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Does Cash Settlement Lead to Greater Market Liquidity for the Derivative Contract?

Yes, simplification of settlement attracts a broader range of participants, including institutions, increasing trading volume and market depth.
Greeks.Live24.11.25

Does Cash Settlement Lead to Greater Market Liquidity for the Derivative Contract?

Yes, cash settlement generally leads to greater liquidity for the derivative contract. By simplifying the settlement process and removing the logistical burden of physical delivery, it attracts a broader range of participants, including institutional traders, who prefer the efficiency of cash flows.

This increased participation boosts trading volume and market depth.

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