A new approach for trading private company shares is getting the green light from the U.K.’s Financial Conduct Authority (FCA).
The FCA has unveiled final rules for a new type of market, known as the Private Intermittent Securities and Capital Exchange System (PISCES), which will launch later this year.
The platform is being introduced through a regulatory sandbox, allowing the FCA to test the design before adopting a permanent regime in 2030.
“We want PISCES to be an innovative, flexible, efficient and effective solution for private companies, to provide investors and employees with concentrated liquidity events in which to buy and sell shares,” the FCA said in a notice setting out its rules.
“It should enable private companies to reach a broader range of investors, strengthening their capital-raising prospects outside of PISCES, growth aspirations and support their potential future transition to public markets,” it added.
The rules detail requirements for participants in these platforms, including issuers, investors, trading platform operators and trading intermediaries.
Under the model, companies that participate in the private equity platform will have some control over who can buy their shares, and they will be able to set trading price parameters (price floors and ceilings). Trading could occur through periodic auctions or during set periods of continuous trading.
Investors on the platforms — limited to “sophisticated” and high net worth investors, company employees and institutional investors — will receive specified risk disclosures. Firms seeking to run a PISCES platform will need FCA approval.
“This bold design rebalances risk, but it is bold risk-taking that made the U.K. the leading financial centre it is today. The new platforms will give investors greater access and confidence to invest in exciting new companies, while early backers and employees can sell up and invest again,” said Simon Walls, executive director of markets at the FCA, in a release.
“PISCES is the latest step in the FCA’s wide-ranging reforms to the U.K.’s markets to boost growth and competitiveness,” he added.