COMEX copper trade growth in May bests LME again

* COMEX May copper volume up 65 pct year on year

* COMEX's growing market share may fuel debate on reasons

* Competition intense in global copper futures

By Josephine Mason

NEW YORK, June 15 (Reuters) - CME Group's COMEX copper trading volume in May surged by 63 percent from a year earlier, growing twice as fast as that of rival London Metal Exchange and underlining the U.S. market's growing role in the burgeoning global market.

Futures trading volume in the U.S. COMEX contract in May vaulted to the equivalent of just under 17 million tonnes from last year, according to Reuters analysis of data. While less than the record of over 20 million tonnes in April, it was still the second-highest total in the contract's 24-year history.

For the first five months of the year, COMEX trading volumes accounted for just over 13 percent of the total turnover in the world's three main copper futures contracts, up from under 12 percent in 2011 and double its share in 2009.

Activity on the LME's second-largest contract by volume rose by 35 percent year-on-year to 91.5 million tonnes, with its global market share unchanged at 65 percent.

The data is likely to add fuel to an emerging debate about whether the U.S. contract is simply benefit ting from short-term market dynamics, or whether it is gaining new customers as the LME prepares to be sold in a deal that will come alongside some of the 135-year-old exchange's most significant reforms.

For a full story on the volumes see:

Including the Shanghai Futures Exchange (ShFE), where volume surged 156 percent year on year last month, total global copper futures activity rose by 56 percent to 142 million tonnes in May.

George Gero, vice president with RBC Capital Markets Global Futures in New York, says more commercial hedgers in Canada and Mexico are using COMEX because of the time difference -- the LME closes at around midday U.S. time, while COMEX trades into the afternoon -- and the CME's electronic Globex trading platform.

"It is quicker, it's simpler and the price discovery is instant," said Gero. He said RBC is securing more business from introducing brokers in Canada and Mexico.

About 95 percent of COMEX copper trade is done through Globex. The LME does not disclose a breakdown of its volume, but traders say that while the use of LMESelect, the electronic platform is growing, the London-based open-outcry "ring" still contributes a significant portion of its volumes.

The rise also reflects continued arbitrage opportunities, with London at the steepest premium to New York than many traders remember. A few suggest it may be tied to the failure of MF Global, as the UK insolvency trustee struggles to return funds to the broker's LME customers.

The CME told Reuters last month the pick-up in activity accentuates a trend underway for several years, pushing what has been a niche, regional contract toward a "tipping point" that could propel it onto the global stage.

Until three years ago, the LME dominated trade in the six base metals setting the global pricing benchmark, but the emergence of more active Chinese traders and U.S.-based funds has handed the storied exchange its toughest competition yet.

The LME's market share so far this year is around 65 percent, the second-lowest level on record and down from 88 percent in 2006.

The loss of market share comes at a critical time for the LME as the nine-month bidding war for the 135-year old exchange nears an end, after the board picked the Hong Kong Clearing and Securities Exchange as its favored suitor on Friday.

Beating out the IntercontinentalExchange, the Hong Kong exchange with its $2.18 billion bid is expected to give the exchange its much-desired access to vast and fast-growing China.

The ICE has a track record of successfully challenging the CME on its own ground, in particular with its U.S. crude oil contract.