Shares in Citigroup Inc , one of the big financial companies bailed out by the U.S. government, rose more than 4 percent on Wednesday, while another, American International Group Inc , jumped 10 percent.

The run-up built on Tuesday's momentum that coincided with speculation that regulators might consider banning short-selling in the shares.

The talk, dismissed by the Securities and Exchange Commission as untrue, triggered a so-called short-squeeze as those who bet the stocks would go down covered short positions.

Shorting has something to do with it. That is going to make the move over exaggerated, said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York. If a lot of guys want to cover their shorts. then it would turn into a snowball effect.

Other traders said the run-up appeared to be momentum play around the stocks. The shares were among the volume leaders.

This morning we're seeing more momentum. Why? Because this is where deep value will be realized in the event we have a meaningful recovery in the overall economy, said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

Shares of AIG shot up $3.37 to $36.14, while Citigroup shares rose as high as $4, a 3-month high, while Fannie Mae was up 3.2 percent at $1.11 after rising as high as $1.15 at the open.

Freddie Mac was up 1.6 percent at $1.30 after rising to $1.36 earlier in the session.

(Reporting by Ellis Mnyandu; editing by Jeffrey Benkoe)