Getting ready for PISCES

A PISCES platform represents a new type of regulated trading platform designed to facilitate the intermittent trading of existing shares in private companies within a multilateral system. The idea is loosely modelled on Nasdaq Private Markets, where blocks of shares in private US companies are frequently traded.

(Technically PISCES – short for the Private Intermittent Securities and Capital Exchange System - refers to the regulatory regime under which the new trading platforms will operate. Where we refer to “PISCES” or “it”, generally we mean a platform operating under the PISCES regime.)

•    Offers a route to liquidity for existing investors in private companies without having to wait for an IPO or M&A deal. Although a PISCES platform cannot be used for a primary fundraising, the increased prospect of liquidity should also help attract primary investors.
• Enables a more orderly process and better price formation than if multiple shareholders were to sell separately.
• Helps incentivise and retain employees who hold or may in future acquire shares or options.
• Helps a company rationalise or broaden its shareholder base.
• Offers individual and institutional investors an opportunity to acquire shares in private companies that ordinarily would be difficult to acquire.
• Helps private companies prepare to become listed, particularly by requiring key information to be disclosed in a semi-public environment.

All UK companies and overseas companies that do not already have shares admitted to trading on a public market in the UK or overseas will be eligible to participate. In practice, PISCES is likely to appeal most to larger or high growth companies and those with a diverse shareholder base, particularly where this includes employees.

PISCES platforms are likely to be useful for smaller, more frequent sales – as an alternative to existing venues like Asset Match and JP Jenkins. But for larger secondary market sales – like those done recently by Revolut and Monzo – there is unlikely to be sufficient demand via a PISCES platform, so a company will probably still need to engage an investment bank to broker a private sale through a book-building process or “tender offer”.

Private equity houses will likely continue to favour other mechanisms to achieve an exit. Where a PE house is looking to buy, they will also probably prefer a bilateral process outside a PISCES platform to conduct due diligence and negotiate suitable rights under the company’s articles and shareholders agreement.

As noted above, the regulatory framework for PISCES is now in place, and stock market operators and FCA-authorised firms with the relevant permissions can apply to the FCA for approval to operate a PISCES platform. We expect to see the first platforms become operational in H2 2025. Eligible companies will then be able to apply for their shares to be admitted to intermittent trading on their chosen platform.

The London Stock Exchange is expected to be one of the first organisations to offer a PISCES platform, which will be called the Private Securities Market. Globacap have also said they intend to operate one, and a number of other organisations are reported to be considering it.

If a company decides to participate in a PISCES platform, in principle any existing shareholder will be able to sell shares unless they are subject to contractual restrictions. In practice, a company will need to decide which classes of shares can be sold, and whether to set any minimum or maximum price (see right). In relation to employees, a company will need to decide which employees should be permitted to sell and what proportion of their holding they can sell. Companies will want to provide employees with sufficient information to make an informed decision but without advising them what to do. Careful thought will be needed about how such matters are communicated internally.

Initially, only certain categories of persons will be permitted to buy shares on a PISCES platform. Broadly, they must be an institutional investor; an employee of or consultant to the participating company; the trustee of an employee share scheme established by the participating company; or an individual who is appropriately certified as a high net-worth individual (HNWI) or sophisticated investor. Later on, retail investors may also be permitted.

Most PISCES platforms are likely to use an intermediated model in which brokers place orders on behalf of their clients. As well as conducting the usual KYC checks, brokers will ensure that would-be buyers meet the eligibility criteria set by the platform operator and any set by the company and, where relevant, that they are employees, HNWIs or sophisticated investors.

Companies will not be able to buy back their own shares via a PISCES platform, although again this may be permitted later on. However, as noted above, an employee benefit trust will be permitted to buy shares.

Yes, provided the relevant PISCES platform allows this and the conditions are designed to promote or protect the company’s legitimate commercial interests. Companies should be able to exclude competitors, restrict trade execution sizes and/or specify that only particular investors or types of investors can buy. In practice, any conditions will need to be objective and specific so an intermediary can determine whether a would be investor qualifies.

Trading will happen in intermittent trading windows – for example, quarterly, biannually or yearly. Subject to the PISCES operator’s rules, companies will have the flexibility to decide the length of time between trading windows and the duration of each trading window.

Yes. To support efficient price discovery, details of the last traded price and volume traded during any previous PISCES trading event will have to be disclosed as part of the company’s “core information”: see below. During a trading event, eligible investors will have access on a real-time basis to: (i) current bid and offer prices, and the depth of trading interests at those prices; (ii) where the platform matches orders on the basis of a periodic auction and a trading algorithm, the indicative uncrossing price and volume that would be executable at that price; and (iii) the price, volume and time of transactions actually executed on the platform.

Yes in principle, although this will depend on the rules of the relevant platform. As part of the company’s “core information”, it will have to disclose the basis on which any price parameters were determined, and whether an independent third party or key investor was involved: see below. But platform operators will not be required to ensure that any price parameters are fair or reasonable or to check the methodology used.

Yes. Although shares will need to be free of restrictions during a PISCES trading window, in principle normal restrictions can apply again once the window closes. In many cases, a company will need to amend its articles, or temporarily “switch off” certain provisions, before it participates in a PISCES platform – for example, to disapply or modify the rules on transfers of shares and pre-emption rights. Any shareholders’ agreement may also need to be amended or certain provisions temporarily switched off. Depending on the platform used, arrangements may also need to be made for shares to be held in CREST (dematerialised) to enable trades executed via PISCES to be settled electronically.

No. Before the start of each trading window, a participating company will have to make available on its chosen PISCES platform certain “core” information about itself and the shares to be traded (see box right). Core information is mandated by FCA rules.

Platform operators will be able to require participating companies to disclose certain additional information – for example, using a “sweeper model” – under which a company would have to disclose all other information the board considers relevant to investors – and/or an “ask model” – under which eligible investors would be able to ask the company to provide specific additional information (for example, via a Q&A function). Any response provided by the company would be visible to all eligible investors. Companies will also be able to provide other information voluntarily: for example, some may choose to provide forward-looking financial information or details of their business strategy and objectives.

Platform operators may exceptionally allow a company not to provide an item of required information where the company has a legitimate reason for withholding it - for example, where its disclosure would be likely to prejudice the company’s legitimate interests or contractual arrangements with other parties prevent disclosure. Any such omission will need to be highlighted and explained. Platform operators will specify how long before the start of a trading window the required information, together with any additional information the company provides voluntarily, must be made available. However, a participating company will not have to identify or disclose on a continuous basis all “inside information” in the way that listed companies are required to do under the UK Market Abuse Regulation. Disclosures will not have to be approved by a platform operator.

• Overview of corporate and organisational structure and description of activities and products
• Overview of management structure and details of directors and senior management
• Three years of financial statements and audit reports
• Capital structure, ownership, and key provisions of the articles of association and any shareholders agreement
• Share capital and rights and restrictions attached to shares
• Summary of any employee share schemes and the aggregate amount of options and awards granted
• Details of recent transactions by directors in company shares and their intentions for the trading event
• Material contracts entered into outside the ordinary course of business 
• Share capital raises within the last three years, including the date, issue price and amount raised
• Material risks relating to the company and its shares
• Any significant change to the company's financial position since the end of the last financial period
• Major shareholders – i.e. broadly a person who (i) holds over 25% (or any lower percentage specified by the platform operator) of the shares or voting rights in the company; or (ii) has the right to appoint a majority of the board; (iii) exercises, or has the right to exercise, significant influence or control over the company
• Details of any price parameters and how they were determined (for example, via a pre-marketing or bookbuilding exercise); whether they were set by the company or an independent third party, such as an auditor or valuer, if set by the company, whether a key investor or other third party was involved
• Details of any material transactions with a related party during the previous 12 months 
• Details of the traded price and volume on the last PISCES trading event, and details of any future trading events

Yes. A participating company will be liable to compensate an investor who suffers loss as a result of a false or misleading statement in the information published on a PISCES platform. In respect of the “core” information, a company will be liable if, broadly, it fails to take reasonable care to ensure the information is accurate (i.e. on a “negligence” basis). But in respect of any additional information required by a platform operator, and any information provided voluntarily, a company will be liable only if its directors knew the information to be untrue or misleading or were reckless as to whether it was (i.e. a “fraud” or recklessness basis).

Given the liability risks, a company will need to be confident that participating in PISCES will provide significant benefit to existing shareholders.

All disclosures will have to be made available – probably using a “controlled data room” type of model - to all persons entitled to access the relevant trading event, which could include individuals and institutions considering whether to purchase shares. While platform operators are likely to require eligible investors to agree to confidentiality undertakings, enforcing these agreements could be difficult. Companies should probably assume that any information they make available on a platform could sooner or later come into the public domain.

No.

Transfers of shares made via a PISCES platform will be exempt from stamp duty and stamp duty reserve tax.

Where arrangements are in place for a company’s shares to be traded on PISCES, they will qualify as “readily convertible assets”, even if a trading window is not open at the time an employee acquires shares in their employer. This means that the company will have to operate PAYE in respect of any income tax due in respect of shares acquired by employees and (employee’s and employer’s) National Insurance contributions will also be payable on the amount subject to income tax. HMRC has also confirmed that a PISCES trading window can be a specified event that allows Enterprise Management Incentive and Company Share Option Plan options to be exercised without losing their tax advantages, and that it will allow existing contracts to be amended in order to achieve this. For share valuation purposes, transactions executed via PISCES will be treated as prima facie evidence of the shares’ market value.

Although PISCES platforms will not by themselves solve all the problems facing UK capital markets, we believe they will play a useful role in offering a new route to liquidity for existing investors in private companies, including employees, either as an alternative or a stepping stone to IPO, and should help companies stay and grow in the UK. Evidence from the US and other markets suggests that, although larger stakes will continue to be sold via bilateral negotiation or a bank-facilitated book- building process, smaller stakes will attract demand from specialist investors, VC secondary funds, family offices and suitably qualified individual investors.

Demand from UK pension funds is also likely to increase following the signing of the Mansion House Accord in May, in which 17 major UK pension providers committed, by 2030, to make a minimum 10% allocation to private markets across all main default funds in their DC schemes, with at least 5% going into UK private markets