PISCES – what we know so far…

Answer

On 14 November 2024, Chancellor Rachel Reeves used her first Mansion House speech to announce the government's commitment to introducing the Private Intermittent Securities and Capital Exchange System (PISCES), to “reinvigorate” the UK’s capital markets and “to support companies to scale and grow”.

Since the Chancellor's Mansion House speech, significant strides have been made in the introduction of PISCES. In November 2024, HM Treasury published its response to the consultation launched by the previous government in March 2024. In the response, HM Treasury stated its intention to lay a statutory instrument before Parliament by May 2025, which will provide the legal framework for the roll out of the PISCES Sandbox. In December 2024, the Financial Conduct Authority (FCA) launched its own consultation paper (CP24/29).

This article seeks to provide an overview of:

• what PISCES is;
• where PlSCES will fit in the UK's capital markets landscape; and
• the challenges which PISCES seeks to address. 

What’s PISCES?

In a sentence, ‘PISCES’ is a new type of secondary-only crossover trading platform for the intermittent auction of shares.

Breaking this down…

As a secondary market, PISCES doesn’t allow for capital raising. Trading platforms under the PISCES regime will facilitate the trading of existing shares rather than the issuing of new shares. This is one of the key ways in which PICSES platforms will differ from crowdfunding platforms, which are a predominantly primary market.

PISCES is technically a cross-over market in that both private companies and public companies (which aren’t already admitted to trading on a public market in the UK or abroad) can arrange for the sale and purchase of their shares. However, the emphasis is heavily on the sale of private company shares given that markets, such as the Alternative Investment Market (AIM), already exist to facilitate the trading of shares in public companies. 

One way PISCES will differ from existing multilateral trading facilities will be the intermittent way shares are auctioned on the platform. Investors will be able to trade their shares only during defined ‘trading windows’ (which will likely be monthly or quarterly), as opposed to the continuous trading during market hours of publicly quoted shares. Furthermore, on PISCES platforms companies will probably be able to set these periods, which gives them control over when liquidity events or changes in share ownership can happen.

Where will PISCES fit in the UK capital markets framework?

PISCES can be viewed as a ‘hybrid’ market, incorporating elements from both public markets (e.g., multilateral trading without any requirement for a share purchase agreement) and elements from private markets (eg, greater discretion on what information should be disclosed). Precisely where PISCES will position itself on this public-private market continuum remains the focus of the ongoing consultation paper. However, HM Treasury has, so far, indicated that PISCES will be “private-plus”, rather than ‘public-minus’ in nature.

By way of example, PISCES will have a "bespoke disclosure regime". While details are awaited, the government has confirmed that companies won’t be required to provide a prospectus, nor will they be required to identify and disclose all inside information, as on public markets. Instead, PISCES will be built on the private market principle of ‘buyer beware’. Companies will only have to disclose “core information” (focused on pricing parameters and how these valuations were prepared) and will be allowed to have “legitimate omissions” from this list. Companies won’t be required to verify that their pricing methodologies are fair or reasonable and, as such, the liquidity of PISCES shares will never be guaranteed (the FCA has prepared a template risk warning). In principle, therefore, deals on a PISCES platform will be more streamlined than transactions requiring private due diligence and less onerous than the full disclosure required by a quoted company. In practice, however, it may well be the case that some investors will still require a large amount of disclosure as part of their due diligence process. 

Other ‘private-plus’ features include confirmations that PISCES platforms will not be subject to:

• UK Listing Rules;
• the UK Takeover Code;
• transactional reporting requirements; or
• the UK Market Abuse Regime (UK MAR) (although abusive and manipulative behaviours will still be monitored and new rules will be enforced by the FCA).

Responses to the March 2024 consultation encouraged the exclusion of UK MAR-like rules. Stakeholders suggested that the creation of new rules for PISCES would create a novel hurdle for potential investors to navigate, inhibiting efficiency and acting as a potential deterrent. On the other hand, in excluding them, fraud risk is an obvious vulnerability for PISCES. “PISCES will struggle even to get out of the sandbox in which it’s being developed if it fails to build adequate trust and confidence regarding the dangers of investors' being cheated out of their money” (Eilís Ferran, Professor of Law, University of Cambridge).

What challenges does PISCES seek to address?

PISCES aims to address two major challenges. Firstly, with M&A activity and initial public offerings (IPOs) down globally, creating ways for private companies and investors to access increased liquidity has been a challenge for governments across the world. Secondly, the UK faces the particular challenge of "stemming the outflow of homegrown companies" (Eilís Ferran) opting to list on US, rather than UK, public markets. Therefore, the objectives of PISCES can broadly be summarised as:

• providing a liquidity solution for private companies and investors to promote growth; and
• serving as a steppingstone to IPO in the UK for private companies.      

PISCES as a liquidity solution

PISCES hopes to offer private companies and investors a way to access increased liquidity, promoting growth in a cost-effective manner.

The demand for innovation in the UK secondary liquidity market has increased as M&A activity and IPO listings have stalled. Last year, Crowdcube acquired secondary liquidity site Semper with the aim of providing a wider range of liquidity solutions for European startups (FTAdviser). Furthermore, while PISCES is something of a domestic novelty, internationally it’s not the first liquidity solutions market for private companies and investors. In May 2024, Dubai Financial Market launched plans for ARENA (a platform for IPOs) and, in the US, Nasdaq Private Market has successfully been operating as a secondary trading venue for private companies since it was formed in 2013.

The key question, therefore, is whether PISCES will be successful in its goal of providing private companies with a liquidity solution by increasing funding options.

At least initially, only certain investors will be allowed to trade on PISCES. These include:

• institutional investors;
• employees of participating companies; and
• investors who meet the definition of ‘high net-worth individuals’, ‘self-certified sophisticated investors’ and ‘certified sophisticated investors’ under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

Notably, the list of potential investors, at least initially, will exclude most retail investors, reflecting the risks inherent in PISCES’ regulatory design. This exclusion has been criticised as being “inconsistent with efforts to increase direct retail participation in capital markets” and, therefore, unnecessarily curtailing the options available to PISCES companies to access liquidity: “making a 'buyer beware' market safe for retail investors is a difficult challenge but tackling it cannot be put off indefinitely” (Eilís Ferran). Furthermore, PISCES platforms will not allow share buybacks (although this is under review) which, given that the liquidity of companies on PISCES will likely be limited, seems like a further missed opportunity.

On the other hand, PISCES will (hopefully) increase funding options for private companies in other ways. Institutional investors on PISCES will enjoy enhanced liquidity for their private company shares which, combined with favourable tax treatment (transactions on a PISCES platform will be exempt from stamp duty and stamp duty reserve tax), will motivate investment. Moreover, for employees "one of the biggest obstacles for private company share ownership is that staff can be put off by the general inability to sell those shares at regular intervals" (Investcentre). PISCES removes this hurdle through periodic trading windows, hopefully incentivising employee investment and broadening the potential investor pool.

PISCES as an IPO steppingstone

In recent years, the UK has faced a challenging environment for IPOs, with a decline in fresh listings and a series of notable de-listings, giving rise to negative press regarding London as an equity listing venue. Furthermore, following Trump’s victory in the US Presidential elections, some fear the draw of a deregulated US funding market will provide an even bigger temptation for European founders to list in the US (FTAdviser). With even the biggest supporters of the UK public markets now accepting that "listing reform will not equip London to compete on an equal footing with the main US exchanges for major international listings", the UK's objective has shifted to "stemming the outflow of homegrown companies" (Eilís Ferran).

At the February 2025 Capital Markets Reform Update, delivered by the Capital Markets Industry Task Force, Dame Julia Hoggart emphasised that PISCES forms part of a broader initiative to reduce the cliff edges between different stages of financing in a company’s lifecycle, improving the UK “funding continuum” between private and public capital spheres and better enabling companies to stay and scale in the UK. PISCES aims to provide private companies with an alternative means of accessing liquidity and ease the transition to becoming a public company, supporting London as an equity listing venue. Therefore, PISCES can be seen as a steppingstone to IPO for private companies, "getting them used to regular financial reporting, transparency as a business and understanding that directors run a company for the best interests of shareholders"(Investcentre).

It’s arguable, however, that a steppingstone to listing on the London main market already exists in the form of AIM (and, to a lesser extent, the Acquis growth market). While PISCES will not be a direct competitor to AIM (differing in that it’ll not support capital raising and it won’t be open to the general public), perhaps this will serve to emphasise the benefits of AIM over PISCES (e.g., allowing share buyback) (Investcentre). Furthermore, as Dame Julia eluded to at the capital markets reform update, Lord Hill’s Listing Review report has already brought about sweeping reforms to UK public capital markets. Indeed, recent changes to the UK Listing rules and prospectus regime mean these are no longer perceived to be a barrier to listing in the UK. With AIM already providing a ‘public-minus’ steppingstone to listing on the London main market, and regulatory reforms removing barriers to main market listing, it’s arguable that PISCES will be superfluous to requirements. 

Further reading

To learn more about PISCES and what it might mean for UK capital markets please see the articles by Burges Salmon LLP below:

• PISCES: an overview of the Private Intermittent Securities and Capital Exchange System;
• PISCES – next steps on the journey to create a new secondary market for shares in unquoted companies;
• PISCES: FCA issues consultation on new private stock market; and
• CLLS and Law Society publish feedback on PISCES.

This article is intended to provide a general overview of the PISCES regime. It doesn’t constitute legal advice and the information contained in this article shouldn’t be construed as legal advice.

Joseph Grosvenor is a trainee solicitor at Burges Salmon LLP.