On 17 December 2024, the Financial Conduct Authority (FCA) published a consultation paper, CP24/29, setting out its proposed regulatory framework for the Private Intermittent Securities and Capital Exchange System (PISCES).

Background

The Government consulted earlier this year on the PISCES, a proposed new type of trading platform that will enable intermittent trading of private company shares using market infrastructure. It published its response in November 2024, confirming that its PISCES proposals were well received and it intends to proceed. PISCES will be developed using a ‘financial markets infrastructure (FMI) sandbox’ – the second use of the FMI sandbox powers after the Digital Securities Sandbox. Over the 5-year PISCES sandbox period, firms wishing to run a PISCES platform will need to seek approval from the FCA, and those involved in trading on a PISCES platform will be subject to modified UK regulation under the sandbox regime.

FCA proposals

The FCA’s proposed regulatory framework for PISCES will be established under an FMI sandbox created by HM Treasury. CP24/29 should be read alongside:

  • HM Treasury’s response to its consultation on the PISCES sandbox.
  • The draft Financial Services and Markets Act 2023 (Private Intermittent Securities and Capital Exchange System Sandbox) Regulations 2025 (see here).

In CP24/29, the FCA sets out its proposed rules and guidance for the PISCES sandbox as well as alternative options it considered in our policy development process. The FCA notes that this framework is temporary and may need to be updated it as it learns from the operation of PISCES – this is intended to help shape the possible permanent regime.

Next steps

The deadline for responses to CP24/29 is 17 February 2025.

HM Treasury plans to lay a statutory instrument before Parliament by May 2025, which will provide the legal framework for the PISCES sandbox, and the FCA expects to publish its final rules shortly thereafter. The FCA also intends to publish further information in early 2025 for firms interested in applying to be a PISCES operator. 

NRF comment

Hannah Meakin commented:

“PISCES is a new and innovative model for the secondary trading of shares in private companies that will be incubated in a sandbox. It uses aspects of both private and public markets but is closer to the private model – described as “private plus”.

“This is the first consultation paper from the FCA, which – though it has been working closely with HM Treasury throughout the process – is the body empowered to set the rules that PISCES operators and issuers will have to comply with. The paper provides a lot of flesh to sit on the bones of the draft legislation.

“There are numerous interesting aspects, but I would call out two in particular. One is the optionality that operators will be allowed to build into their offerings, such as in relation to some of the disclosure mechanisms. The second is the FCA’s proportionate and pragmatic approach, given these are less liquid investments and certain retail users will be able to participate.”