UK financial regulator The FCA has announced that it is consulting on a new private stock market. Proposals for a new platform – The Private Intermittent Securities and Capital Exchange System, or PISCES – on which shares in private companies will be bought and sold, have been set out by the FCA.
The FCA said that PISCES will open the door to more opportunities for investors to take stakes in private companies. Greater confidence to invest in these companies will lead to more funding to help them to grow and scale up.
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. A world-leading innovation in private markets, PISCES could provide opportunities for more diversified returns for investors.
Such opportunities come with risk, which is why the FCA is consulting on risk warnings for investors to help them make informed investment decisions.
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.”
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.”
PISCES was a central pillar of the Chancellor’s Mansion House speech just over a month ago, and the FCA has been working in partnership with the Treasury to build the right framework.
PISCES follows the FCA’s wide-ranging reforms to the UK’s world-leading markets to boost competitiveness by:
- reforming the prospectus regime, to make it cheaper and easier for companies to raise money in the UK,
- giving asset managers greater freedom in how they pay for investment research and setting out proposals to extend that flexibility,
- opening the Digital Securities Sandbox which allows firms to test innovative new technologies for trading and settling assets, and
- setting out a roadmap to regulating crypto.
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 said they will use any lessons from the sandbox period to improve the regime before making it permanent.
