UK Treasury Publishes Regulatory Framework for PISCES, A New Form of Private Market

HM Treasury published on 15 May 2025 the legal framework which will govern the establishment and operation of the Private Intermittent Securities and Capital Exchange System (PISCES), a new type of intermittent private capital market in the United Kingdom. A PISCES will be a secondary market for the trading of private company shares and offer more control to private companies over the marketing of their shares and a lesser degree of ongoing regulatory compliance than would apply on a public market.

Fewer companies are seeking admission to UK public markets, with the companies which are doing so often being further along in their evolution than was historically the case. This has reduced exit opportunities, and liquidity more generally, for investors in these companies, including employees looking to realise the benefits of equity-based incentives, as well as restricting the ability of new investors to access such companies.

In response, the UK government has proposed a number of reforms to its capital markets regime, the creation of PISCES being among them. After a period of consultation, during which the PISCES model was significantly revised, the Financial Services and Markets Act 2023 (Private Intermittent Securities and Capital Exchange System Sandbox) Regulations 2025 (the Regulations) have now been published. The regime adopts elements of both private and public markets.

CORE FEATURES OF A PISCES

The following will be the core features of a PISCES:

• Only available to private companies, i.e., those not listed or traded on any public market in any jurisdiction; however, non-UK companies can use a PISCES
• It can only operate as a secondary market
• Only shares can be traded
• Trading windows must be intermittent and of limited duration; these could be regular events, e.g., quarterly, half-yearly, ad hoc
• Trading is intended to be multilateral, i.e., with multiple buyers and sellers
• With some exceptions, retail investors will not be permitted to participate in the market; however, directors, officers, employees and certain consultants of the company’s group may participate

In addition, a company proposing a trading event on PISCES will be able to exercise a degree of control over the trading process. In particular, and subject to the specific rules applicable to the relevant PISCES, the company will be able to do the following:

• Specify when trading events will occur
• Set floor and ceiling prices
• Exclude certain types of potential purchasers from the process

REGULATORY APPROACH TO PISCES OPERATORS

While PISCES will be multilateral platforms, they will not be classified as multilateral trading facilities (MTFs), but will instead be a new form of market with its own bespoke regulatory framework.

The new regime will operate under a Financial Market Infrastructure sandbox created by HM Treasury under the Financial Services and Markets Act 2023, with the Financial Conduct Authority (FCA) having powers to implement and oversee it for five years. The framework is temporary and may be updated based on lessons learnt from the sandbox period. There will also be a number of changes made to existing UK laws to enable the PISCES to operate (e.g., changes to the financial promotion regime).

PISCES operators will be required to have a specific authorisation from the FCA, a PISCES Approval Notice (PAN), to operate a PISCES, and several potential operators are understood to be in discussions with the FCA about applying for a PAN. Therefore, at least initially, it is expected that there may be several PISCES.

Significant rulemaking authority relating to the oversight of PISCES operators and the operation of PISCES will be delegated to the FCA, and the FCA is expected to publish its rules (the PISCES Rules) in June 2025. The Regulations grant—and the PISCES Rules are expected to grant—a degree of flexibility to PISCES operators, which may result in different PISCES operating with different rules governing admission to, and the marketing and sales process on, that platform.

DISCLOSURE AND TRANSPARENCY

The UK Market Abuse Regulation and the wider disclosure and transparency rules applicable to MTFs will not apply to PISCES. Instead, the FCA will be granted the power to develop its own bespoke transparency and disclosure rules for PISCES. Among other things, these will set out a list of core information which must be disclosed to potential purchasers.

Under the Regulations, investors will have a right to claim compensation for losses resulting from disclosed information being untrue or misleading, or the omission of any information required to be disclosed under the PISCES Rules or the operator’s own rules. Liability for losses arising in relation to core information (other than forward-looking statements) will be determined, broadly, by reference to a “negligence” standard, while a higher “recklessness” standard will apply to losses arising in relation to forward-looking statements and non-core disclosures.

OTHER POINTS TO NOTE

Share buybacks will not be permitted on a PISCES, including through intermediaries.

The Takeover Panel has previously confirmed that the Takeover Code will not apply to a company solely as a result of it being admitted to a PISCES.

The UK government has previously confirmed that transfers of shares on a PISCES platform will be exempt from stamp duty and stamp duty reserve tax, and a draft statutory instrument to this effect has been published.

On 15 May, HM Treasury announced an intention to introduce legislation to allow employers to amend the terms of existing Enterprise Management Incentives and Company Share Option Plans to include a PISCES trading event as an “exercisable event” (with the resulting tax advantages) without any loss of tax advantage.

NEXT STEPS

The Regulations will come into effect on 5 June 2025. The PISCES Rules are expected to be published by the FCA later in June 2025. Following that, potential PISCES operators are expected to make formal applications to the FCA for a PAN, with the possibility that there may be PISCES operating at some point in the second half of 2025.

FURTHER THOUGHTS

There has been a considerable amount of discussion (both positive and more sceptical) as to the level and nature of the likely interest of companies and investors in using PISCES as well as the potential implications of PISCES for the rest of the UK’s capital market’s ecosystem. It will be very interesting to watch the development of this market over the next several months.