FCA's PISCES Framework: New Horizons for Private Share Trading

Written by Khushi Kaushal, 11 Jan 2025.

Understanding the FCA's PISCES Framework

In December 2024, the UK's Financial Conduct Authority (FCA) released a consultation on a new regulatory framework for a platform named PISCES. This framework aims to support the intermittent trading of shares in private companies.

The Private Intermittent Securities and Capital Exchange System (PISCES) is a significant advancement in the UK's financial landscape. It will offer a regulated and flexible trading system for private companies and institutional investors. This framework facilitates the increasing demand for liquidity in private markets, providing more transparency and efficiency in trading opportunities.

What is PISCES?

FCA's PISCES Framework: New Horizons for Private Share Trading 1

PISCES is an unexplored trading platform centred on shares of private companies. It allows companies to trade their shares intermittently, creating a valuable market for investors and shareholders. PISCES lets companies offer shares for sale only during designated events. This framework gives private companies an alternative to an IPO, enabling them to maintain control and confidentiality while benefiting from market liquidity.

Eligible participants include institutional investors, employees of the listed companies, and high-net-worth retail investors. This selective participation ensures that PISCES caters to a specialised and focused group of investors while enhancing market transparency.

Key Aspects of the FCA Consultation

The FCA consultation sets forth the regulatory framework and is the key guidance for establishing the PISCES platform. The document includes rules, guidance, and principles that will preside over the platform's operations, focusing on areas such as disclosure, market integrity, and event management for trading.

1. Custom Disclosure Regime

A vital element of the consultation regards the disclosure requirements for companies using PISCES. Unlike public companies, those listed on PISCES will not be subject to the UK Market Abuse Regulation (UK MAR). However, they will still adhere to a customised disclosure regime. Companies must disclose information, including financial statements, risk factors, and significant company developments. Furthermore, PISCES operators will require companies to reveal their trading intentions, such as partner's plans to buy or sell shares during trading events.

This disclosure regime seeks to issue investors with key information to inform their investment decisions. Operators will also have the choice to request additional information if vital for the coherent functioning of the platform.

2. Organising and Running Trading Events

 The document further addresses the duty of PISCES operators in organising and leading trading events. A key feature of PISCES is the ability for companies to restrict those who FCA's PISCES Framework: New Horizons for Private Share Trading 2 can purchase their shares during trading events. This notion allows companies to protect their commercial interests by blocking competitors from acquiring shares. The FCA also calls for pre-and post-trade transparency rules, guaranteeing that market participants have sufficient information regarding trades and prices while conserving fairness and order in the market.

3. Market Oversight and Integrity

PISCES framework seeks to uphold market integrity. The FCA requires operators to implement mechanisms that reduce market manipulation and abuse in trading practices. PISCES operators will be held accountable for monitoring trading activities and investigating any potential breaches of market regulations. The FCA will overlook these operators to confirm practices comply with the regulatory framework enforced. This would help to maintain a fair and transparent market.

4. Consumer Protection

The document also deliberates on consumer protection measures for retail investors associated with PISCES. The protections support investors in making well-informed decisions by ensuring that only eligible parties, such as high-net-worth individuals and certified investors, can purchase shares on this platform. Furthermore, retail investors may seek an advantage from measures formulated to understand better the unpredictability of trading private company shares.

What's Next?

The FCA has asked for feedback on the proposals, with a February 17, 2025 deadline. Following the review of any feedback, the FCA hopes to finalise the framework and publish the rules by May 2025. This would require approval from HM Treasury's statutory instrument to set the legal framework for PISCES. Once the rules are enforced, interested firms can apply to utilise a PISCES platform.

Companies and investors must remain informed about the final regulations and understand how the framework will influence their investment strategies and operations.

Conclusion

PISCES signifies a pivotal turn in the UK's financial markets; it provides private companies with a new regulated environment for trading shares while yielding investors increased opportunities in private equity markets. The FCA seeks to ensure a fairer market while upholding a focus on market integrity and transparency.