Why are MacroShares created in pairs (i.e., equal number of Up and Down shares)?
Paired issuance is a fundamental aspect of the MacroShares structure. This arrangement is consistent with aspects of other risk transfer instruments. For example, in a futures market, for every long contract, there is a simultaneous offsetting short; in a swap market, one party simultaneously commits to pay what the counterparty agrees to receive and vice-versa. However, unlike a swap, a MacroShare is exchange-traded and entails no counterparty or credit risk. Additionally, swaps and futures instruments may be less suitable, or even non-permitted, for certain investors and risk managers. MacroShares enable both individual and institutional investors to rebalance their risk portfolio without the costs, tax consequences, added complexity and documentation that futures or swaps can entail.
