CONTACT: GEORGE MCCRORY
300 Plaza Centre One
Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
Release: Nov. 2, 2001
IEM opens web-based futures market for Fed interest rate policy
IOWA CITY, Iowa The Iowa Electronic Markets (IEM) has opened public
trading in a futures market on the Federal Open Market Committee's (FOMC)
decision to raise or lower interest rates, or keep them unchanged.
Six professors in the University of Iowa Henry B. Tippie College of Business
run the web-based, real-money market at http://www.biz.uiowa.edu/iem/markets/fedpolicyb.html.
Opened Oct. 3, this market allows traders to buy and sell three contracts
based on possible FOMC decisions to set the rate target for borrowing federal
funds , which are: to raise the target, to lower it, or to leave it unchanged.
After the FOMC announces the target at its Nov. 6 meeting, the corresponding
contract earns $1, while other contracts earn nothing.
With an investment of as little as $5 or as much as $500, traders can participate
in these markets. So far the IEM traders believe the FOMC will lower the target
rate, with contracts for this decision at 94 cents, showing they believe there
is about a 94 percent chance the FOMC will lower the target rate. After the
Nov. 6 meeting, another market will start based before or during the Dec.
The IEM directors set up the Fed funds market several years ago as an educational
tool to teach students about finance, but decided to open it to a wider range
of traders in order to gather more data on trader behavior.
Started in 1988, the IEM is a teaching and research laboratory at the UI
Tippie College of Business. The UI professors have conducted several other
political and business markets, including markets for the 2000 presidential
elections, the New York Senate race, and Republican or Democratic control
of the two houses of Congress. During the 2000 presidential elections, the
IEM had 7,600 traders and more than $240,000 in equity.
The IEM also currently has markets on the outcome of the New York mayoral
race and an academic-only market based on box-office receipts of "Monsters,
Inc." and "Harry Potter and the Sorcerer's Stone." For more
information, contact the IEM operations office at (319) 335-0794 or (319)
335-0881. Detailed trading information can be found on the IEM website at