The dominant public equity market in the U.K., the London Stock Exchange plc (LSE), is poised to launch the first regulated private market, becoming the first company to gain regulatory approval to operate a Private Intermittent Securities and Capital Exchange System (PISCES) platform.
The U.K.’s Financial Conduct Authority (FCA) approved the LSE to operate a PISCES platform, which will allow private company shares to trade on an intermittent basis, either through periodic auctions or limited periods of continuous trading.
These platforms will operate in a “regulatory sandbox” — a test environment that allows the FCA to assess designs before finalizing a permanent regime, expected in 2030.
The new model was announced late last year as part of the FCA’s expanded mandate to stoke investment and support economic growth. It aims to help private companies raise growth capital and expand their investor base, while also giving employees and investors the opportunity to access liquidity.
Earlier this year, the FCA set out initial rules for the model, which will give issuers some control over which investors can buy their shares and allow them to set trading price parameters, such as floors and ceilings. Participation will be limited to “sophisticated” investors, high-net-worth investors, company employees and institutional investors.
“We are delighted to announce the first PISCES operator has been approved, marking a major milestone in our drive to boost growth and unlock capital investment,” said Simon Walls, executive director of markets at the FCA, in a release.
“We are looking forward to seeing the first of many transactions, seeding a competitive market that gives greater investor access to exciting growth companies,” he added.
The LSE said it plans to launch its market later this year.
Alongside the FCA’s approval, the LSE published a set of draft rulebooks and changes to existing rules to facilitate the new market’s operation. Those proposals are out for comment until Sept. 9 and will take effect when the market officially launches.
The LSE said it will provide a further update on the timing of the launch “in due course.”
Under the LSE model, companies “will have the flexibility to set a timetable of events for their auction; and will be required to provide sufficient time for investors to review disclosure information and ask questions ahead of the auction,” the exchange said in a notice.
The new market will be operated as a “Recognised Investment Exchange” by the LSE, “leveraging much of its existing trading infrastructure to enable private companies to facilitate trading of their securities through an auction facility, complemented by the development of new functionality giving companies control over who gets access to their disclosures,” it said.
It will also introduce a new category of market intermediary, comprised of the exchange’s approved member firms — known as registered auction agents — that will assess the eligibility of investors to participate in the market and/or place trades on their behalf.
However, investors will largely be expected to fend for themselves on the new platform.
“PISCES is a buyer-beware market model, where investors take responsibility for considering the market model and are responsible for holding a company to account on the quality of its disclosure,” the LSE said.
To that end, the rules will provide investors with tailored statutory rights and remedies, but the existing disclosure rules won’t apply in the new market.
“The PISCES market model is significantly different from public markets and is designed to create a proportionate market framework to reflect the private nature of the companies seeking to participate and, as such, many of the regulatory obligations which apply in public markets do not apply,” it noted.
“This new market demonstrates our commitment to the creation of a genuine funding continuum from the private to public markets so that businesses in the U.K. and around the world can be effectively supported across all stages of their growth,” said Julia Hoggett, CEO of the LSE, in a release.