(Repeats story that ran yesterday. No change in text.)

By Jamie McGeever

LONDON, March 5 (Reuters) - The explosion in financial market volatility in February raised the question these episodes always throw up: was it "good" vol or "bad" vol?

For the big market-making banks on The Street, it looks like it was good volatility. They raked in higher revenues from the resulting surge in trading and hedging activity from their clients, particularly hedge funds.

Industry sources say top banks saw equity trading revenues jump by around 15 percent following the volatility breakout in the first week of last month, as equity derivatives trading boomed.

Senior traders at one U.S. bank said February was the best month in a decade for equity trading, according to one source. Overall, big banks' equity revenues are up around 15 to 20 percent so far this year.

This shows that it's not the direction markets take that matters for big banks, but the volume of trading business generated. After all, trillions of dollars were wiped off the value of world stocks early in February and the S&P 500 fell 4 percent, its worst month in over two years.

The same can't be said for hedge funds. Early indications are February was, for many hedge funds and speculators, a dreadful month, and for some strategies the worst on record.

This is counterintuitive. Hedge funds, particularly those in the macro space using trend-following strategies, have had a dismal couple of years because historically low volatility has made it difficult for them to exploit arbitrage opportunities and generate high returns.

They've been crying out for volatility. Yet it turns out what happened in the first week of February wasn't the volatility they were looking for.

Eurekahedge's main hedge fund index is on course to have slumped 2.01 percent in February, according to estimates from the industry index compiler. That would be its worst month since September 2011, wiping out all the gains accrued in January.

Some strategies did particularly badly. The CTA/Managed Futures hedge fund index crashed 6.18 percent, its worst month since Eurekahedge first compiled the index in 1999. The trend-following index plunged 8.39 percent, also its worst month on record.

These funds were wrong-footed by the surge in U.S. stock market volatility in early February when U.S. inflation fears gripped markets and traders suddenly began to price in higher U.S. interest rates.

Eurekahedge estimated that its CBOE short volatility index collapsed 16.72 percent, its worst month on record, while the long volatility index rose 1.92 percent, its best month since January 2016.