Trading on the Iowa Electronic Markets

1. Trading on the Iowa Electronic Markets Introduction

2. Introduction • The IEM is an on-line futures market • Payoffs are based on real-world events such as: • political outcomes • companies' earnings per share (EPS) • stock price returns • Operated by University of Iowa Henry B. Tippie College of Business faculty as an educational and research project

3. Agenda • Signing up for an IEM account • Connecting to the IEM • Navigating in the IEM • Trading with the IEM • Getting Account Information • Getting Market Information

4. Signing Up for an IEM Account • Start at http://iemweb.biz.uiowa.edu/signup • Follow instructions provided in class • Warning: use only forms that you were instructed to use. • Using the wrong forms may result in additional fees

5. Connecting to the IEM • Connect using a web browser • Internet browsers are Microsoft Internet Explorer, Netscape, AOL, etc. • Web address: • http://iemweb.biz.uiowa.edu/

6. Logging Into the IEM • Address: • http://iemweb.biz.uiowa.edu • Select the “login and trade” link. • Logging into the Practice Markets • Trader ID: aaa, bbb, ccc, … • Password: aaa, bbb, ccc, … • Logging into your own account: • Use Trader ID and password received from the IEM • For security, CHANGE YOUR PASSWORD the first time you login! • Logging out • REMEMBER to log out for security reasons!

7. Using the IEM • Trading screen divided into three sections • Market Window • shows current market status • Trading Console • where you enter your orders • Navigation Bar • to move around between markets or generate reports

8. The IEM Screen

9. The WebEx Market Window

10. The Market Window • Top panel of your screen • Shows • current market information • your holdings in cash and assets • your outstanding orders

11. The WebEx Navigation Bar

12. The WebEx Navigation Bar • Bottom panel of your screen • 5 buttons: • "Go To Market" Button • "Market Info" Button • "My Account" Button • "Help" Button • "Logout" Button

13. Trading in the IEM • Trading Rights • All traders can trade in political markets • Only academic traders can trade other markets • Markets and the Objects Traded • IEM contains many markets • Each market is related to some future event • Assets are the objects traded in the market • The future event determines how assets in the market will payoff

14. Trading in the IEM • Three ways to buy and sell assets • Market Orders • Limit Orders • Bundle transactions

15. Market Order: Definition • Request to buy or sell an asset at the current ask and bid price • Consists of: • Instruction to buy or sell • Asset ticker symbol • Quantity you wish to trade

16. Placing a Market Order • Use the market order menu • Choose the asset you wish to buy or sell from the Action/Asset select list • Specify the quantity • Click on the Market Order button

17. Market Orders in WebExchange

18. Limit Order: Definition • A request to buy or sell an asset at a specified price for a specified period of time • Consists of: • an instruction to buy or sell • an asset ticker symbol • the quantity you wish to trade • a price at which you are willing to trade • an expiration date and time after which the order will not be traded

19. Placing a Limit Order • Use the limit order menu • Choose the asset you wish to buy or sell from the Action/Asset List • Specify • price • quantity • expiration date and time • Click on the Limit Order button

20. Limit Orders in WebExchange

21. Buying and Selling Bundles • A bundle • is a set of assets which can be purchased from or sold to the exchange at a fixed price • This fixed price is the guaranteed aggregate liquidation value of the assets • Processed as market orders in IEM

22. Withdrawing Orders • You can withdraw any of your bid and ask orders as long as they have not traded or expired. • To withdraw an order • Access the market in which the order was placed. • Click on the bid or ask hypertext to the right of the appropriate asset • Find the order you wish to withdraw and click on the word delete to the right of the order • Once an order is deleted it cannot be retrieved

23. Order Queues • Limit Orders are maintained in queues • Orders are listed in these queues in priority order. • Bid orders with higher prices have higher priority than orders with lower prices. • Ask orders with lower prices have higher priority than orders with higher prices. • Within a particular price, older orders (orders that were placed sooner) have higher priority than newer orders.

24. Other Aspects of Trading • Short Sales and Margins • You cannot sell short or buy on margin • Feasibility Checks • Self Trades • You cannot trade with yourself • Spinoffs and Splits • The IEM governors can declare asset spinoffs and splits • Asset Liquidations by the Exchange • The liquidation formula describes how and when assets will payoff • Once assets are liquidated, they can no longer be traded

25. Other Aspects of Trading • Short Sales and Margins • You cannot sell short or buy on margin • Feasibility Checks • Self Trades • You cannot trade with yourself • Spinoffs and Splits • The IEM governors can declare asset spinoffs and splits • Asset Liquidations by the Exchange • The liquidation formula describes how and when assets will payoff • Once assets are liquidated, they can no longer be traded

26. Other Aspects of Trading • Short Sales and Margins • You cannot sell short or buy on margin • Feasibility Checks • Self Trades • You cannot trade with yourself • Spinoffs and Splits • The IEM governors can declare asset spinoffs and splits • Asset Liquidations by the Exchange • The liquidation formula describes how and when assets will payoff • Once assets are liquidated, they can no longer be traded

27. Reports About Your Account • Trades Report • Outstanding Asks Report • Outstanding Bids Report • Orders and Order Resolution Report • Portfolio Report • Liquidation Report

28. Reports About Your Account • Trades Report • Outstanding Asks Report • Outstanding Bids Report • Orders and Order Resolution Report • Portfolio Report • Liquidation Report

29. Reports About Your Account • Trades Report • Outstanding Asks Report • Outstanding Bids Report • Orders and Order Resolution Report • Portfolio Report • Liquidation Report

30. Reports About Your Account • Trades Report • Outstanding Asks Report • Outstanding Bids Report • Orders and Order Resolution Report • Portfolio Report • Liquidation Report

31. Reports About the Market • Price History • Daily contract volumes, dollar volumes, high prices, low prices, average prices and closing prices • Current Quotes • Best bids, best asks and last trade prices • Prospectus • READ IT BEFORE TRADING!

32. Reports About the Market • Price History • Daily contract volumes, dollar volumes, high prices, low prices, average prices and closing prices • Current Quotes • Best bids, best asks and last trade prices • Prospectus • READ IT BEFORE TRADING!