How Does the Absence of Physical Delivery Affect the Liquidity of the Underlying Spot Market?

The absence of physical delivery generally reduces the direct, mechanical link between the futures market and the spot market. This means that futures trading, even at high volumes, has less direct influence on the spot market's liquidity or price.

Cash settlement allows the futures market to function more as a separate financial speculation vehicle, though large futures positions can still indirectly influence spot prices through sentiment and capital flows.