London Stock Exchange gets go-ahead to run Pisces private stock market

The London Stock Exchange (LSE) has been given the green light to operate a Pisces platform, a new type of private stock market.

The Financial Conduct Authority (FCA) confirmed on 26 August that the London Stock Exchange had become the first operator to receive approval to run Pisces, the world’s first regulated private stock market.

Pisces - which stands for Private Intermittent Securities and Capital Exchange System - is a marketplace that will allow investors to buy and sell shares in private companies.

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Plans to launch the market were announced by the chancellor in her Mansion House speech last November.

Emma Reynolds, economic secretary to the Treasury, said the London Stock Exchange gaining FCA approval was the “latest significant milestone” for Pisces.

She added that the government was “committed to working with the regulators and business to enhance our capital markets offering, supporting economic growth, and putting more money in working people’s pockets”.

Julia Hoggett, CEO of the LSE, commented: “We look forward to welcoming the first private companies to utilise the market when they have completed their preparations and to expanding the options they will have to realise their ambitions.”

Pisces is not open to all retail investors. We explain how the market works, when it will launch and which people will be able to buy and sell shares.

How will Pisces work?

Pisces is a new type of private stock market that gives investors more opportunities to buy stakes in growing companies.

It’s aimed at boosting liquidity in private markets and encouraging large start-ups and scale-ups to list in London.

It’s different to a public market listing, instead Pisces platforms will run “intermittent” trading events. For example, companies using a Pisces platform can control when their shares may be traded and who can buy their shares.

While the LSE is the first operator to be approved to run Pisces, we could see more Pisces platforms approved. London’s challenger stock exchange Aquis is said to be looking at launching one.

It’s not clear what fees will be involved in terms of buying and selling shares, however the government has proposed that Pisces share transactions be exempt from stamp duty.

Who can buy and sell shares on Pisces?

Pisces will generally be restricted to institutional investors, high net worth individuals and employees of participating companies.

In terms of a high net worth individual, the FCA defines this as someone who earns at least £100,000 (not including any one-off pension withdrawals) or holds net assets to the value of £250,000.

Sophisticated investors (including self-certified) may also be able to trade shares; being classified as a sophisticated investor usually requires you to have relevant investment experience and knowledge.

Companies on Pisces can restrict who can buy their shares, if these restrictions promote or protect their legitimate commercial interests, according to the FCA.

However, they are not allowed to impose any new restrictions on which investors may sell their shares.

Under Treasury rules, employees of companies with shares traded on Pisces platforms can either buy shares in the company that employs them, or sell their existing shares.

Michael Healy, UK managing director at investment and trading platform IG, comments: “It's frustrating access has been restricted to institutional investors, high net worth individuals, and employees of participating companies. This cuts out most retail investors, meaning the UK risks falling behind recent developments in the US.”

When will it launch?

The London Stock Exchange says it will launch its Pisces platform later this year.

The FCA is currently testing the design before finalising a permanent regime in 2030.

Which companies could launch on Pisces?

Revolut, Octopus Energy, ClearScore and SME lender Oaknorth have been reported as some of the companies that may be interested in listing on Pisces.

Dan Coatsworth, investment analyst at AJ Bell, tells MoneyWeek that the platform could be useful for fast-growing fintechs looking for institutional investment and also an opportunity for staff to exit their shareholdings.

He adds that Pisces won’t replace an established stock market like AIM as it will not support capital raising and it won’t be open to the general public.

However, it may “whet the appetite” of a company to then go on and seek a listing on the stock market.

“Pisces could help private companies get used to the idea of slices of their business being owned by different people.

“It might act as a stepping stone towards a public stock listing, getting them used to regular financial reporting, transparency as a business, and understanding that a company is run for the best interests of shareholders, not the board of directors,” he notes.