On Tuesday, October 14, 2019, at 9:00am CST, the Iowa Electronic Market (IEM) will open trading in a market based on the composition of the U.S. Senate after the 2020 U.S. elections.
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.
Contract liquidation values in this winner-takes-all Senate Control Market will be determined by whether the Republicans increase the number of seats they hold in the Senate, maintain an absolute majority but do not increase their lead, or lose the absolute majority. The contract that represents the actual outcome of the election will have a liquidation value of $1.00. All other contracts will expire worthless.
The financial contracts initially traded in this market are:
|RS.gain20||$1 if the Republicans have more than 53 Senate seats;
|RS.hold20||$1 if Republicans have 50 Senate seats plus the Vice Presidency
or more than 50, but not more than 53, Senate seats;
|RS.lose20||$1 if Republicans hold fewer than 50 Senate seats or hold 50 Senate seats but not the
The contract RS.gain20 represents the outcome that Republicans increase the number of U.S. Senate seats they hold. For purposes of initial seat count, we use the number of Republicans seats listed in the U.S. Senate website on October 7, 2019 (53 seats). Thus, the RS.gain20 contract represents the outcome that Republicans hold more than 53 Senate seats after the 2020 election.
The contract RS.hold20 represents the outcome that Republicans maintain a majority in the Senate (including the Vice President if necessary), but do not increase their control after the elections. That is, Republicans hold 50 Senate seats with the Vice President being a Republican or the Republicans hold more than 50, but not more than 53, Senate seats.
The contract RS.lose20 represents the outcome that Republicans lose the majority in the Senate after the elections. That is, the Republicans hold 49 or fewer seats or hold 50 Senate seats but not the Vice Presidency.
Determination of Liquidation Values
This market is a winner-takes-all market. The contract that denotes the actual outcome of the election will have a $1.00 liquidation value; all others will expire worthless. For example, if as a result of the elections, Republicans hold 51 Senate seats, the contract RS.hold20 will pay off $1.00 and the contracts RS.gain20 and RS.lose20 will each expire worthless.
The election data posted on the New York Times official website at 5pm on Wednesday, November 4, 2020, or as soon after as available, will be the official source used to determine the results of the election. In the event that the results 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 2020 election results 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.
For purposes of determining payoffs, we will use the composition of the Senate as determined by each member's party affiliation at the time of the election. For newly elected Senators, their affiliations will be determined by the party affiliations as shown on the election ballot. For Senators not standing for re-election, their affiliations will be determined by their party affiliations as reported at the senate.gov website the evening before the election.
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.
In the event that the liquidation values of contracts cannot be determined until after run-off elections are completed, liquidation will occur after a sufficient number of run-off elections are completed so as to determine the liquidation values. In this case, we will count the parties of elected senators as of the date that they won their respective elections and we will count the parties of senators not up for re-election as of the date of the general election. That is, party changes or vacancies that arise between the general election and runoffs will have no effect on IEM contract values.
If there is a vacant senate seat not up for re-election and not filled by the election, that seat will be counted as belonging to the party of the governor of the state of that senate seat after the election.
If a candidate is nominated by more than one party and one of the parties is a major party (Democrat or Republican), that candidate will be counted according to his or her major party affiliation (Democrat or Republican). If a party goes by multiple designations (such as the Democratic-Farmer-Labor Party of Minnesota) and one of the party designations is a major party (Democrat or Republican), the candidate of that party will be counted according to the party's major party designation (Democrat or Republican).
The judgment of the IEM Governors and Directors will be final in resolving questions of typographical or clerical errors and ambiguities.
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 new contracts which divide the payoff range of the original contract into sub-intervals.
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.
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 exactly one of the listed U.S. Senate Control contract outcomes will result from the election, 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 "Senate20" and the radio button "Buy at Fixed Price" from the Bundle Orders list to buy bundles. Select "Senate20" 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 contract bundle at current ASK prices, use the "Bundle Orders" option as above but select "Senate20" and the radio button "Buy at Market ASK Prices." To sell a contract bundle at current market BID prices, select "Senate20" 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. Senate Control Market. Access to this market is achieved by logging into the IEM and choosing "Senate20" 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 at https://iem.uiowa.edu. There is a one-time account activation fee of $5.00. 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 (http://iemweb.biz.uiowa.edu/accounts/cashout.html). Additional information about requesting withdrawals is available at the IEM website at https://iemweb.biz.uiowa.edu/accounts/withdrawals.html.