Mansion House: UK Government Finalizes PISCES Policy

HM Treasury has published a consultation response, policy note and draft legislation to deliver its commitment to establish the Private Intermittent Securities and Capital Exchange System (PISCES), a new innovative market for trading private company shares. The documents describe how the PISCES regime, which is a key part of the latest Mansion House reforms, will be established, reflecting the policy decisions and design choices of the government.

In its consultation response, the government notes that the proposal to establish a PISCES Sandbox was well received as an appropriate way to develop and test this new regulatory regime. The government confirms that it will proceed to establish PISCES in a sandbox, granting the Financial Conduct Authority the relevant powers to implement and operate it. The sandbox will run for five years. Firms that want to operate a PISCES platform will need to apply to the FCA for approval and those trading on such a platform will be subject to modified regulations. Future measures to make PISCES permanent will depend on the outcomes of the sandbox.

The government confirms that PISCES will be a regulated secondary market for trading of existing shares in intermittent trading windows. Only shares in companies whose shares are not admitted to trading on a public market (in the U.K. or other jurisdictions) will be eligible for trading on PISCES. The market will only be open to institutional investors, employees of participating companies and high-net-worth individuals and self-certified or certified sophisticated investors. Contrary to the government's proposals, the PISCES regime will not include a public market style market abuse regime. The FCA will be empowered to establish a new and bespoke disclosure regime for PISCES, under which disclosures and pre- and post-trade transparency will not be required to be made public but will need to be provided to all investors participating in a PISCES trading event. In addition, transaction reporting requirements will not apply, although the FCA may impose record-keeping obligations. Operators of PISCES markets will have discretion as to whether or not shares must be recorded into a central securities depository. Buy-backs will not be possible on PISCES; however, this may change at a later date if deemed appropriate after the initial launch of the PISCES Sandbox.

The policy notes describes the provisions of the draft Financial Services and Markets Act 2023 (Private Intermittent Securities and Capital Exchange System Sandbox) Regulations 2025. Technical comments on the draft Regulations may be submitted until January 9, 2025. It is intended that the PISCES legislation will be introduced by May 2025. The FCA will consult on its proposed rules on PISCES in due course, finalizing the rules before opening the Sandbox for applications.

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