2007 Philadelphia Democratic Mayoral Primary Election - Winner-Takes-All Market

At 11:59am, Central Standard Time, Tuesday, April 3, 2007, the Iowa Electronic Market (IEM) will open trading in a market based on the outcome of the 2007 Philadelphia Democratic Mayoral Primary Election. 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 2007 Philadelphia Democratic Mayoral Primary Election. At market open, there are six contracts in this market representing six 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 2007 Philadelphia Democratic Mayoral Primary Election will be $1.00. All other contracts will have a value of $0.00.

CONTRACTS

Initially the market will consist of six contracts: five representing named candidates in the 2007 Philadelphia Democratic Mayoral Primary Election and one representing all other candidates in that primary.



The initial financial contracts traded in this market are:

Code Contract Description
BRADY_WTA     $1.00 if U.S. Rep. Bob Brady wins the nomination;
$0.00 otherwise
EVANS_WTA     $1.00 if State Rep. Dwight Evans wins the nomination;
$0.00 otherwise
FATTAH_WTA     $1.00 if U.S. Rep. Chaka Fattah wins the nomination;
$0.00 otherwise
KNOX_WTA     $1.00 if Tom Knox wins the nomination;
$0.00 otherwise
NUTTER_WTA     $1.00 if Michael Nutter wins the nomination;
$0.00 otherwise
PDROF_WTA     $1.00 if another candidate wins the 2007 Philadelphia Democratic Mayoral Primary Election;
$0.00 otherwise

PDROF_WTA stands for 2007 Philadelphia Democratic Mayoral Primary Rest of Field and represents all candidates not separately listed in this market.

As the 2007 Philadelphia Democratic Mayoral Primary campaign progresses, new candidate-specific contracts may be introduced as spin-offs of the PDROF_WTA 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 the end of the market when all contracts are liquidated.

DETERMINATION OF LIQUIDATION VALUES

This is a Winner-Takes-All market. The contract that denotes the actual outcome of the 2007 Philadelphia Democratic Mayoral Primary Election will have a liquidation value of $1.00, all others will have values of $0.00.

The contract, BRADY_WTA, will be liquidated for $1.00 after the 2007 Philadelphia Democratic Mayoral Primary Election if U.S. Rep. Bob Brady receives the most votes in the 2007 Philadelphia Democratic Mayoral Primary Election. If he does not receive the most votes in the primary, the liquidation value of the BRADY_WTA 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 receives the most votes in the primary. The contract PDROF_WTA will have a liquidation value of $1.00 if some candidate not separately listed in this market receives the most votes in the primary; its liquidation value will be $0.00 if one of the listed candidates receives the most votes.

The official final vote count for the primary certified by the Philadelphia City Commissioners will be the IEM's official source for primary results. This vote count is expected to be released no later than 20 days after the election.

Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, PDPRIM_WTA, 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 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 PDROF_WTA contract. When a contract spin-off occurs, each PDROF_WTA contract will be replaced by two new contracts: a candidate-specific Democratic Primary candidate contract and a new PDROF_WTA contract. The new PDROF_WTA contract will represent all remaining un-named Democratic Primary candidates in the market.

No trader of pre-spin-off PDROF_WTA 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 PDROF_WTA contracts may change when new candidate-specific contracts are spun off, all outstanding PDROF_WTA bids and asks will be canceled at the time of the spin-off.

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.

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 candidate will receive the most votes in the primary, 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 PDPRIM_WTA (buy at fixed price) from the Market Orders list to buy bundles. Select the PDPRIM_WTA (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 "PDPRIM_WTA (buy at market prices)". To sell a bundle at current BID prices, select the option "PDPRIM_WTA (sell at market prices)."

MARKET CLOSING

This market will remain open until contracts are liquidated. When official primary vote counts 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 2007 Philadelphia Democratic Mayoral Primary Election Winner Takes All Market. Access to the market is achieved by choosing PDPRIM_WTA 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 http://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 (www.biz.uiowa.edu/iem/accounts/withdrawalrequestform.html) or by completing and mailing the paper version of the request form. Additional information about requesting withdrawals is available at the IEM website at http://www.biz.uiowa.edu/iem/accounts/withdrawals.html.