I can only say short term speculators provide the liquidity in the system. Hedgers can't buy/sell big volumes@their price without enough liquidity...For any buying selling, there must be some one present at the opposite side of the trade. If there is not enough liquidity, u have to compromise with the price...Slippage on the average price for executing the big volumes will be big. My point is clear.
Previously India VIX trading concept was failed due to no matching of the buyer-seller. Still, many ones want hedge using it, but there are no opposite sides... no liquidity at all.
Just wait, we will see the bid-ask spread & open interest in 1kg Gold options soon and how the experiment of launching first a 30lakh Gold contract goes on vs 3 lakh Crude contract. No need to argue further, time will tell the result. We'll see the health of Gold options soon by observing bid-ask and OI.