Private Intermittent Securities and Capital Exchange System: December 2024 update

The UK Government has confirmed its proposals to press ahead with the Private Intermittent Securities and Capital Exchange System (PISCES). In her first Mansion House speech, Rachel Reeves confirmed that reforming capital markets was a “priority” for the government, and committed to establish PISCES, and to open the regulatory sandbox, by May 2025.

To recap, PISCES is the proposed platform which would allow private and other unquoted UK and overseas companies to trade their securities during intermittent trading windows.

We wrote about these innovative proposals when HM Treasury issued a consultation paper in March 2024. Since then, there have been several significant developments:

30 October 2024 – The Autumn Budget confirmed that PISCES trading would be stamp duty exempt
14 November 2024 – Government response to the consultation paper – view here
14 November 2024 – HM Treasury published a draft Statutory Instrument on The Financial Services and Markets Act 2023 (Private Intermittent Securities and Capital Exchange System Sandbox) Regulations 2025 – view here

In this article, we outline the key changes made since the March 2024 consultation paper, and what we can expect next.

What hasn’t changed?

Secondary market only – participators will only be able to trade existing shares and not new issues.
Intermittent trading only – shares will only be traded in specific windows.
Unlisted companies only – PISCES will only be open to companies not trading on a public market.
No buybacks – companies will not be able to carry out buybacks on PISCES, although the government has confirmed that they will revisit this at a later date.

Tax breaks

On 30 October 2024, the government announced that HM Treasury could pass secondary legislation to exempt PISCES related transactions from stamp duty and stamp duty reserve tax. These exemptions will be introduced in the Finance Bill 2025.

These exemptions are aimed to incentivise participation and improve the competitiveness of PISCES.

Who can participate?

The government has expanded the group of investors eligible to participate in the sandbox. In addition to institutional and professional investors, the following retail investors may participate:

Self-certified sophisticated investors, sophisticated investors, and high net-worth investors, (as defined in the Financial Promotion Order (FPO));
Employees of companies participating in PISCES; and
Employees of companies in the immediate corporate group of participant companies, provided their employment is connected to the participant company’s business.

Eligibility may be broadened further when the sandbox ends.

Those who wish to operate a PISCES platform must be Financial Conduct Authority (FCA) authorised. The application procedure and requirements are detailed in the draft Statutory Instrument.

Approach to market abuse & disclosure

The key change to PISCES is the U-turn in applying the market abuse regime. This comes after stakeholders raised concerns that it would be challenging for PISCES participators to comply with current public company MAR requirements.

The FCA will now have powers to create a new disclosure regime, tailor-made for PISCES. Under this regime, disclosures and pre- and post-trade transparency will need to be made to participating investors, although they need not be made public. Transaction reporting requirements will also be abandoned.

Nevertheless, the FCA will still monitor and sanction abusive or manipulative activities.

Financial promotions

The government intends to modify the FPO to ensure that PISCES disclosures are exempt from the financial promotion restrictions.

The government will also modify the FPO to ensure that PISCES shares are caught by the exemptions for high-net-worth individuals and self-certified sophisticated investors.

Conclusion

With these exciting updates, the government has confirmed its commitment to establishing PISCES. This will provide a unique – and world-first – opportunity for shareholders of unlisted companies to sell down their investment, provide liquidity, and equip the company for an initial public offering (IPO).