IEM Prospectus: IACaucus12
2012 Iowa Caucus Market

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

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 Iowa Republican Caucus Market will be determined by the reported vote shares cast for each candidate in the 2012 Iowa Republican Caucus. Contracts associated with candidates who receive the first or second most votes in the caucus will pay off $1. All others will expire worthless.


Contracts

The financial contracts initially traded in this market are:

Code Contract Description
IA_BACH     $1 if Michele Bachmann receives the first or second most votes in the Iowa Republican caucus; $0 otherwise
IA_CAIN     $1 if Herman Cain receives the first or second most votes in the Iowa Republican caucus; $0 otherwise
IA_GING     $1 if Newt Gingrich receives the first or second most votes in the Iowa Republican caucus; $0 otherwise
IA_PERR     $1 if Rick Perry receives the first or second most votes in the Iowa Republican caucus; $0 otherwise
IA_PAUL     $1 if Ron Paul receives the first or second most votes in the Iowa Republican caucus; $0 otherwise
IA_ROMN     $1 if Mitt Romney receives the first or second most votes in the Iowa Republican caucus; $0 otherwise
IA_ROF     $2 if none of the candidates named in another contract receive the first or second most votes; $1 if only one of the candidates named in another contract receives the first or second most votes; $0 if both candidates who receive the first and second most votes in the caucus are named in other contracts
 

The contract IA_BACH represents Michele Bachmann at the 2012 Iowa Republican Caucus. If Michele Bachmann receives the first or second most votes in the caucus, the contract will pay off $1. Otherwise, it will pay off $0. Similarly, other contracts represent the candidate named in the contract and that candidate's ranking in the vote count from the caucus. The contract IA_ROF represents all candidates not named in another contract in this market.


Determination of Liquidation Values

The liquidation value of a candidate-specific contract in this market is equal to $1 if the associated candidate received the first or second most votes in the caucus. Otherwise, the contract will pay $0. The contract IA_ROF represents all candidates not associated with candidate-specific contracts. The IA_ROF contract liquidation value will be $1 times the number of candidates who receive the first or second most votes in the caucus and are not named in candidate-specific contracts.

The caucus data posted on the New York Times official website at 5pm on the day following the 2012 Republican caucus, or as soon after as it becomes available, will be the official source used to determine payoffs. In the event that the results are not reported at that website by midnight of the day following the caucus, the Washington Post official website will become the official source. Should neither source report popular vote by midnight the day following the caucus, the information reported in the print version of the New York Times will be used.

For purposes of determining payoffs, we will use the vote shares reported by the Republican Party of Iowa to the media.

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, IACaucus12, at the upper right-hand corner of the market window.

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 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.


Contract Bundles

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 $2.00. As specificed in the "Determination of Liquidation Values" section, the total payoff from holding a contract bundle until the market closes is $2.00.

To buy or sell fixed price contract bundles from the system, use the "Market Orders" option from the Trading Console. Select "IACaucus12 (buy at fixed price)" from the Market Orders list to buy bundles. Select "IACaucus12 (sell at fixed price)" to sell bundles.

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 Access

Current and newly enrolled IEM traders with U.S. dollar accounts will automatically be given access rights to trade in the 2012 Iowa Republican Caucus market. Access to this market is achieved by logging into the IEM and choosing "IACaucus12" 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://iemweb.biz.uiowa.edu/signup/online/. 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/iem/accounts/withdrawals.html.