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One of the tests of the quality of a derivative market instrument is how closely the derivative's forward price converges to the cash market spot price at expiration. Some markets, such as the market in S&P-500 futures, are characterized by almost perfect convergence: An arbitrageur can be confident that a long stock index replicating portfolio sold at the opening on expiration day will match the value of the cash settlement on the related futures contract almost exactly. In other markets where an investor cannot be certain of trading at the settlement price, convergence is less certain, and the pricing relationship between the underlying and the futures contract is more tenuous. Other things equal, markets with good convergence and close spot/futures trading relationships tend to be more liquid markets.
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