Sep. 24--A strange omission by the Securities and Exchange Commission nearly allowed "short-selling" in the stock of M&T Bank Corp. and HSBC Holdings Plc, while banning it in the area's smaller community banks.

M&T and HSBC were the only publicly traded Buffaloarea banks left off Friday's SEC order barring traders from "short-selling" in 799 financial stocks. The order, which took effect immediately and lasts through Oct. 2, is designed to stabilize markets and end speculative trading that hurt companies.

The order specifically covered companies as large as Bank of America Corp., Citigroup, KeyCorp and J. P. Morgan Chase, and as small as Evans Bancorp and Lake Shore Bancorp. But it left off Western New York's two biggest banks, baffling officials.

"We were surprised that we were left off and were on the phone with the SEC first thing Friday morning when we saw that the list was incomplete," said M&T spokesman C. Michael Zabel.

The New York Stock Exchange corrected the omission by Monday. Using authority granted to U. S. exchanges by the SEC, the NYSE on Monday added the Buffalo-based bank and British giant to the rapidly growing list of financial companies covered by the prohibition.

"There were other companies that were left off, too, and they corrected it over the weekend," Zabel said. M&T was added Monday morning along with 30 other firms, while HSBC was added Monday night as part of another group of 40.

M&T shares closed Tuesday at $84.13, down $5.46. The shares are up 57 percent from their 52-week low of $53.61 on July 14, but are down 22 percent from their 52-week high of $108.53 last September.

Besides M&T and HSBC, the combined list now includes Bank of America, Citi, Community Bank System, Evans, Financial Institutions, First Niagara Financial Group, J. P. Morgan Chase, KeyCorp, Lake Shore, Northwest Bancorp, Royal Bank of Scotland Group and Tompkins Financial Corp.

Allied Irish Banks Plc, which owns 24 percent of M&T, is also included, as is Berkshire Hathaway, which owns 6 percent of M&T and is the parent of Geico Corp. and The Buffalo News.

Short-selling refers to the legal but controversial practice among traders of betting against a stock by borrowing and then agreeing to sell stocks they don't own, in the expectation the price will fall in the interim. They then profit by purchasing the shares later at the lower price but still completing the sale that was agreed to at the higher price. In "naked" short-selling, the traders don't even borrow the shares first.

"We suspected that there was inordinate trading in our stock that could only be explained by naked short-selling," Zabel said, noting that about half of M&T's stock is owned by "insiders," including Allied Irish and Berkshire, who haven't been selling in any large amounts. "We think it contributed to some of the turbulence."

jepstein@buffnews.com

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