On 17 December 2024, the United Kingdom Financial Conduct Authority (UK FCA) published a consultation paper CP24/29 on the establishment of the Private Intermittent Securities and Capital Exchange System (PISCES). This proposed private stock market aims to allow investors to trade shares in private companies. PISCES is designed to address the increasing demand for trading private company shares as more firms opt to remain private for extended periods. The proposals apply to private companies seeking to raise capital through share sales and to firms operating trading platforms within the PISCES framework which allows intermittent trading events and mandatory risk warnings for investors.
PISCES is aimed to bridge the gap between private and public markets, but it also raises important questions about regulatory oversight and market feasibility. While the initiative promises to unlock diversified investment opportunities, the risks inherent in private company trading require careful management. Unlike traditional stock markets, where regulatory standards are well-established, PISCES relies on a yet-to-be-finalised framework that could face challenges in balancing flexibility with investor protection. Stakeholders will need to address how intermittent trading events will manage liquidity constraints and whether the platform can sustain long-term confidence among participants.
The proposed PISCES framework introduces disclosure standards for private companies seeking to trade shares on the platform. Companies will be required to provide detailed financial information, including audited annual accounts where available, as well as material contracts and any ongoing legal or litigation risks. The disclosures will also encompass governance structures, highlighting the roles and responsibilities of board members and executives. To align with modern investment preferences, sustainability-related disclosures will be mandatory for firms claiming adherence to environmental, social, or governance (ESG) principles. Companies will need to report developments or event-driven updates, such as leadership changes or material transactions, to keep investors informed. The framework offers some flexibility, allowing companies to tailor additional disclosures to meet specific investor needs, such as sector-specific insights or unique business model details.
PISCES will operate through intermittent trading sessions rather than continuous trading. These trading events will be held periodically, potentially quarterly or biannually, and will allow shares to be bought and sold within a defined timeframe. This structure reduces the administrative burden on companies while ensuring sufficient market activity during trading periods. The sessions will also feature aggregated order books to ensure fair price discovery and preventing excessive volatility. Measures like price caps or volatility controls may be implemented to protect against manipulative practices, ensuring that the trading environment remains transparent and efficient.
To address the risks associated with investing in private companies, the PISCES framework proposes eligibility requirements for investors. Only sophisticated or high-net-worth individuals will be allowed to participate. Sophisticated investors must demonstrate experience in private equity markets or a deep understanding of the associated risks. High-net-worth individuals will need to meet financial thresholds, such as an annual income exceeding GBP 100,000 or net assets above GBP 250,000. PISCES platform operators will be responsible for verifying investor eligibility through review and checks.
Firms operating a PISCES platform will need to obtain authorisation from the UK FCA, demonstrating their capability to meet the system’s compliance requirements including showcasing sufficient technological infrastructure, adequate financial stability, and a clear operational plan. Operators will also bear the responsibility of monitoring companies listed on their platforms to ensure adherence to disclosure standards. Active surveillance of trading activities will be mandatory to detect and prevent market manipulation, insider trading, or other forms of market abuse. Platform operators must establish a transparent dispute resolution system to address complaints effectively, especially those related to disclosure failures or irregular trading practices.
The UK FCA places emphasis on mitigating the risks of market abuse within the PISCES framework. To achieve this, platform operators must implement advanced market surveillance tools to monitor trading activities in real-time and detect unusual patterns or fraudulent behaviour. The framework also includes provisions for penalties and sanctions against entities found violating trading rules or failing to meet disclosure obligations.
Before its full implementation, PISCES will operate within a financial markets infrastructure (FMI) sandbox which will enable firms to test trading mechanisms, disclosure practices, and operational logistics under regulatory supervision. The sandbox period will provide the UK FCA and other stakeholders with insights to identify potential gaps in the framework. The UK FCA proposes requirements for transparency around pricing and fees associated with PISCES platforms. Platform operators will need to disclose all trading and listing fees, so that investors are fully aware of the costs involved. Any additional charges, such as administrative or operational fees, must also be clearly outlined.
Simon Walls, Interim Executive Director of Markets at the FCA, described PISCES as a potential game-changer, stating: “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.”
Tulip Siddiq, Economic Secretary to the Treasury, added: “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. Today’s consultation 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.”
The UK Treasury plans to lay a statutory instrument before Parliament by May 2025 to establish the legal framework for PISCES. Following this, the UK FCA will finalise operational rules for platform operators, expected by mid-2025. A sandbox testing phase will run through the latter half of the year, allowing regulators and participants to identify and address any operational challenges. The full implementation of PISCES is anticipated by late 2025.
(Source: https://www.fca.org.uk/news/press-releases/fca-consults-new-private-stock-market, https://www.fca.org.uk/publication/consultation/cp24-29.pdf)
