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Already, the FSA's moves to boost transparency among the share price speculators has brought out its first mea culpa.

Harbinger Capital Partners, a hedge fund, revealed that it was short more than 3 per cent of the outstanding shares of HBoS. It certainly seems as if the FSA's rules are having the desired effect. At last the arcane, opaque world of the hedge fund seems to be responding to the harsh gaze of the FSA. And not before time. For too long hedge funds have operated in a haze of obfuscation, claiming that they do not need to open up their doors because they operate outside normal rules. The problem is that they are seen by many to be some of the main movers behind the stranger activities on the stock market, particularly in the housing sector. In recent months, the share prices of a number of housing stocks have wavered wildly, as the market speculated, quite justifiably, that the value of the company may go down. Where things have gone wrong is when the speculators bet on the share price going down, simply to make money for themselves, regardless of the consequences.

Now that the banking sector is in serious trouble, and it is having to raise money in the markets, quite rightly the FSA has stepped in and demanded more transparency. The question is whether this will have a positive effect on the stock markets or not. The hedge funds make much of their money out of shorting particular stocks, and indeed this is an accepted tactic. However, whether they will carry on doing the same when it comes to taking positions on banks about to issue new shares is another matter. The other stock in trade among hedge funds is their ability to move about unseen, whether transparency is too high a price to pay is open to question.

The other issue is that the FSA has, for once, acted promptly and sought to instil the rules quickly. Clearly it could see financial chaos on its hands, if more and more banks came to the market to shore up their crumbling capital base, only to be raided by the speculators. It also shows that the FSA, under Hector Sants, is willing to stand up to the Mayfair whizz kids, and show who is really in charge when it matters. After the Northern Rock debacle, some strong posturing from the regulator is certainly called for.