By Sinead Cruise
LONDON (Reuters) – Britain’s hopes of an equity capital market revival are weighing heavily on a secondary share trading platform that is sowing discord in the finance sector months before its launch.
The Private Intermittent Securities and Capital Exchange System (PISCES) will give private company owners opportunity to sell their shares on regulated exchanges in special trading windows, effectively ‘going public’ on a temporary basis.
Ministers and regulators are betting on PISCES to increase ties between cash-rich investors and private firms, and ideally encourage the latter to pursue big-ticket listings that have eluded London for several years.
But the concept was proving a tough sell in some quarters of the UK financial industry, even before U.S. President Donald Trump’s blockbuster tariffs hit global trade and capital markets, threatening to spark what billionaire financier Bill Ackman dubbed “a self-induced economic nuclear winter”.
More than a dozen bankers who spoke to Reuters about PISCES fear hits to revenues and ultimately being bypassed in a booming market for private capital. But they also pointed to other potential downsides to using the platform.
These include a lack of privacy on sales outcomes which may harm future valuations of fledgling firms, the risks a competitor or predatory activist could infiltrate the shareholder register and demand outsized influence, and reduced legal protections for investors against insider dealing.
As a result, several bankers said they were unlikely to recommend PISCES to the majority of their sell-side or buyside clients, or at best, use it as a last resort, potentially hampering take-up.
This lack of enthusiasm could have costly implications for Chancellor Rachel Reeves’ bid to jumpstart anaemic economic growth in Britain, at a time when international rivals are hustling to replace London as Europe’s premier financial hub.
Several sources contacted by Reuters said they had doubts about the true depth of demand for a platform like PISCES.
Owners will be able to set a price range for the shares they wish to sell, but they may not be able to conceal disappointing pricing as easily as they might if they had instructed a bank to hand-pick investors and sell entirely off-market.
“Without the liquidity, it becomes a vulnerable place for a business to be because PISCES is always going to be more public than doing a purely bilateral secondary transaction,” Rishi Khosla, CEO and co-founder of OakNorth Bank, told Reuters.
“The key unanswered question is how to bring liquidity into it.”
REVENUE AT RISK
The question of who has most to gain, or lose, from PISCES is dominating chatter in London’s financial circles.
Simon Walls, the Financial Conduct Authority’s (FCA) interim executive director of markets, said PISCES could act as a “stepping stone” to full listings, but some analysts say firms who tap the market effectively may eschew IPO plans altogether, denying banks a lucrative payday.
This fear, combined with rising competition to lend from non-banks like Apollo, BlackRock, Blackstone, ARES and KKR, has played a part in dampening banker enthusiasm for PISCES, sources said.
Banks typically charge fees of around 5% for connecting companies with new backers in private placements or off-market stock sales.
But PISCES is expected to offer a cheaper alternative to bank-led transactions, meaning exchange operators like London Stock Exchange will earn a chunk of the fees that used to end up in bankers’ pockets.
LSEG has not yet disclosed PISCES’ pricing structure but will have no say over any other fees levied by banks, advisers and service providers who support companies using the platform.
Not everyone believes banks stand to lose out financially from the advent of PISCES, which the FCA describes as the first trading platform of its kind.
Those banks willing to adapt equity capital markets and corporate brokerage teams to tap new private company clients could turn PISCES into a money-spinner, another source said.
“Maybe you’re not charging 5% on a deal that happens once every two years. But if there’s an auction every six months, you’re more likely to build a relationship which leads to more lending and more services,” the person said.
“It’s a huge opportunity to increase a client base for very little shoe leather.”
Other bank sources said clients had already expressed misgivings about the lighter disclosure demands on firms trading on PISCES compared with other markets where liquidity was also more reliable.
Until the platform boasts some success stories, few said they would be willing to invest the time marketing PISCES to nervous clients, when tried-and-trusted mechanisms are already in place.
James Tyler, Counsel at law firm Peters and Peters, said it was notable that the usual market abuse and insider dealing rules will not apply to the new PISCES market, citing the emphasis of ‘caveat emptor’ emphasis in the FCA consultation.
“Unfortunately, the risks of harm to investors and market abuse on the platform seem high when set against a limited business case,” he said.
(Reporting by Sinead Cruise; Editing by Susan Fenton)
