Are critics of Pisces simply misunderstanding it?

This summer, a new system called the Private Intermittent Securities and Capital Exchange System (Pisces) is set to be launched by the government, aiming to facilitate the trading of private company shares. While some are optimistic about the potential of Pisces to revitalize the UK’s capital markets, others express doubts and reservations about its effectiveness. Myles Milston, CEO of Globacap, sheds light on what he believes are misconceptions fueling the criticisms surrounding Pisces.

Back in 1998, the US Securities and Exchange Commission (SEC) introduced the concept of an alternative trading system (ATS) to regulate the trading of securities outside traditional stock exchanges. This move paved the way for the establishment of deep and liquid private markets driven by platforms like Nasdaq Private Markets and Forge. Nearly three decades later, the UK is following suit by proposing its own private markets framework in response to the thriving private markets buoyed by enhanced liquidity, increased funding, and technological advancements.

Despite the upcoming implementation of Pisces, some stakeholders remain wary and apprehensive. Venture capitalists and private equity executives have expressed concerns about the demand for this new framework and have drawn parallels between Pisces and London’s struggling Alternative Investment Market (AIM). Additionally, bankers have raised apprehensions about potential issues such as insider dealing, loss of control, reduced fees, and the risk of competitors infiltrating shareholder registers, which may compromise the privacy and valuations of sales.

However, much of the criticism aimed at Pisces stems from a lack of understanding of how the platform will operate. Contrary to assumptions, Pisces transactions do not necessarily mirror public market transactions, offering flexibility and control over execution prices. Private entities using Pisces will maintain ultimate control over their shareholder register, mitigating the risk of competitor infiltration. Moreover, concerns about insider dealing are misguided, as regulations within a Pisces venue will uphold existing corporate standards.

The growing interest in accessing private markets is evidenced by the soaring popularity of secondaries, which reached a new high of $160 billion in 2024. Secondaries provide companies with rapid liquidity and investors with opportunities in high-growth ventures, underscoring the shifting preference from public to private markets. Pisces, with the London Stock Exchange Group’s involvement, is poised to revolutionize the UK’s private markets and position them as formidable competitors to public markets, contrary to comparisons with the struggling AIM.

In conclusion, Pisces has the potential to reshape the private markets ecosystem in the UK, offering firms a path to substantial liquidity without the complexities and costs associated with traditional IPOs. Rather than replicating AIM, Pisces is envisioned to supplant it, providing a seamless transition for companies scaling up to an IPO. Despite criticisms, Pisces stands as a transformative force that could mark the beginning of a new era for private markets, challenging the dominance of public counterparts.