The Private Intermittent Securities and Capital Exchange System (PISCES) has been given the regulatory green light by the FCA.
PISCES will be a new trading platform dedicated to shares in private companies.
The launch has been confirmed to be on track for later this year, with the FCA detailing the final rules for its operation.
The aim of PISCES is to open the door to more opportunities for investors, facilitating greater access to growth companies.
Private companies will benefit from being able to tap into a broader range of investors and asset managers, while shareholders will have an new way to exit their holdings.
The FCA said as companies stay private for longer, there is demand for investors to trade private company shares “easily and efficiently in an organised marketplace”.
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Access to PISCES will be limited to institutional investors, high-net-worth individuals, sophisticated investors and employees of participating companies.
Investors will be provided with information about the risks involved to help them make informed decisions.
Simon Walls, executive director of markets at the FCA, said: “This bold design rebalances risk, but it is bold risk taking that made the UK 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.
“PISCES is the latest step in the FCA’s wide-ranging reforms to the UK’s markets to boost growth and competitiveness.”
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Emma Reynolds, economic secretary to the Treasury, said: “PISCES is a great example of industry, regulators and the government working together to go further and faster on innovative reforms to strengthen UK capital markets, supporting economic growth and putting more money in people’s pocket as part of our Plan for Change.
“I welcome the FCA’s announcement, which follows our legislation and opens PISCES to industry. This also builds on our announcements on a Stamp Taxes on Shares exemption for PISCES transactions, and on employees retaining the tax advantages on eligible shares traded.”
“The proposed new stockmarket called ‘PISCES’ won’t be like the ones people know today,” said Dan Coatsworth, investment analyst at AJ Bell. “It’s just for privately-owned companies and while it won’t be open to the public, there are positives from its creation.
“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.
“It could also encourage their staff to develop a saving and investing habit. One of the biggest stumbling blocks for private company share ownership is that staff are often put off by the general inability to sell those shares at regular intervals,” he continued.
“A lot of private companies won’t offer the ability for staff to trade shares, meaning some people are stuck owning the equity until the business either lists on a public market or there is an internal event where they can sell down.
“In theory, PISCES could improve liquidity by allowing private company shares to be traded at more regular intervals.
“However, it has only been designed for intermittent trading, not the continuous trading during market hours that you get with publicly listed stocks. Such restrictions would give a company control over when changes in share ownership can happen.
