome of the 2012 Republican National Convention. At market open, there are five contracts in this market representing five possible unique outcomes. Other contracts may be added to this market according to the contract spin-off procedure described below. The liquidation value of the contract which represents the actual outcome of the 2012 Republican Convention will be $1.00. All other contracts will have a value of $0.00.


The initial financial contracts traded in this market are:


Code Contract Description
BACH_NOM $1.00 if Michele Bachmann wins the nomination;
$0.00 otherwise
PAUL_NOM $1.00 if Ron Paul wins the nomination;
$0.00 otherwise
PERR_NOM $1.00 if Rick Perry wins the nomination;
$0.00 otherwise
ROMN_NOM $1.00 if Mitt Romney wins the nomination;
$0.00 otherwise
RROF_NOM $1.00 if another candidate wins the 2012 Republican Convention nomination;
$0.00 otherwise

RROF_NOM stands for Republican Convention Rest of Field and represents all candidates not separately listed in this market.

As the 2012 Presidential campaign progresses, new candidate-specific contracts may be introduced as spinoffs of the RROF_NOM contract as described below. The order in which contracts appear on the trading screen may also change. 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 actual outcome of the 2012 Republican Convention will have a liquidation value of $1.00, all others will have values of $0.00.

The contract, BACH_NOM, will be liquidated for $1.00 after the 2012 Republican Convention if Michelle Bachmann is elected by the convention delegates as the official Republican nominee for the presidency. If she is not named as the Republican candidate, the liquidation value of the BACH_NOM contract will be $0.00. Similarly, other candidate-specific contracts will be liquidated for $1.00 or $0.00 depending upon whether or not the associated candidate becomes the Republican Presidential nominee. The contract RROF_NOM will have a liquidation value of $1.00 if some candidate not listed in this market is the Republican Convention nominee; its liquidation value will be $0.00 if one of the listed candidates is the nominee.

The New York Times website will be the official source for nomination results.

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, RCONV12, at the upper righthand corner of the market window.

The judgment of the IEM Governors and Directors will be final in resolving questions of interpretation and 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 the RROF_NOM contract. When a contract spin-off occurs, each RROF_NOM contract will be replaced by two new contracts: a candidate-specific Republican nominee contract and a new RROF_NOM contract. The new RROF_NOM contract will represent all remaining un-named Republican candidates in the market.

No trader of pre-spinoff RROF_NOM 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 RROF_NOM contracts may change when new candidate-specific contracts are spun off, all outstanding RROF_NOM 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 national news coverage of the candidate indicating the candidate's viability. National news sources to be used 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.

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 only one official Republican candidate will result from the convention process, 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 RCONV12 (buy at fixed price) from the Market Orders list to buy bundles. Select the RCONV12 (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 "RCONV12 (buy at market prices)". To sell a bundle at current BID prices, select the option "RCONV12 (sell at market prices)."

Market Closing

This market will close at 12:00PM, C.D.T. the day after the final Presidential nomination ballot at the convention. At that time, or as soon thereafter as results are available, liquidation values will be declared and funds credited to the cash accounts of market participants.

Market Access

All current and newly enrolled IEM traders with US dollar denominated accounts will automatically be given trading rights in the 2012 Republican National Convention Market. Access to the market is achieved by choosing RCONV12 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 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