UK – Government legislates to establish PISCES platforms

Why should I read this?

On 15 May 2025, the Regulations that create the legal framework to establish PISCES platforms (PISCES Regulations) were laid before Parliament. PISCES will be a new trading platform for the intermittent trading of private company shares. 

Alongside the publication of the PISCES Regulations, HM Treasury has confirmed it intends to legislate, with retrospective effect, so that certain employee share options may be amended to permit them to become exercisable in the event of a PISCES transaction without losing the tax advantages the schemes offer.

What is PISCES?

PISCES, the Private Intermittent Securities and Capital Exchange System, is a new type of regulated trading platform that will facilitate the intermittent trading of existing shares in private companies. It will be established using the Financial Markets Infrastructure Sandbox under powers granted by the Financial Services and Markets Act 2023. The Sandbox will be overseen by the Financial Conduct Authority (FCA). The FCA is given broad powers to make rules to implement and oversee the PISCES Sandbox and will have supervisory powers over PISCES operators. 

For further details on PISCES platforms, the companies that will be eligible to trade on them and how platforms will be operated, see our previous briefing: Government to establish new market to trade private company shares. 

Separately, the FCA has consulted on the detailed PISCES regulatory framework, including the draft rules and guidance for operators. See our briefing: FCA consults on regulatory framework for PISCES secondary market.

What do the PISCES Regulations cover?

The PISCES Regulations establish the PISCES Sandbox. The Regulations also cover areas including:

• Who can apply to operate PISCES platforms and the FCA permissions required.
• Eligible companies: UK companies and overseas companies that do not already have shares admitted to trading on a public market (in the UK or overseas) are allowed to have their shares traded on the platform.
• Range of investors: this has been expanded upon from the draft Regulations published in November 2024.  Most retail investors are prohibited from trading on PISCES. Professional clients (as defined in UK MiFIR) and sophisticated investors and high net-worth investors (based upon the Financial Promotion Order) are eligible to buy shares on PISCES, as well as trustees of employee benefit trusts. Employees of, consultants to or officers of participating companies (or other companies within the participating company's group) are also eligible to participate on the PISCES platform.
• The circumstances in which PISECS participants can claim compensation if they have suffered a loss because of a false or misleading statement made by a PISCES company, together with certain exemptions from liability for core disclosures required by the FCA rules that are set out in Schedule 2.
  
  The Regulations also clarify that share buybacks are not permitted on PISCES platforms. Further, from a technical perspective, the Regulations make certain amendments to and disapply provisions of existing legislation for the purposes of the PISCES Sandbox. 

Impact for share options

In a written Treasury Statement published alongside the PISCES Regulations, the Government confirmed their intention to legislate in the next Finance Bill to allow employers, with their employee’s permission, to amend existing EMI and CSOP contracts to include a PISCES trading event as an exercisable event, without losing the tax advantages the schemes offer. This will allow employees with contracts amended in line with the legislation to exercise their options on PISCES and retain the tax advantages. The legislation will have retrospective effect. Further details are expected to be published in late July. 

Given the lack of liquidity in the market and that these types of share options have a ten year life, the introduction of PISCES and, crucially, the ability to amend the terms of these options to permit exercise on a PISCES event without jeopardising their tax relief is potentially a very valuable concession. 

Timing and next steps

The PISCES Regulations enter into force on 5 June 2025. The PISCES Sandbox will operate for a five-year period. 

In April, the FCA published a statement setting out a number of “technical changes” it intends to make to the PISCES regulatory framework compared to that set out in the consultation draft as a result of feedback received. The changes are intended to more fully align the PISCES framework with private market practice. This indicates what we can expect from the FCA’s regulatory framework when the regulator publishes the final rules for PISCES operators in June. 

The Treasury anticipates that the first PISCES trading events will take place later in 2025. The London Stock Exchange is set to be among the first to offer a PISCES platform announcing its intention to launch what it has named its Private Securities Market using the PISCES framework. All authorised PISCES operators will publish their own rulebooks. 

Impact

The PISCES model is being introduced as part of the overall package of reforms to boost the UK’s capital markets, with the intention of boosting the pipeline of growth companies for IPOs on UK markets. There have been mixed reactions to the proposals. However, in addressing the issues around tax advantaged share options, the Government is demonstrating that it is keen for the PISCES model to be successful in attracting participating companies and investors and to facilitate employee participation. The FCA rules for operators will be the final part of the regulatory package when they are published next month but the recent update statement is interesting in setting out the direction of travel that the FCA intends to take in aligning PISCES platforms more fully with private market practice. 

From an employee incentivisation perspective, the ability for employees to potentially participate in a liquidity event should make EMI/CSOP and other share incentive arrangements more attractive and should allow employees to benefit from value creation to which they have contributed alongside other investors.  

Further reading 

Explanatory Memorandum to the PISCES Regulations

Government press release

HMRC Technical Note: Tax implications for companies and employees in relation to employees trading their shares on PISCES