Germany's stock market regulators are the laughing stock of Europe.

It is embarrassing that Porsche could have been allowed to build a secret options stake in Volkswagen equivalent to 32 per cent of its market value, on top of an existing holding of 43 per cent, with no disclosure. A false market of epic proportions was allowed.

But that does not mean those short-selling hedge funds nursing nasty losses have real grounds for complaint.

They knew perfectly well, or should have known, the lacuna in the German rules and the fact that such positions could be kept secret. Given the ferocity with which they fought proposals to close precisely this loophole in the UK, they have no excuse for ignorance and little cause for sympathy.

Porsche is no slouch when it comes to financial trading. The gag goes that it is a massive hedge fund with a small carmaking facility on the side. Last year it made profits of €1billion from building Cayennes and 911s, and €3.6billion from trading in options.

It was, however, unwise to leave unclarified its March statement that it was highly unlikely to lift its stake in VW to 75 per cent. That leaves it vulnerable to accusations of market manipulation.

Back in 2003, Britain suffered its own scandal in which the derivatives tail wagged the equity dog.

AIM-listed Room Service had more outstanding shorts than its entire market value at one point. Fortunately for Britain, that absurdity occurred in the shares of one of Britain's piddliest and least significant listed companies. It's a very different story in Germany.

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