2007-2008 North Carolina Influenza Activity Market :: Prospectus
At 11:00 pm, CST on Saturday, September 15, 2007, a market will open for trading in contracts based on the extent of influenza in the State of North Carolina during the 2007-08 influenza season. This document describes these contracts and the structure of the market in which they trade.
MARKET CURRENCYAll transactions in this market will be denominated in North Carolina Flu dollars (NCFlu$), the unit of exchange for this market. Each new account will be endowed with NCFlu$100.00, and as much as NCFlu$6.00 will be added each week -- NCFlu$1.00 for each full set of orders for each target-week. When the markets close at the end of the influenza season, the remaining NCFlu$ balance will converted to US$ and distributed to the holder of that account (with the holder's consent) as a grant towards professional and educational expenses.
CONTRACTSContracts to be traded in the market are based on the extent of influenza activity in North Carolina during the 2007-2008 influenza season. Contracts will be introduced in sets of 5, one set for each week of the season. The five contracts in a set cover all possible activity levels as reported to the CDC by the State Epidemiologist. The activity levels are those used by the CDC in its weekly report. (See http://www.cdc.gov/flu/weekly/usmap.htm)
Using week 42 as an example, the first set of contracts to be introduced for trading in this market is as follows:
| Code | Contract Description |
| NCF-42-NIL | NCFlu$1.00 if the North Carolina influenza activity report for week 42, 2007 is no activity; NCFlu$0.00 otherwise |
| NCF-42-SPO | NCFlu$1.00 if the North Carolina influenza activity report for week 42, 2007 is sporadic; NCFlu$0.00 otherwise |
| NCF-42-LOC | NCFlu$1.00 if the North Carolina influenza activity report for week 42, 2007 is local; NCFlu$0.00 otherwise |
| NCF-42-REG | NCFlu$1.00 if the North Carolina influenza activity report for week 42, 2007 is regional; NCFlu$0.00 otherwise |
| NCF-42-WID | NCFlu$1.00 if the North Carolina influenza activity report for week 42, 2007 is widespread; NCFlu$0.00 otherwise |
Sets for other weeks will be introduced in separate market windows and contract codes will follow the same naming convention - "NCF-ww-ccc" - where ww is the week of the calendar year and ccc is the activity level. The 5 contracts for each target week will be open for trading for six weeks prior to last day of the target week, and contracts for six target weeks will be open for trade at any time (except for the first and last few weeks of the influenza season.) The schedule for markets to be conducted for the 2007-2008 season appears in the table below.
| Market Week | Activity Week | Market Opens | Market Closes | CDC Map | Liquidation |
| 40 | Sep 30 - Oct 6 | Sep 15, 07 | Oct 6, 07 | Oct 12, 07 | Oct 13, 07 |
| 41 | Oct 7 - Oct 13 | Sep 15, 07 | Oct 13, 07 | Oct 19, 07 | Oct 20, 07 |
| 42 | Oct 14 - Oct 20 | Sep 15, 07 | Oct 20, 07 | Oct 26, 07 | Oct 27, 07 |
| 43 | Oct 21 - Oct 27 | Sep 15, 07 | Oct 27, 07 | Nov 2, 07 | Nov 3, 07 |
| 44 | Oct 28 - Nov 3 | Sep 15, 07 | Nov 3, 07 | Nov 9, 07 | Nov 10, 07 |
| 45 | Nov 4 - Nov 10 | Sep 15, 07 | Nov 10, 07 | Nov 16, 07 | Nov 17, 07 |
| 46 | Nov 11 - Nov 17 | Oct 6, 07 | Nov 17, 07 | Nov 23, 07 | Nov 24, 07 |
| 47 | Nov 18 - Nov 24 | Oct 13, 07 | Nov 24, 07 | Nov 30, 07 | Dec 1, 07 |
| 48 | Nov 25 - Dec 1 | Oct 20, 07 | Dec 1, 07 | Dec 7, 07 | Dec 8, 07 |
| 49 | Dec 2 - Dec 8 | Oct 27, 07 | Dec 8, 07 | Dec 14, 07 | Dec 15, 07 |
| 50 | Dec 9 - Dec 15 | Nov 3, 07 | Dec 15, 07 | Dec 21, 07 | Dec 22, 07 |
| 51 | Dec 16 - Dec 22 | Nov 10, 07 | Dec 22, 07 | Dec 28, 07 | Dec 29, 07 |
| 52 | Dec 23 - Dec 29 | Nov 17, 07 | Dec 29, 07 | Jan 4, 08 | Jan 5, 08 |
| 1 | Dec 30 - Jan 5 | Nov 24, 07 | Jan 5, 08 | Jan 11, 08 | Jan 12, 08 |
| 2 | Jan 6 - Jan 12 | Dec 1, 07 | Jan 12, 08 | Jan 18, 08 | Jan 19, 08 |
| 3 | Jan 13 - Jan 19 | Dec 8, 07 | Jan 19, 08 | Jan 25, 08 | Jan 26, 08 |
| 4 | Jan 20 - Jan 26 | Dec 15, 07 | Jan 26, 08 | Feb 1, 08 | Feb 2, 08 |
| 5 | Jan 27 - Feb 2 | Dec 22, 07 | Feb 2, 08 | Feb 8, 08 | Feb 9, 08 |
| 6 | Feb 3 - Feb 9 | Dec 29, 07 | Feb 9, 08 | Feb 15, 08 | Feb 16, 08 |
| 7 | Feb 10 - Feb 16 | Jan 5, 08 | Feb 16, 08 | Feb 22, 08 | Feb 23, 08 |
| 8 | Feb 17 - Feb 23 | Jan 12, 08 | Feb 23, 08 | Feb 29, 08 | Mar 1, 08 |
| 9 | Feb 24 - Mar 1 | Jan 19, 08 | Mar 1, 08 | Mar 7, 08 | Mar 8, 08 |
| 10 | Mar 2 - Mar 8 | Jan 26, 08 | Mar 8, 08 | Mar 14, 08 | Mar 15, 08 |
| 11 | Mar 9 - Mar 15 | Feb 2, 08 | Mar 15, 08 | Mar 21, 08 | Mar 22, 08 |
| 12 | Mar 16 - Mar 22 | Feb 9, 08 | Mar 22, 08 | Mar 28, 08 | Mar 29, 08 |
| 13 | Mar 23 - Mar 29 | Feb 16, 08 | Mar 29, 08 | Apr 4, 08 | Apr 5, 08 |
| 14 | Mar 30 - Apr 5 | Feb 23, 08 | Apr 5, 08 | Apr 11, 08 | Apr 12, 08 |
| 15 | Apr 6 - Apr 12 | Mar 1, 08 | Apr 12, 08 | Apr 18, 08 | Apr 19, 08 |
| 16 | Apr 13 - Apr 19 | Mar 8, 08 | Apr 19, 08 | Apr 25, 08 | Apr 26, 08 |
| 17 | Apr 20 - Apr 26 | Mar 15, 08 | Apr 26, 08 | May 2, 08 | May 3, 08 |
| 18 | Apr 27 - May 3 | Mar 22, 08 | May 3, 08 | May 9, 08 | May 10, 08 |
| 19 | May 4 - May 10 | Mar 29, 08 | May 10, 08 | May 16, 08 | May 17, 08 |
| 20 | May 11 - May 17 | Apr 5, 08 | May 17, 08 | May 23, 08 | May 24, 08 |
| 21 | May 18 - May 24 | Apr 12, 08 | May 24, 08 | May 30, 08 | May 31, 08 |
These are "Binary Contracts", meaning there are two possible liquidation values, zero and one, for each contract. Within a set of 5 contracts for a particular week, the contract that denotes the actual influenza outcome in North Carolina for the week will have a liquidation value of NCFlu$1.00; all other contracts for that week will have values of NCFlu$0.00. (On the rare occasion when no level is reported -- it appears as white on the CDC map -- all trading for that week will be undone and trader's accounts will be adjusted accordingly.)
For example, if the CDC announces on October 27 that the state of North Carolina was classified as having regional outbreaks of influenza during week 42, the contract, NCF-42-REG, will be liquidated for 1.00 North Carolina Flu dollar. If any other level of influenza is announced, the liquidation value of the NCF-42-REG contract will be zero. Similarly, other influenza level contracts will be liquidated for 1.00 or 0.00 North Carolina Flu dollars depending upon whether or not the associated level is the one announced.
The weekly epidemiological report of the CDC will be the official source for influenza results. Those reports can be viewed at the CDC web site -- http://www.cdc.gov/flu/weekly/usmap.htm. Liquidation formulas can be viewed while you are logged into the IEM trading system by clicking on the market name, NCFLU_WKxx, at the upper right-hand corner of the market window. The judgment of the managers of the Influenza Prediction Markets will be final in resolving questions of interpretation and typographical or clerical errors.
Fixed-price bundles consisting of one share of each of the contracts for one week in this market can be purchased from or sold to the trading system at any time. The price of each bundle is NCFlu$1.00. Because only one outcome will be announced for each week, the total payoff from holding a bundle consisting of one of each contract until the market closes is NCFlu$1.00.
To buy or sell fixed-price bundles from the exchange, use the "Market Orders" option from the trading console. Select the option "NCFLU_WKww (buy at fixed price)" from the Market Orders list to buy bundles. Select the "NCFLU_WKww (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 NCFlu$1.00. To buy a market bundle at current ASK prices, use the "Market Order" option as above but select the option "NCFLU_WKww (buy at market prices)". To sell a bundle at current BID prices, select the option "NCFLU_WKww (sell at market prices)".
MARKET OPEN AND CLOSETrading in the set of contracts for a given influenza week will open at 11:00 PM on the Saturday six weeks in advance of the target week. It will close at 11:30 PM, CST. on the Saturday of the target week. Except for the first few weeks, trading will continue for six weeks on the contracts for each target week. Soon after results are available from the CDC (typically the Friday of the following week) liquidation values will be declared and funds credited to the cash accounts of market participants. It is expected that new markets will open through week 16 of 2008. Market managers reserve the right, however, to extend it beyond the 16th week, or to end trading earlier than the 16th week.
TRADING RIGHTS AND MARKET ACCESSParticipation is restricted to registered traders, and registration is by invitation only. Invitations will be extended to members of the medical community and others who may have particular expertise with influenza. Any person desiring an invitation to participate may indicate that interest by following the instructions on the join the market page. If an account is approved by the market managers, a trader id and password will be created and returned to the applicant by email. For traders with open accounts, access to the market is achieved by pointing a web browser to http://fluprediction.uiowa.edu/trader-login.html and following the login instructions found there.
TRADING SYSTEM AND TRADING RULESTransactions on the Influenza Prediction Markets are executed either directly by the trader using a real-time web based system operating over the Internet or through and "electronic broker". In the latter case, traders complete and submit an order form indicating their beliefs about influenza activity for each target week, and an automated procedure translates those beliefs into market actions and submits the resulting market orders to the trading system. The system, called Web Exchange (WebEx), is maintained by the Iowa Health Prediction Markets project in the University of Iowa's Tippie College of Business and Carver College of Medicine. To access the trading system, an enrolled trader uses a web browser on any computer connected to the Internet. The URL for trader access to the market is http://fluprediction.uiowa.edu/trader-login.html. The market operates in the Central time zone and is open for trading around the clock.
MARKET MANAGERSThe Iowa Health Prediction Market is a joint research project involving the Carver College of Medicine and the Tippie College of Business at the University of Iowa. Contact information for managers of the market can be found here.
*An update of the prospectus occurred on October 24, 2007 to account for the change in contract names.