What is PISCES? The UK’s new private stock market explained

The government is one step closer to launching its Private Intermittent Securities and Capital Exchange System, also called PISCES, after the London Stock Exchange (LSE) announced it’s on board.

PISCES is a bid to allow private companies access to a wider range of investors as they seek to gain funding, mirroring how public companies trade shares on the stock exchange.

Launching this summer, it will allow startups to try out Initial Public Offering (IPO) waters, but with control over how and when they trade.

The LSE is now looking at a shakeup of its rules and trading systems in order to launch its new Private Securities Market to incorporate PISCES.

Participants will apparently not be regulated under the same market abuse or transaction reporting rules that publicly trading companies are. However, there will be requirements for companies. These changes to the LSE’s rules and regulations are now being scrutinised.

What is PISCES?

PISCES is a ground-breaking framework for buying and selling private company shares, which will open up the LSE – and other participating stock exchanges – to private companies.

In development since 2021, the platform is a recognition that companies are choosing to stay private for longer; but still want an organised marketplace where they can trade their shares.

The focus is growth – connecting investors with growing ventures in one place. It is a key pillar of the government’s Plan for Change which was launched in December. PISCES falls under the wider plan to “raise living standards” by ensuring “working people have more money in their pocket” and the UK “deliver[s] the highest sustained growth in the G7”.

Emma Reynolds, Economic Secretary to the Treasury, reiterated this in a statement in May, saying: “Getting PISCES up and running will support UK growth companies. This will boost our capital markets and help to grow our economy.”

The treasury has also confirmed that legislation will be made alongside PISCES that employees retain tax advantages on the share options they have. This, it says, is hoped will “make PISCES more attractive and encourage even more businesses to use the platform”.

When will PISCES launch?

The legislative framework for PISCES was finalised in May after the Treasury laid the Statutory Instrument before Parliament. The framework includes the disclosure arrangements companies will work by; how they can organise and run trading events; and the rules over market manipulation and oversight.

In June, the FCA “rang the bell” on the new stock market, giving more details of the path to reality. These include information how PISCES will be tested and by who. It states that: “Access to PISCES will be limited to institutional investors, high-net-worth individuals, sophisticated investors and employees of participating companies.”

To get access, though, companies need a PISCES approval notice (PAN). To apply, they need to share their firm’s current permissions; how they are planning to comply with PISCES’ rules; and what their commercial motivations are, among other requests. There is also a list of supporting documents that companies must submit, plus details on the fees.

Once approved, companies can get testing through a Sandbox, which opened on June 10. This contained environment will be closely monitored but live and with real companies and investors. The end game is that PISCES will become permanent after June 2030.

At the same time, the LSE is calling for member firms to register as Registered Auction Agents (“RAAs”) in its Member Portal, which is a huge step towards PISCES’ integration.

Why are companies staying private longer?

Some of the UK’s biggest startups – among them Deliveroo and Wise – have become notable absentees from the LSE in recent months. Deliveroo was acquired by US rival DoorDash earlier this year, while Wise moved its primary listing to the US at the start of June.

The path to listing has traditionally been seen as a huge milestone for any business, but homegrown companies appear to have begun being put off by the perceived regulatory burden and the time and cost of executing a UK IPO.

PISCES offers a try-before-you-buy option for companies, whether success stories like Deliveroo, Wise, Revolut, and Octopus or smaller ventures desperate to scale.

As James Klein, Partner at law firm Spencer West LLP explains, it delivers “…a flexible path to liquidity so private company shareholders, including founders and early-stage investors, can realise gains,” but in a protected environment.

Klein adds that this might provide a boost “in a period of relative angst in the UK’s IPO pipeline” as an intermediate option for ventures, which are not feeling ready to list.