PISCES - an innovative response to the changing UK IPO landscape

Expert Opinion: Jof Walters, WM FinTech Leader & CEO of Greater Things

Yesterday (June 10th) the FCA announced that they had agreed the rules under which the London Stock Exchange’s new Private Intermittent Securities and Capital Exchange System (PISCES to its friends) will operate. This paves the way for the LSE to launch it’s first new exchange in the city since 1995. 

What is PISCES and why is it important? 

The London Stock Exchange already operates two markets: 

The Main Market - which hosts about a thousand companies with a combined market capitalisation of £4.4 trillion. It exists as the gold standard for publicly listed companies in the UK, giving them access to deep capital pools. The main market can trace its origins back to a chap called Jonathan Castaing who started publishing stock and commodity prices in his Change Alley coffee shop in 1698. 

The Alternative Investment Market (AIM) - AIM has around 800 issuers with a combined market capitalisation of £135 billion. AIM launched thirty years ago, with its purpose closely mirrored that of PISCES: to lower barriers to capital markets, support early-stage company growth, and offer greater flexibility and liquidity.

Critics of the PISCES project have asked: “Why build a new exchange? Why not simply fix AIM?”

The LSE would argue that PISCES takes the principles of AIM further and is a sound strategic reaction to a new market context where companies remain private longer and IPO activity has slowed significantly. Rather than replacing AIM, PISCES acts as a transitional mechanism: a controlled way to move stock from private to public offering. 

Responding to the changing IPO landscape

The number of UK IPOs has declined sharply: from around 60 annual listings a decade ago to just 18 in 2024. High profile snubs from companies like Revolut, coupled with stronger performance in US, Asian, and European markets, have sparked calls for tax reform (notably on Stamp Duty) and a reduction in the regulatory burden associated with listing in the UK. Broader factors such as post-Brexit economic uncertainty and diminished investor appetite have also contributed to the downturn.

Another major factor may simply be that listing doesn’t currently serve the interests of many companies or their private investors. Over the past decade, the UK’s private capital markets have expanded significantly, with venture capital and private equity providing ample funding to high-growth businesses. In 2024 alone, UK-managed funds invested over £29.4 billion into nearly 1,600 firms, and VC investment grew to £9 billion, up 12.5% from the previous year. Compared to the rigour and volatility of public markets, raising capital privately has been simpler and faster—while valuations, free from public market scrutiny, have surged. For many founders and investors, remaining private has simply been more attractive.

So PISCES has to overcome the fears of business owners and investors that may be facing likely market corrections, valuation adjustments, additional scrutiny and muted investor sentiment. In yesterday’s announcement we can see some of the ways LSE plans to achieve that.  

At the heart of the PISCES offering is the principle that privately held shares can be traded during limited, pre-announced windows rather than continuously, as they are on AIM or the Main Market. This approach protects companies from the pressure of daily share price movements and public scrutiny. It preserves the advantages of staying private, including greater strategic freedom and a lighter regulatory load, while still giving shareholders access to periodic liquidity.

PISCES also brings, tax perks and a lower regulatory and compliance burden. Companies are not required to meet the same audit and reporting standards expected in the public markets. Trading will be fully digital, enabling seamless issuance, transfer, and settlement of private securities. In essence, PISCES is designed to feel like a natural extension of private fundraising and a practical, accessible gateway into the private capital markets.

The role for the Financial Conduct Authority here is critical. The UK financial system has always performed well on the world stage because strong regulation creates a stable and trusted ecosystem. But lets face it, whenever a new way of trading securities arrives it tends to invite bad actors - Ponzi, Madoff, Belfort, Stanford and Bankman-Fried. Does reduced red tape mean reduced controls? Is PISCES open to abuse- or dare I say “fishy operatives?”?

Managing the risks

The FCA has been cautious. PISCES will operate in the FCA sandbox under threshold conditions and higher scrutiny until 2030. This limits the market to vetted investors and sees it operating under a tailored set of controls that will be monitored and updated before a wider release. The hope is that this will reduce the uncertainty of investor participation, reduce investor risk and plug any ‘loopholes’ before they can cause wider economic impact. 

On a brief personal note I worked on a FinTech project back in 2006 that has relevance here. Founded by the brilliant and professorial Stephen Kenny, ‘The Property Investment Market’ sought to create an open exchange for people to speculate on shares in residential and commercial property assets. It operated under special permission from the Financial Services Authority which was retracted in 2007 precisely because the regulator had similar concerns over investor risk and wider economic impact. Is there a risk that the FCA will do the same here? Will they lose their nerve and U-turn? Only time will tell. 

What does the future hold for PISCES?  

PISCES might be a roll-back to the bad old days of weak securities regulation that opens our market up to abuse by bad actors and continues the decade long decline of a tarnished financial offering from the City of London to the world. It might be an odd irrelevance, largely ignored and and shunned by the investment community like its predecessor the Alternative Investments Market. 

However, I hope that PISCES provides a safe route to liquidity and access to capital for businesses without the burdens of a full IPO. It might be the shot in the arm our ‘scale-up’ community needs and a way for the LSE to get back on track. It might be a safe and controlled mechanism to let the steam out of the over-inflated valuations of privately held companies that have been driven up by a decade of private market excess. 

One thing is for certain, the FCA and the LSE are innovating and they should be applauded for that.