The CME Group posted its December volume data for individual contracts yesterday. Last Thursday they published their overall monthly figures which showed the FX unit experiencing 6.5% MoM ADV growth. The December growth led FX trading to be the CME’s best performer for the month. Powering the growth was a continuation of Japanese Yen related trading as contract volumes rose 20.5% month over month and a staggering 74.6% from the same period last year (see table below). Also of note was the British Pound which experienced a 10.9% increase in trading from November and was slightly ahead of the Aussie Dollar to be the third most traded FX product. Also of note, the Mexican Peso continues to be an active mover on the CME as it posted 47.6% MoM growth. The growth contrasts to EBS and Thomson Reuters which post released monthly declines in its FX trading divisions.

Commenting on the positive month and outperformance compared to competing OTC FX venues, Derek Sammann, Senior Managing Director, Financial Products & Services at CME Group told Forex Magnates “We’re very pleased with December’s performance as it continues to confirm our outperformance versus the broader OTC FX market, which is also reflected in our full-year 2012 results. We outperformed our competition throughout the year, with strong performances across most of our 58 currency pairs. Not only is our volume performing well, but we continue to grow our global customer base and the amount of FX risk being held in the form of CME FX Futures. Specifically, larger amounts of FX risk is being held by more customers, as indicated by our growth of open interest which is +16% percent year-over-year, and we have reached 929 “Large Open Interest Holders”, which is a new all-time record for us. Additionally, FX options are +6% YoY, with 78% of our FX options volume trading electronically.

In addition to our deep pools of liquidity across the full breadth of currency pairs, counterparty credit risk is an increasingly overarching concern in the global FX market. We’ve found that customers are increasingly valuing the security and liquidity provided by our listed FX markets, particularly with Dodd-Frank and Basel III weighing on the minds of market participants. In addition to the growth of our Majors business, our Emerging Markets such the Mexican Peso (+24% YoY) have seen a lot of growth as our global client base continues to expand and the appetite to trade international markets develops.”

Taking a deeper look at the contract data, the Yen growth wasn’t so surprising given the continued weakness in the currency as the Bank of Japan has become aggressive with its stimulus actions. The question now though is whether the current Yen volumes will continue or has the trade become too crowded as momentum traders pile on. In speaking to FX trader’s earlier this year, one of the reasons given for the decline in 2012 volumes was the lack of any one trading strategy doing well. Typically, as a strategy begins to outperform it will lead to copycats running similar trades. As such, with the USDJPY beginning to trade in parabolic fashion it appears to have become the trade of the day.

Commenting on the move, Aaron Smith, Managing Director of Pecora Capital, whose fund was recently short the yen acknowledged that the trade is attracting interest from traders but pointed out that the size of aggregate yen shorts has been decreasing “The Yen broke a 5-year trendline against the dollar in March last year, then pulled back until October-November. The entire month of December has been a straight line up with low deviation and high momentum. This type of price action along with a break of the 52-week high must have prompted medium term trend followers to initiate or add to long positions. On the macro side, long term sentiment is shifting as investors are starting to acknowledge that short Yen might no longer be a widowmaker positioning.

Since the end of December, the move has turned exponential, yet the record aggregate short position is slightly decreasing. In the short term, it wouldn’t be a surprise to see a pause or pullback. Our diversified portfolio of short term systematic strategies stand ready to take advantage of whatever the market has to offer.”