The Private Intermittent Securities and Capital Exchange System (PISCES) will allow shares in private companies to be bought and sold. This proposal is set to “open the door to more opportunities for investors to take stakes in private companies”, said the FCA.  

With many companies choosing to stay private for longer, there is increasing demand for investors to be able to trade shares in private companies more easily. In a press statement, the FCA described PISCES as “a world-leading innovation in private markets” that “could provide opportunities for more diversified returns for investors.”

The FCA said the proposals will give people more confidence to invest in smaller private companies and this will lead to those companies getting more access to funding, which will help them expand. However, such opportunities come with risk, which is why the FCA is also consulting on risk warnings for investors to help them make informed investment decisions.  

PISCES was a central pillar of the Chancellor’s November Mansion House speech and the Government intends to legislate for it in the spring of 2025.

Tulip Siddiq, Economic Secretary to the Treasury, said: “PISCES will be an innovative new type of stock market for trading for private company shares and is a significant step forward in our reforms to capital markets.

“It will give investors the chance to get in on the ground floor of some of the most exciting companies and support the growth of those businesses, and marks a significant step towards delivery of the new market next year, and sits alongside our wider programme of reforms to boost competitiveness and investment. That includes the FCA’s overhaul of the UK listing rules and the creation of pension megafunds which will unlock billions of pounds of potential investment in businesses.”

How PISCES will work

PISCES will be company led and will allow investors to buy and sell shares in private firms in a style similar to a public exchange.

The distinguishing features of PISCES:

• It will operate as a secondary market, facilitating the trading of existing shares in intermittent trading windows.
• It will be open to professional investors, high-net-worth individuals, employees of participating private firms and self-certified or certified sophisticated investors under the Financial Promotion Order (FPO).
• The UK Market Abuse Regime is not applicable as it is considered too onerous. However, there will be a bespoke disclosure regime for secondary markets with non-public and intermittent disclosures which includes a core information requirement.
• No transaction reporting requirements but the FCA will look at setting recordkeeping rules.
• Issuer flexibility over trading events with the user determining when shares are traded and can request certain restrictions over investor participation in trading events and restrictions on price through price parameters.

See also PISCES: Fishing in the new waters of private share trading.

Industry support

Simon Walls, interim executive director of markets at the FCA, said: “Next year we will ring the bell on a new private stock market that could transform how private companies access funds and grow. It will offer investors more access and a greater confidence to invest in private companies and could act as a stepping stone to public markets for those firms. 

“We want to work with industry and ensure we have the right building blocks in place to support investment in growing companies.” 

Dame Julia Hoggett, chief executive of the London Stock Exchange, said the plan was “a truly innovative and tailored framework that supports the funding continuum across public and private markets.”

However, the proposals have led to concerns from some areas of the industry. Not everyone sees PISCES as “a stepping stone to public markets”, some have said that the new private market may deter some private companies from listing on the public market. Also, there is potential for clashes with crowdfunding platforms and AIM.

“There is still quite a lot of scepticism in the market as to whether PISCES will actually work,” says Tom Callaby, a financial services Partner with law firm CMS. “What function will it play in the ‘capital markets escalator’ and will it increase or decrease UK listings? The FCA seems to be taking a balanced approach but has not allowed much time for consultation on the draft rules. Industry will be keen to continue to engage with the FCA as PISCES evolves during the sandbox process.”

What next?

The consultation will run until the February 17, 2025.

The FCA said it will work with market participants, industry leaders, trade bodies and platform operators to develop a proportionate regulatory framework that can support growth and enable innovation. 

PISCES will be developed using a “financial markets infrastructure (FMI) sandbox”. This will be the second use of the FMI Sandbox powers after the Digital Securities Sandbox. The Treasury intends to lay a statutory instrument before Parliament by May 2025, which will provide the legal framework for the PISCES Sandbox. The FCA expects to publish its final rules shortly thereafter. 

The sandbox environment will allow government and regulators to check it is working properly. Firms wishing to run a PISCES platform will have to apply to the FCA, and once approved will be able to run intermittent trading events. The FCA will publish further information in early 2025 for firms interested in applying to be a PISCES operator. The regulator and government will use any lessons from the sandbox period to improve the regime before making it permanent.